Phaestos Ltd & Anor v Ho (Costs)

The claimants issued their application for summary judgment and/or for striking out of parts of the defence and counterclaim on 20 January 2012. In one respect, they have succeeded, without any argument as a fortnight later the defendants conceded defeat. That relates to a claim put forward by the claimants and a counterclaim put forward by the defendants in relation to an equity share and a higher profit share which Dr Ho and Dr Gover had suggested and indeed they eventually pleaded that they were entitled to an equity share in an IKOS company or in the IKOS group. The Claimants seek costs on an indemnity basis, it being accepted that they should have their cost on a standard basis.

I am not going to go into the background of the dispute, but it is accepted that, when proceedings were commenced in 2009 here against Dr Ho, he put forward a case that he was entitled to an equity share in one or other of the claimant group companies and at that stage, Dr Gover had not been involved in any English court proceedings, although I am told, and it is not disputed, that it had been raised in correspondence.

So when the time came for consolidated pleadings to be put forward, the claimants sought, in effect, to anticipate what Dr Gover might say in pleading form and what they knew Dr Ho was already putting forward in relation to the right to an equity share. So between paragraphs 51 and 53 in the consolidated Particulars of Claim (which runs to 61 paragraphs), the claimants put a case relating to what happened in 2007. They pleaded that in the course of 2007, Mr Ho and Mr Gover each entered into discussions with IKOS CIF regarding, amongst other matters, whether he would receive any bonus and whether he would be given any ownership stake in any of the companies in the IKOS group. Those discussions did not result in any agreement. Further, or alternatively, even if, which is denied, there was any agreement, there was no consideration for any such agreement. Paragraph 53 stated:

In the consolidated Defence, starting at about paragraph 16 in the case of Mr Ho and paragraph 31 in relation to Mr Gover, the history of the employment, as put forward by them, is set out. There is, interspersed with references to an equity share or a share in the equity, the remaining case, which is a profit share. That claim remains in the proceedings. At paragraph 23 through to paragraph 25, for instance, and it is much the same in relation to Mr Gover, the defendants plead that not only was there going to be a share in another IKOS company, a company to be called IKOS LLC, but also that there was an entitlement to a share as well.

Discussions and e-mails relied on and pleaded by the defendants in this context cover a very short period of time, some six or seven days between 19 and 25 April 2002. The pleaded case is that the meaning and effect of promises orally given and/or confirmed in e-mails was that Mr Ho and Mr Gover were to be entitled to a 9 per cent share in the equity of the profit earning IKOS vehicle, whatever it might be, and that Mr Ho was to be given a 25 per cent equity interest in any new IKOS research vehicle. As I said, interspersed in there are claims in relation simply to profit share. In relation to paragraph 51 to paragraph 53 of the consolidated Particulars of Claim, paragraph 167 of the Defence effectively admits that there was no agreement in 2007 but what is said is that all that happened during 2007 was an attempt to confirm or to record what had been agreed in 2002; save in those respects, paragraphs 51 to 53 are denied. In the Counterclaim which follows a few paragraphs later, in fairly short order, the defendants plead by reason of the matters aforesaid that they were entitled to shares in the profits and also they pick up reference to a 12 per cent equity interest or equity share in the IKOS group.

That is dealt with to some extent, at least, in the Reply and Defence to Counterclaim. I am not going to set that out. It has not been referred to in argument, but the version of events put forward by Doctors Ho and Gover is challenged in the Reply and apart from clear challenges to the equity basis of claim, for instance, paragraph 100.3 pleads that no proper basis is pleaded for any such equity share and that this allegation is liable to be struck out. I refer also to the fact that exactly the same is said in relation to the profit share which still remains in.

So it is that the strike-out summary judgment application was issued and within a fortnight the defendants were making it clear that they were withdrawing or discontinuing the claim to an equity share. Thereafter, fortunately, for the court at least, that was not one of the things it had to rule on when matters came before it in late February and then on three or four occasions in March.

I am not going to set out the detailed references to the law on the imposition of indemnity costs. It is accepted, as I understand it, that there must be something which, in broad terms, takes the case out of the norm. It does not require necessarily moral condemnation and reference has been made particularly to Lord Justice Waller's judgment in Excelsior v Salisbury and to a paragraph in His Honour Judge Coulson QC, as he then was, his judgment in Wates Construction Ltd v HGB. Mr Tozzi relies upon general authority, adumbrated in the Civil Procedural Rules, in particular the notes at 44.4.3, which, I hasten to say, also address the Excelsior case as well; in particular, he relies on what is set out on page 1339, in the fourth and fifth paragraphs which should simply be taken as read.

I have formed the view that this is not a case for indemnity costs. Certainly it is agreed that there should be an order for standard costs. The factors I take into account are that, first of all, until the claimant made its pleading in its consolidated pleading against Dr Gover about this, it had not been raised by him in any pleading before, albeit that it had been raised by Dr Ho before.

