New CPR govern Indemnity Costs awards
The defendant had successfully defended the main claim and now appealed against the refusal of an order for costs on an indemnity basis even though judge thought that the claimants had behaved unreasonably. He had said that some conduct deserving of moral condemnation was required. The defendant had made an offer to settle which was only later accepted. The defendant sought costs on an indemnity basis.
Held: A civil court may make an order for the assessment of costs on an indemnity basis to mark the court’s disapproval of a party’s unreasonable conduct. The Civil Procedure Rules contain a new procedural code, intended to enable the court to deal with cases justly. It is no longer necessary to show that there has to be some sort of moral lack of probity or conduct deserving moral condemnation on the part of the paying party before ordering indemnity costs. If one party has made a real effort to find a reasonable solution to the proceedings and the other party has resisted that sensible approach, then the latter puts himself at risk that the order for costs may be on an indemnity basis. In this case the judge had applied the incorrect test. His decision was set aside, and the case remitted to him for further determination.
May LJ said: ‘As the very word ‘standard’ implies, this will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted, but I do not think this will necessarily be so in every case. What is, however, relevant to the present appeal is that litigation can readily be conducted in a way which is unreasonable and which justifies an award of costs on an indemnity basis, where the conduct could not properly be regarded as lacking moral probity or deserving moral condemnation.’ . . And ‘If costs are awarded on an indemnity basis in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted, but I do not think that this will necessarily be so in every case. What is, however, relevant, at the present appeal, is that litigation can readily be conducted in a way which is unreasonable and which justifies an award of costs on an indemnity basis, where the conduct could not properly be regarded as lacking moral probity, or deserving moral condemnation . . There will be many cases in which, although the defendant asserts a strong case throughout and eventually wins, the Court will not regard the claimant’s conduct of the litigation as unreasonable and will not be persuaded to award the defendant indemnity costs. There may be others where the conduct of a losing claimant will be regarded, in all the circumstances, as meriting an order in favour of the defendant of indemnity costs. Offers to settle and their terms will be relevant, and if they come within Part 36 may, subject to the Court’s discretion, be determinative.’
May LJ, Kay LJ, Ward LJ
[2002] 1 WLR 2800, [2001] EWCA Civ 1723, [2002] EMLR 19, [2002] 1 Costs LR 180, [2002] 2 All ER 150, [2002] CP Rep 12, [2002] CPLR 1
Bailii
Civil Procedure Rules 36.21 44.3 44.4
England and Wales
Citing:
Cited – Petrograde Inc v Texaco Ltd CA 23-May-2000
The award of costs under Rule 36.21 on an indemnity basis is not intended to be penal, and the court must look at what was fair and reasonable in the circumstances. Lord Woolf said: ‘However, it would be wrong to regard the rule [36.21] as producing . .
Cited – David John Baron v Brian Lovell CA 27-Jul-1999
A party to litigation must ensure that an agent attending had sufficient knowledge and authority to deal with issues raised at a pre-trial review, and where he failed in this he could be penalised in indemnity costs or interest at higher rates than . .
Cited – McPhilemy v Times Newspapers Ltd (No 4) CA 3-Jul-2001
The fact that a defendant had not acted unreasonably in pursuing a case after an offer of settlement, was not a reason for not awarding costs to be paid on an indemnity basis. Such an award had no penal element, and did not first require any . .
Cited – Raja v Rubin and Another CA 19-Mar-1999
Having waived his right to a dividend under a voluntary arrangement, a creditor could not object to its later variation to include other creditors, despite an absence of explicit power in the deed for this purpose. Waiver should have been made . .
Cited by:
Cited – Kiam II v MGN Ltd (2) CA 6-Feb-2002
An appeal against a damages award in a defamation case had been unsuccessful. The claimant now appealed for the award of indemnity costs. The claimant had made an offer of compromise, which had been ignored by the defendant.
Held: If a party . .
Cited – Brawley v Marczynski and Another CA 21-Oct-2002
The defendants appealed an award of costs on an indemnity basis against them in the favour of a legally aided claimant.
Held: Indemnity costs were often intended to indicate disapproval of a party’s behaviour in an action, and were awarded in . .
Cited – Fourie v Le Roux and others HL 24-Jan-2007
The appellant, liquidator of two South African companies, had made a successful without notice application for an asset freezing order. He believed that the defendants had stripped the companies of substantial assets. The order was set aside for . .
Cited – Carvill v HM Inspector of Taxes SCIT 23-Mar-2005
SCIT COSTS – Basis for award – Indemnity costs – Whether Special Commissioners have power to award costs on the indemnity basis – Yes – Whether costs should be awarded on the indemnity basis – Yes – Special . .
Cited – Fosberry and Another v Revenue and Customs VDT 28-Jul-2005
COSTS – Indemnity basis – Commissioners accepted that taxpayers’ appeal succeeded – Commissioners offered to pay taxpayers’ costs – Taxpayers applied for indemnity costs on grounds that Commissioners had changed their reasons for original decision . .
Cited – Vaidyanathan v Milton Keynes Council EAT 25-Nov-2003
EAT Practice and Procedure – Appearance . .
Cited – Harrods (UK) Ltd v Revenue and Customs VDT 1-Nov-2005
VDT VALUE ADDED TAX – Direction to pay costs to the successful party (the Appellant) – rule 29(1) of the VAT Tribunals Rules 1986 – whether costs should be awarded on the standard basis or alternatively on the . .
Cited – The Funding Corporation Ltd v Revenue Customs VDT 4-Apr-2006
VDT VALUE ADDED TAX – Direction to pay costs to the successful party (the Appellant) – rule 29(1) of the VAT Tribunals Rules 1986 – whether costs should be awarded on the standard basis or alternatively on the . .
Cited – Vauxhall Motors Ltd and Another v Revenue and Customs VDT 14-Mar-2007
VDT Value Added Tax – Direction to pay costs to the successful party (the Appellant) – Rule 29(1) of the VAT Tribunals Rules 1986 – Whether costs should be awarded on the standard basis or alternatively on the . .
Cited – Landlord Protect Ltd v St Anselm Development Company Ltd ChD 8-Jul-2008
. .
Cited – Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson (A Firm) CA 12-Jun-2002
The court was asked as to when it is appropriate to order costs on an indemnity basis. Waller LJ said: ‘The question will always be: is there something in the conduct of the action or the circumstances of the case which takes the case out of the . .
Cited – Wates Construction Ltd v HGP Greentree Allchurch Evans Ltd TCC 10-Oct-2005
A unit constructed by the claimant had collapsed under a weight of rainwater. It had been constructed according to a design provided by the defendants. The claimants had discontinued the action on the morning of the trial, and the defendants now . .
Cited – Evans and Others v The Serious Fraud Office QBD 12-Feb-2015
evans_sfoQBD201502
The claimants had had criminal charges brought against them by the defendants. A court had ordered them discharged, but the defendant had recommenced proceedings and these second set of proceedings had also been dismissed by the court. They now . .
Lists of cited by and citing cases may be incomplete.
Costs, Civil Procedure Rules
Leading Case
Updated: 02 November 2021; Ref: scu.182851