Shackleton And Associates Ltd v Shamsi & Ors [2017] EWHC 304 (Comm)

[2017] EWHC 304 (Comm)Case No CL-2014-000882
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, 7 Rolls Buildings, Fetter Lane, London EC4A 1NLDate 23/02/2017
Before
MR. JUSTICE TEARE
Between
SHACKLETON AND ASSOCIATES LIMITEDClaimant(1) ALI MARZOOK ALI BIN KAMIL AL SHAMSIDefendants(2) MOHAMMED ALI MARZOOK ALI BIN KAMIL AL SHAMSIDefendant(3) MARZOOK ALI MARZOOK ALI BIN KAMIL AL SHAMSIDefendant
John Snider and Stewart Shackleton (instructed by Gateley Plc) for ClaimantElizabeth Weaver (instructed by Fladgate LLP) for RespondentsHearing Hearing date: 15 February 2017
Judgment ApprovedMr. Justice Teare:
[1]This is an application issued on 9 June 2016 for an order for costs and for further orders relating to the issue of costs. It is unusual for costs matters to generate their own application. The explanation for the application in this case is as follows. The application arises out of a long drawn out dispute between the Claimant and its former clients concerning the Claimant’s fees for acting for the Defendants in a London arbitration. The dispute began in 2011. In March 2013 the Claimant secured an ICC arbitration award in its favour for payment of its fees. The Defendants did not participate in the arbitration apart from making a written submission that the tribunal lacked jurisdiction. The Claimant has successfully resisted attempts to set aside that award (again on jurisdictional grounds) before the French courts, including the French Supreme Court, the Cour de cassation. In this jurisdiction there were proceedings to enforce the award and the costs of certain hearings were reserved. Once the appeal to the Cour de cassation failed in March 2016 this application for costs was issued. Unfortunately, the disputes between the parties continued and there were further applications in this court in 2016. I am told that the position now is that the award and associated costs orders have been paid. What remains, at any rate in this jurisdiction, is the Claimant’s application for costs in relation to the English proceedings.[2]The court must now decide the incidence of those costs which were reserved. In addition the court must decide whether the Claimant is entitled to costs on an indemnity basis or only on the standard basis. Finally, the court must decide whether the Claimant, as part of its recoverable costs, is entitled to compensation for the time spent on the English proceedings by Mr. Shackleton, a solicitor advocate and sole shareholder of the Claimant, in circumstances where the Claimant engaged the services of a solicitor and, for some hearings, including this one, counsel and is not liable to pay Mr. Shackleton in respect of these services.[3]Mr. Snider appeared (with Mr. Shackleton) for the Claimant. He identified the following hearings as those in respect of which costs had been reserved: a hearing before Phillips J. on 24 April 2015, a hearing before Flaux J. on 19 May 2015, a hearing before Males J. on 28 August 2015 and a hearing before Walker J. on 10 June 2016. But happily Ms. Weaver, who appeared for the Defendants, helpfully and reasonably accepted that there was only one hearing in respect of which the Defendants could resist an order that the Defendants pay the costs, namely, the hearing before Flaux J on 19 May 2015. She submitted that there should be no order as to the costs of that hearing.[4]It is necessary to describe the nature of the proceedings in this jurisdiction.[5]On 24 October 2014 the Claimant obtained an order for the registration of a judgment of the Paris Court of Appeal and on 4 November 2014 permission was given to enforce the ICC award as a judgment. On 23 December 2014 the Defendant issued an application notice seeking an order(i) that the registration of the Paris Court of Appeal judgment be set aside, alternatively adjourned until after the disposal of a pending appeal against the judgment and(ii) that the permission to enforce the award as a judgment be set aside, alternatively adjourned until after the final disposal of proceedings in France to set aside the award. The reasons for the orders which were sought were stated in the application to be that an appeal was pending before the French Supreme Court against the judgment of the Paris Court of Appeal and that an application to set aside the award had been made to the French courts. Mr. Abu-Manneh, a partner in Mayer Brown who acted for the Defendants, made a witness statement dated 23 December 2014 in support of the application. He referred to the parties, the English proceedings, the background, the Claimant’s fees and the arbitration in relation to the dispute concerning those fees. This was done in 18 short paragraphs effectively setting out the context of the application. At paragraph 19 reference was made to the appeal against the Paris Court of Appeal judgment to the Cour de cassation on 25 August 2014 and to a witness statement of Me Khayat, a partner in Mayer Brown. In paragraphs 20 and 21 reference was made to the financial position of the Claimant and in paragraph 22 it was stated that the Defendant would not object to it “being made a condition of the adjournments which they seek that suitable security be given.” Me Khayat also made a witness statement dated 23 December 2014 in support of the application. He gave evidence of the proceedings before the Paris Court of Appeal, the appeal before the Court de cassation and the grounds of the appeal (of which there were two) which he described as “serious”. They concerned the jurisdiction of the arbitrator. In response Mr. Shackleton made a witness statement dated 9 January 2015. Remarkably it ran to 97 pages and 292 paragraphs. In response Mr. Abu-Manneh made a further witness statement dated 6 February 2015. He noted his surprise at the length of Mr. Shackleton’s statement and that it contained an exhibit of over 900 pages. He correctly judged that it would not assist the court were he to respond to each and every point raised by Mr. Shackleton. He restricted himself to addressing 8 topics which he did in 8 pages and 40 paragraphs.[6]That exchange of evidence led to a dispute between the parties as to what were the relevant issues on the Defendants’ application. On 24 April 2015 a CMC took place before Phillips J. He made certain directions. In the course of the hearing he said:
“I think that it seems absolutely plain what the issue is, which is whether or not this award should be enforced pending the appeal in France.”
