England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/12/2014

Mr Justice Warby:

Introduction

1. This is a libel action brought by three claimants against three defendants in respect of emails sent in January and July 2012. The action was listed for a 1 day case management conference on 15 October 2014 to deal with an application for permission to amend the third defendant's Defence, and costs budgeting. However, on 9 October 2014 the claimants each accepted offers of settlement which had been made by the third defendant on 13 November 2013. At the same time the claimants gave notice of discontinuance of their claims against the first and second defendants.
2. That leaves for determination the appropriate final orders in respect of damages and costs to give effect to the settlements and the discontinuance. The defendants have made applications for what they say are appropriate orders. The main issues arise from the application of the third defendant. They are whether such costs orders as are made against the claimants should be on the standard or the indemnity basis; whether the claimants should be jointly and severally liable for costs ordered in favour of the third defendant; and whether and if so to what extent costs and damages due to the claimants should be set off against costs due to the third defendant.

Background

3. The account of the factual background which is set out below is derived from the materials put before the court on behalf of the third defendant. It does not include any findings of fact as to the matters alleged by him.
4. The claimants described themselves in this way in the Re-Amended Particulars of Claim. The first claimant ("Mr Ontulmus") is a shareholder in the second claimant ("MTH") and a consultant to MTH and to the third claimant ("Kaiserwerft"). MTH is a Turkish company carrying on business as a yacht builder, seller and charterer. Kaiserwerft is a German company engaged in the same business. The claimants are said to have international reputations.
5. The third defendant ("Mr Moore") is a former client of MTH who ordered a number of successively larger yachts from MTH. He and his wife became engaged in a dispute with the claimants. The first defendant is the managing director of the second defendant. The first and second defendants were instructed to advise Mr & Mrs Moore in relation to the dispute with the claimants.
6. The main claim in the libel action related to an email and attachments sent by Mr Moore to a watchmaker and businessman named Franck Muller and a business associate of Mr Muller, in Switzerland, on 28 July 2012. It is unnecessary to set out details of the words complained of or the full extent of the defamatory meanings complained of. In summary, the Re-Amended Particulars of Claim alleged that the words complained of imputed to all the claimants fraud and manipulation, a variety of other acts of dishonesty, and gross negligence. All three defendants were sued in respect of the publication of this email and attachments. This was the only claim against Mr Moore.
7. Each of the claimants advanced a substantial claim for special damage. They did so on the basis that the publication of the 28 July 2012 email caused Mr Muller to withdraw from an agreement made in May and June 2012 to place an order with Kaiserwerft for the construction of an approximately 45 metre motoryacht, at an agreed price of €21m.
8. Mr Muller's decision not to proceed with this order was alleged to have caused Mr Ontulmus to lose €630,000 by way of a 3% commission which he would have obtained on the purchase price of the yacht. MTH complained that it had lost €900,000 which would have been due under a licence agreement with Kaiserwerft. Kaiserwerft claimed €1.35m in wasted costs and €4.5m in lost profit in relation to the order from Mr Muller. Kaiserwerft also claimed that very substantial profits would have been earned from the production of further yachts based on the same model. In Further Information of 17 July 2013 it was said that it had been intended and planned to attract 3 customers a year over 10 years, with each yacht yielding a profit of at least €4.5m. The claim implied by those figures was therefore €135m.
9. These allegations were set out in the Particulars of Claim and in extensive Further Information provided during July 2013, together with supporting documentation. Among the documents was a copy of what was said to be the licence agreement between Kaiserwerft and MTH. This document is headed "Subcontractor agreement" and provides for the carrying out of a "Work Segment" at a price of €900,000. The document appears to be a standard form building contract referring to a "lot of land" and appears to relate to the USA.
10. Simultaneously with the issue of these proceedings MTH began arbitration proceedings against Mr Moore claiming some €13 million in respect of yacht contracts between them. There were also proceedings in Italy and Malta.
11. On 2 August 2013 Mr Moore filed his Defence in this action, containing among other defences a plea of justification. The defence of justification included allegations of fraud and improper manipulation against Mr Ontulmus and MTH. As against Kaiserwerft Mr Moore sought to justify a meaning that it was so closely related to and/or involved with MTH that "considerable caution should be exercised before any financial commitment is made to Kaiserwerft". The Defence disputed the special damage claim in detail, denying that there had been any contract between Kaiserwerft and Mr Muller, and taking issue with the allegation that there had been any licence agreement between MTH and Kaiserwerft.
12. On 4 October 2013 the claimants served a Reply taking issue with the Defence of Mr Moore and the Amended Defence of the first and second defendants, which had adopted much of the content of Mr Moore's defence.
13. On 13 November 2013 Mr Moore made offers of settlement to each of the claimants. The offer to Mr Ontulmus was a Part 36 offer to settle the whole of Mr Ontulmus' claim. The offer was that: "Our client will pay Mr Ontulmus, within 14 days of acceptance of this Offer, the sum of £75,000, including interest, in full and final settlement of the whole of Mr Ontulmus' claim against our client in the above proceedings."
14. In accordance with Part 36.10(1) the letter stated that Mr Moore would pay Mr Ontulmus' costs on the standard basis to be assessed if not agreed up to the date of written notice of acceptance if the offer was accepted within 21 days, the Relevant Period for the purposes of CPR 36. The end of the Relevant Period was therefore 3 December 2013.
15. The offer made to Kaiserwerft was also a Part 36 offer. It was in terms materially identical to those of the offer to Mr Ontulmus, except that the sum offered was £25,000 including interest.
16. The offer to MTH was not made under Part 36. It was instead a without prejudice save as to costs offer. It suggested that MTH did not appear to have been trading and that it therefore had "no trading reputation which could have been damaged by our client's allegedly defamatory communication". It went on:

"Nevertheless, our client is mindful of the provisions of the CPR which expect litigants to resolve disputes where possible. Accordingly, our client is prepared to offer [MTH] the sum of £500 in full and final settlement of the whole of [MTH]'s claim against our client in the above proceedings. If your client accepts this offer of damages, the amount of any costs owing to either MTH or to our client can be determined by the court at a suitable time.

Please note that this offer will remain open until such time as it is withdrawn in writing."

