COSTS: THE FACT YOU CAN’T PAY MAKES NO DIFFERENCE: AN IMPORTANT LESSON FOR LITIGANTS

In Bridge -v- Daley [2015] EWHC 2121 (Ch) Judge Hodge QC (sitting as a judge of the High Court) considered submissions made in relation to a losing party paying costs.

THE CASE

The claimant sought permission to continue a derivative claim against for individual defendants and a limited company.  The judge dismissed the claimant’s application and then considered the issue of liability for costs.

THE JUDGMENT ON COSTS

JUDGE HODGE QC:
  1. Having delivered my substantive extemporary judgment I now inevitably have to deal with the issue of costs.
  2. I record that there has been no application for permission to appeal from Mr Bridge. Naturally he wishes to consider his position; but he is aware that it is open to him, without having asked me for permission to appeal, to approach the Court of Appeal directly, which he can do in an applicant’s notice to be filed within 21 days from today.
  3. So all I have to address now is the issue of costs. The normal rule is that costs follow the event, although the court may make a different order. One of the matters that has to be considered is the conduct of the parties. Mr Bridge submits that prior to his issue of these proceedings, he had engaged in considerable communication with the company, and the company and its directors had made no concessions to him, thereby making it inevitable that proceedings would follow. The company must therefore, he says, bear some of the responsibility for the resulting costs.
  4. Secondly, he makes the point that he did have the support of some other minor shareholders. It was not he alone who supported the continuation of a derivative claim. The court has found that he was not acting in bad faith. He emphasises that he was not seeking a direct benefit for himself, but was litigating for the benefit of the company and its shareholders and, as a result, it would be unfair for him to be penalised by an adverse costs order, or at least that the burden of that costs order should be attenuated.
  5. Thirdly, Mr Bridge relies upon his personal circumstances. He is 65 years old; his health is not too good; his income is limited. Although he has received an inheritance recently, he will need to support himself from that over the next five years until he can afford to draw down on a deferred pension. He does have a mortgage, but it is secured over his shares in the company. Moreover, he has two dependent relatives, and any adverse costs order will inevitably affect them as well as himself.
  6. Those considerations are relied upon both in relation to the substantive costs order and also in relation to the application by each set of defendants for a payment on account pending detailed assessment.
  7. In my judgment it is appropriate to order Mr Bridge to pay the costs of this litigation. He initiated this litigation; it has been unsuccessful. I really cannot see how it could have been avoided given the attitude that Mr Bridge has taken to pursuing a derivative claim.
  8. So far as the basis of assessment is concerned, I am invited to order the costs to be paid on the indemnity, rather than the standard basis, if not throughout the proceedings, at least since the hearing last October.
  9. In my judgment, it is clearly the case that Mr Bridge should pay the costs in the exercise of the court’s discretion, since he has been the unsuccessful party. True it is that he was seeking to bring these proceedings for the benefit of the company, but the court has held that that benefit should not be thrust upon the company against its will; and in those circumstances there is no reason why the company should have to bear the costs, both itself and through its indemnity to the directors, for Mr Bridge having pursued a course of action which the company did not want, and in respect of which the company’s position, and that of its directors, has been vindicated.
  10. So far as the basis of assessment is concerned, there is no proper basis for ordering indemnity costs before the 1 October hearing; but it does seem to me that, in the light of what has transpired since then, it is appropriate to order the costs to be assessed on the indemnity basis from 1 October. By that time, and with the benefit of legal representation, Mr Bridge should have seen that his claim was doomed to failure. He chose to dispense with the services of his legal representatives and continued to this hearing. As a result of failing to take advantage of the opportunity to engage in constructive dialogue, or limiting his claim, the costs of the January hearing were wasted; case management directions could have been given, up to a final hearing, on 1 October.
  11. But it goes further than that. It seems to me that after 1 October the continued pursuit of this application to continue a derivative claim took the case outside the commercial norm for cases of this kind and merits, in the exercise of the court’s discretion, assessment of costs on the indemnity basis. That of course does not give the receiving parties carte blanche in the matter; there must still be a detailed assessment, but it does mean that issues of proportionality disappear from the detailed assessment process after 1 October and, in the event of any doubt as to whether sums were reasonably incurred, that doubt will fall to be resolved in favour of the receiving rather than, as is usual, the paying party.
  12. So my order is that Mr Bridge should pay the costs of these proceedings, including all reserved costs because there is no reason to differentiate between them and any other costs; and that he should do so on the standard basis up to and including 1 October, but on the indemnity basis thereafter.
  13. As to the application for an order for an interim payment on account, by the new CPR 44.2(8) I am now required to order the paying party to pay a reasonable sum on account of costs unless there is good reason not to do so. Here, whilst I have sympathy for the personal circumstances of Mr Bridge and the possible impact upon his dependent relatives, the fact is that he has caused the company to incur costs, including the costs in respect of which it must indemnify the directors, as a result of his actions; and it does not seem to me that there is any good reason not to make an interim payment on account order.
  14. I should not order more than it seems to me will be allowed on a detailed assessment. As regards that, I must bear in mind the basis of assessment, including the fact that it will be on the indemnity basis after 1 October. Bearing that in mind, as against the figure (exclusive of VAT) for the individual defendants of some £110,000, it seems to me that the appropriate payment on account should be £50,000; and in relation to the company, as against a figure of £85,000, the appropriate figure should be £40,000.
  15. So I will order an interim payment on account to the individual defendants of £50,000 and to the company of £40,000. The normal rule is that that should be paid within 14 days. It seems to me that, given the amounts in question, I should, in the first instance, allow 28 days, which is twice the normal time. If Mr Bridge wants a further extension of time, he must apply to one of the Chancery District Judges on fuller evidence as to his financial circumstances and means.
  16. So that means that, since it is now 17 June, the interim payments on account will be payable by close of business on 15 July.

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