[7]The order of Phillips J. made clear that some 8 issues, identified in a schedule, were not relevant. Those issues broadly reflected the 8 topics which Mr. Abu-Manneh had mentioned in his second statement.[8]Following the CMC and the directions made by Phillips J. for the exchange of expert evidence the Defendants provided expert evidence of French law from Professor Audit. In his statement dated 5 May 2015 Professor Audit considered the Defendants’ prospects of success before the Court de cassation. He concluded that with regard to the point at issue there was no precedent in French law, that the solution adopted by the Paris Court of Appeal to the question whether the holder of a power of attorney could conclude an arbitration agreement on behalf of his client was highly criticised by pre-eminent French academics specialised in the field of arbitration and that consequently the Defendant had “an arguable case” before the Court de cassation. Although he had been specifically asked to say what the prospects of success were he did not do so. M. Derains, the French law expert instructed by the Claimant described the grounds of appeal as “without merit”, “unsustainable” and “having no real prospect of success”. He regarded the opinion of Professor Audit, that the appeal was arguable, as “wishful thinking that the Cour de cassation might possibly, and suddenly, undertake a Copernican revolution to abandon its established view”. He regarded the prospect of success as “most improbable.”[9]Before the hearing of the Defendants’ applications the parties reached agreement that enforcement of the ICC award be adjourned until the result of the appeal to the Cour de cassation was known on terms that the Defendants paid the sum claimed into court. In the course of the parties’ correspondence “without prejudice save as to costs” the Claimant expressed its willingness to agree such an adjournment but wished to reserve its position that in fact the Defendants were not entitled to an adjournment and that the question of the costs of the Defendants’ application be reserved to be dealt with at the hearing which would take place after the decision by the Cour de cassation; see the letter dated 6 May 2015 from Mundays. There was however a dispute as to whether the security should be provided in 30 days (as suggested by the Claimant) or 77 days (as suggested by the Defendants). Flaux J decided on 19 May 2015 that the Defendants should have the 77 days they sought. His order stated that any application to extend the time for the provision of security would require “very cogent evidence indeed”. In the course of the hearing before Flaux J. it was necessary to consider the ambit of the Defendants’ applications notwithstanding that that matter had been clearly stated by Phillips J. Flaux J said “Lest there be any doubt about this and so that this whole sorry matter does not recur and waste yet more time in this court ……………..the nature of the application that was being made by [the Defendants] was as plain as a pikestaff from 23 December 2014 onwards…………It is plain to me that the nature of the application was an order that the enforcement …and registration …..be adjourned or stayed pending the determination of that hearing before the Cour de cassation….””[10]The Defendants did not provide the security by 3 August 2015, the date specified by Flaux J. On 31 July 2015 they sought an extension of time until 10 October 2015. The application was supported by a witness statement of the Group Financial Controller of the Defendants. This application was initially opposed but in the event a Consent Order was made by Males J. on 28 August 2015. Time was extended until 1 October 2015 on terms that the extension was final and that if security were not provided the Defendants would each swear an affidavit of assets.[11]The Defendants did not provide the security by 1 October 2015, the date specified by Males J. The Claimant applied for an order granting a short further extension but with a penal notice attached. On 9 October 2015 Knowles J. extended time until 16 October 2015. His order included a penal notice.[12]The security was paid into court on 14 or 15 October 2015 but not the sums which had been ordered to be paid by way of an interim payment on account of costs. An application to extend the time for payment of those costs was dismissed by Knowles J. on 30 October 2015 without a hearing. The interim payments on account of costs were paid on 4 November 2015.[13]On 16 March 2016 the Cour de cassation dismissed the appeal before it. It said simply that the “Court of Appeal concluded correctly that the arbitral tribunal had jurisdiction and that the ground for appeal cannot be upheld.” Pursuant to the order of Flaux J. dated 19 May 2015 the security which had been paid into court was to be paid out to the Claimant. The Claimant requested the Defendants to do so on 21 March 2016. On 1 April 2016 an application for payment out was filed by the Claimant. The Defendants informed the court that the application was opposed and requested time to put in evidence. In their letter to the court dated 6 April 2016 Mayer Brown informed the court that the Defendants “may wish to put before the Court certain public policy considerations relevant to the Claimant’s arbitral awards which the Claimant seeks to enforce…” It appears that an order was made that evidence was to be filed by 19 April 2016. On that day Mayer Brown filed with the court a legal opinion of Emad Hassan, a translation of a Dubai Court decision and the judgment of Popplewell J. dismissing the application by the Defendants for permission to appeal from the London arbitration award. The same letter “respectfully requested the Court to consider whether there are public policy considerations relevant to the enforcement in England of the arbitral awards which the Claimant seeks to enforce …..” That was a remarkable request. In the light of Flaux J’s order it was incumbent upon the Defendants to apply for an order suspending his order for payment out and to articulate the public policy grounds on which such an order was sought. Those grounds had not been articulated in the letter to the court. On 22 April 2016 Gateley (the solicitors then acting on behalf of the Claimant) informed Mayer Brown that any application raising public policy issues would be an abuse of the process of the court since any such considerations should have been raised in the Defendants' application notice dated 23 December 2014 and had not been. On 26 May 2016 Mayer Brown ceased to act for the Defendants. The Claimant’s application for payment out of the security was to be heard on 10 June 2016.[14]On 7 June 2016 Fladgate served notice that they were now acting for the Defendants. On 9 June 2016 Fladgate issued an application seeking an adjournment on the grounds that they had only recently been instructed. On 10 June 2016 Walker J. adjourned the application on terms that by 27 June 2016 the Defendants pay £200,000 into court as security for costs and issue an application notice stating, in effect, why the security which had been paid into court should not be paid out to the Claimant. They were ordered to identify “all statutory provisions and matters of fact” on which they relied. If those conditions were not satisfied Walker J ordered that the security be paid out to the Claimant. In the event the conditions were not satisfied. The Claimant requested payment out on 28 June 2016. Payment out was effected on 30 August 2016.[15]In the meantime the ICC arbitrator had made another arbitration award pursuant to which the Defendants were to pay US$45,000 to the Claimant, being the Defendants’ share of the advance sums paid to the arbitrator or the ICC. On 22 July 2016 Walker J. gave permission for part of that award to be enforced as a judgment.[16]Several costs orders remained outstanding. By a consent order dated 14 September 2016 Carr J. made a series of orders concerning costs, including an order for the provision of security for the Claimant’s costs of its application dated 9 June 2016, an order for the payment of outstanding orders for costs (together with the sum of $45,000 pursuant to the recent arbitration award) by 15 December 2016, an order that in default of such payment the Defendant shall be debarred from defending the application dated 9 June 2016 and directions for the hearing of that application.[17]The required sums were not paid by 15 December 2016 and on that day an extension was sought on the grounds that one of the Defendants had suffered a bereavement. That was agreed and the outstanding sums were paid by 17 January 2017.

