22 June 2022

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Indemnity costs awarded over “fundamentally inappropriate” witness statements challenge

Judge says fact defendant was successful on a few points did not mean the application was justified

A defendant has been ordered to pay 75% of the costs of a “fundamentally inappropriate” application to strike out witness evidence on the indemnity basis.

His Honour Judge Keyser QC, sitting as a High Court judge, said the fact that Zurich Insurance was successful on a few of the points it raised did not mean the application was justified.

The underlying case in Curtiss & Ors v Zurich Insurance Plc & Anor (Costs) [2022] EWHC 1514 (TCC) concerns a strongly contested claim for damages for deceit on behalf of flat-owners in a development in Swansea against Zurich Insurance. There is to be a 24-day trial of issues common to certain lead claimants next month.

In January, the claimants served 49 witness statements, of which 39 were relevant to the issues being considered next month. Zurich responded in April by highlighting numerous alleged breaches of the witness statement rules in practice direction 57AC, which came into force last year.

It applied successfully to strike out four of the statements in their entirety and less successfully parts of another 29. The total costs incurred by both sides on the application, excluding VAT, exceeded £275,000.

“I regard that with dismay,” said HHJ Keyser. “This is substantial litigation, involving a lot of evidence and quite a few issues. But, in my view, there is no rational world in which this sort of expenditure can have been justified on an application such as this.”

He went on to rule that Zurich ought to pay 75% of the claimants' costs, to be assessed on the indemnity basis, and ought not to recover any part of its own costs.

“In my view, this application was fundamentally inappropriate,” he explained. “That does not mean that no part of it had merit. If one makes hundreds of points, there are almost bound to be some good ones. That does not show that the application was justified. In giving my judgment on 1 June, I said that the application was not worth the candle. I remain of that view.”

The more than two months it took Zurich to prepare a 109-page schedule with particulars of non-compliance “seems to me to have been a waste of time and effort”, the judge went on.

HHJ Keyser acknowledged that the application had “a measure of success” and that the claimants never accepted that any of their witness statements were open to any objection.

But this carried little weight, he went on. The meritorious points were set in the context of “a disproportionate and oppressive schedule, much of which was patently lacking in merit”, while “the fact that I made an order striking out all or part of several witness statements does not show that the application was justified”.

The judge explained that the points could just as well be dealt with at trial by counsel “cross-examining quickly and pertinently on some parts of the evidence, disdainfully ignoring other parts, and dealing appropriately with the evidence in submissions”.

“The additional time that this would have taken in preparation and hearing time would have been modest and is far outweighed by the application.”

HHJ Keyser stressed that applications for the imposition of sanctions for breach of PD57AC “should not be used as a weapon for the purpose of battering the opposition”, and a party “must use common sense and have regard to proportionality” when approaching breaches.

“Before the application in the present case was made, there were sufficient dicta to make it clear, if there had been any doubt, that the power to strike out offending parts of a witness statement will be exercised only where it is reasonably necessary and that in many cases the appropriate course will be for the court to place less, or no, weight on witness evidence that fails to comply with the requirements of the practice direction.”

The order for Zurich ought to pay 75% of the claimants' costs reflected “the modest gains” it made through the application being determined, while awarding them on the indemnity basis reflected the fact that its conduct fell “well outside” the ordinary and reasonable conduct of litigation.

Thomas Grant QC and Ryan James Turner (instructed by Walker Morris) for the claimants. Fiona Sinclair QC and Tom Asquith (instructed by Clyde & Co) for the first defendant.