17. On 18 February 2014 Tugendhat J gave judgment on an application for security for costs made by Mr Moore against all the claimants: [2014] EWHC 294 (QB). The Judge declined to order security against Mr Ontulmus, finding that he was resident in Germany and had not as alleged changed his address since proceedings with a view to avoiding the consequences. He did find at [34] that "Mr Ontulmus has been inconsistent and evasive in his statements about where in Germany he has been residing". He thought this may well have been due to a concern to avoid casting doubt on the legitimacy of his German residence permit, but made no findings about that.
18. Tugendhat J also found at [49] that the documents relied on by MTH in support of its claim included one which, as the claimants' counsel accepted, was not what it purported to be. This, I was told by Mr Price QC for Mr Moore, was a reference to the alleged licence agreement between MTH and Kaiserwerft. The Judge recorded that counsel had submitted that the document was created to be produced to the Turkish authorities. He said "Whether or not that is so, I find it very difficult to imagine a legitimate purpose for which this document could have been created or for which it could be produced, whether to the Turkish authorities or to this court". Since Mr Ontulmus had not been asked about the document in cross-examined about the document, however, the judge made no concluded findings about it.
19. By an order of 18 February 2014 the Judge ordered MTH and Kaiserwerft to provide security of £600,000 for Mr Moore's costs of the action in a form acceptable to Mr Moore and stayed the proceedings by them against him pending the provision of that sum. In May 2014 MTH was ordered to provide £270,000 by way of security for costs in the arbitration. On 23 June 2014 MTH and Kaiserwerft provided security for costs pursuant to the order of Tugendhat J via a guarantee from an insurer, Great Lakes plc. This was the insurer which had provided the claimants with after-the-event (ATE) insurance. (All the claimants had entered into conditional fee agreements with their solicitors.) The stay of proceedings was accordingly lifted.
20. On 30 June 2014 Mr Moore's solicitors sent the claimants' solicitors a lengthy letter relating to the arbitration, alleging that an agreement between MTH and one "Moris Cavagliero" for the sale of a catamaran motor yacht on which reliance had been placed in opposition to Mr Moore's application for security for costs in the arbitration was a forgery and demanding a full explanation supported by witness statements of or affidavits by 3 July 2014. There was no reply to this letter.
21. On 16 July 2014 Mr Moore sent the claimants a draft Amended Defence. An application for permission to amend was issued on 17 and served on 18 July 2014. The amendments were extensive. They included allegations that the special damages claims in these proceedings were false and fraudulent, and that there had been fraud in the arbitration proceedings.
22. At the forefront of the former allegations was a contention that the true circumstances in which Mr Muller broke off relations with Kaiserwerft and Mr Ontulmus had nothing to do with Mr Moore's email to Mr Muller, on which the libel claim is based. It was said that Mr Ontulmus and Mr Muller had agreed that Mr Ontulmus' company would carry out a complete refit on a yacht owned by Mr Muller called C'est la Vie, in return for which Mr Muller would design a new 45m boat for him. According to the draft amended Defence the refit was then carried out but not to a proper standard and this led to Mr Muller losing confidence in Mr Ontulmus and his company, and not proceeding with any joint venture. It was also alleged that the "licence agreement" on which MTH based its claim for €900,000 special damages was a forged document.
23. On 22 July 2014, the deadline for providing security in the arbitration, MTH gave notice of its decision not to pursue the arbitration claims. By letter from its solicitors it stated that it had made arrangements for the security to be provided but considered that "the best forum for this dispute is the libel proceedings where our client can re-establish its reputation and demonstrate the falsity of the Defendants' claims."
24. The claimants' solicitors indicated in correspondence on 12 September 2014 that Mr Moore's application to amend his Defence would be opposed. The grounds of opposition were not identified.
25. On Thursday 9 October 2014 the claimants' solicitors wrote letters on behalf of each claimant to accept each of Mr Moore's offers of settlement. They asked for confirmation that Mr Moore would pay the sums offered within 14 days. In relation to MTH they wrote that "the only issue which remains to be determined is therefore one of costs." In relation to each of Mr Ontulmus and Kaiserwerft they wrote:-

"In relation to costs, the consequences of Part 36 clearly apply, although we acknowledge that the amount of the costs payable to our client will have to be determined having regard to the costs incurred by your client since the end of the Relevant Period. We propose that the CMC should be adjourned in order to give the Parties an opportunity to seek to reach agreement on cost. To the extent that agreement cannot be reached, there will need to be a detailed assessment in due course."

26. None of the letters accepting the settlement offers contained any explanation of why the offers were being accepted at that time.
27. At the same time as accepting the settlement offers the claimants' solicitors wrote to the solicitors for the first and second defendants giving formal notice of discontinuance of their claims against those defendants. The covering letter stated: "This should not be seen as a reflection of our clients' view of the merits of their case. Our client no longer considers it proportionate to continue the proceedings against your clients in circumstances where they are clearly impecunious."

The applications

28. On Friday 10 October 2014 Mr Moore's solicitors wrote to the claimant's solicitors acknowledging the claimants' acceptance of the offers, but rejecting the proposal for an adjournment of the CMC. They gave notice of intention to apply at the 15 October hearing for orders in relation to damages and costs. These included judgment for the claimants for the sums offered; an order that MTH pay all Mr Moore's costs of its claim; orders for payment of standard basis costs by Mr Moore to Mr Ontulmus and Kaiserwerft up to 3 December 2013 and payment by them to him of indemnity costs from 4 December 2013; and that Mr Moore's liability in damages be not enforced until after costs had been assessed and then set off against any net sums owing to him in costs.
29. The claimants' solicitors replied on 10 October 2014 stating that:-

"Whatever your position as regards your client's claim for indemnity costs, the offers were to pay libel damages within 14 days. There is a vindicatory element to those libel damages and there is no reason why the court should depart from the usual rule that the damages be paid and the costs should be determined separately in the normal way. That was envisaged by your client's offers and your client is now contractually bound by that agreement."

