Campaign Of Vengeance Results In Award Of Indemnity Costs

Issues to be decided

The main costs issues the court had to decide were:

1. Whether the general rule that costs follow the event should apply
2. Whether costs should be awarded on the indemnity basis
3. The appropriate amount for a payment on account of costs

Parties’ positions

The claimants:

• Argued they were the successful party in the proceedings, having succeeded on all claims and in obtaining an ECRO
• Contended that the defendant’s conduct warranted an order for indemnity costs
• Sought a payment on account of costs of £288,344.50, representing 50% of their claimed trial costs

The claimants based their arguments on the following:

• CPR 44.2(2)(a), which establishes the general rule that the unsuccessful party pays the costs of the successful party
• The defendant’s conduct throughout the proceedings, including breaches of court orders and unmeritorious applications
• The principle that indemnity costs are appropriate where a party’s conduct takes the case “out of the norm” (Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879)
• The guidance in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) regarding payments on account of costs

The defendant appeared in person. She:

• Disputed the level of the claimants’ costs
• Argued her inability to pay any costs orders
• Contended that the payment on account should be proportionate to previous interim costs orders

The defendant’s arguments were primarily based on:

• Her financial circumstances and inability to pay
• A comparison with previous costs orders made in the case, particularly the £15,000 payment on account ordered by Chamberlain J after a two-day hearing

Decisions and Findings

The judge’s decision on costs followed a comprehensive analysis of the parties’ positions and the relevant legal principles. She began by addressing the general rule on costs:

“The Claimants are plainly the successful party in these proceedings: the Defendant’s strike out/summary judgment application has been dismissed and certified to be totally without merit; the Claimants’ claims have succeeded in full; and the Claimants have succeeded in ensuring that an ECRO will be made against the Defendant for 3 years.” [191]

The judge then considered whether there was any reason to depart from the general rule:

“I cannot see that there is any basis to depart from the general rule CPR 44.2(2)(a) that the unsuccessful party will be ordered to pay the costs of the successful party. The only points the Defendant made in costs submissions related to the level of the Claimants’ costs and her inability to pay any costs orders. Neither of these provides a reason to depart from the general rule in CPR 44.2(2)(a).” [192]

Moving on to the issue of indemnity costs, the judge found that such an order was justified:

“Further, in my judgment the Claimants are entitled to their costs on an indemnity basis for three reasons.

“First, the Defendant’s conduct has been such as to take this case “out of the norm”: Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879 at [19] and [39]

“I accept the Claimants’ submission that underlying conduct by the Defendant which obliged them to bring their claims was “extraordinary”. In addition to the nature of her conduct which I address further at [198] below, her substantive defences were plainly lacking unmeritorious. Her defences to the breach of contract and confidence claims – primarily her assertions over a lack of authority, the assertion of the forgery of her employment contract and the suggestion that the material in question was not confidential and/or she was permitted to use it as she did – were not only lacking in substantive merit but had in part already been determined by the Employment Tribunal. I have roundly rejected her defence of “humour” to the harassment claim.

“Moreover, the Defendant has repeatedly shown a disregard for the overriding objective and the authority of the court by breaching numerous court orders and making unmeritorious applications. She has deluged the Claimants’ legal team with abusive and threatening communications which has affected the Claimants’ ability to conduct these proceedings properly and in accordance with the overriding objective and let to them incurring potentially irrecoverable costs: see, further, [2024] EWHC 2641 (KB) dated 18 October 2024 at [24]-[25].

“Second, the Defendant’s admitted campaign of “vengeance” against the Claimants was intended to cause, and has caused, significant loss to the First and Second Claimants and considerable suffering to the Third and Fourth Claimants. This is conduct deserving of moral condemnation. Such conduct is a good indicator that indemnity costs are appropriate: Three Rivers District Council v Bank of England [2006] EWHC 816 (Comm); [2006] 5 Costs LR 714 at [25(3)].

Regarding the payment on account of costs, the judge accepted the claimants’ proposed amount:

“A payment on account of approximately 50% of the claimed costs where costs are to be assessed on the standard basis is often made: see, for example, German Property 50 Sarl v Summers-Inman Construction & Property Consultants LLP [2010] BLR 179 at [12]. Here, A payment on account of approximately 50% of the claimed costs where costs are to be assessed on the standard basis is often made: see, for example, German Property 50 Sarl v Summers-Inman Construction & Property Consultants LLP [2010] BLR 179 at [12]. Here, the total costs figure will be higher than the figure given at [203] above and the costs will be assessed on the indemnity basis. For these reasons, the amount sought by the Claimants for a payment on account of £288,344.50 (that being 50% of the trial costs element of the figure at [203] above) is entirely reasonable.the total costs figure will be higher than the figure given at [203] above and the costs will be assessed on the indemnity basis. For these reasons, the amount sought by the Claimants for a payment on account of £288,344.50 (that being 50% of the trial costs element of the figure at [203] above) is entirely reasonable.” [204]

The judge rejected the defendant’s argument for a lower payment on account:

“I respectfully disagree. It is clear from the transcript of the discussion on costs that the Claimants’ costs schedule for the hearing before Chamberlain J reflected costs at a very much higher level and that they simply made a pragmatic decision to limit their application for a payment on account to £15,000.” [205]