England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
MERCANTILE COURT

		No. LM-2017-000012 Rolls Building
		16th June 2017

THE JUDGE:

1. What is listed before me today are applications to vary a costs order on the standard basis, which is included in a discontinuance, so as to provide that the defendants to this action be entitled to their costs on an indemnity basis. Those are the applications that I came here ready to hear. At the eleventh and a half hour, I was informed that Miss Allen would appear on behalf of DAS, who are the after-the-event insurers for the claimant/liquidator, so they are not, therefore, currently a party. Her instructions, given to her also very late in the day - and she was very fairly admitting not on the fullest and most complete basis - were to ask for an adjournment on the basis, not that she yet had instructions for DAS to apply to become a party, but on the basis that DAS had some authority from the claimant to act, though no document embodying that was put forward. She, therefore, appeared quasi on behalf of the claimant and DAS, so far as necessary.
2. The arguments which she has put forward on the basis of the limited instructions that she has been able to get are that an adjournment should be permitted in this case because the claimant has been unrepresented and has been unable to put together evidence to place before the court in relation to this application, in circumstances where indemnity under the insurance was withdrawn on 22^nd February, and, while DAS acknowledges some form of liability to pay, they want an opportunity to decide whether to apply to be joined and to respond effectively on behalf of the claimant.
3. The application was, unsurprisingly, opposed by counsel for the first, second and third defendants. A number of arguments were deployed before me which overlapped somewhat. The point which was made was that the claimant in this case is not a helpless litigant in person, but is, effectively, under the stewardship of an experienced professional liquidator, who has been in conduct of the original litigation, who personally served notice of discontinuance back in February of this year, put himself as an address for service on discontinuance of solicitors acting and was duly served with relevant correspondence.
4. I have been taken to a good deal of correspondence, which makes it perfectly clear that, very shortly after the notice of discontinuance was served, notices were given both by the first and second defendants on 3^rd March and by the third defendant on 10^th March, that they considered that they were entitled to indemnity costs and, if indemnity costs were not agreed, they would make an application in that regard.
5. The claimant has therefore had notice of the intention to apply for indemnity costs, if it was not agreed, since early in March. I have also been shown documents which disclose that DAS was on notice of this application at least three months ago. There have been repeated chasers regarding costs. This matter has been listed for over three weeks; the claimant, in fact, has known that the hearing has been scheduled today for a very considerable time, because the PTR in the original trial had been arranged for this date and this has, effectively, been utilised as a date which was already in the diary. There have been proposals which were made in the correspondence in relation to directions for evidence and there has been no response to that; and the applications when made were notified promptly both to the claimant and to DAS. DAS, for example, were notified on 30^th May; that is 17 days ago. So the company itself, through its liquidator, has been on notice both of the intention to apply for indemnity costs and of the intention to have a hearing, to have a formal application and of the date of the hearing for a considerable period of time. DAS has also been on notice for a considerable period of time. No reason has been given for an application for an adjournment, save that, effectively, the claimant is unrepresented and that there has been, effectively, some desire to participate in the litigation very recently.
6. So far as the claimant is concerned, I do not accept the contention that the claimant is, effectively, helpless. He is a professional liquidator who is experienced in matters of this sort and he could have appeared in person, if necessary. He could certainly have dealt with the matter in correspondence and raised issues as to timetabling or the need for an adjournment and why an adjournment was needed earlier. DAS, similarly, are not litigants in person. DAS and QM Costs, to whom they have deputed the negotiation of costs in this case, are professionals who do deal with ATE insurance and costs, and hence court procedures, for a living.
7. In relation to all of the "claimant side" parties, it seems to me that there is no excuse for the lateness of the raising of this question of an adjournment. It is absolutely plain that they have been given plenty of notice and that it was perfectly possible for them to have responded sooner. DAS could have applied to be joined. DAS and the claimant could have put their heads together to see how to deal with it. As it is, all I am faced with is a bare application for an adjournment, no indication as to whether DAS would apply to be joined and, if so, on what basis, no indication of what evidence is sought to be put in, no skeleton argument as to the basis on which the adjournment is sought. In effect, I am asked to grant an adjournment in vacuo.
