Mex Group Worldwide Limited v Adam Duthie & Anor

This is my further judgment on costs in this case about the use of confidential information by a solicitor, the first defendant (Mr Duthie) who is sued by his former client, the claimant (Mex) for breaches of his duties of confidence and wrongful retention of client documents. The second defendant (DCL) is a service company owned and controlled by Mr Duthie, through which he provided in house counsel services to Mex and its subsidiaries known as the MultiBank Group. Mex applied to strike out part or all of the defence and counterclaim and / or for summary judgment.

I handed down my reserved judgment on 5 June 2025: see [2025] EWHC 1360 (KB). I dismissed the application, except that I granted Mex’s application for summary judgment on the claim for destruction or delivery up of documents and confidential information wrongfully retained. I adjourned the question of the claimant’s remedy for that wrongdoing until the end of the trial or further order. Mex accepts that the defendants were the mainly successful party, but the parties disagree about what orders in respect of costs are appropriate. They made written submissions on costs.

The defendants seek their costs of the whole application on the standard basis, to be subject to detailed assessment if not agreed; save that, they submit, the costs of a hearing listed for 18 and 19 March 2025, adjourned at my initiative (the adjourned hearing), should be in the case. They seek a payment on account of £122,000 (Footnote: ¹), i.e. 70 per cent of £174,000, the costs (excluding costs of the adjourned hearing) in their updated costs schedule. They do not accept any discount to reflect the success of the claim for wrongful retention of confidential information.

Mex seeks its costs of the adjourned hearing on an indemnity basis, with a payment on account of £49,700. Mex says it should pay (on the standard basis) only 60 per cent of the defendants’ costs, other than of the adjourned hearing, the discount reflecting the defendants’ only partial not full success and the weakness of parts of their defences to the claim, on which I commented towards the end of the main judgment. Mex objects to a payment on account at the level sought objecting to some claimed items and suggesting 50 not 70 per cent. It suggests it should pay £40,500, with mutual set-off.

The submissions of the defendants can be summarised as follows:

Mex’s arguments were set out in a letter of 4 June 2025 commenting on the then draft judgment and consequential matters, with a schedule stating concerns about the amount claimed in the defendants’ costs schedule. Those submissions were then amplified in written argument from counsel. I paraphrase them thus:

I will deal first with the costs of the adjourned hearing, which both sides invited me to treat separately, in very different ways. I should start with a mea culpa, as I did when the parties appeared before me at 12 noon on 19 March 2025. As I said then, I am sorry that I made what turned out to be a wrong call since the settlement negotiations failed. In mitigation, I had reason to hope that adjourning to the second day would promote settlement not just of Mex’s application, but of the action as a whole.

That seemed to me a prize worth pursuing. A trial of the action, should Mex’s application fail, would by all appearances be (as Mex submitted in strong terms) burdensome and expensive. An adjournment would also spare a much needed day of the court’s resources, rather than spend the day hearing argument I thought would soon become academic. It is correct that, costs apart, the parties were very close to agreement. As I said at the time in an email, the remaining differences were ones of drafting which, I thought, could be easily overcome.

Next, I reject Mex’s extravagant contention that the defendants cynically misled the court and their own and Mex’s lawyers, to manufacture an adjournment on the second day, 19 March 2025. There are several reasons why I decline the invitation to draw that inference. First, it is unreal to suppose the defendants misled their own lawyers. They are not naïve people. Second, the defendants’ lawyers seem to me reasonable people doing nothing worse than fighting their clients’ cause with vim and vigour, as Mex’s legal team have also done, in this rather heated litigation. Their professional competence should not be lightly impugned; still less their integrity.

Third, the defendants could not have been aware that the court would of its own motion adjourn the first day of the hearing. They had to react to that and decide quickly what positions to take in the settlement negotiations in which costs remained the real obstacle. Fourth, they are likely to have considered that they held the upper hand in negotiating a substantive settlement because the merits of the application were obviously weak (as time has proved) and because Mex was showing willing to settle the whole action, having already withdrawn from the fray in Scotland. The defendants therefore had good foundations for driving a hard bargain.

Fifth, however, they had to assess and react to Mex’s steadfast refusal to pay any of their costs as part of an overall settlement. The inference I draw is not one of bad faith in the negotiations or of attempting to mislead anyone, but of an increasing consciousness on the defendants’ side that my idea of a “costs only” adjudication on the second day was not going to work. The inexorable logic of a costs only adjudication is that some assessment of the merits is either accepted as between the parties or made by the court, in order to determine where costs should fall.

I should have realised sooner that a costs only adjudication would not work, but that is not the fault of either side. I do not find it unreasonable that, faced with that position, the defendants should change their mind settling the action as a whole and withdraw their willingness to do so, having failed to persuade Mex to pay or at least contribute to their costs. There was then not time on 19 March to hear full argument on the merits of the application in a single day and an adjournment was therefore needed.

I find no reprehensible conduct on the part of the defendants or their lawyers. Their stance, moreover, has been vindicated by the outcome. For those reasons, the costs of and occasioned by the adjournment of the hearing on 18 and 19 March 2025 will be costs in the case. I appreciate that some of those costs may not be easily seperable from the main costs of the application, to which I am coming next. But I think it is the right order to make and that attribution or otherwise of items of cost to the adjournment of that hearing will have to await detailed assessment, if it cannot be agreed.

I come to the costs of the application. The defendants’ overall figure of £174,000, excluding the costs of the adjourned hearing, is not obviously excessive for a two day strike out and summary judgment application of this kind. This is hard fought litigation with high stakes, where very serious allegations of fraud and deception are being made by both sides. Mex’s costs for the same exercise are at least as high, making due allowance for the point that a claimant will generally incur higher “front loaded” costs.

Both sides accept that the defendants have been the mainly successful parties. I would not make any reduction on account of the perceived weakness of the arguments about a duty of disclosure, de minimis disclosure, or waiver of privilege. Those issues were found fit for trial in the context of the stronger iniquity arguments. Mex knew that the weaker arguments arose in the context of the iniquity arguments and failed to defeat the defendants summarily on the weaker issues.

I do think a reduction is appropriate on account of Mex’s success on the summary judgment application regarding wrongful retention of property, i.e. documents and confidential information. Adopting a broad brush approach, I think the appropriate reduction is 25 per cent. I would have decided upon 20 per cent, but I adjust the reduction modestly upwards by a further 5 per cent because I was troubled in the application by the point that Mr Duthie used the wrongfully retained documents to found his successful resistance to the summary judgment and strike out application.

As for the amount of the payment on account, there may be merit is some of Mex’s points disputing individual items of cost, to the tune of just over £19,000. However, I do not need to form a firm view on the recoverability of those disputed items, as that is a matter for detailed assessment and I do not wish to pre-empt any arguments at that stage. The possibility of reduced recoverability is taken into account by reducing the amount of any interim payment by a reasonable percentage, in the usual way. I therefore start with the defendants’ baseline figure of £174,000.

I reduce that by the 25 per cent discount, leaving £130,500. I think the appropriate payment on account is 70 per cent of that figure which balances uncertainty of future recoverability against the receiving party’s present out of pocket position. It is the amount which Mex secured as an interim payment percentage on the occasion in this litigation when it succeeded in defeating the defendants’ application to vary certain undertakings given voluntarily pending the trial of the action. I will therefore order Mex to make an interim payment of £91,350.

In conclusion, my order accompanying this judgment reflects the following decisions in respect of the costs of the application:

If the action is to proceed further, the parties should restore the matter before the Master for the purpose of further case management and directions for trial. I conclude by thanking the parties for their helpful written contributions.