The costs reserved by Flaux J. on 19 May 2015

[18]The basis upon which the Defendants have agreed to bear the costs of their application dated 23 December 2014 is that the Claimant’s application to enforce the ICC award has ultimately succeeded. Once the Cour de cassation had dismissed the jurisdiction appeal before it there was no reason why the award should not be enforced. For that reason the Defendants have agreed to bear the costs of the CMC before Philipps J. on 24 April 2015, the costs of the hearing before Males J. on 28 August 2015 when an extension of time was sought by the Defendants in which to pay the security into court and the costs of the hearing before Walker J. on 10 June 2016 when an adjournment was sought by the Defendants of the Claimant’s application for payment out of the security. By the same logic the Defendants ought to pay the costs of the hearing before Flaux J. when the Defendants obtained a stay of enforcement of the award on terms that security be paid into court. Ms. Weaver submitted that there should be no order as to costs because there were only two points argued, whether the Defendants should have 77 days in which to provide security, on which they succeeded, and the basis of the Defendants’ application, on which they also succeeded. Flaux J. was indeed receptive to the idea that the Defendants should have got at least part of their costs.[19]I consider that the just order as to costs is that the Claimant recovers most of its costs, to reflect the ultimate success of the Claimant's application to enforce the arbitration award, but that a small part of the costs should be the subject of no order, to reflect the issues which were argued and on which the Claimant lost. I therefore order that the Claimant should have 80% of its costs of the hearing before Flaux J. with no order as to the remaining 20%.

Indemnity costs

[20]There is no dispute that an order for indemnity costs can be justified where there is some conduct or circumstance which takes the case out of the norm. There must usually be a significant level of unreasonable conduct. The court must keep in mind that an order for indemnity costs removes the requirement that costs be proportionate to the matters in issue.[21]Mr. Snider identified no less than 13 reasons why an order for indemnity costs was appropriate. It is often the case that where counsel identifies a large number of points which he wishes to make there is in reality a much smaller number of effective points. The present case is no exception. There were in effect 3 points; first, the Defendants’ unreasonable failure to settle the Claimant’s claim, second, their unreasonable introduction of issues which were irrelevant to their application and third their unreasonable conduct of the litigation which was designed simply to delay payment of the sums which had been awarded to the Claimant.