8. There is no sensible explanation for what purpose the adjournment is required. Let me make it clear, I do not blame Miss Allen for this, because she has been in a very difficult position and she has done the very best that she can. However, bearing in mind the overriding objective in relation to the progress of litigation in these courts and the circumstances of this application, I am quite satisfied that this is not an appropriate case for an adjournment. Insofar as Miss Allen has locus to make the application and has been allowed to make it or has been allowed to make it de bene esse, I refuse it.
LATER
9. This is the hearing of applications by the first, second and third defendants to vary an order that the claimant pays the defendants' costs on the standard basis, the variation sought being that the claimant should pay the costs on an indemnity basis. The defendants are also seeking payment on account of that costs liability.
10. The background to this hearing is that it was initially listed as a PTR prior to a trial, which was scheduled to take place in autumn 2017. However, on 27^th February 2017, the claimant discontinued proceedings. The terms of that discontinuance in the normal way involved an order for costs on the standard basis, but the defendants now seek to vary that order. They say that this is a case well away from the norm and one in which an order for indemnity costs is manifestly appropriate. They rely on a number of heads, which are summarised in para.14 of Mr. Asquith's skeleton for the first and second defendants and dealt with in detailed statements by Miss Elizabeth Elliot and Mr. Michael Barnett for the respective defendants.
11. I will consider these grounds more fully later, but, in essence, the grounds go to a failure to engage pre-action, improper and unjustified allegations, an exaggerated claim, a case which was speculative, indeed, both in facts and law, a claim which was brought without proper investigation, delayed discontinuance and other delays and concerns as to the approach to disclosure and a few other smaller points.
12. Up until the start of this hearing, the applications appeared to be unopposed. As I have already indicated, Miss Allen has appeared, effectively, on behalf of DAS, who is not a party. The claimant has had ample notice of the application, but has failed to provide any substantive response, other than to the extent that Miss Allen may be regarded as being authorised to say something on behalf of the claimant.
13. I will outline first the background to the case before turning to the particular considerations which arise in relation to the application. The background was helpfully set out in the skeleton argument for the third defendant by Mr. Robins.
14. Essentially, the claimant carried on business as an online retailer for baby products and experienced serious cash flow difficulties, becoming increasingly indebted to the first and second defendants. It also, it appears, owed substantial liabilities to other creditors. The defendants have alleged in these proceedings that the claimant's financial difficulties had some adverse knock-on effects for its business, in that customers would place orders but the claimants would not have the stock to fulfil the orders. The claimant's suppliers would then refuse to provide further stock until the arrears owed had been cleared. The claimant would be unable to clear the arrears and so unable to fulfil orders. That led to complaints and, ultimately, cancellation of orders which, in turn, led to an obligation to refund. This obligation failed to be discharged and customers claimed against credit card companies, who claimed against the Bank who passed the costs back to the claimant.
15. Customers complained to the Trading Standard Authority and the BBC's "Watchdog" programme, which featured the claimant's business in November 2006 and, again, at the beginning of March 2009. The adverse publicity, not surprisingly, resulted in the cancellation of further customer orders worth a substantial amount of money and a further decline in sales.
16. Streamline, the unit within the Bank which provided the credit card processing services to the claimant, asked the third defendant, KPMG, to visit the claimant's premises with a view to formulating a proposal for an independent business review. The third defendant agreed to perform this task and Mr. Medcalf of KPMG visited the claimant's premises on 17^th March 2009. He asked the claimant's director, Mr. Bone, to provide financial information, including a cash-flow forecast. On 20^th March 2009, Mr. Bone emailed that cash-flow forecast to the third defendant and to the Bank under cover of an email in which he says that he was providing accurate and reliable figures, saying that his cash-flow forecast contained "current and precise information" with "a complete overview". He also explained that the claimant would have to clear the arrears owed to suppliers in order to obtain the new stock that it required to fulfil customer orders.
17. That cash-flow forecast, which Mr. Bone sent, assumed a substantial rise in weekly turnover over quite a short period. In fact, up to that point, the claimant's turnover had been falling for some time. But, even with Mr. Bone's assumption of a rise in turnover, his cash-flow forecast nonetheless indicated that the claimant would continue to incur heavy losses and its debt to the Bank would continue to rise considerably.
