Court Addresses Assessment of Indemnity Costs Following Breaches of Court Order

Citation: [2023] EWHC 321 (KB)
Judgment on

Introduction

In the recent High Court of Justice King’s Bench Division case of AB v Michelle Spicer ([2023] EWHC 321 (KB)), presided over by His Honour Judge Pearce, the court examined issues related to the assessment of costs on an indemnity basis following breaches of a court order by the defendant. The case serves as an example of how the courts address costs incurred due to a party’s behaviour leading to litigation and subsequent orders for committal.

Key Facts

The defendant, Michelle Spicer, faced a suspended committal order and an indemnity costs order due to breaches of a prior order by HHJ Simpkiss dated 26 July 2022. The specific details of the breach and resulting suspended committal order are not recounted within the provided summary but are deemed to be of a fairly standard nature within such proceedings in the King’s Bench Division.

Following disagreements regarding the costs sought by the claimant, Judge Pearce directed a detailed costs statement to be filed, to which the defendant could respond with written submissions. These submissions would allow the court to make an assessment of costs without a further hearing. The final judgement was to determine the appropriate costs on an indemnity basis.

The case reinforces several legal principles related to the assessment of costs:

  1. Indemnity Basis Costs: Under Civil Procedure Rules (CPR) 44.3, costs assessed on an indemnity basis do not allow for costs that have been unreasonably incurred or are unreasonable in amount; any doubt is resolved in favor of the receiving party.

  2. Guideline Hourly Rates: Judge Pearce referred to the importance of adhering to the ‘National 1’ Guideline Hourly Rates for calculating time costs unless a clear and compelling justification for exceeding these rates is provided. This principle was accentuated by citing Males LJ in Samsung Electronics v LG Display [2022] EWCA Civ 466.

  3. Conduct of Parties: The judge considered the conduct of the parties, particularly the defendant’s late admissions, which impacted the cost consequences.

  4. Reasonableness and Proportionality of Costs: The assessment covered various items of work, with specific attention to reasonableness and proportionality — key concepts under CPR 44.4 — in the context of time spent, work done, and fees charged.

Outcomes

The cost assessment led to several conclusions and adjustments:

  • The costs incurred by the claimant were subject to a degree of scrutiny, with reductions for work deemed excessive or not fully justified.
  • The judge allowed only a Grade B fee earner’s attendance at hearings, as opposed to both a Grade A and Grade B, to streamline costs.
  • Guideline Hourly Rates were applied as a cap on charges, following the ‘National 1’ band, rejecting any excess without adequate justification.
  • The final adjudicated cost figure was £28,839.80 net of VAT, totaling £34,454.56 including VAT, a precise quantification reflecting the principles discussed.

Conclusion

AB v Michelle Spicer exemplifies the court’s approach in holding parties accountable for the legal costs incurred due to conduct that necessitates litigation, particularly in the realm of contempt proceedings. The application of indemnity costs serves as a deterrence to breaches of court orders, upholding the principle that such conduct has significant financial implications. The judgement reiterates the requirement for legal professionals to provide clear justifications for inflated hourly rates and underscores the court’s commitment to a reasonable and proportionate assessment of litigation costs.