John Michael Gee & Anor v The Estate of John Richard Gee & Anor

The court has discretion over the costs of proceedings. The usual rule is that the unsuccessful party pays the successful party’s costs, but the court must consider all the circumstances, including conduct and admissible settlement offers. Costs incurred before proceedings may be recoverable where they are sufficiently connected with, and useful to, the proceedings. This includes reasonable negotiations aimed at avoiding an application. Indemnity costs require conduct outside the norm, not merely an unsuccessful argument. Where costs are ordered subject to detailed assessment, an interim payment should ordinarily be made in a reasonable sum, allowing for uncertainty in the assessment.

The claimants applied for relief following the respondents’ alleged breach of an order made in earlier proprietary estoppel proceedings. The application resulted in the company being joined as a claimant and in an inquiry being directed into liability and relief, with disclosure to follow. The court subsequently found a further breach and invited written submissions on the costs of that application.

The issues were whether the costs should be reserved or made costs in the case, whether costs incurred before the application were recoverable, whether assessment should be on the indemnity basis, and what interim payment should be made on account.

1. Costs order. Under CPR rule 44.2(1), costs were in the court’s discretion. The claimants were the overall successful parties because they obtained orders which the respondents had opposed, including an inquiry into the breach and consequential directions. The court therefore ordered the respondents to pay the claimants’ costs rather than making them costs in the case.
2. Pre-application costs. The jurisdiction under section 51 of the Senior Courts Act 1981 extends to costs of and incidental to proceedings. Reasonable costs incurred before proceedings may be recoverable where they relate to the proceedings and assist their proper resolution. The costs of responding to the threatened breach and attempting to prevent it were therefore incidental to the later application.
3. Indemnity basis. Mere failure in litigation does not justify indemnity costs. The relevant conduct must take the case outside the norm. The respondents’ conduct was directed towards frustrating or substantially undermining the original High Court judgment, including resisting the inquiry and raising procedural obstacles. This was an obvious case for indemnity costs.
4. Detailed assessment and payment on account. Because no costs schedule had been supplied, summary assessment was not possible. The costs were ordered to be subject to detailed assessment if not agreed. Under CPR rule 44.2(8), an interim payment was required absent good reason. Allowing for uncertainty, the court ordered payment of £20,000 on account, approximately 40 per cent of the costs said to have been incurred.