30. The claimants' solicitors wrote that they would take instructions and revert on Monday 13 October. They did not revert substantively. Instead, in the early afternoon of 13 October 2014 they wrote to give notice that they had ceased to act for each of the claimants who were now acting in person. However, they made clear that they had agreed to continue to accept service of correspondence until such time as the claimants instructed new legal representatives, and they gave their address as the address for service for each claimant. No explanation was provided of why the solicitors had ceased to act.
31. Later that day Mr Moore's solicitors wrote enclosing by way of service the third witness statement of Amy Jane Harvey dated 13 October 2014, made in support of the application, and a slightly amended draft order.
32. On 14 October 2014 the first and second defendants applied by letter to the court for an order that "the Claimants shall pay the costs of the First and Second Defendants to be assessed if not agreed". The letter described this as "a standard draft Order for Cost in accordance with CPR 38.6(1)" .It explained that "We have attempted to agree an Order for costs with the Claimants but have received no response".
33. On 14 October 2014 Mr Ontulmus emailed the court seeking an adjournment. His email referred to the fact that his solicitors had come off the record, and he stated that he wanted to appoint a new law office "as I want to proceed against Mister Peter Moore and Yvonne Moore because of the big damage they caused to me…" He alleged that there were criminal proceedings against Mr and Mrs Moore and that a European Arrest Warrant was about to be issued against them and the first defendant by a judge on the application of the prosecutor. Kaiserwerft wrote to the court the same day referring to the fact that their solicitors had come off the record and also seeking an adjournment, stating "We will appoint a new law firm to follow up our claim." Nothing was heard from MTH. Neither Mr Ontulmus's email nor Kaiserwerft's letter was copied to Mr Moore's legal team who arrived at the hearing in ignorance of their existence and contents.
34. Mr Price urged me to proceed to hear the application of Mr Moore. He submitted that the change of representation was wholly unexplained, and that the positions adopted by Mr Ontulmus and Kaiserwerft took no account whatever of the realities of the situation, namely that the action was at an end due to acceptance of Mr Moore's offer. An adjournment would waste costs. In the unusual circumstances of this case I declined to adjourn and proceeded to hear Mr Moore's application. In taking this course I bore in mind (a) the desirability of making use of the resources already devoted to preparing for the hearing; (b) that MTH had not sought any adjournment; (c) that Mr Moore had conceded an obligation to pay the costs of Mr Ontulmus and Kaiserwerft up to 3 December 2013; (d) that there was implied acceptance by them via their solicitors, and no real room for dispute, that they should pay Mr Moore's costs from 4 December 2013, the real issue being on what basis; (e) that if I acceded to Mr Moore's application the orders made would not be immediately enforceable; (f) that Mr Moore's election to proceed in this way would set limits on the conclusions I could fairly reach; and (g) that where an order is made against a party at hearing they did not attend CPR 32.11 gives the court power upon application to re-list the matter, that is, to re-hear it.
35. In addition to hearing from Mr Price I heard some brief representations from Mr Smith of the claimants' former solicitors Ford & Warren (there was a change of representation between the offers and their acceptance by which time Olswang were representing the claimants).

Issues

36. The issues for decision are:

i) Should the proceedings be stayed, as proposed by Mr Moore, save for the enforcement of the provisions for damages and costs to be contained in the order?

ii) What is the appropriate order in respect of the damages which Mr Moore has agreed to pay the claimants?

iii) How should costs be allocated in relation to the claims of MTH, Mr Ontulmus and Kaiserwerft?

iv) Whether such costs orders as are made against the claimants should be on the standard or indemnity basis;

v) Whether the claimants should be jointly and severally liable for Mr Moore's costs;

vi) Whether payment of the damages due to the claimants should await quantification of costs and be set off against any net amount found owing to Mr Moore;

37. There is a further minor issue as to whether the claimants or Mr Moore should have the costs of a strike out application made early on by Mr Moore, which were ordered to be costs in the case.

Discussion

Stay

38. The stay of proceedings save for enforcement of the order which is proposed by paragraph 1 of Mr Moore's draft order is appropriate. By CPR 36.11(1) and (2), if a Part 36 offer which relates to the whole of the claim is accepted the claim will be stayed on the terms of the offer. This does not affect the power of the court to enforce the terms of the offer, or to deal with any question of costs relating to the proceedings: CPR 36.11(5). So far as the settlement with MTH is concerned, a stay can be imposed under the court's general powers of case management: CPR 3.1(2)(f). Since the offer to MTH was made and accepted in full and final settlement, subject to the question of costs, a stay is appropriate here also.

Damages

39. The original draft order prepared on behalf of Mr Moore provided that judgment should be entered for each of the claimants for the sums which had been offered and accepted. Although Mr Moore's team then had second thoughts as to what form of order was appropriate, Mr Price came to agree that the entry of judgment was the appropriate course. This, so far as Mr Ontulmus and Kaiserwerft are concerned, is consonant with CPR 36.11(6) and (7) which provide so far as relevant that:-

"(6) unless the parties agree otherwise in writing, where a Part 36 offer by a defendant that is or includes an offer to pay a single sum of money is accepted, that sum must be paid to the offeree within 14 days of the date of (a) acceptance;

…

(7) If the accepted sum is not paid within 14 days or such other period as has been agreed the offeree may enter judgment for the unpaid sum."

40. The settlement with MTH is not governed by Part 36 but in this regard the claimants' solicitors were clearly correct to say that Mr Moore had undertaken a contractual obligation to pay within 14 days. Mr Price agreed that I should enter judgment for MTH in the sum of £500. The question whether enforcement of these judgments should be stayed pending assessment of costs is one I deal with below.

Costs

41. The governing legal principles are contained in s 51 of the Senior Courts Act 1981 which provide:

"(1) Subject to the provisions of this and or any other enactment and to rules of court, the costs of and incidental to all proceedings in- ..(b) the High Court … shall be in the discretion of the court.

(2) The court shall have full power to determine to whom and to what extent the costs are to be paid."

42. Rules governing the exercise of the court's discretion as to costs are contained in CPR 44.2. Rule 44.2(1) provides that "the court has a discretion as to (a) whether costs are payable by one party to another; (b) the amount of those costs; and (c) when they are to be paid." CPR 44.2(2) provides that "(a) The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order." The authorities make clear that the issue of which is the "successful party" for this purpose is to be determined with the exercise of common sense.
43. CPR 44.2(4) provides a non-exhaustive list of circumstances which the court will take into account in deciding what order (if any) to make about costs. The specified circumstances are "(a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; (c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply." An offer made without prejudice save as to costs as in the case of the offer made to MTH is an "admissible offer to settle".
44. I shall refer to other relevant rules, principles, and authorities in relation to costs as I address the individual issues that arise.

