HASSAN ALI MAKKI v BANK OF BEIRUT S.A.L.

Where a party succeeds on all issues in insolvency proceedings, the court may award its costs without reducing them because later events might have changed the issues. Indemnity costs require conduct or circumstances taking the case outside the norm. Using insolvency proceedings as a debt-collection method, particularly where the alleged insolvency is unfounded and the claim is hopeless, may justify indemnity costs. A payment on account under Civil Procedure Rules 1998, r 44.2(8), requires a reasonable assessment of likely recovery. The court may defer or limit payment where reliable evidence of liability to former solicitors is unavailable, while making a separate award for adequately evidenced costs.

This was a further judgment following the court’s substantive decision setting aside a statutory demand served by Bank of Beirut S.A.L. on Hassan Ali Makki under the Insolvency (England and Wales) Rules 2016. The substantive application succeeded because Mr Makki’s Lebanese claim raised a genuine triable issue.

The further issues were the incidence and basis of costs, whether costs should be assessed on the indemnity basis, and whether the Bank should make a payment on account under Civil Procedure Rules 1998, r 44.2(8). The court also considered the effect of an unresolved dispute with former solicitors on the proposed interim payment.

1. Costs. Mr Makki had succeeded on each of the four issues decided in the substantive proceedings. Later claims that the debt had been discharged, or that some issues had become moot, could not rewrite what had actually been argued and decided. The Bank was therefore ordered to pay his costs.
2. Indemnity basis. Indemnity costs are justified where conduct or circumstances take the case outside the norm, including exposure to disproportionate costs. Prospective insolvency proceedings are a particularly risky means of proceeding without a judgment or a truly clear debt. They are a class remedy for collective distribution, not a debt-collection process. On the evidence, the Bank did not genuinely believe that Mr Makki was insolvent, and its attempt to show that the Lebanese proceedings raised no genuine triable issue was hopeless and high-risk. The costs were therefore to be assessed on the indemnity basis.
3. The Bank’s reliance on Mr Makki’s historic contempt conviction did not, in the circumstances, justify or materially support an indemnity award.
4. Payment on account. Under Civil Procedure Rules 1998, r 44.2(8), the court should make a reasonable assessment of the likely sum recoverable, rather than an irreducible minimum. The unresolved set-off issue meant that payment should be stayed, but did not justify refusing all interim payment.
5. The unsigned costs statements relating to former solicitors did not deprive the court of jurisdiction to order or assess costs. However, the unresolved dispute gave the court no reliable basis for estimating Mr Makki’s ultimate liability to those solicitors. No payment on account was awarded for those costs. A payment of £25,000 was awarded for the costs evidenced by the signed statement and subsequent correspondence, subject to the agreed stay.

The set-off application was adjourned generally with liberty to restore. The Bank was ordered to pay the £25,000 within 14 days, subject to the stay.