It was perfectly legitimate for the claimant to raise it positively in the consolidated Particulars of Claim. The case that they put in their consolidated Particulars of Claim identified the fact that there was nothing which happened in 2007 which gave rise to any entitlement to an equity share. That, in substance, was never in issue. What was more in issue was whether what happened in April 2002 gave rise to any obligations. So the claim as put by the claimants does not seem to have been one that was ever particularly adumbrated by either of the defendants. That is the second factor.

The third factor is that I do not see that this is particularly out of the norm. Of course parties put forward claims or defences, some of which may be weaker than others, and when a stand is taken by one side, a summary judgment application may be issued, as here. Within a reasonable and short period of time, the defendants decided, properly (and no one is suggesting anything otherwise) that it was not worth pursuing. A detailed witness statement was perfectly properly submitted by Mr Wayne. It is his sixth witness statement, dated 20 January 2012, which had a number of exhibits attached to it; at some length (and no criticism is made of the length that he took) he analyses first of all what the defendants' pleaded claims are and then sets out why, in his view, and no doubt his client's view, there is no entitlement. This goes into much more detail than the pleading does and this is effectively the third point. It goes into issues of uncertainty and that any promises, if made at all, lacked any consideration. It sets forward substantial and, ultimately, the defendants accepted, good arguments as to why the claim in relation to the equity was not sustainable. It seems to me that when the argument was put in the way that Mr Wayne puts it, the defendants legitimately considered their position and decided that it was not worth pursuing.

It is important to have regard to the fact that when a substantial or significant part of a party's case fails at the stage of summary judgment, that certainly does not necessarily or automatically warrant an award of indemnity costs. Even more so, this could be said, where the defendant as in this case facing the application for summary judgment and strike-out formed the view well before the hearing of the applications by the claimants that this particular aspect of the case or defence was not to be pursued. It therefore seems to me that, for that reason also, it is not appropriate to make any award of indemnity costs.

There are various other grounds relied upon by the claimants: one is that there has been an unwarranted attack on Miss Ambrosiadou personally and the claimants generally. That is based on some limited paragraphs in the consolidated Defence and Counterclaim which have not been, as I understand it, abandoned by the Defendants. For instance, paragraph 6, relied upon by Mr Goulding QC as supporting this assertion, does refer to many promises being made to the defendants regarding having an interest in the IKOS group and an entitlement to a profit share; I quote this from the pleading:

I do not see that these contain a particularly or indeed any personal attack. It refers to Miss Ambrosiadou and it may or may not be in issue whether Miss Ambrosiadou played any part in the procurement of the dismissal of the defendants. That may still emerge, whether she did or she did not, but it remains in the pleading and it is as relevant, if relevant at all ultimately, to all the other defences and claims which Doctors Ho and Gover put forward. Although it does refer to the equity share in effect in passing, it does not seem to me to be something which will begin to justify indemnity costs, particularly since it remains in the pleading.

I have dealt, in effect, with the third ground put forward by Mr Goulding QC, that the defendants abandoned their defence to the claimants' claim. It is said that the claim for an equity share and 12 per cent profit share was doomed to fail on the facts and on the law which was known or ought to have been known to the defendants. I have already addressed this effectively in passing. Mr Wayne's doubtless very helpful statement, his sixth statement, provided additional evidence and primarily argument as to why the claim for an equity share was likely to fail. I am not prepared to find or infer, on what I have at this stage, that the defendants knew or ought to have known that this particular claim was doomed to fail. I think that is putting it much too high. So it will be costs on a standard basis.

I now turn to the question of whether there should be a summary assessment on the claimants' costs on a standard basis. The total costs bill submitted by the claimants is £165,733.50, and contrary to the suggestion at the head of this summary costs bill, this is not a general “claim for costs of work relating to the defendants' discontinued equity and 12 per cent profit share claims”. I am assured by Mr Goulding QC on behalf of the claimants that it is limited to the period beginning with the time when the summary judgment application was first contemplated, that is since 5 August 2011, and it covers only the costs of and occasioned by the claimants’ application relating to the eventually conceded equity and 12% profit share claim.

I have to say that I regard this bill on that basis as, on its face, enormous. In the light of Mr Goulding’s explanation, doubtless on instructions, I am presuming, since there is no claim in this costs bill now in relation to the claimants' solicitors' and counsel's original work in dealing with Dr Ho's allegations in his pleadings in 2009 and 2010 and obviously nothing in relation to Dr Gover either, that if £165,000 was spent from that stage up until pretty well the time that the application to strike-out or summary judgment was issued, it just, on its face, seems to be a wholly and disproportionately enormous sum.