Costs of MTH's claim

45. Mr Price submits that MTH should pay all Mr Moore's costs of defending its claim. The grounds for that submission are (a) that the sum offered and accepted is a tiny fraction of MTH's claim, which was for general damages for libel plus €900,000 in special damages; (b) that MTH's claim has always been regarded by Mr Moore as entirely without merit because there was no evidence it was trading or had any trading reputation in this jurisdiction; (c) that the special damages claim was false and dishonest based on an alleged licence agreement that was no such thing; the statement of Ms Harvey says of this document that it "appears to be a forgery".
46. The first issue to be addressed is what the court's approach should be to an application for costs based on a settlement agreement that provides for costs to be determined by the court. It is not uncommon for parties to settle a dispute save as to costs and then ask the court to determine the costs dispute. If they do, there is no doubt that the court has jurisdiction to do so: Brawley v Marczynski [2002] EWCA Civ 756, [2003] 1 WLR 813. Brawley is authority for the following propositions: that in such a case the court's overriding objective is to do justice between the parties without incurring unnecessary court time and additional cost; that where it is obvious which party would have won had the substantive issues been fought to a conclusion it would be appropriate to award costs to that party; that where that is not obvious the extent to which the court will be prepared to look into the previously unresolved substantive issues in order to determine the issue of costs will depend on the circumstances of the case, including the amount of costs at stake and the conduct of the parties; and that in the absence of a good reason to make specific order the court will make no order as to costs.
47. Subsequent authorities have held that the court may often be entitled to say to the parties that if they have not agreed who is to pay the costs they have not settled their dispute, and have cautioned against the court conducting a detailed factual investigation purely for the purposes of assessing costs: BCT Software Solutions Ltd v C Brewer & Sons Ltd [2003] EWCA Civ 939, [2004] FSR 9, and Venture Finance Ltd v Mead [2005] EWCA Civ 325.
48. Mr Smith urges me to keep in mind that any costs liability of MTH arises under the settlement agreement. I do so, but as I see it where the parties have agreed to allow the court to determine costs the court's jurisdiction derives from s 51 of the Senior Courts Act 1981 and is to be exercised in accordance with ordinary principles unless, perhaps, the parties have agreed otherwise. In this case the settlement agreement constituted by the offer of 13 November 2013 and the acceptance of 9 October 2014 leave the court's discretion unfettered.
49. Turning to Mr Price's submissions on the facts, it seems to me that there are quite strict limits on the conclusions that I can safely and properly reach, based on the evidence adduced on this application. It is clear to me that I cannot make a finding as to the trading, or trading reputation of MTH. The evidence does not even assert as a fact that the company does not trade or have a reputation; it refers to Mr Moore's views on the matter and points to the absence of evidence of these matters. Mr Price's submissions are similarly phrased, stating that "it appeared to Mr Moore that MTH was not solvent or a going concern, with no trading reputation to speak of". Nor, it seems to me, can I properly find that the claim based on the alleged licence agreement was false and dishonest. There is much about it that appears untoward, to say the least, but a fuller investigation of the evidence would be needed before making that finding than was possible over the 3 hours devoted to the hearing of this application.
50. What I can do is to decide, as I do, the following. The sum of £500 does not represent substantial damages for the libel complained of by MTH; it amounts to no more than nominal damages. To obtain judgment for that sum in damages is success of a kind for MTH, but success of such a very limited kind that it should carry no costs. The right order up to 3 December 2013 is therefore that there be no order as to costs. If £500 was an appropriate sum in damages, there is no apparent justification for MTH's delay in accepting it. Allowing the same 21 days as Part 36 provides, MTH should have accepted the offer by 3 December 2013. Having failed to do so it should pay Mr Moore's costs from 4 December 2013.

Costs of Mr Ontulmus and Kaiserwerft

51. The relevant general rules as to the allocation of costs where a Part 36 offer is accepted after the relevant period are laid down by CPR 36.10(4) and (5):

"(4) Where –

…

(b) a Part 36 offer is accepted after expiry of the relevant period,

if the parties do not agree the liability for costs, the court will make an order as to costs.

(5) Where paragraph (4)(b) applies, unless the court orders otherwise –

(a) the claimant will be entitled to the costs of the proceedings up to the date on which the relevant period expired; and

(b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance."

52. Mr Moore does not ask the court to order otherwise. He concedes that he should pay these claimants their costs on the standard basis up to 3 December 2013. He seeks an order for his costs after that date. I see no reason to depart from the default position as to allocation of costs which is provided for by the Rules. I note that the claimants' solicitors appear to have assumed in correspondence that this would be the position here.

