Melissa Von Westenholz & Ors. v Marcus Gregson & Anor.

Indemnity costs require conduct sufficiently outside the ordinary and reasonable conduct of proceedings. A party’s failure to prove several issues, refusal to mediate, late disclosure or misleading evidence must be assessed cumulatively and in context.

Where a claimant beats a valid Part 36 offer, the ordinary consequences under Civil Procedure Rules 1998, r 36.17 should follow unless unjust. The court may moderate enhanced interest by reference to all relevant circumstances. Interest on equitable compensation is ordinarily simple, unless the defaulting trustee used the money for personal business benefit.

This was a supplemental first-instance judgment following the court’s earlier finding that the defendants were liable to account for £400,000 in equitable compensation for breach of fiduciary duties and the Guardian Trust principle.

The parties could not agree the consequential order. The disputes concerned the basis and reduction of costs, the effect of two Part 36 offers, interest on the compensation and costs, payment on account, and a proposed stay to allow the defendants to realise assets.

1. Indemnity costs. The defendants’ conduct did not meet the threshold of conduct outside the ordinary and reasonable conduct of proceedings. Although there had been some excessive denials, late disclosure and a misrepresentation in evidence, the conduct had to be assessed in the context of the issues and evidence. Costs up to 18 August 2020 were therefore payable on the standard basis.
2. Unsuccessful issues. The claimants had pursued eight causes of action and succeeded on only two. The overlap between the claims and the failure on dishonesty and malice justified a broad-brush 25 per cent reduction, rather than the defendants’ proposed 50 per cent reduction.
3. Part 36 offer. The 2018 offer concerned different parties and materially different proposed proceedings, and had no effect. The 28 July 2020 offer was valid for the present proceedings. The judgment was more advantageous than the offer, so the consequences under Civil Procedure Rules 1998, r 36.17 applied. The fact that the Guardian Trust claim had not yet been pleaded did not make those consequences unjust.
4. The claimants were entitled to their post-expiry costs on the indemnity basis, together with an additional payment of 10 per cent of the amount awarded. Interest on costs and equitable compensation was set at 4 per cent above base rate, rather than the maximum 10 per cent. Interest was simple, because the defendants had not benefited from or used the dividend funds in their business operations.
5. Pre-offer interest was set at 2.5 per cent above base rate, reflecting an assumed cost of borrowing. A payment on account was ordered at 65 per cent of the claimants’ budgeted and incurred costs, after deducting estimated costs payable to the defendants. The costs order was stayed until 1 April 2023, except for the payment on account, which was payable within 14 days; judgment interest continued on unpaid sums.

First-instance supplemental judgment consequential upon the court’s earlier judgment dated 21 November 2022. The judgment itself does not provide a citation for that earlier decision.