Kathryn Clough and Mark O’Connor successfully acted for a commercial Landlord in obtaining indemnity costs against former tenant who operates an Orthodontic Clinic.
On 21 May 2025, Deputy High Bailiff Arrowsmith handed down a costs judgment in the case of Doddington Limited (“Doddington”) v Isle of Man Orthodontics Limited (“IOM Orthodontics”), which found the conduct of IOM Orthodontics was of such a poor nature that it merited an indemnity costs order being made against it.
Doddington is the owner of premises which were occupied by IOM Orthodontics. Following the instigation of proceedings by Doddington for possession of the premises, the parties entered into a confidential settlement agreement on 23 December 2024 (“the Settlement Agreement”), and subsequently a consent order was signed by the parties on 3 January 2025 (“the January Order”). As part of the Settlement Agreement, IOM Orthodontics agreed to vacate the premises by 4pm on 31 March 2025.
On the afternoon of 26 March 2025 (only 2 working days before 31 March 2025), IOM Orthodontics notified Doddington that, due to unforeseen challenges, it would not be able to vacate by 31 March as agreed. A hearing was subsequently listed on an urgent basis and possession was ordered against IOM Orthodontics; the court subsequently asked for submissions on indemnity costs.
Somewhat departing from previous decisions of Isle of Man courts (see Clucas Food Services Limited [15 December 2013]), in his decision, DHB Arrowsmith considered only broad inferences can be taken from previous authorities at [33] he considered:
“whilst broad principles can be drawn from the various authorities relied upon by each of the parties, they give little more than examples of particular factual scenarios, which will differ from one to the another. The Claimant [Doddington] was placed in a position where they had to take action to enforce the Agreement because of breach of the Agreement and the Consent Order by the Defendant [IOM Orthodontics].”
The court also considered the key English authority of Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA 879 which provides a pithy but useful summary on the principles for indemnity costs. In that case, the Court of Appeal declined to give circumstances where indemnity costs orders should or should not be made and it emphasised the breadth of discretion of the trial judge. DHB Arrowsmith at [32] agreed with the words of the then Lord Chief Justice who stated (also) at paragraph 32:
“This court can do no more than draw attention to the width of the discretion of the trial judge and re-emphasise the point that has already been made that, before an indemnity order can be made, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement.”
The court has emphasised that the circumstances where indemnity costs are to be ordered varies from case to case but the critical, and indeed first, requirement for the test is that the circumstances of the case are out of the norm. In this case, IOM Orthodontics sought to row back on an agreement it had entered with the benefit of legal advice to the detriment of Doddington; the court was presented with a fait accompli by IOM Orthodontics and as such the conduct was out of the norm.
The judgment can be found here