18. On Mr. Bone's own figures, the Bank would have to increase the claimant's overdraft limit from £450,000 to nearly £1.5 million.
19. On that basis, the Bank was not prepared to lend any further sums to the claimant and told KPMG not to spend any more time reviewing Mr. Bone's figures, as they regarded the business as a non-runner.
20. On 23^rd March 2009, the Bank told the claimant that it was not prepared to extend any further the credit and recommended that the claimant take advice from insolvency practitioners.
21. What followed from that was that the claimant ceased trading in March 2009, shut down its website and sent home its staff. It filed a notice of intention to appoint administrators and sent an email to customers, suppliers and staff informing them that it was going into administration.
22. However, at that time, the directors failed to proceed with the appointment and on 31^st March 2009 the Bank appointed administrators in relation to the claimant pursuant to its floating charge. At a later date in April 2015, a liquidator was appointed at a creditors' meeting and that liquidator was Mr. Hunt of Griffins, who was closely involved in the litigation which I am considering today.
23. On 3^rd March 2015, the claimant had commenced proceedings against the Bank and KPMG in the Chancery Division. In the claim form, the claimant alleged that the Bank and KPMG were liable for, amongst other things, deceit and unlawful means conspiracy, very serious allegations.
24. The claim was first notified to the Bank on 9^th June 2015 and the claim form with brief details of claim was served on 3^rd July 2015. The allegations of deceit and conspiracy, which were set out in the short-form claim, were not actually pursued in the points of claim dated 3^rd July 2015. However, the particulars of claim continued to assert serious claims against the Bank and KPMG, on the following grounds. The claimant contended that the Bank owed it a duty of care in tort and that the Bank had breached its duty by failing to lend further moneys to the claimant. It was said that the Bank's decision not to lend further moneys to the claimant was capricious or irrational or arbitrary or lacked any justification.
25. The claimant contended that KPMG had entered into a contract with the claimant for the provision of a financial review and said that it was an implied term of this contract that KPMG would act with reasonable skill and care and that KPMG had breached the implied term by failing to persuade the Bank to support the business.
26. It also contended that KPMG had, effectively, tricked Mr. Bone into preparing an artificially frontloaded cash-flow forecast to show the claimant borrowing an extremely large amount from the Bank. The allegation was, essentially, that KPMG had somehow sought to deceive Mr. Bone into putting forward an inaccurate cash flow containing false figures, which would then be used by KPMG to persuade the Bank to withdraw its support for the claimant's business and to appoint KPMG partners as administrators.
27. The amounts claimed in the points of claim amounted to £20 million. That was the value which was said to be ascribed to the business as a going concern.
28. These claims were always denied by the defendants in their defences served on 16^th October 2015. The Bank denied that it owed any duty of care to the claimant or that it could be said to have acted capriciously or irrationally or arbitrarily or without any justification in deciding that it was not prepared to lend any further moneys to a failing company, which was insolvent and suffering from heavy complaints and declining orders. KPMG denied the existence of a contract between it and the claimant and said that there was no implied term. It relied on the fact that it had only ever visited the claimant's premises once, at the request of Streamline, with a view to formulating a proposal for an independent review and that nothing came of this, because the cash-flow forecast meant that the Bank was not prepared to lend any moneys to the claimant.
29. I am reminded by the defendants' counsel that the defence on behalf of KPMG quoted extensively from documents, which, effectively, contradicted the position which was advanced by the claimant.
30. On 7^th October 2016 (so quite a long time after the commencement of proceedings and the service of defences) there was a CMC before His Honour Judge Pelling QC at which directions to trial were set and the case was transferred into the Mercantile Court. The parties gave disclosure on 10^th January 2017 and the documents disclosed by the claimant, it is said, contained nothing whatsoever to support the claimant's serious allegations, as advanced in the brief details of claim originally or as maintained, certainly, as against KPMG, in the particulars of claim.
31. On 22^nd February 2017, the claimant discontinued its claim against KPMG. At about this time its solicitors came off the record and Mr. Hunt identified himself as the person to be notified in relation to further matters concerning the litigation.
