Summary

Where a bank sought its costs incurred in debt and possession proceedings against individual and corporate defendants, costs were awarded on a joint and several basis and an indemnity basis. The case was run was on the basis that effectively all the defendants were in it together and were presenting a common front, and the contract referred to an indemnity in respect of all costs.

Facts

The claimant bank (D) sought its costs incurred, under a facility agreement, in proceedings against the individual and corporate defendants in debt and for possession of properties charged to D to secure the defendants' indebtedness.

The individual defendants were members of a family (K). The corporate defendants were beneficially owned and controlled by K. D obtained judgment on its claims and the various counterclaims were dismissed.

D submitted that (1) the defendants were liable for costs on a joint and several basis. It contended that a reference to "borrowers" in clause 16 in the facility agreement was to all the parties to the facility agreement, and that they were all liable in relation to the costs referred to in that clause; (2) it was entitled to costs on an indemnity basis, and relied on clause 16 which referred to an indemnity in respect of "all costs"; (3) the appropriate payment on account was £2,743,000, which represented two-thirds of its total costs discounted by 80 per cent.

Held

(1) The facility agreement distinguished between the obligations of the borrower and the borrowers collectively, and clause 16 addressed general charges which could be recoverable against all the borrowers. The natural reading of the clause was that the "borrowers" meant just that, namely all the borrowers, not each individual borrower. Accordingly, under the contract the defendants' liability for costs was joint and several. The reality of the litigation throughout was that the real party interested in the proceedings was K, whether the claims were being made against them individually or against the corporate defendants which they owned and controlled. The way in which the case was run was on the basis that effectively all the defendants were in it together and were presenting a common front in relation to virtually all issues. In all the circumstances it was a collectively run case and it was appropriate to make a costs order that reflected that situation, which meant a joint and several order (see paras 8-11, 15, 17-18 of judgment). (2) The starting point was the contract itself. The clear weight of authority supported the proposition that the reference to "all costs" in an agreement such as the facility agreement meant all costs unless they were unreasonable in amount or had been unreasonably incurred, which was the equivalent to costs on the indemnity basis. Accordingly, costs were to be assessed on an indemnity basis (paras 19, 23-24). (3) In all the circumstances of the case and its conduct, the appropriate sum for payment on account was £2,100,000 (para.28).

Judgment accordingly