The settlement negotiations

[22]Before the arbitrator made his award the Claimant offered to accept £1.1m in settlement of his claims. The sum awarded in March 2013 was of the order of £1.4m. In September 2014 when the amount due, allowing for interest and costs, was £1.625m the Claimant offered to accept £1.576m, a discount of about 3%. This offer was not acceptable to the Defendants. They considered that the offer did not take account of their concerns as to the Claimant’s conduct of the arbitration. A 3 page letter dated 3 October 2014 from Mayer Brown set out certain suggested heads of negligence as to which their preliminary conclusion was that they had merit. The Claimant responded to these allegations in a 4 page email dated 17 October 2014 in which the allegations were firmly denied.[23]It was submitted by Mr. Snider that this was an improper means of putting pressure on the Claimant to settle at a lower figure. It was said to be improper because(i) when the Defendants’ application for permission to appeal from the London award had been dismissed in November 2012 Popplewell J. had pointed out that there was no evidence that the points relied upon in that appeal (which were similar to the points taken by Mayer Brown in October 2014) would have made any difference,(ii) there was still no evidence in that regard and(iii) the Defendants had not raised these arguments in the ICC arbitration.[24]It is not unusual for those asked to pay substantial fees for legal services to complain about the service provided. I have no doubt that the Defendants raised their concerns intending thereby to put pressure on the Claimant to accept a lower figure. I am not persuaded that that was “improper”. It would be improper, it seems to me, if the Defendants knew that their complaints were groundless. In circumstances where Mayer Brown had expressed their “preliminary conclusion” that the concerns had merit it is unlikely that the Defendants knew that their complaints were groundless. It would also be improper if the Defendants had alleged negligence in the ICC arbitration and those allegations had been dismissed. But they had not done so. They had challenged the jurisdiction of the arbitrator and were pursuing their challenge to the Cour de cassation, their appeal to that court having been issued on 25 August 2014.[25]In the event the Claimant responded by seeking and obtaining an order permitting the award to be enforced as a judgment. The negotiations continued. On 30 October 2014 there was a meeting. The Claimant said in an email sent later that day that an offer made by the Defendants had been accompanied by a threat of criminal prosecution in the UAE. The Claimant complained that the threat was unfounded and improper and called for it to be withdrawn. On 5 November 2014 Mayer Brown, whose representative had been at the meeting, said that it was not accepted that a threat had been made. No more was heard of this matter. Again, if a threat was made and it was known that there was no basis for making any such threat then the making of the threat would be improper. In the light of the Claimant’s email which indicates that the Defendants had been asked at the meeting to elaborate on the threat and that reference had been made to an “opinion” from a public prosecutor it is likely that there was some mention of a criminal prosecution. It is also unlikely that there was any basis for it because none has been suggested. So it may be that the threat, if there was one, was improper. But nothing more was heard of it and it does not appear to have dissuaded the Claimant from pursuing its case. I suspect that it had the opposite effect. I am not persuaded that this episode, which occurred before the Defendants had issued their own application to set aside or adjourn the enforcement of the award is a good reason for ordering indemnity costs in respect of that application.[26]On 1 December 2014 the Claimant offered to accept £1.741m in settlement of its claim which was then put at £1.848m on the basis of the two ICC awards. It appears that the negotiations continued with the result that by February 2015 the Defendants had offered to pay a certain sum by 30 April 2015. That was acceptable to the Claimant so long as interest until 30 April 2015 was included. The Claimant said that brought the settlement figure to £1.868m. On 16 February 2015 it would appear that the parties reached agreement, subject to contract, that £1.85m would be paid by 30 April 2015 plus interest of £18,141. Mayer Brown requested a draft agreement and on 18 February 2015 the Claimant set out all the terms it required. On 19 February 2015 Mayer Brown agreed to those conditions, subject to contract. They hoped that the wording could be agreed without too much difficulty. On 16 March 2015, having reviewed the draft settlement agreement provided by the Claimant, certain changes were requested. These did not prove acceptable to the Claimant. The Claimant had stated that in default of payment there should be a consent arbitration award, whereas the Defendants considered that a consent order of the English High Court would be sufficient. The Claimant preferred a consent award because it was thought that an award could be enforced in the UAE whereas an English High Court order would not be.[27]Mr. Snider submitted that it was unreasonable of the Defendants to agree terms subject to contract and then seek to resile from them. However, this often happens and the very purpose of stating that the agreement is subject to contract is to enable the parties to resile if they wish to do so. I am not persuaded that the Defendants acted so unreasonably that an order for indemnity costs is appropriate. In Kiam v MGN [2002] 1 WLR 2810 Simon Brown LJ said at p. 2814 that it will be a “rare case” in which the refusal of a settlement offer will justify an order for indemnity costs. He did not approve of the proposition that it is “generally appropriate to condemn in indemnity costs those who decline reasonable settlement offers”. In the present case the Defendants had agreed to pay a sum which was acceptable to the Claimant and by a date which was acceptable to the Claimant. They fell out over what should happen in the event that they did not pay. The Claimant wanted a consent award. The Defendant thought a consent order of the English High Court was sufficient. It may be that the Claimant had reasons for preferring a consent award in circumstances in which he anticipated enforcing it in the UAE but I am not persuaded that I can properly say that the Defendants’ refusal to agree this ancillary, albeit potentially important, matter was so unreasonable as to justify an order for costs on the indemnity basis.

