Indemnity Costs Awarded Where Defences Were 'Built On Deliberate Lies'

The court awarded indemnity costs and a £76.4 million interim payment after finding defendants had advanced defences built on deliberate lies throughout the fraud proceedings.

Indemnity costs fraudulent defence CPR 44.2 Commercial Court judgment

JSC COMMERCIAL BANK PRIVATBANK V KOLOMOISKY & OTHERS [2025] EWHC 2909 (CH)

In JSC Commercial Bank Privatbank v Kolomoisky & Others [2025] EWHC 2909 (Ch), Mr Justice Trower determined consequential costs matters following his substantive fraud judgment. The court awarded the Bank its costs on the indemnity basis, finding the Defendants’ conduct took the case outside the norm based on: the serious underlying fraud, defences built on deliberate falsehoods, significant disclosure failures, refusal to give evidence, belated changes of case, and expert evidence failures contrary to CPR Part 35 duties. The court rejected arguments for issue-based costs orders. Pursuant to CPR 44.2(8), the court ordered an interim payment on account of £76.4 million (65% of profit costs, 70% of counsel’s fees, 75% of disbursements), payable within 14 days. On interest, the court awarded pre-judgment interest at base rate plus 3% from dates costs were paid, reflecting the Bank’s commercial borrowing costs. Post-judgment interest on the interim payment runs from the payment date; for remaining costs, from three months after judgment, applying Involnert Management Inc v Aprilgrange Ltd principles. The court refused permission to appeal and stay applications.
Link to full judgment

In all of these circumstances, I am satisfied that, taken in the round, the conduct I have summarised above takes this case out of the norm in a way which justifies an award of indemnity costs in respect of the proceedings as a whole. I should add that the factors which I have described are attributable to the way in which each of the Defendants either directly advanced their case or adopted a case made by one or the other Defendants. In my judgment, an order that the Bank’s costs be paid by the Defendants on the indemnity basis is the right order to make in this case.

Citations

Esure Services Ltd v Quarcoo [2009] EWCA Civ 959 Established that an indemnity costs order may be appropriate where conduct takes a case outside the ordinary and reasonable course of proceedings. Whaleys (Bradford) Ltd v Bennett [2017] EWCA Civ 2143  Confirmed that indemnity costs do not require exceptional circumstances but are justified where conduct is outside the norm. Eurasian Natural Resources Corporation Ltd v Dechert LLP (3.8.22; unreported) Recognised that serious dishonest conduct forming the basis of a claim may justify indemnity costs.Kazakhstan Kagazy v Zhunus [2018] EWHC 369 (Comm) Supported awarding indemnity costs where the nature of the underlying conduct takes the case outside the norm. Pisante v Logathetis [2022] EWHC 2575 (Comm) Emphasised that pre-action conduct is relevant to indemnity costs only where sufficiently connected to the proceedings. Singh v Singh [2014] EWHC 1770 (Ch) Held that an “extraordinarily casual” or “very casual” approach to disclosure may justify an indemnity costs order. Involnert Management Inc v Aprilgrange Ltd [2015] EWHC 2834 (Comm)  Stated that interest on costs from the date the costs are incurred or paid is routinely awarded at a commercial rate. Jones v Secretary of State for Energy and Climate Change [2014] EWCA Civ 363 Confirmed that interest on costs compensates a party for being deprived of the use of money. AS Latvijas Krajbanka v Antonov [2016] EWHC 1679 (Comm) Held that section 35A interest may be awarded where foreign law provides no interest, with rates informed by commercial borrowing costs. Maher v Groupama Grand Est [2010] 1 WLR 1564 
Established that section 35A Senior Courts Act 1981 provides a discretionary remedy available regardless of foreign law’s approach to interest. Saipem SPA v Petrofac Ltd [2025] EWCA Civ 1106 Reaffirmed that guideline hourly rates should not be materially exceeded without clear justification, including during interim costs assessments. Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) Confirmed that when estimating a payment on account of costs, the court should allow a margin reflecting likely recovery and case size.
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Key Points

  • An award of indemnity costs is justified where a party’s conduct, viewed in the round, takes the case outside the norm. This can include the nature of the underlying wrongdoing, advancing a defence built on dishonesty, significant disclosure failings, and the unsatisfactory nature of expert evidence. [72-93]
  • When quantifying an interim payment on account of costs, the court will make a reasonable estimate of the likely level of recovery, applying an appropriate margin for error. This involves a broad-brush assessment of the costs claimed, taking into account factors such as the proportionality of hourly rates and counsel numbers. [94-106]
  • The court has the power to award interest on costs from the date they were paid, and the appropriate rate is a commercial rate reflecting the cost of borrowing for a party with the successful claimant’s general characteristics. [108-115]
  • For post-judgment interest on costs, the default position is that interest runs from the date of the costs order. However, where the paying party lacks sufficient information to assess its full liability, it may be just to defer the running of judgment interest until a reasonable time after detailed information is provided. [116-120]

