XL CATLIN INSURANCE COMPANY UK LIMITED v LINKHAM SERVICES LIMITED & Ors

A failure to pay an instalment under a settlement agreement may trigger an acceleration clause, entitling the claimant to lift a stay and enter judgment for the outstanding settlement sum. Indemnity costs are not automatic merely because a party defaults shortly after agreeing to settle, gives late notice of non-payment, or fails to enter a consent judgment. The relevant question is whether the conduct falls outside the norm reasonably expected in commercial litigation. Where a detailed assessment is ordered because the claimant failed to provide a costs schedule suitable for summary assessment, the claimant may be denied the costs of commencing that detailed assessment.

The claimant sought to lift a stay imposed by a Tomlin order and obtain judgment against the second and third defendants under separate settlement agreements. Each defendant had agreed to pay £300,000 by instalments. The first instalment was not paid, and each agreement provided that the outstanding settlement sum became immediately due on default.

The defendants accepted the defaults. The remaining issues were interest, whether the claimant should receive indemnity costs, and whether costs should be summarily or summarily assessed despite the absence of a costs schedule.

1. Stay and judgment. The first instalment under each settlement agreement was not paid. The contractual default provision therefore operated according to its terms, making the outstanding £300,000 immediately due. The stay was lifted and judgment was entered against each of the second and third defendants for £300,000.
2. Interest. Interest at the contractual default rate was payable on the first instalment from 1 March 2022 until judgment. Thereafter, interest was payable under the Judgment Act.
3. Indemnity costs. Applying the test identified by the Court of Appeal in Excelsior, the question was whether the defendants' conduct fell outside the norm expected in commercial litigation. The early default, late notification that payment would not be made, and failure to seek a consent judgment did not, without more, satisfy that test. There was no evidence that the defendants lacked a genuine intention to perform the settlement agreements when they were signed. The claimant therefore recovered its costs on the standard basis.
4. Assessment of costs. A detailed assessment was ordered because no costs schedule had been supplied for summary assessment. However, the claimant should not recover the costs of commencing the detailed assessment, since a summary assessment schedule could and should have been filed. Any later costs caused by the defendants' conduct in the detailed assessment were left to the costs judge.