Introduction of irrelevant matters

[28]Mr. Snider submitted that the Defendants, by their evidence in support of their application, introduced irrelevant matters and as a result it was necessary to seek an order from Phillips J. stating what was in issue on the Defendant’s application.[29]I consider that there is no merit in this contention. I have already summarised the basis of the Defendants’ application as stated in the notice of application and have recounted the course the evidence took. I entirely agree with Phillips J. and Flaux J. that the basis of the Defendants’ application was always clear, namely, that the ICC award should not be enforced whilst the appeal to the Cour de cassation was outstanding. The first statement of Mr. Abu-Mannah did no more than set out the context in which the application arose. I accept that Mr. Abu-Manneh said that the claim for rescission in the London arbitration had not been “properly defended” and said that the Defendants “wanted the opportunity to have the claimants’ invoices properly scrutinised” but no one, it seems to me, could have thought that those matters formed the basis of the Defendants’ application. It was, it seems to me, Mr. Shackleton who introduced unnecessary matter in his remarkable 97 page witness statement in response. Mr. Abu-Mannah showed commendable restraint in his second witness statement. In that statement he confirmed that alleged professional negligence had no bearing upon the Defendants’ application. Had Mr. Shackleton not produced his 97 page witness statement but had only adduced evidence concerning the prospects of success of the appeal to the Cour de cassation it seems to me that there would have been no uncertainty as to what was in issue at the hearing and there would have been no need for a schedule to Phillips J’s order setting out the topics which were not relevant to the application. I accept that prior to the hearing before Phillips J. the Defendants maintained that the alleged excessive charging was relevant to the Defendants’ desire to have the Claimant’s invoices scrutinised but they accepted that that would only happen if the challenge to the final award succeeded; see the letter dated 14 April 2014 from Mayer Brown. However, the allegation and the suggested desire could not form the basis of the Defendant’s application. They merely explained the context which had given rise to the application. I also accept that there was debate about whether the Defendant’s application was to “set aside”, “adjourn” or “stay” the enforcement of the award. But that debate was not about the basis of the application. In any event, even if my view (and that of Phillips J. and of Flaux J.) that the basis of the Defendants’ application was clear from the outset is wrong it would be perverse to blame the Defendants alone for introducing irrelevant matters when Mr. Shackleton had filed a 97 page statement dealing with those matters.