"While the focus of the Defendants' case had shifted by the time of closing submissions to a heavy reliance on the Limitation Defence and the Repayment Defence, they continued to maintain their position throughout that they were not responsible for the unlawful conduct alleged by the Bank, a position which was argued in great detail and with considerable forcefulness by Mr Bogolyubov. I have concluded that this involved them seeking to advance a case which sought to mislead the court as to the reality of what occurred in numerous respects."

Key Findings In The Case

  • The Defendants’ conduct throughout the proceedings—including dishonest pleadings, significant disclosure failings, and reliance on expert evidence that failed to meet the standards of CPR Part 35—was found to take the case outside the norm and justify an award of indemnity costs in favour of the Claimant on the basis of conduct both before and during the litigation [72–93].
  • The Bank’s estimated legal costs of £110.5 million were broadly reasonable in context, and the Court found there was enough information—despite some questions over hourly rates and partner-level involvement—to justify an interim payment on account of costs in the sum of £76.4 million, representing 65% of profit costs, 70% of counsel fees, and 75% of disbursements [94–106].
  • The Court found that the Bank had incurred legal costs in sterling since 2017, and it was therefore appropriate to award pre-judgment interest on costs from the time they were paid at a commercial rate, namely Bank of England base rate plus 3%, reflecting a realistic proxy for the Bank’s cost of funding [108–115].
  • The start date for post-judgment interest on costs was determined to be subject to a deferred approach, such that interest at the 8% judgment rate would apply either: (a) from the date of the interim payment for the part covered by it, or (b) three months after the date of the judgment for the balance, to reflect the point at which the paying parties could reasonably assess their liability based on detailed information from the Bank [116–120].
  • The Individual Defendants’ applications for a stay of execution on the costs order were refused, as the Court found no sufficient risk of irrecoverability due to Ukrainian sanctions and concluded that ring-fencing arrangements within England (particularly via solicitors’ accounts) provided adequate protection for any restitution risk pending appeal [163–215].

"In making that order, the exercise of quantifying what amounts to a reasonable sum involves the making of an estimate of the likely level of recovery subject to an appropriate margin to allow for error in the estimation, per Christopher Clarke LJ in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) at [23]. He went on to say at [24]: 'In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them...'"

The High Court’s decision in JSC Commercial Bank Privatbank v Kolomoisky [2025] EWHC 2909 (Ch) confirms that conduct viewed “in the round” can justify indemnity costs where multiple factors including dishonest defences, disclosure failures, and expert evidence deficiencies take the case outside the norm.

Background

The claimant, JSC Commercial Bank Privatbank, brought proceedings against multiple defendants, including Igor Kolomoisky and Gennadiy Bogolyubov, alleging misappropriation of funds through a fraudulent scheme. On 30 July 2025, the court handed down judgment ([2025] EWHC 1987 (Ch)) finding the defendants liable for substantial sums. A consequentials hearing was convened to address unresolved matters, including the quantification of the judgment sum, interest, costs, and ancillary relief. The Bank, as the successful party, sought its costs of the proceedings. The defendants opposed the Bank’s applications regarding the basis of assessment, an interim payment on account, and interest on costs. The Corporate Defendants were not represented at the hearing, as their solicitors had come off the record.

Costs Issues Before the Court

The court was required to determine three principal costs issues:

      • first, whether the Bank’s costs should be assessed on the indemnity basis rather than the standard basis;
      • second, the amount of any interim payment on account of costs pending detailed assessment; and
      • third, the rate and timing of interest payable on the Bank’s costs.

These issues arose in the context of the Bank having succeeded at trial and the defendants resisting the full extent of the costs relief sought.

The Parties’ Positions

The Bank contended that its costs should be assessed on the indemnity basis, arguing that the defendants’ conduct, both pre-action and during the proceedings, took the case outside the norm. It relied on factors including the nature of the underlying fraud, dishonesty in the defence, evidential failings, belated changes of case, and deficiencies in the defendants’ expert evidence. The Bank sought an interim payment on account of costs of £80 million, representing approximately 72% of its claimed costs of £110,524,169.99. It also sought interest on costs at the Bank of England base rate plus 3% from the dates costs were paid, with post-judgment interest at the statutory rate from the date of the costs order.

