Bernard Jacob Carl v John Hawkins & Ors

The court may refuse a costs sanction for failure to comply with pre-action requirements where, viewed objectively and proportionately, compliance would probably have achieved none of the protocol’s purposes. Equitable interest may compensate loss or require disgorgement, and may be awarded at a rate above the ordinary cost of funds and on a compound basis where justified by dishonest misappropriation. A signed written agreement is not avoided merely because the signatory did not understand it; something more is required. Indemnity costs require conduct that is unreasonable to a high degree. Costs thrown away must be assessed rather than treated automatically as all costs incurred before an adjourned trial.

This was a consequentials judgment following the claimant’s successful claims against most defendants in litigation concerning dishonest assistance, knowing receipt, misappropriation of funds, and a bill of sale relating to a vehicle. The court considered costs, payments on account, pre-action conduct, pre-judgment and contractual interest, proposed amendments, permission to appeal, and indemnity costs.

The claimant appeared in person. The judgment dealt principally with outstanding disputes involving Mrs Edwards and Mr Limbani, including whether costs sanctions should follow alleged pre-action non-compliance and how interest and costs should be assessed.

1. Costs thrown away and payment on account. The expression is not strictly prescribed. Costs incurred preparing for a trial that is later adjourned are not automatically wasted, particularly where the trial ultimately takes place. The claimed costs therefore required detailed assessment, and no payment on account was ordered because the eventual recoverable sum might be substantially lower.
2. Pre-action conduct. Under the Practice Direction on Pre-Action Conduct and Protocols, where no specific protocol applies, correspondence and information should be exchanged proportionately to meet the objectives in paragraph 3. The relevant question was whether a reasonable claimant, knowing the defendant’s previous conduct, should have concluded that a pre-action letter was likely to achieve any of those objectives. On the facts, it was reasonable and proportionate to proceed without such a letter, and no sanction was imposed.
3. Interest. Interest compensates for being kept out of money rather than punishing the defendant: Carrasco v Johnson [2018] EWCA Civ 87. In equity it may be compensatory or restitutionary. A higher rate than the ordinary cost of funds was available in a knowing-receipt claim, but the appropriate rate here was 1 per cent above the Bank of England base rate. Because the relevant conduct involved dishonest appropriation, interest was to be compounded annually.
4. Bill of sale. The covenant to pay interest remained enforceable after release of the security interest. A party who signs a written agreement cannot resist enforcement merely by saying that its effect was not understood. No pleaded case of undue influence was available, and the contractual interest claim succeeded. The late, unpleaded registration argument was not considered; in any event, the interest agreement operated as a simple contract independently of the bill’s validity.
5. Costs and appeals. The claimant’s costs were ordered to be assessed in detail. The 40 per cent discount for his chaotic conduct applied only to any net balance due to him after cross-claims. Permission to appeal was refused on the proposed challenges to the main judgment. Amendments correcting the judgment were permitted under the jurisdiction confirmed in Re Barrell Enterprises [1973] 1 WLR 19. Indemnity costs were refused because the conduct did not meet the high threshold identified in Kiam v MGN (No 2) [2002] EWCA Civ 66.