Delay in payment

[30]Mr. Snider submitted that it is clear that the Defendants’ intention had been to do what they could to delay payment of the sum adjudged to be due to the Claimant in the ICC arbitration. He said that the Defendants had no genuine defence and so were not acting good faith; see Olatawura v Abiloye [2003] 1 WLR 275 at paragraph 25 for an explanation of a want of good faith (in the context of a claim for security for costs). Mr. Snider supported this submission by reference to(i) the appeal to the Cour de cassation having no real prospect of success,(ii) the delay in paying the security into court,(iii) the delay in agreeing to payment out after the appeal to the Cour de cassation had failed and the suggested but unparticularised ground of public policy to justify such lack of agreement and(iv) the delay in paying $45,000 pursuant to the second ICC award.[31]Ms. Weaver submitted that the court could not look at events which occurred after the order in which a judge reserved costs. However, I consider that where it is said that a party acted in bad faith it is legitimate to look at the entirety of the party’s conduct when deciding whether a lack of bad faith can be inferred from that conduct.[32]It is a remarkable fact that the Defendants’ expert on French law was specifically asked to advise as to the prospects of the appeal to the Cour de cassation and did not do so in his statement dated 5 May 2015. He was only able to say the appeal was arguable. I infer that he thought the prospects were negligible. That was certainly the view of the Claimant’s expert on French law. The minimal language used by the Cour de cassation in dismissing the appeal is consistent with that view. It therefore appears that the Defendants, in seeking a stay on the enforcement of the award pending the appeal, had no genuine reason for delaying enforcement of the ICC award.[33]The delay in paying the security into court was also remarkable. Flaux J. ordered that it be paid in by 3 August 2015 and said that any application for an extension of time must be supported by very cogent evidence. The application for an extension on 31 July 2015 was supported by evidence but it was hardly cogent evidence. The evidence stated that the bank from whom a loan had been requested was only willing to lend a sum less than that which had been requested. There was said to be an offer letter but none was disclosed. No detailed evidence of the Defendants' other resources was given. It was merely stated that the Defendants were left with “little available cash”. There was evidence from Mr. Shackleton that the Defendants were one of the wealthiest families in Sharjah in terms of properties and investments. He said they own much of “downtown Sharjah”. He did not doubt their ability to pay the award regardless of any loan. There was no evidence challenging that assessment. The Defendants did not even pay the security into court by 1 October 2015, the amended date for payment following their application. They only did so after the Claimant had obtained a further order with a penal notice attached. The impression one gains from this history is that the Defendants were intent on delaying payment into court as long as was possible.[34]When the Cour de cassation dismissed the appeal the Defendants ought to have agreed to the immediate payment out of the security from court. The basis of their stay of enforcement of the award had fallen away. But instead they instructed their lawyers to float the possibility that there may be public policy grounds for not enforcing the award. These grounds were never particularised and soon after their lawyers came off the record. Their new lawyers sought an adjournment of the Claimant’s application for payment out and obtained an adjournment on terms that security for costs be provided and that full particulars of the Defendants’ case for not ordering payment were provided. Those terms were not complied with and so the security was eventually paid out. This episode is strong evidence that the Defendants were casting about for any reason to avoid payment out and in the event could not find one. But by floating “public policy” they obtained a delay in payment out of the security.[35]Finally, the failure to pay $45,000 pursuant to the second ICC award from July 2016 until January 2017 is significant because there can have been no defence whatsoever to the claim by the Claimants for reimbursement of the Defendants’ share of the arbitrator’s fees, once the appeal to the Cour de cassation had been dismissed in March 2016.[36]These matters strongly suggest that the Defendants lacked any realistic defence to the enforcement of the ICC award and that the steps they took in the proceedings were taken not in pursuit of a genuine defence but solely for the purpose of delaying payment to the Claimant of the fees to which it had been held to be entitled. Against those matters may be put the fact that the Defendants came to close to settling the claim by agreeing to pay the sum in question by 30 April 2015 which suggests good faith on their part. But in circumstances where they instead agreed to provide security but failed to do so either by 3 August 2015 or by 1 October 2015 in breach of orders of this court and then only did so when the order contained a penal notice means that I cannot place much weight on that fact. I am therefore persuaded that the Defendants had no genuine defence to the claim for enforcement of the award and were simply doing all they could to avoid paying it. That takes the case out of the norm and is a very significant level of unreasonable conduct which undoubtedly justifies an order for indemnity costs. I acknowledge that this means that the requirement that the costs be proportionate to the matters in issue is removed but the recoverable costs must still be reasonably incurred.