Basis of assessment

53. Mr Moore invites me to order that all costs payable by the claimants to him should be assessed on the indemnity basis. Again, I approach this issue on the basis that the settlement agreement between MTH and Mr Moore court sets no limitations on the way the court can exercise its powers, and contemplates that the court will exercise its discretion on ordinary principles.
54. The principles by which the court decides whether to award indemnity costs are by now well-settled. They were reviewed in Esure Services v Quarcoo [2009] EWCA Civ 595. As Waller LJ observed at [21] the starting point is the rules, and the important rule is CPR 44.3, parts of which I have quoted above, which highlights the importance of the conduct of the parties. At [22] Waller LJ observed that "The conduct of the parties is one of the very key matters to which 44.3 refers. Indeed, if a court has found that a claim is dishonestly brought or has been dishonestly maintained it seems to me that it will be normal for the court to seek to mark its disapproval by the costs order it makes." It is not, however, necessary in order for a costs order on the indemnity basis to be made that there should be some moral lack of probity or conduct deserving moral condemnation on the part of the paying party: Reid Minty v Taylor [2001] EWCA Civ 1723, [2002] EMLR 19, [27]. A general rule is that indemnity costs may be appropriate where the conduct or circumstances of the case take it out of the norm: Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson & Ors [2002] EWCA Civ 879.
55. Mr Price's primary stance is to rely on the words of Waller LJ in Esure and to submit that MTH should pay costs on the indemnity basis throughout and the other claimants with effect from 4 December 2014 on the grounds that they have brought and maintained false and fraudulent claims. He submits that MTH deliberately pursued a false claim for special damages which is an abuse of the court's process which would lead to an award of nominal damages only (Joseph v Spiller [2012] EWHC 2958 (QB)) and should similarly be reflected in adverse costs consequences. As to Mr Ontulmus and Kaiserwerft he submits that they have advanced claims which they knew from the start were without merit, and he identifies a number of instances in which he alleges that they were guilty of fraud, deceit and forgery in the pursuit of this claim and the arbitration proceedings.
56. In the alternative, Mr Price submits that since the offers of settlement were made the claims have been pursued simply and solely for the purposes of recovering special damages. He says this on the basis that the offers were amply sufficient to cover the maximum awards of general damages that could be recovered, given the very limited extent of publication (to two people at the most). Mr Price argues that the acceptance of the offers represents a complete abandonment of the special damages claims which demonstrates that they were without merit. This is conduct which is so far different from the norms of serious and proper litigation as to justify an indemnity costs order. There is no good or fair reason, he submits, why Mr Moore should be out of pocket as a result of the claimants having chosen to delay accepting the offers for over a year.
57. The invitation to me to make findings of dishonesty, fraud and forgery as a basis for ordering costs on the indemnity basis was ambitious. I am confident that I could not fairly do so on the material presented and in the circumstances of this application. I do however regard the claimants' conduct of the claims since the making of the settlement offers as highly unreasonable and well outside the norm so as to justify awarding costs on the indemnity basis.
58. As for MTH, it is easy to conclude from its acceptance of £500 in damages that there was never anything of substantial value in its claim except the special damages. I am not sure that I would regard the sums of £75,000 and £25,000 in general damages as the very highest that Mr Ontulmus and Kaiserwerft could have recovered at a trial, but the figures are certainly towards the higher end of the appropriate range and would have represented entirely adequate vindication. In reality it appears correct to say that the only justification for continuing with these claims after November 2013 was the substantial and, in the case of Kaiserwerft, huge, claims for special damages. It is in my view entirely fair to represent the claimants' acceptance of Mr Moore's offers as a complete capitulation so far as special damages are concerned. I accept the submission that, on the evidence before me, there is no new factor or circumstance that has emerged since November 2013 that could justify that change of stance.

Joint and several liability

59. Mr Moore seeks a direction that the liability of the claimants for his costs should be joint and several. The concern, as explained by Mr Price, is that if there were only several liability, with each claimant liable for 1/3 of the total costs, there is a risk that Mr Moore would be unable to recover in full due to an inability to enforce against Mr Ontulmus. The basis for alleging such a risk is the finding of Tugendhat J that Mr Ontulmus had been evasive about his residence, and a suggestion that Mr Ontulmus may not have any assets. The third witness statement of Ms Harvey states that "Mr Moore has no information as to the extent of, or location of, Mr Ontulmus' assets" that the place of his residence is unclear and that he "may be judgment proof". Mr Price submits that in the circumstances of this case it would be wholly unfair if Mr Moore was left in a position where he was unable to recover a substantial portion of his costs.
60. Mr Price cites Seavision Investment SA v Norman Thomas Everett (The Tiburon) [1992] 2 Lloyds Rep 26, 28 where Parker LJ held that it follows from s 51 of the Senior Courts Act 1981 that "If there are four or five parties to proceedings before the Judge, the Judge has a complete discretion as to which of those parties is to pay, and to what extent they are to pay, any of the costs incurred in those proceedings". In the Tiburon one defendant, a broker, had maintained that the other defendant, an underwriter, was liable. The broker was held liable and the claim against the underwriter was dismissed. The court ordered the broker to pay the costs of the underwriter's successful defence and the plaintiff's costs of suing the underwriter.
61. Mr Price relies also on Bairstow v Queens Moat Houses plc [2001] C P Rep 59, where Nelson J ordered that claimants in four separate actions raising similar issues should be jointly responsible for the defendant's common costs of the actions. The basis for making such an order in that case was that the claimants had acted together in a co-ordinated fashion to pursue a dishonest claim, giving untrue evidence and advancing false cases. Nelson J held that the claimants had actively supported one another. "They effectively combined together in presenting the claims and should therefore be liable jointly and severally for the costs which are common to all actions as opposed to those cost which are referable solely to their own": [30].
62. It is submitted that in the present case the claimants have made common cause, with the same solicitors. Eight specific points are relied on as reasons for joint and several liability: (1) MTH is the alter ego of Mr Ontulmus or at least closely associated with him; (2) the connections between Kaiserwerft and the other parties appear to be close; (3) the claimants have put in a common legal bill; reference is made to their Precedent H costs estimate; (4) they have collaborated in presenting the special damage claim, the elements of which are extensively inter-related as they are all based essentially on the alleged contract with Mr Muller; (5) the claims all rely in essence on the evidence of Mr Ontulmus, he being the only one who could give evidence of the relevant dealings; (6) there was at one point an attempt by Mr Ontulmus and MTH to assign their libel claims to Kaiswerwerft, which is said to be a telling indication that this is a common claim; (7) an occasion is relied on when the claimants' solicitors asked for interim payments due to Mr Ontulmus and from Kaiserwerft and MTH be set off against one another, suggestion that the claimants were operating a common fund; (8) the settlement was achieved by letters sent on the same day.
63. The argument and evidence as to the risk of being unable to enforce against Mr Ontulmus are decidedly somewhat thin, though just enough to raise a real possibility that enforcement against him would not be possible. That however is a reason for making the application rather than its justification, which must lie in whether it is just to make the claimants liable for costs incurred in pursuit of a common case. The evidence on this application is not strong enough to allow reliable conclusions on points (1) and (2) above. However, the action clearly has been run in large part as a common enterprise and taken overall the points relied on, and in particular points (3), (4) and (5), represent strong arguments in favour of each claimant being jointly liable for the costs of the action which are common to their claims. There is considerable force in the submission made by Mr Price that Mr Moore would have incurred the same or a very similar amount of costs if only one claimant had sued as he has in fact incurred in relation to claims by all three claimants. The plea of justification would have been very similar, and the investigation of the special damages claim would have proceeded in much the same way.
64. I do not think there is any difficulty about holding each claimant liable for such costs of Mr Moore's defence of the claims from 4 December 2013 as are common to all the claims. As I understand the law, the general rule where several parties combine to advance an unsuccessful case is that each is liable for the common costs incurred by the successful party in resisting that case. In Bairstow v Queens Moat Houses plc at [20] Nolan J referred to Stumm v Dixon (1889) 22 QBD 529, 533 where Lord Esher MR said this:

