Balancing the books

In Bailey & Anor v Glaxosmithkline UK Ltd [2020] EWHC 1766 (QB), the court ordered the claimants in a failed product liability case to pay indemnity costs in a claim which pre-dated the qualified one-way costs shifting (QOCS) regime.

The case is notable for one of the most bizarre submissions ever made to a senior court, namely that the defendant should be deprived of most of its costs for failing to apply to have the claim struck out as being weak. This brings a claim in personal injury to a new level of madness.

Such submissions cause great harm to real, injured people and were roundly and rightly dismissed by a high court judge who, equally rightly, ordered the claimants to pay indemnity costs. They create a climate in which it is much easier for parliament to legislate unfairly against real personal injury victims.

Had this been a post-QOCS case then, on the face of it, the court would have had no power to order the claimants to pay any costs, let alone indemnity costs. The facts of this case must cast into doubt the reasonableness of the QOCS regime.

Separately, in Infinity Distribution Ltd (in administration) v The Khan Partnership Ltd [2020] EWHC 1657 (Ch) the court upheld an order that a proposed deed of indemnity offered by the claimant was adequate and acceptable security for the defendant’s costs; and that the amount and potential recoverability from the defendant of the associated ‘after the event’ (ATE) insurance premium was not '¨a relevant factor when assessing the deed’s acceptability '¨as security.

The master at first instance said the disadvantage incurred by the party seeking security for costs, of facing a larger costs exposure, had come about by the funding regime which (at the time the ATE policy was taken out) allowed for recoverability of the premium, rather than by the operation of the regime for security for costs.

The claimant had been ordered to provide £350,000 security to the defendant by way of a proposed deed of indemnity. If the deed was not reasonably acceptable to the defendant, all further proceedings would be stayed pending a further hearing. 

The parties agreed the deed’s terms, but the claimant indicated it would seek to recover from the defendant its original ATE premium of £120,000 plus £195,000 for the costs of the topped-up ATE policy and the deed. '¨The defendant considered that the deed of indemnity was unacceptable because '¨of the £195,000 increase in the defendant’s potential costs liability.

The Chancery Division dismissed the defendant’s appeal. It held that the purpose of ordering security is to protect the recipient against the risk of being unable to enforce any subsequent costs order; and that the court must balance the injustice to a claimant if prevented from pursuing a proper claim, with the injustice to the defendant if no security is ordered and they cannot recover their costs after trial.

The court also noted that security for costs should be provided in the manner least onerous to the provider. Applying these principles, the lower court was correct not to have taken into account the amount and potential recoverability of the increased ATE premium from the defendant. 

The deed of indemnity would give the defendant real and adequate security for costs. Making the order would not prevent the claimant from pursuing its claim.  

Kerry Underwood is senior partner at Underwoods Solicitors underwoods-solicitors.co.uk 

He also runs a consultant service at kerryunderwood.co.uk