Mr. Shackleton’s time

[37]The Claimant is a company. Its sole business is, I am told, to provide the services of Mr. Shackleton as counsel or arbitrator in international arbitration. He is a solicitor advocate. The Claimant earns fees from its clients for so doing. In this case the Claimant has claimed its fees from the Defendants in an ICC arbitration and has obtained an arbitration award in its favour. In this jurisdiction the Claimant has sought to enforce the arbitration award and has faced resistance from the Defendants. In the course of overcoming that resistance the Claimant has incurred legal costs by instructing two firms of solicitors and counsel to represent it. Mr. Shackleton has also worked on the proceedings in this jurisdiction but is not paid for his work by the Claimant because, as he puts it, he benefits in any event as its sole shareholder. He has said that there would be no sense in requiring the Claimant to employ outside solicitors to enable it to recover the cost of work which he can undertake more efficiently and that the arrangement between the Claimant and himself and the outside solicitors is an economical and appropriate way to divide the work required for the conduct of this litigation. The Claimant therefore seeks an order that the Claimant can recover as part of its costs compensation for the time spent by Mr. Shackleton on this case notwithstanding that the Claimant has no liability to pay such compensation to Mr. Shackleton. The Defendants resist such an order. They say that it breaches the indemnity principle pursuant to which a successful party cannot recover more than it is liable to pay; see The White Book at note 44.2.5. They also point out that Mr. Shackleton’s charge out rate of £800 per hour is more than double that of the solicitor acting for him at Gateleys.[38]I have not been taken to the Claimant’s bill of costs but I have noted that it is formidable document of some 203 pages. I suspect that this question of the recoverability of costs in relation to Mr. Shackleton’s work is a substantial one in terms of the sums involved.[39]Mr. Snider accepted that if there was any duplication of work by Gateleys and Mr. Shackleton then account could not to be taken of Mr. Shackleton’s time. But such matters were to be resolved on a detailed assessment and did not concern the court on this occasion. He submitted that since there was no applicable rule in the CPR dealing with this situation (the Claimant was not a litigant in person and so CPR 46.5 did not apply) the common law applied. He said that, pursuant to principles developed by the common law, where a solicitor advocate bestows his professional skill and care on the Claimant in the conduct of the Claimant’s litigation, his time, which can be measured, is properly to be allowed as part of the Claimant’s costs. In support of that proposition he relied on, in particular, London Scottish Benefit Society v Chorley [1884] 13 QBD 874 and Malkinson v Trim [2003] 1 WLR 463.[40]In London Scottish Benefit Society v Chorley the question was whether solicitors who had been sued but had been successful in their defence could recover anything other than their out of pocket expenditure or whether they could recover as costs the time they spent acting on their own behalf as solicitor. It was held that they could. Brett MR stated that the headnote of the report of the case in the Queen’s Bench Division at 12 QBD 452 accurately expressed the law. That headnote read:
“Where an action is brought against a solicitor who defends it in person and obtains judgment he is entitled upon taxation to the same costs as if he had employed a solicitor, except in respect of items which the fact of his acting renders unnecessary.”
[41]Bowen LJ said at p.877 “Professional skill and labour are recognised and can be measured by the law; private expenditure of labour and trouble by a layman cannot be measured. It depends upon the zeal, the assiduity, or the nervousness of the individual. Professional skill, when it is bestowed, is accordingly allowed for in taxing a bill of costs; and it would be absurd to permit a solicitor to charge for the same work when it is done by another solicitor and not to permit him to charge for it when it is done by his own clerk. ”[42]London Scottish Benefit Society v Chorley was considered and explained by the Court of Appeal in Malkinson v Trim [2003] 1 WLR 463 where the question was whether the principle established by London Scottish Benefit Society v Chorley applied where the defendant, although a solicitor, does not expend his own time and skill in defending the claim but the defence is undertaken by one of his partners or by others within the firm of which he is a member. It was held that it did. Chadwick LJ said at paragraph 14:
“The reasoning which led this court to the conclusion which it reached in the London Scottish Benefit Society case must lead to the same conclusion in a case where the solicitor litigant carries on his practice as a solicitor in partnership. The successful litigant is entitled to an indemnity; there is no difficulty in measuring the cost of legal professional time and skill; and there is likely to be some saving of costs if the work is done within his own firm rather than if he is encouraged in practice to instruct another firm. ”
[43]At a later stage in the judgment when dealing with an argument based upon the CPR (now expressly dealt with by CPR 46.5(6)) Chadwick LJ said at paragraph 22:
“…the basis of the principle that a solicitor who acts for himself in litigation is entitled to compensation, by way of costs, for his time and trouble is a recognition that (in common with any other litigant) he ought to be indemnified against the expense to which….he has been unjustly put. The special position of a solicitor is that he does not need to employ others to provide professional skill and knowledge in the conduct of litigation. He can provide that skill and knowledge himself. Further, there is no difficulty in measuring what it costs him to do so; and there is a potential saving in costs if he is not discouraged from doing so. ”
[44]Finally, at paragraph 24 Chadwick LJ said:
“A partner who is represented in legal proceedings by his firm incurs no liability to the firm; but he suffers loss for which under the indemnity principle he ought to be compensated, because the firm of which he is a member expends time and resources which would otherwise be devoted to other clients. The only sensible way in which effect can be given to the indemnity principle is by allowing those costs.”
[45]It is to be noted from these two cases that the indemnity principle does not require the litigant to be under a liability to pay for the legal services which have been bestowed upon him. It is sufficient if he suffers a loss. If he does so there is no breach of the indemnity principle because an award of costs indemnifies the litigant in respect of that loss. Moreover, “loss” for this purpose can be broadly defined. In Malkinson v Trim loss was established because the firm of which the solicitor litigant was a member expended time and resources on his case which would otherwise have been devoted to other clients.[46]A similar broad definition of loss is indicated by In re Nossen’s Letter Patent [1969] 638 which concerned the question whether costs could be recovered in respect of the work of an in-house expert. The taxing master had allowed costs to be recovered in respect of the fees and salaries of the in-house expert but had not allowed overhead expenses. Lloyd-Jacob J. said at p.643:
