Costs News

10 October 2019
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There’s only one authority you need to cite on indemnity costs, says CA

The law on indemnity costs was settled by a ruling in 2002 and litigants are to be “discouraged” from citing additional authority on it, the Court of Appeal has said.

The court was giving a rare ruling on the issue in Ford & Anor v Bennett & Anor [2019] EWCA Civ 1604, an appeal against the award of indemnity costs by two additional parties.

In the substantive case, following a 12-day trial, Mr George Bompas QC, sitting as a deputy judge of the Chancery Division, found that the defendant and the additional parties had failed to prove an oral agreement whereby they alleged that the second claimant had agreed to form a partnership with them to hold East Thurrock United Football Club and its grounds at Corringham in Essex.

In awarding indemnity costs against the defendant and additional parties, Mr Bompas said it was a case “in which plainly unreliable evidence was advanced to support a case founded ultimately on a fiction”. Although the most serious criticism was directed at the defendant and the witnesses he called, the judge said the additional parties relied on the defendant’s evidence and witnesses and “ultimately they cannot avoid being treated along with the defendant in terms of the basis of assessment of costs”.

Sir Bernard Rix, giving the ruling of the Court of Appeal, with which Lord Justice Baker agreed, said it was common ground that the “leading modern authority” was Excelsior Commercial & Industrial Holdings Limited v Salisbury Hammer Aspden & Johnson [2002] EWCA 879, with its test that, for indemnity costs to be ordered, there had to be some conduct or circumstance taking the case out of the norm.

He said: “On this appeal, the court was not taken to any other decision, although others were collected together in a small bundle of authorities.

“In Excelsior, the trial judge had made an order for indemnity costs, and this court did not interfere with that decision. Lord Woolf CJ said (at [32]): ‘In my judgment it is dangerous for the court to try and add to the requirements of the CPR which are not spelt out in the relevant parts of the CPR. 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.’

“In the circumstances, litigants are discouraged from citation of authority in what, particularly at first instance, is a well-travelled road, depending in each case on its particular circumstances and the discretion of the trial judge.”

He added that the counsel’s citation from the 2018 White Book could be traced back to what Tomlinson J (as he then was) said in Three Rivers District Council v Bank of England [2006] EWHC 816 (Comm), where among a longer list he highlighted as a possible ground for indemnity costs “where a claim is speculative, weak, opportunistic or thin, a claimant who chooses to pursue it is taking a high risk and can expect to pay indemnity costs if it fails”.

Sir Bernard said: “Tomlinson J's list continues to be cited in the 2019 White Book at 4.3.10.”

Having examined Mr Bompas’s decision, he upheld his ruling. “At the end of the day, this is an appeal on a matter of discretion from a trial judge who applied the correct test, and, after a most careful and comprehensive substantive judgment which is subject to no criticism whatsoever from the additional parties, made a careful evaluation of the various arguments put forward to him on the matter of costs…

“In a complex case of which he had showed himself the master, the judge steered a careful and thoughtful course. In his ultimate judgment that the additional parties had made common cause with the defendant Wayne, the judge was not only entitled to come to the conclusion that he did, but was in my view right to do so.”

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