"In my opinion the true rule is this: When an action is tried against two or more defendants, and any defendant separates in his defence, and the judgment is against all, the law is that each of them is liable for the damages awarded by the judgment, and each of them is liable to the plaintiff for all costs taxed on his behalf as properly incurred by him in the maintenance of his action, except as to costs caused to him by so much of the separate defence of any defendant as is, and can only be, a defence for that defendant as distinguished from other defendants."

65. That rule as to costs would clearly be equally applicable in the reverse situation, where a number of claimants sue a single defendant, as here. Stumm v Dixon was considered inapplicable in Bairstow because the claims in the latter case had been pursued by separate actions which had not been consolidated. I note, however, that Stumm v Dixon was referred to by Jackson LJ in Dufoo v Tolaini & Ors [2014] EWCA Civ 1536, [58] as an illustration of the "normal starting point" for the exercise of the court's discretion in a case where "different parties advance the same unsuccessful case against their common adversary".
66. I am not dealing with a case in which Mr Moore's entitlement to costs flows from having successfully resisted the claim. His entitlement results from his having made Part 36 and without prejudice as to costs offers which were accepted at a late stage – in the case of the Part 36 offers, after the expiry of the relevant period. It seems to me however that in principle the starting point should be the same in such a case. In substance, Mr Moore is the successful party in respect of the period since 4 December 2013. In so far as the costs incurred by him during that period were incurred because the claimants pressed on with their common case despite the settlement offers, the claimants' liability for those costs should be joint and several.
67. In reaching that conclusion I have, again, borne in mind that the liability of MTH arises from a contract and Mr Smith's invitation to take care lest I reach decisions that impose liability that goes beyond the parameters of the agreement. For the reasons given above I do not believe that I am doing so.
68. My conclusion does not go quite as far as Mr Moore's application. He asks for all his recoverable costs to be payable by all the claimants jointly and severally. I am not sure that he sees this as an order different in practical terms from the one that I have indicated I am prepared to make. Mr Price submits that the costs from December 2013 onwards were all costs common to all three claims, apart from the costs of the security for costs application in respect of which a sum of £5,000 remains due to Mr Ontulmus from Mr Moore. He accepts that there may be some costs relating to the quantification of the special damages claims which are peculiar to the individual claimants' claims but suggests that such costs will date from the time when the claims were being formulated in the particulars of claim and further information, all of which took place before December 2013. That may be so, and if it is an order for joint and several liability for common costs from 4 December 2013 would in practice achieve what is sought. In case it does have a practical impact, however, I should consider whether, if Mr Moore incurred costs after 3 December 2013 which were caused solely by the claim of one of the claimants, any order for joint and several liability should be made in respect of such costs.
69. I do not believe that it should. It might well be just to make one claimant responsible for costs incurred by a defendant as the result of another claimant's claim, if it could be demonstrated that the former was effectively in control of the running of the latter's case, but the evidence does not satisfy me that this was the position. It is Mr Moore's case as set out in his draft Amended Defence that Mr Ontulmus owns and/or controls MTH and has been responsible for running at least MTH's case in this litigation. Reliance is placed on Mr Ontulmus having signed the statements of truth on the statements of case served prior to Mr Moore's serviced of his Defence, which alleged that MTH was controlled by Mr Ontulmus, and an inference that he was the person giving instructions to the claimants' solicitors on behalf of MTH. As far as Kaiserwerft is concerned it is alleged that it is controlled by Mr Ontulmus and/or MTH who gave Mr Ontulmus to understand that it was their vehicle for yacht building. However, not all the statements of case for MTH were signed by Mr Ontulmus who has denied controlling MTH; and it was a Dr Leiber who signed the statements of truth for Kaiserwerft. More importantly, these allegations were not the subject of any evidence nor were they explored in any detail at the hearing and again, especially given the circumstances in which I am deciding the application, I do not think I can uphold these allegations.
70. For these reasons I conclude that it is just to direct that the claimants shall be jointly and severally liable for the costs incurred by Mr Moore on and after 4 December 2013 other than any incurred solely as a result of the separate claim of any one of the claimants, which shall be the sole and several responsibility of that claimant.

Set-off/time for payment of damages

71. Mr Moore applies for an order as follows:

"The [judgments for damages] are not to be enforced until after liability for costs in this claim, including the amount of such costs, has been finally resolved, and the sums owing to the Claimants under paragraphs 2 to 4 above shall be set off against any net sums owing to the Third Defendant in costs."

72. Although this form of order does not include any direction that costs owing by and to the parties should be set off against one another, it has been submitted that I should make such a direction as well as the order which is expressly sought, for the set off of the £100,500 due in damages to the claimants against "any net sums owing to [Mr Moore] in costs."
73. Specific provision is made for the set off of costs in CPR 44.12:

"Where a party entitled to costs is also liable to pay costs, the court may assess the costs which that party is liable to pay and either-

(a) set off the amount assessed against the amount the party is entitled to be paid and direct that party to pay any balance; or

(b) delay the issue of a certificate for the costs to which the party is entitled until the party has paid the amount which that party is liable to pay."

74. This envisages a set off during the process of assessment. It is clear, however, that the court has power to direct a set off when making orders as to costs. The power to make an order setting off costs against costs is a discretionary power which derives from s 51 of the Senior Courts Act 1981: see Burkett v Hammersmith & Fulham [2004] EWCA Civ 1432, [2005] 1 Costs LR 104, esp [38], [41]-[42], [47]. In that case at [56] Brooke LJ cited with approval the observation of Scott LJ in Lockley v Blood Transfusion Service [1992] 1 WLR 492, 497, that:

"A set-off of costs against costs, where all are incurred in the prosecution and defence of the same action, seems so natural and equitable as not to need any special justification."