“In this he was plainly right, covering as he did the actual and direct costs of the work undertaken in the sense of indemnifying the respondents for the salaries, materials and out-of-pocket expenses of those engaged in the conduct of the experiments. No part of the respondents’ expenditure on overheads was occasioned by this litigation and it would be unreasonable to transfer to the applicant the burden of meeting some part of it by reason only of the respondents’ decision to prefer the services of their own staff to those of independent experts. ”
[47]In In re Eastwood [1975] 1 Ch. 112 the Court of Appeal had to consider the basis upon which costs could be recovered by the Attorney General in respect of work done by a senior solicitor in the Treasury Solicitors’ office. Russell LJ said at p.132:
“(1) It is the proper method of taxation of a bill in a case of this sort to deal with it as though it were the bill of an independent solicitor, assessing accordingly the reasonable and fair amount of a discretionary item such as this, having regard to all the circumstances of the case …………….(3) It is a sensible and reasonable presumption that the figure arrived at on this basis will not infringe the principle that the taxed costs should not be more than an indemnity to the party against the expense to which he has been put in the litigation…..”
[48]Russell LJ warned against requiring in all cases of employed solicitors a total exposition and breakdown of the activities and expenses of the department with a view to ensuring that the indemnity principle was not infringed. To do so would “introduce a rule unworkable in practice and to push abstract principle to a point at which it ceases to give results consistent with justice.”[49]Two comments may be made about this decision. First, it is unclear what the lord justice had in mind was the “expense” of the Attorney General which had been incurred. He probably had in mind the salary which the solicitor was paid. Second, the warning against pushing abstract principle to the point where injustice is caused suggests that one should not apply the indemnity principle too rigorously and that one should always seek to achieve a just result.[50]Finally, reference should be made to Ultraframe v Eurocell 31 July 2006 (unreported), a decision of Master Campbell, in which he held that costs could be recovered in respect of the work done by an in-house solicitor in circumstances where an independent solicitor was also instructed, provided that there was no duplication. Duplication was a matter of quantum, not of principle.[51]A cogent argument can be made in this case that, although Mr. Shackleton has bestowed his professional skill upon the Claimant and that the time he spent doing so can be measured, the principle established by London Scottish Benefit Society v Chorley does not apply. The Claimant is the litigant, not Mr. Shackleton. The court cannot ignore the separate personality of the Claimant. The Claimant has not expended its own “time and trouble” in respect of which it claims to be indemnified. It has suffered no loss. Mr. Shackleton has expended his own “time and trouble” and has suffered loss but he has no status in the litigation as a party and has chosen not to charge the Claimant for his services. The cases on in-house solicitors or experts do not assist because the Claimant does not employ Mr. Shackleton and so does not suffer a loss by paying him a salary.[52]But a cogent argument can be made the other way. The Claimant has suffered a loss because as a result of Mr. Shackleton spending his time on the Claimant's pursuit of its fees the Claimant cannot use his services to earn fees for the Claimant in other cases. There is no doubt that at least some of the services performed by Mr. Shackleton were not duplicated by the solicitor and counsel instructed by the Claimant. For example he appeared as counsel before Flaux J. and he prepared the Skeleton Argument for this application. If the Claimant had instructed a solicitor and counsel to do that work there is no doubt that it would recover the costs of so doing. It would be odd if by using Mr. Shackleton to do that work the Claimant could recover nothing in respect of his work. That suggests that a just result would be one which enabled the Claimant to recover a reasonable and fair amount of his time.[53]This is an unusual case and none of the cases to which I was referred deal with its circumstances. I suspect that in legal practice, at any rate in this jurisdiction, it is unusual for a lawyer to provide his services through a company in the manner in which Mr. Shackleton does. Having considered the opposing arguments I have reached the conclusion that the Claimant can recover a reasonable and fair amount in respect of Mr. Shackleton's services. I do not consider that such a conclusion breaches the indemnity principle because a broad understanding of "loss" is appropriate in this field. Further, to disallow his time would risk pushing "abstract principle" to a point where the result was not consistent with justice.[54]What is a reasonable and fair amount to be recovered in respect of Mr. Shackleton's services must be considered on assessment, in the event that the parties cannot settle the matter. On assessment it seems to me that at least three matters will have to be considered. First, there will be the question of duplication with work done by the solicitor at Gateleys. It is likely that there was some. Second, there will be the question of the appropriate rate to use when assessing Mr. Shackleton's services. His rate of £800 is more than double the rate of the solicitor at Gateleys. Her rate appears to be within the guideline rate. The guideline rate can be exceeded when the matter is sufficiently complex but proceedings to enforce an arbitration award do not fall into that category. There would appear therefore to be a cogent argument for saying that the rate charged by Gateleys is an appropriate rate at which to assess Mr. Shackleton's time. Third, there will be the question whether items of Mr. Shackleton's work were not reasonably necessary. My knowledge of this case suggests that there will be some items of work which were not reasonably necessary. The 97 page statement in response to the Defendants' application was not necessary. All that was necessary was a statement by an independent expert on French law as to the prospects of the success of the appeal to the Cour de cassation.

Conclusion

[55]On the three matters which I have been asked to resolve my conclusions are i) the Claimant may recover 80% of the costs of the hearing before Flaux J. with no order as to the remaining 20%; ii) the Claimant’s costs shall be assessed on the indemnity basis; iii) the Claimant is entitled to recover costs in respect of the work done by Mr. Shackleton in a reasonable and fair amount.

Cited in 3 later judgments