Deutsche Bank AG v Sebastian Holdings Inc.

When deciding who should pay the costs of detailed assessment proceedings, the court must consider all the circumstances. Relevant matters include the parties’ conduct, the reduction in the bill, and whether it was reasonable to claim or dispute particular items.

A receiving party should not recover costs attributable to poor time recording, missing attendance notes, or the improper inclusion of costs. A paying party ordinarily bears the costs of prolongation caused by its own challenges, but should not bear costs caused by the receiving party. The assessment may therefore require a broad and pragmatic percentage reduction.

The judgment concerned the costs of detailed assessment proceedings following substantial Commercial Court litigation in which the claimant had obtained judgment and an order for 85 per cent of its costs on the indemnity basis. Alexander Vik had subsequently been ordered to pay those costs as a non-party costs payer.

The detailed assessment lasted about 97 days. The bill was reduced by approximately 31 per cent. The issues included the claimant’s preliminary directions application, the treatment of preliminary issues, costs relating to initial margin, inadequate time recording, incomplete files, and the conduct of the paying party in challenging almost every item.

The central question was the appropriate order for the costs of the detailed assessment proceedings under CPR 47.20.

The court ordered that Mr Vik pay 70 per cent of the claimant’s costs of the detailed assessment proceedings, assessed on the standard basis. The claimant was ordered to pay Mr Vik’s costs of its 2017 directions application, including the hearing, on the standard basis.

1. Relevant framework. CPR 47.20 entitled the receiving party to the costs of detailed assessment, subject to another order. In deciding whether to make another order, the court had to consider all the circumstances, including the conduct of the parties, the amount by which the bill was reduced, and whether it was reasonable to claim or dispute particular items.
2. Preliminary issues. Mr Vik’s success on some preliminary issues did not, by itself, justify depriving the claimant of its costs. Those issues formed only a small part of the assessment and could be taken into account in determining any overall percentage reduction.
3. Initial margin and prolongation. The claimant had improperly claimed costs relating to initial margin and had failed to correct the error promptly after it was raised. Its vague and composite time entries and incomplete files materially prolonged the assessment. The court applied the reasoning in Fattal v Walbrook Trustees (Jersey) Ltd [2009] EWHC 1674 (Ch) that inadequate records can materially contribute to the length and cost of assessment proceedings.
4. Conduct of both parties. A paying party ordinarily pays the costs of prolongation caused by its challenges, but should not pay for prolongation caused by the receiving party. The substantial reduction in the bill did not independently justify a different order, particularly given the indemnity costs order and Mr Vik’s failure to make a Part 36 offer. Taken together, the claimant’s conduct justified a broad reduction of 30 per cent.
5. The costs of the assessment were not ordered on the indemnity basis because the unusual length of the hearing resulted from the conduct of both parties.

The judgment records that appeals by Sebastian Holdings Inc. against the order made after trial, and by Alexander Vik against the non-party costs order, were unsuccessful. The present judgment was a first-instance determination of the costs of the detailed assessment proceedings.