75. This seems to me very likely, on the face of things, to be the just position here, though it would of course be necessary to ensure that the provision for set off was specific to each claimant. It is however unnecessary for me to make an order for the set off of costs at this stage, long before any assessment has taken place. I recognise that there are other interests involved, most notably those of the claimants' former solicitors and the insurers Great Lakes plc. Mr Smith told me that his firm had asserted a lien over any recoveries and that his firm might apply for joinder to the costs proceedings which will follow the termination of this litigation, asserting an equitable interest in the costs payable to their client. Without reaching any conclusions on what the merits might be of any such application I have decided to make no order at this stage as regards the question of setting off costs.
76. Lockley v Blood Transfusion Service is authority for the proposition that the court has power to order the set off of damages against costs: see 496-7 per Scott LJ, with whom the other members of the court agreed. Scott LJ held that this was not merely a matter of discretion:

"(3) The broad criterion for the application of set-off is that the plaintiff's claim and the defendant's claim are so closely connected that it would inequitable to allow the plaintiff's claim without taking into account the defendant's claim. As it has sometimes been put, the defendant's claim must, in equity, impeach the plaintiff's claim

(4) Set-off of costs or damages to which one party is entitled against costs or damages to which another party is entitled depends upon the application of the equitable criterion I have endeavoured to express…."

77. The proposition that set off of costs against costs is not a matter of discretion is superseded by Burkett. The equitable criterion remains, it seems, the touchstone when it comes to the set-off of costs against damages. Mr Price submits that this criterion is satisfied here. He says set off is natural and equitable in this context also, given the close connection between the circumstances in which the cross-liabilities arise: the obligations to pay damages and the obligation to pay costs on both sides arise out of the acceptance of the Part 36/without prejudice save as to costs offers. I agree that set off of damages against costs would appear equitable here on account of the connection between the cross-liabilities. As appears from what follows, however, I am not so sure that there will be a net sum owing to Mr Moore in costs against which to set off his damages liabilities. Since the assessment process will take some time and third party interests have been identified and to some extent asserted as rights there is no need and it is inappropriate to decide now whether to direct a set off of damages against costs.
78. The court's power to order a stay on enforcement of a judgment forms part of its inherent jurisdiction, but is reflected in CPR 3.1(2)(f). Mr Price's submission is that (a) the net costs position is likely to be in favour of Mr Moore and that (b) if he pays out damages now he may not be able to recover it back when the time comes for the claimants to meet their costs liability to him.
79. As to the net costs position, the evidence is contained in the third and fourth statements of Ms Harvey. She estimates that Mr Moore's costs of the claim since 4 December 2013 are some £240,000, and that the outstanding costs payable by MTH and Kaiserwerft of the security application are some £86,000. On the other side of the equation she acknowledges that there is £5,000 outstanding from Mr Moore to Mr Ontulmus in respect of the security for costs application and that he has a liability for the costs of Mr Ontulmus and Kaiserwerft up to 3 December 2013. The Precedent H form for all the claimants filed on 19 November 2013 shows base costs of approximately £200,000. Ms Harvey suggests this should be discounted by £45,000 which are the costs claimed of the strike out application. As explained below, however, I have concluded that Mr Moore should pay the costs of Mr Ontulmus and Kaiserwerft of the strike out application. Ms Harvey also criticises the costs schedule as containing excessive costs. I am not persuaded I should discount for that in the process I am engaged in now.
80. On the above figures the net balance due to Mr Moore in costs would be some £120,000, which is more than the damages he owes. But these calculations ignore any success fees that may be recoverable under the CFA agreements made by the claimants with their solicitors, as well as any ATE premium that may be recoverable. As to the former, Mr Price submits that it is impossible for his client to assess the amount of any success fee or what the trigger might be for its payment or what percentage of base costs would be allowed on assessment. For these reasons I am invited to leave out of account the possibility of the recovery of any success fee. That seems to me unrealistic. It seems likely that the recovery of damages by way of settlement will satisfy the definition of success for the purposes of the CFAs. The fact that it is not possible to be sure of the size of the contractual success fee or how much would be allowed on assessment is no justification for ignoring it altogether.
81. I should make cautious assumptions, allowing for the prospect of some substantial recovery of a success fee, and take account of the fact that the ATE insurance premium may very well be recoverable. On that basis I can see a real possibility that after set off the costs balance would come out in favour of the claimants. (I add that although reference is made in the evidence and submissions to a sum in excess of £230,000 owed by MTH to Mr Moore in costs from the aborted arbitration proceedings, it is not suggested that I should or even that I could order a set off of those sums against sums due from Mr Moore to the claimants as a result of these proceedings.)
82. Mr Price's fall-back position is to draw attention to the change in legal policy reflected in the amendment to s 58 of the Legal Services Act 1990 brought about by the Legal Aid and Sentencing of Offenders Act 2012. In general, success fees are no longer recoverable from the other side from 1 April 2013. He acknowledges that defamation proceedings were exempted from this reform pending consideration of new forms of funding arrangements for this kind of claim, and that CFA success fees remain recoverable in libel cases, but submits that the potential recoverability of a success fee should be disregarded in the light of Coventry v Lawrence [2014] 3 WLR 555 where the Supreme Court indicated that it would consider favourably an application by the paying party in that case for a declaration that the legislation legalising CFA agreements is incompatible with the Convention. He relies on Lord Neuberger's observation at [41] that "it may be that the respondents are right in their contention that their liability for costs under the [Courts and Legal Services Act 1990] would be inconsistent with their Convention rights" under Article 6 or Article 1 of the First Protocol. Pending a decision in that case, or another if it reaches the Supreme Court first, Mr Moore will challenge any application for recovery of any success fee or ATE premium as incompatible with his Convention rights, it is said.
83. I do not consider that I should speculate. I should proceed on the basis of the law as it stands. My conclusion is that it may be that Mr Moore will be owed a net sum in costs but I should not assume this will be so. He might turn out to be net debtor so far as costs are concerned, leaving nothing against which to set off his liability in damages.
84. Mr Price's application for a stay also has to confront the existence of security for Mr Moore's costs in the form of the bond for £600,000 put up by Great Lakes plc on behalf of MTH and Kaiserwerft. I have held that the companies and Mr Ontulmus should be jointly and severally liable for Mr Moore's costs common to the defence of the claims from 4 December 2013. Mr Moore's case is that all the costs during that period are common costs. If the bond can be relied upon therefore it seems that even at his own highest estimation of the costs due to him Mr Moore's position is amply secure, in which case the argument for a stay on enforcement of damages falls away.
85. The order of Tugendhat J was that security should be provided "in a form reasonably acceptable to Mr Moore". Mr Price nonetheless submits that his client's costs position may not be secure. I make clear in fairness to Great Lakes plc that there is no suggestion that they are not reliable. The submission is that it "remains to be seen whether or not" Great Lakes will seek to avoid liability under the guarantee on the basis of some wrongful conduct by the claimants. In other words, the suggestion is that insurers may have some valid ground on which to avoid liability under the guarantee. It is said that Mr Moore's solicitors have been attempting to engage with the brokers for Great Lakes but without response. I have not been shown any correspondence. Nor is the bond in evidence.
86. This is not a strong basis on which to seek a stay on enforcement of damages offered and agreed to be paid in settlement of a claim for libel and the insurers have not been heard. However, I am prepared to grant an interim stay, on the following basis. The evidence relied on by Mr Moore in support of his allegations of wrongdoing against the claimants is enough to persuade me that there is a real issue as to whether grounds may exist for insurers to avoid liability. If there are and they do then there a real prospect that Mr Moore will prove to be owed costs, and some risk that he would be unable to recover monies paid out. The reason there is a bond is that Tugendhat J found in February 2014 that there was reason to believe that MTH and Kaiserwerft would be unable to pay Mr Moore's costs if ordered to do so. I have referred to Mr Ontulmus' position above. The loss which Mr Moore would sustain if he had to pay the damages and there later proved to be an irrecoverable balance due to him in costs would be irretrievable. The claimants will earn interest on the judgment sums until payment. The balance of justice as it now appears favours the preservation for the time being of the status quo.
87. Assuming the position remains the same at the date of handing down this judgment I will grant a temporary stay on that basis. I am not prepared to impose a stay for the entire period until after assessment of costs. The position as regards enforcement of the bond needs clarification. The stay will therefore be limited in time, requiring Mr Moore to make a further application when it expires, and with a liberty to apply to enable the claimants or other affected parties to challenge the continuation of a stay meanwhile.

