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Court will (generally) not revisit matters relating to conduct of a case on assessment

The recent judgment in Andrews v Retro Computers Ltd [2019] provides some clarification on conduct issues raised following a provisional costs assessment. Our Susie Power, Costs Consultant, takes a look.

The judgment in Andrews deals with an application for partial or total disallowance of the Claimant’s costs pursuant to rule 44.11 (1)(b) of the CPR: “the court may make an order under this rule where it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper”.

Background of the parties:

The two Claimants, Paul Andrews and Christopher Smith, were shareholders and Directors of the First Defendant (Retro Computers Limited) with the Second (David Levy), Third (Suzanne Martin), and Fourth (Janko Mrsic-Flogel) Defendants all being Directors and/or Consultants to the First Defendant.

Relevant background of the case:

Following a dissolving and close to toxic relationship, which continued during litigation, the Claimants applied for injunctive relief two days ahead of a forfeiture date regarding their shares in the First Defendant. The application related to claims of harassment, defamation, intimidation, and other such matters (the ‘Conduct Issues’). The Defendants then had to deal with the matter at very short notice which involved them having to instruct new solicitors due to their original solicitors not having capacity to deal with the matter due to time constraints. The matter was dealt with by Proudman J and the court was noted as not being impressed by the Defendants not having adequate notice of the application, with costs being reserved. Following this, two more hearings took place with the final hearing taking place on 9 February 2017 where an issues-based order was made which required the Defendants to pay costs generally, but with the costs of the conduct Issues (and one or two other issues) being the Defendants.

The Defendants served an application following provisional assessment of the Claimant’s costs to have the assessment revisited due to conduct issues not taken into consideration at the original provisional assessment. The Defendants had been acting in person and were unaware that the conduct issues were to be raised prior to the provisional hearing rather than following it. The application was allowed, and the parties were then represented at the hearing by Counsel.

The Defendants filed Particulars of Allegations, which were later amended, that detailed a history of the First Claimant lying in witness statements to the police and court, hacking emails to and from the First Defendant, as well as abusing his position as Managing Director of the First Defendant. The Defendants used the aforementioned behaviours as being unreasonable for the purposes of CPR r 44.11(1)(b).

The burden of proof lies with the person alleging misconduct (see Gempride v Bamrah [2018]) and the terms unreasonable and improper are noted to be very narrow as detailed by Hickinbottom LJ in Gempride. Unreasonable was noted to be that which had no reasonable explanation, and improper related to the consensus of professional opinion and what they would regard as improper. Hickinbottom LJ also stated that there need not be a loss as a result of the misconduct. The costs sanction was intended to mark the court’s disapproval of the failure of a party or of a legal representative to comply with his duty to the court. However, the important issue to note here was that the misconduct in Gempride took place during costs of assessment, whereas in this case the conduct issues took place during the substantive matter.

Longmore LJ made it clear that the power to disallow costs was limited to costs that were incurred as a result of the conduct (see Haji-Ioannou) and the changes to the CPR in 2013 have not changed this.

Friston DM, upon hearing the parties in this matter and considering the CPR and precedent (previously mentioned above), dismissed the Defendant’s application.

So, what did we learn from this case:

1. Conduct issues which have been raised during the substantive matters, and dealt with in court orders, are not to be raised again in costs assessment.
2. Conduct issues can be raised in relation to behaviour before or during proceedings, as well as during assessment proceedings.
3. It is a very narrow line upon which any conduct issues can rest so that the full impact of CPR r 44.11(1)(b) will apply.

Should you have any queries regarding potential conduct issues during the substantive matter or costs of assessment, contact PIC today and we will be happy to help!

Susie Power – Costs Consultant

18.09.19