Dexia SA v Regione Emilia Romagna

Where a contract entitles a party to recover the costs incurred in enforcing and protecting its contractual rights, the court will ordinarily assess those costs on the indemnity basis under Civil Procedure Rules 1998, rule 44.5, unless the contract provides otherwise. The contractual indemnity must cover the proceedings in question. Costs remain subject to disallowance where they were unreasonably incurred or are unreasonable in amount. Detailed assessment may be appropriate despite the usual preference for summary assessment. An interim payment on account should reflect the likely recovery, allowing an appropriate margin for error and taking all the circumstances into account.

Following judgment in favour of Dexia SA in the substantive proceedings, the court considered consequential costs issues on paper because Regione Emilia Romagna had disengaged from the proceedings. Dexia sought its costs, assessment on the indemnity basis under rule 44.5 of the Civil Procedure Rules 1998, detailed assessment, an interim payment on account, and interest.

The central issues were whether the contractual indemnity in clause 11 of the Master Agreement covered the English proceedings, whether the costs should be assessed on the indemnity basis, and whether detailed assessment and a substantial interim payment were appropriate.

1. Costs order. Dexia was the successful party and was entitled to its costs under rule 44.2(2)(a) of the Civil Procedure Rules 1998.
2. Contractual indemnity and basis of assessment. Clause 11 of the Master Agreement required Regione Emilia Romagna to indemnify Dexia for reasonable out-of-pocket expenses, including legal fees, incurred in enforcing and protecting its contractual rights. Because the Italian proceedings breached clause 13 and the English proceedings were brought to enforce and protect rights under the Master Agreement, the indemnity covered these proceedings. The costs were therefore to be assessed on the indemnity basis pursuant to rule 44.5.
3. The court would ordinarily exercise its discretion so that the basis of assessment corresponds with the contractual entitlement to costs. Under paragraph 6.1 of PD44, costs should be disallowed only to the extent that they were unreasonably incurred or unreasonable in amount. The court found that Dexia’s costs satisfied neither criterion, having regard to the importance and value of the proceedings, their complexity, the need for specialist Italian-law and derivatives evidence, the defendant’s non-participation, and comparable litigation.
4. Assessment and interim payment. Detailed assessment was appropriate, notwithstanding paragraph 9 of PD44. Under rule 44.2(8), the interim payment should reflect the likely recovery with an appropriate margin for error. An interim payment of 80% of the claimed costs, £475,809.73, was reasonable.
5. An order for interest on costs under rule 44.2(6)(g) was appropriate. Regione Emilia Romagna was ordered to pay Dexia’s costs on the indemnity basis, subject to detailed assessment if not agreed, with an interim payment of £475,809.73.

First-instance consequential costs judgment following the substantive judgment in [2024] EWHC 3236 (Comm).