Costs of the strike-out application

88. The application was made in November 2012 at a time when Mr Moore was the sole defendant, on the basis that the court had no jurisdiction to try the claim. The claimants amended the claim to add the first and second defendants which rendered the application redundant and it was withdrawn. The court ordered on 30 April 2013 that the costs be in the case.
89. The "general effect" of an order for costs in the case is that "the party in whose favour the court makes an order for costs at the end of the proceedings is entitled to that party's costs of the part of the proceedings to which the order relates": PD44 paragraph 4.2. Here, that general rule cannot be very readily applied; at the end of the proceedings the court has made orders for costs in favour of each party, save for MTH. My attention was not drawn to any rule, practice direction or authority which helps in determining how the court should proceed in such a situation. Mr Price submitted that the test should be whether the claimants or the defendants have won and that in reality the outcome, whereby the claimants have accepted less than 1% of their combined claims, is a victory for Mr Moore.
90. This is a beguiling submission but I do not think this approach provides a clear or satisfactory test for cases such as this, where at the end of proceedings costs orders go both ways because a settlement offer has been accepted. The answer to the question of who has won may not always be straightforward, as Mr Price's submission illustrates. The action has concluded by settlement via Part 36 and without prejudice save as to costs offers. All the claimants have obtained judgment for damages. Mr Ontulmus and Kaiserwerft have recovered substantial damages, sums which on Mr Moore's case are the maximum they could possibly have obtained. Yet it is said that they are the losers because their recovery is but a fraction of what they claimed. Views could differ about that conclusion, in this case and in others. It is easy to see that if Mr Price's criterion were adopted there could often be lengthy argument as to which party has in reality "won".
91. A simpler and better criterion is to hand for a case like this, which is to have regard to when in the proceedings the relevant costs were incurred and which party has obtained an order for costs in relation to that phase of the proceedings. As a starting point I would suggest that acceptance of a Part 36 offer, which will ordinarily lead to an order for the costs up to the relevant date, should also carry with it any costs incurred within that period which are the subject of an order for costs in the case. Equally, if an offer is accepted "out of time" and an order is made, in the ordinary way, for the offeree to pay costs since the expiry of the relevant period that order should carry with it any costs incurred in that period which are the subject of an order for costs in the case. I would therefore order Mr Moore to pay Mr Ontulmus' and Kaiserwerft's costs of the strike out application. This does not apply to MTH which I have held should not recover costs prior to the £500 offer.

Costs consequent on discontinuance

92. As noted above, the claimants have discontinued their claims against the first and second defendants. CPR 36.8(1) provides as follows:

"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 notice of discontinuance was served on the defendant."

93. CPR 44.9(1) provides, so far as material, that

"… where a right to costs arises under –

…

(c) rule 38.6 (defendant's right to costs where claimant discontinues),

a costs order will be deemed to have been made on the standard basis."

94. The effect of these rules in combination is that unless the court orders otherwise discontinuance triggers a deemed order for payment by the discontinuing claimant of the costs of a defendant against whom the claimant discontinues which were incurred by that defendant on or before the date of service of the notice of discontinuance, to be assessed on the standard basis. That is what the first and second defendants seek. I do not consider it necessary for me to make any costs order in this respect but since the order sought accords precisely with what the rules provide by way of default I will do so.

Liberty to apply

95. It was agreed by Mr Price that the order should include a liberty to apply. I have made clear that there will be liberty to apply specifically in relation to the stay on enforcement of the judgments for damages. As already noted, the claimants are entitled in any event to apply to the court under CPR 23.11 to have the application re-listed.