I find myself in a very real difficulty in those circumstances to proceed by way of summary assessment, particularly on a standard basis. When one looks at Mr Wayne's sixth statement, what there has undoubtedly been done is an analysis primarily of the pleadings and the specific documents referred to in the pleadings. Thus, the effort involved that analysis which is fairly limited and it did not need to involve any large ranging analysis of or investigation into the pre- or post- 2002 period. I cannot see that, if and as the exercise was based on an analysis of the pleading by reference to the documents referred to in the Defence and Counterclaim, in the context of this was being a part of the defendants’ case which should be struck out or on which there should be summary judgment, I am just not in a position to deal with this cost bill just on its face. £165,000 appears, frankly, to be a ridiculously large sum of money for this exercise. Having said that, I am not saying that it is not capable of proof, but where one has such a very, very large claim for summarily assessed costs and where the court has very severe reservations about it, as I do, this is not an appropriate case for summary assessment. That said, it does seem to me that it is likely to be the case that reasonably the claimants will have spent time with their solicitors and counsel reviewing the equity and higher profit share claim to decide whether or not it could be the subject matter of a strike-out application.

I am also somewhat concerned by the form of the schedule of costs, of which is said this:

Very little detail is given on the face of the summary bill and, although Mr Goulding, on instructions and based on what he knows, has sought to assist, I think it would be very dangerous, as I said, to assess summarily. Just doing the best I can, it seems however, that a safe allowance by way of interim payment of costs is £40,000 and, subject to any other order I may make today about other interim payments of costs or summary assessments, that is a credit which will be payable by the defendants to the claimants within 14 days. Otherwise, it will go to a detailed assessment on a standard basis.

The question arises now as to what costs should be payable by the claimants in respect of the strike-out application, upon which they lost, and the security for costs application, upon which they lost. This is something which the Court is able to deal with by way of summary assessment, unless the costs put forward appear to be so out of kilter with what the Court might expect that it is inappropriate to make a summary assessment. I do not think that either side is suggesting that, at least on these two costs bills.

In relation to the defendants’ costs for the striking out upon which they succeeded, as near as makes no odds, they total £98,000. The first point made by Mr Goulding QC is that in relation to what are called the DPA arguments (because, ultimately, one of them, the claim against CIF, was effectively dropped and others were cured by late draft amendments) that should be reflected in the costs assessment, i.e. a proportion of the costs allowance which in principle he accepts the defendants are entitled to. He suggests a reduction of 25 per cent to allow for the claimants’ and the defendants’ costs of the issue.

I am of the view that he has a reasonable point to make but that a reduction of 25 per cent is by far too much. The large part of the applications were concerned with seeking to strike out the surveillance claims. That was what was left and so far as the claims in relation to DPA, it is and was quite clear that they could be relatively easily resolved by relatively simple amendments. Certainly time was spent by the parties in argument or in written argument at least about this, but this was something which, if there had been a level of co-operation between the parties, could have been resolved by agreement and at least without prejudice discussion leading to agreement; but that is not the way of things so far very much in this case.

I do not think that it was particularly clear from Mr Wayne's witness statement, which supported the strike out on this, as to the basis on which the strike-out was sought. It was certainly clarified in a good amount of detail by Mr Goulding QC in his written submissions and it is clear that, when those were exchanged shortly before the hearing, they were taken on board by the defendants and the case redrafted to preserve a case at least in part under the DPA.

But time and costs were spent by both parties considering that and it does seem to me that it would be inappropriate, therefore, for the defendants to have 100 per cent of their costs. Doing the best I can (and it is difficult on the available information) I can not see that a reduction of more than 10 per cent would be reasonable or fair in this case. That reflects not only the amount of time and effort which the claimants have put into dealing with the point but also that which doubtless the defendants put into dealing with the point.

The overall bill is therefore to be reduced from £98,000 by 10 per cent, which I will round up to £10,000. So it comes down to £88,000.

A number of points have been made on the summary assessment by Mr Goulding QC. It is suggested that too much time may have been spent here and there, but it seems here that the overall bill is not obviously an excessively high one; it does seem to me that, based on the number of points that have been made, a reduction of 30 per cent would reflect the sort of things which would be picked up by a costs judge on a standard assessment. It is difficult always to work out on a summary bill each and everything which should fall to be reduced but certainly the attendance of, from time to time, five solicitors at the hearing dealing with this may be considered the sort of point which would attract the attention of the costs judge and certainly has attracted my attention. Here and there I have absolutely no doubt that a detailed assessment would reduce the overall figure.

The summary assessment will be 30 per cent off £88,000, £61,600.

So far as the security for costs is concerned, the total costs claimed by the successful defendants in respect of that are £54,178. Mr Goulding QC seeks to challenge the summary assessment on the basis, for instance, that attendance on clients of some ten hours was not justified, that too much time was allocated to attendance by solicitors and that there were too many solicitors at the hearing. There may well be something in those points. He also points to 29 hours being booked by Mr Fisher, an assistant Grade B solicitor, for work done on documents and other work not covered by other matters. They may all be good points, but it does seem to me that they are all encompassed by a general reduction of 30 per cent on the bill of £54,178. It does not seem unreasonable for there to have been some attendance on clients, particularly in relation to matters impacting on practice in Cyprus which were raised and I do not think that it would have been unreasonable for at least two solicitors to attend the hearing on the security application.

30 per cent of 54,000 is 37,924. I will round that down to £37,900. Those should be payable within 14 days.