32. As I have already indicated, in relation to the application for an adjournment, notification was given shortly thereafter that the defendants proposed to seek costs on an indemnity basis and, following correspondence which was not responded to by the claimant, applications for indemnity costs were made by the third defendant on 26^th May and by the Bank on 7^th June 2017.
33. I will now consider the principles in relation to indemnity costs and how it applies in relation to discontinuance. CPR 38.3 provides that a claimant may discontinue a claim by filing and serving a notice of discontinuance on the other parties and, under 38.6(1) it is stated that

"Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which the notice of discontinuance was served …"

34. That is deemed to be, under CPR 44.9(1), a costs order on the standard basis. So the default position is that, where a party discontinues, the basis of assessment will be on the standard basis unless the court orders otherwise. Atlantic Bar & Grill Limited v. Posthouse Hotels Ltd [2000] C.P. Rep 32 is authority for the proposition that the authority to order otherwise under the CPR 38.6 includes an ability to order that costs be assessed on an indemnity basis. So the court has jurisdiction to make the kind of order which is sought in this case.
35. As regards the court's discretion to order indemnity costs, the provisions of CPR 44.2 are familiar. They provide that, in deciding what order, if any, to make about costs, the court will have regard to all the circumstances, including the conduct of the parties, which includes conduct before as well as during the proceedings, and, in particular, the extent to which the parties followed the practice direction pre-action protocol or any other pre-action protocol; whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; the manner in which a party has pursued or defended its case or a particular allegation in issue; and whether a claimant, who has succeeded in the claim in whole or in part, exaggerated its claim.
36. The key principles relevant to the exercise of that discretion were summarised by Morgan J in Digicel (St Lucia) Ltd v. Cable & Wireless PLC [2010] 5 Costs Law Reports 709 at paras.11 to 17. I will quote only parts of that passage in the judgment. He noted that the Court of Appeal has refused to lay down guidelines on the circumstances in which an application for indemnity costs are appropriate, but he goes on to say at para.16,

"Where the application for indemnity costs is put on the basis that the behaviour of the paying party justifies that response, it may be helpful to refer to how the matter was described by Colman J in National Westminster Bank plc v. Rabobank Nederland [2008] All ER (Comm) 243…"

In that judgment Colman J set out the relevant rules of the CPR and referred to a number of decisions of the Court of Appeal and collected a number of statements of judges at first instance. Then he cited part of the judgment of Tomlinson J, as he then was, in Three Rivers DC v. Bank of England [2006] EWHC 816 who there gave helpful summary of what he considered to be the matters relevant to be taken into account, saying that

"(1) …the discretion to award indemnity coats is extremely wide … (2) …. There must be some conduct or some circumstance which takes the case out of the norm … (3) ….The test is not conduct attracting moral condemnation, which is an a fortiori ground, but rather unreasonableness (4) The court can and should have regard to the conduct of an unsuccessful claimant during the proceedings, both before and during trial, as well as whether it was reasonable for the claimant to raise and pursue particular allegations … (5) Where a claim is speculative, weak, opportunistic, or thin, a claimant who chooses to pursue it is taking a high risk and can expect to pay indemnity costs if it fails. (6) A fortiori, where the claim includes allegations of dishonesty …(8) The following circumstances take a case out of the norm and justify an order for indemnity costs, particularly when taken in combination with the fact that a defendant has discontinued only at a very late stage in proceedings: (a) where the claimant advances and aggressively pursues serious and wide-ranging allegations of dishonesty or impropriety over an extended period of time; (b) where the claimant advances and aggressively pursues such allegations, despite the lack of any foundation in the documentary evidence for those allegations …"

37. Then Colman J indicated in his case, the Rabobank case at [27] and following, a rider to that, that the court must take into account

"specific patterns of conduct capable of rendering a party's overall conduct, relevantly, unreasonable or inappropriate … But in each case in which the costs of the whole litigation are under consideration, the conduct adversely criticised must be looked at in the context of the entire litigation and a view taken as a to whether the level of unreasonableness or inappropriateness is in all the circumstances high enough to engage such an order."