The defendants opposed indemnity costs, arguing that their conduct did not justify departure from the standard basis. Mr Bogolyubov submitted that he had adopted a proportionate approach to the litigation. Both individual defendants contested the amount of the interim payment, with Mr Bogolyubov proposing £36.67 million held by his solicitors pending appeal. They also disputed the interest rate sought by the Bank, suggesting that a lower rate would be appropriate, and argued that post-judgment interest on costs should not run until three months after the order to allow for assessment of liability.

The Court’s Decision

The court awarded the Bank its costs on the indemnity basis. It found that the defendants’ conduct, viewed in the round, was outside the norm. Key factors included:

      • the serious nature of the underlying fraud;
      • the advancement of defences built on deliberate falsehoods;
      • significant disclosure failures;
      • the defendants’ decision not to give evidence;
      • belated abandonment of key arguments; and
      • the unsatisfactory nature of their expert evidence.

The court rejected arguments that certain defences should be carved out from indemnity costs, noting their pervasive impact on the proceedings.

On the interim payment, the court determined that a reasonable sum was £76.4 million, after adjusting the Bank’s claim. This comprised 65% of claimed profit costs (£42.4 million), 70% of counsel’s fees (£10.5 million), and 75% of other disbursements (£23.5 million). The court considered the evidence of costs incurred, the defendants’ criticisms of hourly rates and counsel numbers, and the principles from Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm). The payment was ordered within 14 days, consistent with the judgment debt.

Regarding interest on costs, the court awarded pre-judgment interest at the Bank of England base rate plus 3% from the date costs were paid until payment. This rate was deemed appropriate to compensate the Bank for being kept out of its money, reflecting commercial borrowing costs. Post-judgment interest on the interim payment would run at the statutory rate from the due date. For the balance of costs, post-judgment interest would begin three months after the judgment date, allowing the defendants time to assess liability, following the approach in Involnert Management Inc v Aprilgrange Ltd [2015] EWHC 2834 (Comm).

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JSC COMMERCIAL BANK PRIVATBANK V KOLOMOISKY AND OTHERS [2025] EWHC 2909 (CH) | THE HONOURABLE MR JUSTICE TROWER | INDEMNITY COSTS | CPR 44.2(4) | CPR 44.2(5) | CPR 44.2(6)(G) | CPR 44.11 | CPR 52.16 | CPR 40.11 | SECTION 35A SENIOR COURTS ACT 1981 | SECTION 44A ADMINISTRATION OF JUSTICE ACT 1970 | FULL COMPENSATION | COMPOUND INTEREST | SIMPLE INTEREST | ARTICLE 625 CIVIL CODE (UKRAINE) | ARTICLE 1166 CIVIL CODE (UKRAINE) | ARTICLE 1192 CIVIL CODE (UKRAINE) | ARTICLE 1212 CIVIL CODE (UKRAINE) | VENIRE CONTRA FACTUM PROPRIUM | INTERIM PAYMENT ON ACCOUNT OF COSTS | DETAILED ASSESSMENT | COSTS ON APPEAL | COSTS OF ENFORCEMENT | COSTS SANCTIONS IMPACT | LIVING EXPENSES UNDER FREEZING ORDER | WORLDWIDE FREEZING ORDER | RING-FENCED EXPENSES | COSTS OF COMPLIANCE WITH WFO AND DDO | DISCRETIONARY COSTS ORDERS | APPLICATION FOR A STAY PENDING APPEAL | RISK OF STIFLING APPEAL | PROCEEDS HELD TO COURT’S ORDER | ENFORCEMENT PREJUDICE | RECEIVABLE COLLECTION OBLIGATIONS | JUDGMENT INTEREST ON COSTS | CREDITOR COMPETITION | CPR MODEL FORM FREEZING ORDER | EU BRUSSELS RECAST REGULATION ARTICLE 39 | BABANAFT PROVISO | SANCTIONS RETURN RISK | SAS INSTITUTE INC V WORLD PROGRAMMING LTD | BANK OF CHINA LLC V NBM LLC | NICHOLLS V MAPFRE ESPANA [2025] 1 WLR 660 | SAGICOR BANK JAMAICA V YP SEATON [2022] UKPC 48 | HOTEL PORTFOLIO II UK LTD V RUHAN [2022] EWHC 1695 (COMM) | KAZAKHSTAN KAGAZY V ZHUNUS [2018] EWHC 369 (COMM)