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Costs are open to significant reductions even when costs are ordered on an indemnity basis



Costs are open to significant reductions even when costs are ordered on an indemnity basis

In the case of Louis Dreyfus Company Suisse S.A. v International Bank of St Petersburg (Joint-Stock Company) [2021] EWHC 1039 (Comm) Mr Justice Calver was asked to determine the amount of costs to allow on a summary assessment when the court had ordered an indemnity basis assessment. The claim for costs related to a request for an anti-suit injunction where it is usual practice for an indemnity basis award to be granted.

In his assessment of costs Mr Justice Calver concluded that the amount of costs claimed was unreasonable, particularly given that the costs related to three applications which were not opposed, and he referred to CPR 44.30 and CPR 44.4:

“CPR 44.3 and 44.4 provide that where costs are to be assessed on an indemnity basis, the court (1) will not allow costs which have been unreasonably incurred or are unreasonable in amount; (2) will have regard to all the circumstances in deciding whether costs were unreasonably incurred or unreasonable in amount; and (3) will resolve any doubt which it may have as to whether costs were unreasonably incurred or were unreasonable in amount in favour of the receiving party (“the receiving party presumption”).”

He also referred to the case of Kazakhstan Kagazy plc v Zhunus [2015] WEHC 404 (Comm) in his assessment. In this case Mr Justice Leggatt was asked to determine an appropriate amount for a payment on account of costs pursuant to CPR 44.2(8). On this occasion the total claim for costs was much less than the claim value and the Judge considered the costs claimed to be unreasonable. He found that parties should expect to only recover the lowest amount of costs which could reasonably have been incurred, whether or not they had, in fact, reasonably incurred higher costs than that. It was considered that costs over and above this should not be recoverable from the other party. He commented that “the touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances”.

The Judge adopted Mr Justice Leggatt’s approach and ordered that the costs be reduced from £292,066 to £200,000, which resulted in the statement of costs being cut by almost a third.

It is helpful to bear in mind that although parties are entitled to incur the amount of costs they choose advancing their claim, it is not an automatic entitlement that all of those costs will be recovered from the other side, even when an indemnity basis award has been secured.

Sue Fox is the Head of Costs Management at A & M Bacon. You can contact her on 01733 359036, or by email to Sue.Fox@aandmbacon.co.uk

Published 29 April 2021

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