38. Moving on, I will now consider the reasons why it is said that indemnity costs are appropriate in the present case. The defendants in this case are in agreement that an award of indemnity costs is appropriate. They are also in substantial agreement as to the reasons why such an order is appropriate. The first and second defendants also draw an analogy between this case and the case of Singh v. Singh [2014] EWHC 1770 (Ch.). The reasons on which the defendants rely are as follows:
39. Firstly, the defendants say that the claimant failed to engage with the pre-action protocol, which was noted in the Singh case as a factor, and, of course, is reflected in the paragraphs of the CPR which I have already quoted and the authorities that I have mentioned. It is not said to be a major factor, but it is a factor which comes into account and being a factor that is specifically noted should not be ignored. The first and second defendants also draw to my attention that, in this case, the claimant says that the reason for discontinuing when it did was what was seen on disclosure, in particular in relation to internal emails, and it says that that is not obviously accepted. But, even if it had been true, had the pre-action protocol been properly invoked and used before the proceedings were commenced, the kind of information which led to the discontinuance would have come to the fore much sooner. Therefore, the pre-action protocol point should not be taken as a makeweight.
40. The second point which is prayed in aid is that the claimant made improper and unjustified allegations. The first point which is relied on are the serious allegations of dishonesty and fraud which were made in the claim form. These were not properly pleaded, there appears to have been absolutely no basis for them and ultimately they were not pursued by the claimant in the points of claim. Miss Elliot in her witness statement notes that KPMG repeatedly asked the claimant to identify the reasonably credible material which should have been available before such a case was advanced and the claimant failed to respond to this.
41. Miss Allen, who has been heard de bene esse on behalf of the claimant and DAS, has prayed in aid the fact that the allegations were not pursued; but, of course, as the defendants note, the allegations may not have been pursued in the points of claim, but they were extremely serious allegations of dishonesty and fraud, which were made in a claim form which was issued and served.
42. In the points of claim, there are also said to be improper and unjustified allegations. The most serious, of course, is the allegation that the director of KPMG, who had the meeting with the claimant and was providing the investigation and potential financial review, had deceived the claimant into giving inaccurate financial information to justify the appointment of administrators and, effectively, bring about the destruction of the claimant's business, which was said to have been worth more than £20 million.
43. That was not pleaded as an allegation of fraud, but it contained extremely serious allegations against a professional of high standing and this is not an allegation that was ever supported by any evidence. The contemporaneous documentation, including Mr. Bone's own correspondence, it would appear, in fact, showed the allegations to be false.
44. The second point, in relation to unjustified allegations in the points of claim, is that the claimant maintained an allegation of failure to act in good faith. There are also complaints that there was no basis for the central allegation in the claim against KPMG, which was the linchpin of the claimant's claim, which was a contention that there had been a contract with KPMG for the conduct of an independent business review and that was used then to found a claim for breach of an implied term in a contract. But without a contract there was no claim, there was never any evidence to support the claimant's allegation that it ever entered into a contract with KPMG, there was no engagement letter, no fees were ever charged and it is hard to understand how it can have been thought that there was a contract. Also the way in which the claims were pleaded was unconventional and slightly peculiar, I think is one way of putting it. Here deficiencies which are relied on are said to go beyond ambiguity and inadequate particularisation. I am noting that factor because the question of ambiguity and inadequate particularisation was noted as a factor in favour of the indemnity costs in the Singh case.
45. I should also mention that there were complaints set out in the witness statement of Mr. Barnett that there were serious factual inaccuracies within the points of claim, which would have been within the knowledge of the claimant, in particular allegations that it was not in breach of its lending terms, allegations that the stated reason for the transfer to GRG and withdrawing the claimant's banking facilities was that Streamline had withdrawn its support when it should not have done so and that, plainly, was not borne out by the contemporaneous documents. The claimant alleged that the Bank had intended that an independent business review would be used as a justification for the appointment of administrators, when there was no evidence to support that allegation. The claimant alleged that but for the withdrawal of banking facilities the claimant was not insolvent, whereas the contemporaneous documents, including, effectively, the material provided by Mr. Bone, did not bear that out. So there were legally unjustified and insubstantial allegations and there were factual inaccuracies.
46. As to quantum, the claimant sought damages in excess of £20 million, which was said to be the value of the claimant's business as a going concern. However, the claimant had ceased to trade before the appointment of the administrators. It had not been a going concern. Its assets were sold in the administration for £740,000, which was a sum insufficient to repay the Bank. There was never any evidence to support the claimant's case on quantum, including on disclosure, where it appeared that the claim that was being advanced was, effectively, 50 times gross earnings, which I think was described in submissions as "ludicrous".
