Timothy Piers Horlick & Ors v Diogo Jose Henriques Cavaco & Ors

Indemnity costs require conduct or circumstances outside the norm, meaning something outside ordinary and reasonable conduct of proceedings. Costs on the standard basis must be reasonable and proportionate, including in relation to the sums in issue and the complexity of the litigation.

For a payment on account, the court should estimate likely recovery conservatively and allow an appropriate margin for error. There are no fixed rules of thumb. Where the costs claimed provide no reasonable framework because they appear disproportionate, the court may adopt a broad-brush approach and use a safer apportionment.

This was a consequential costs judgment following the substantive judgment in [2022] EWHC 2935 (QB). The court determined costs arising from a set-aside application and a video-link application, an application for indemnity costs concerning expenses and unjust enrichment claims, payments on account of costs for the Trust and other claims, and a contribution claim by the Second Defendant against Mr Cavaco.

The central issues were whether the relevant conduct justified indemnity costs, how the parties’ costs should be estimated and apportioned for interim payments, and what orders should be made.

1. Set-aside application. The Claimants were the overall winners of the application before Butcher J because they succeeded concerning Ms Veloso and the hybrid trial, although they failed concerning General Veloso. The Defendants were ordered to pay the Claimants’ costs, subject to a one-third deduction. JVC and PMSA were ordered jointly to pay £8,000 on account.
2. Indemnity costs. The court applied the ordinary threshold that indemnity costs are warranted only where conduct or circumstances take the case outside the norm. The alleged evidential deficiencies, rejection of settlement offers and delay in mediation did not meet that threshold. Costs relating to the expenses and unjust enrichment claims were therefore payable on the standard basis.
3. Standard-basis costs and proportionality. The burden was on the Claimants to show that their costs were reasonable and proportionate. Under Civil Procedure Rules 1998 rule 44.3(5), proportionality included the amounts in issue and the complexity of the litigation. The court considered the claimed costs, pre-action work, pleadings, mediation, leading counsel and the proposed 50 per cent apportionment excessive or insufficiently supported.
4. Payments on account. Under rule 44.2(8), the court was required to order a reasonable sum on account. The appropriate approach was a conservative estimate of likely recovery with an allowance for error. Because the Claimants’ figures supplied no reasonable starting point, the court adopted a broad-brush assessment and used 40 per cent as the safer apportionment for the Trust claim. JVC was ordered to pay £225,000 on account to the trustees.
5. For PMSA’s costs, the court preferred an equal apportionment between the relevant claims and applied a 50 per cent apportionment followed by a 40 per cent deduction for the interim-payment approach. PMSA was awarded £175,000 on account, divided equally between Mr Horlick and the Third Claimant. JVC’s contribution costs against Mr Cavaco were summarily assessed at £10,007.50.