Verlox International Limited & Anor v Igor Antoshin & Ors

In assessing consequential costs, the court may order indemnity costs where the conduct of the litigation or the parties’ wider dealings takes the case outside ordinary and reasonable proceedings. The conduct must be assessed in the context of the litigation as a whole. A party’s inability to pay, or allegations that the successful party caused that inability, does not by itself justify depriving the successful party of costs where the underlying proceedings have properly ended. For a payment on account, the court should estimate the likely recovery on detailed assessment and apply an appropriate margin for error. A single overall percentage may be used where costs fall to be assessed on different bases. Guideline rates need not be applied where the circumstances make them inappropriate.

The judgment dealt with consequential matters following the court’s earlier decision refusing the claimants’ application to amend the Claim Form and revoking permission to serve out. The proceedings against the First and Fourth Defendants therefore came to an end.

The claimants sought, in substance, to reopen the earlier judgment. The court refused permission to appeal and then determined the successful defendants’ entitlement to costs, the basis of assessment and payments on account. The central issues were whether the claimants’ conduct justified indemnity costs, whether alleged misconduct by the defendants affected the costs order, and what provisional sums should be paid.

The court refused to revise its judgment of 25 October. CPR 3.1(2)(l) did not apply because the earlier hearing had determined applications for security for costs and amendment, rather than a preliminary issue. CPR 3.1(7) did not provide a basis for reopening that judgment or varying the earlier order concerning the claimant’s authority to act for Verlox.

1. Costs entitlement. The First and Fourth Defendants were entitled to costs against both claimants. The claimants’ inability to pay, and their allegations that the defendants’ conduct had caused that position, did not justify depriving the successful defendants of costs. The relevant applications had been decided on their own terms, and the proceedings had ended because the basis on which permission to serve out had been obtained was no longer extant.
2. Indemnity basis. Costs were to be assessed on the standard basis up to 1 September 2021 and thereafter on the indemnity basis. The applicable question was whether the conduct of the action or the circumstances of the case took it outside the norm in a way justifying indemnity costs. The phrase referred to conduct outside ordinary and reasonable litigation, assessed in the context of the litigation as a whole. The claimants’ extensive witness statements, numerous applications, serious allegations of dishonesty, bias and collusion, and repeated allegations against judges, lawyers and experts made the conduct out of the norm.
3. Payments on account. A reasonable sum on account was an estimate of likely recovery on detailed assessment, discounted by an appropriate margin for error. The court adopted an overall figure of 70%, reflecting the different expected recovery rates for standard and indemnity costs. It ordered £644,787.94 for the Fourth Defendant and £1,312,871.85 for the First Defendant. It was inappropriate to reduce the First Defendant’s payment to Guideline Rates in this exceptional litigation.

The judgment records that an earlier order concerning Mr Sychev’s authority to act for Verlox was upheld when permission to appeal was refused on paper by Bean LJ. The present judgment was a first-instance decision on consequential matters following the court’s own earlier judgment.