47. I accept the submissions advanced on behalf of the defendants and it follows that the claim was properly to be characterised as speculative and weak, both in fact and in law. I would also concur with the criticisms which were advanced, that the factual inaccuracies, and, indeed, the extremely contrived and insubstantial nature of the claim brought, are particularly to be deprecated given that the claim was not brought by an inexperienced non-professional, but by an experienced professional liquidator.
48. Another point which is raised is that the claim was brought without proper investigation and it is suggested, possibly, to beat a limitation defence, noting the gap in time between the events in 2009 and the issuance of proceedings in 2015. In particular, the defendants submit that there was no documentary evidence to support the claimant's allegations and important parts of the claimant's case were contradicted by the contemporaneous documents, some of which were within its own control, and that its reason for discontinuing the claim, that it had sight on disclosure of documents, which prompted it to settle, was not to be accepted, given that those documents were consistent with documents that it already had. It is submitted that either the claimant commenced the claim without undertaking any investigation into the merits of the claim or the logical alternative must be that the claimant commenced the claim knowing that it was wholly unmeritorious and bound to fail. That latter submission is not pushed as it is entirely right; all that is said here is that, at the very least, it must be the case that the claimant commenced the claim without undertaking investigations into the merits of the claim, including the factual materials within its own control.
49. It is submitted that commencing proceedings without investigation is inappropriate and is a further feature which takes this case out of the norm.
50. So far as I can see from the materials before me, there seems to be some substance in this criticism, given the materials which the claimant must have had in relation to its financial affairs and some of the factual allegations which it made within its particulars of claim. It is inappropriate for a party to commence proceedings without investigation and, particularly, where it does not engage in a pre-action protocol; and that is an even stronger factor where serious allegations are made, as was the case in this litigation, and even more so were made against professionals whose reputations are part of their stock in trade, as was done here against KPMG.
51. A further factor which makes it even more a matter to be deprecated is that, as the defendants say, Mr. Hunt, who was the liquidator, effectively, throughout nearly the whole of the litigation, had many years of experience as a liquidator and is, therefore, not somebody who is inexperienced in these matters.
52. It seems to me that there is much force in these submissions, which are made in relation to the speculative, insubstantial and improperly-investigated claims which were apparently advanced. These two factors, in my view, do engage the sub-heads set out within CPR as to whether it was reasonable to raise or pursue a particular point. I have in mind, also that effectively all of the main heads of claim, which were raised in the claim form and then in the particulars of claim, were ones which seemed to have borne no chances of succeeding. These points echo the finding in the Singh case that the claim there was farfetched, speculative and irreconcilable with the whole raft of documents; which was there held to be a very powerful indication in favour of indemnity costs.
53. Then the defendants consider the claimant's conduct of the case more broadly, which they say was unreasonable. They refer first to delay and note that the claimant engaged in delay, obtaining four extensions for the service of its reply and acted in other ways which led to the litigation proceeding slowly; for example, in slow responses to correspondence and requests for information. Secondly, they also rely on the fact that the claimant delayed in discontinuing its case against KPMG and against the Bank. It was noted that, so far as there was any substance in the case which the claimant advanced, namely that it wanted to see the documents on which the defendants relied, those documents were referred to in pleadings and could have been sought under 31.14 of the CPR. But, certainly, after the claimant's disclosure on 10^th January 2017, which the defendants note effectively just disclosed more material, which was consistent with material which the defendants already had, there was still a delay of a month and a half before the claimant discontinued its claim against KPMG. During this interval with the timetable to trial having been set in October 2016, and a trial impending, as was thought, in the autumn of this year, the defendants had incurred significant costs in relation to the preparation of witness evidence, which was due to be filed and served early in March. There has been, they say, no explanation for this delay and that has resulted in the incurring of further unnecessary costs by the defendants. This, they say, engages again the head under CPR of the way in which the litigation is conducted.
54. Another matter on which they rely strongly in relation to that head of consideration in relation to indemnity costs is the way in which the claimant failed to comply with the relevant provisions of the CPR relating to disclosure. In particular, there was, apparently, no disclosure of any internal documents of the claimant; there was no constructive discussion or engagement, as parties are enjoined to do in relation to disclosure; the search was wrongly limited, effectively, to the laptop of Mr. Bone; while Mr. Hunt signed the disclosure statement himself, it was apparent that he had not concluded any search for documents and the only person who had made a search was Mr. Bone. Mr. Bone had no authority to act on the claimant's behalf. He was not a lawyer; he was not a party to proceedings; he was the claimant's potential primary factual witness, who would, of course, be the first person exposed to cross-examination. He was referred to by the claimant's solicitors as "knowing his obligations of disclosure", but, as the defendants have rightly pointed out, Mr. Bone, as a witness, did not have any obligations of disclosure. It is also said, and I agree, that the non-involvement of solicitors in the disclosure exercise is remarkable.
55. The Court of Appeal authorities which were cited in correspondence, and which are cited in Matthews and Malek on Disclosure, make it clear that clients should not be allowed to decide the relevance of documents still less should the matter be deputed to a witness who will be key to the evidence of that client and who will, obviously, be cross-examined on whatever is disclosed. The defendants say that this echoes the extraordinarily casual approach to disclosure which was noted as a factor in para.7(c) and I have also been referred to the fact that the disclosure report, which was signed on behalf of the claimant, actually appears not to be consistent with the search conducted.
56. Taking these matters together I agree with the defendants that the approach to disclosure goes beyond being extraordinarily casual; it seems to have been thoroughly misconceived and wrongly gone about and, certainly, not compliant with CPR obligations and not helpful.
57. It has also been drawn to my attention that the claimant failed to comply with a court order relating to the appointment and instruction of a single joint expert in the field of independent business review. Having sought permission for evidence from such an expert and the court having said that the single joint expert was the appropriate way to go, the claimant then failed to engage with the process of agreeing one.
58. The defendants also rely on what they say is unreasonable conduct since the discontinuance by failing to engage on the issue of costs. I have already mentioned the number of chasers, which were sent in relation to costs, and the indication that indemnity costs would be sought.
59. I am also referred to the fact that the late adjournment that was sought by DAS a few days ago asked for a breakdown of costs, which indicated that there might be some issue as to liability on their part from before the inception of the policy. It is said that this has never been raised before and would be unreasonable not to have done so if there was some issue.
60. Obviously, there are a number of points which are made here. I have considered each separately above and have also considered their overall effect. I agree with the defendants that these matters do engage the heads of conduct which justify the finding of a case being an appropriate one for indemnity costs. The defendants highlight in particular the making of improper and unjustified allegations and allegations which are contradicted by the contemporaneous record. They say that this is particularly egregious when instructions have been given by experienced insolvency professionals, though, of course, for some of the time the claimant was also instructing solicitors and counsel. Miss Allen has prayed in aid the fact that it is said, on behalf of the claimant, that the decision to discontinue was done on the advice of counsel, who had been happy to pursue the allegations up until that point.
61. However, it seems to me that, on all the materials before me, there were materials which were available to the claimant at a very early stage, indeed, at the time when it made the decision to commence these proceedings, which shed considerable doubt, if not higher than that, on the claims which were to be made and there was no material at all which justified the making of some of the most serious allegations which were pursued. I do therefore consider that there have been serious issues in relation to the making of improper and unjustified allegations. This is not excused by the advice which may or may not have been received.
62. I do also consider that the conduct of the claimant, in relation to matters such as disclosure and delays, are matters which also engage the concern of the court. These are matters, taken together - although the grant of indemnity costs is never made lightly, but only where a party's conduct carries the case out of the norm - which would make it appropriate. In my judgment, this would be such a case on those bases alone. However, there are matters which go wider than what I have been through already in the long list of points, including a failure to engage in the pre-action protocol, the exaggeration of quantum and the other subsidiary points which I have dealt with later. It seems to me that this is one of the unusual cases, where one can ask oneself: does something in the way that this case has been advanced or conducted carry the case out of the norm, and answer that, yes, this is such a case.
63. So the grant of an order for indemnity costs is in my judgment appropriate and will be made.
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