A decision of the Court of Appeal dealing with the question of when indemnity costs may be awarded. Of interest where one party chooses to engage in a level of vigorous litigation which departs from the norm. Note the indication that much hard fought litigation falls within the norm and hence would not attract indemnity basis costs.

The claimant recovered damages. The defendant was ordered to pay costs ‘on the indemnity rather than the standard basis… including…the costs of the trial which…lasted for eight days and in the course of which a considerable body of expert evidence was heard.’
Tomlinson L.J.said,

‘34 …The judge gave two reasons for her decision.

[Conduct during  negotiations]

The first was that the defendant had failed “to enter into meaningful negotiations in a collaborative way and to seek a sensible compromise in a quantum only trial” in a manner which “was unreasonable, especially in light of the self-evident weaknesses in their care and occupational therapy evidence”. The judge castigated the defendant’s decision to carry on to trial as “ill-judged”, necessitating “an eight day trial, at huge cost both to public funds and to the family of this severely disabled young claimant”.

[Conduct at trial]

The second reason was that the judge regarded the nature of the case advanced by the defendant and as put to Mr and Mrs Cocking in the witness box as unsustainable and entirely inappropriate in the context of the case.

39 The claimant’s recovery as a result of the judge’s award of damages equates to a further lump sum payment of £1.75 million and periodical payments of £103,000 per annum. The claimant has therefore made a recovery substantially in excess of his own pre-trial offer.’

The Lord Justice dealt with two aspects: conduct in negotiations and conduct during the trial. He said,

[Conduct during  negotiations]

‘40 For my part I do not think that the defendant’s conduct in negotiations should attract any sanction in costs, and I do not consider that the judge gave adequate reasons for her conclusion that it did. A judge should in my view be very slow to entertain a discussion as to whether parties to litigation have negotiated in a reasonable manner. Such an enquiry opens up the prospect of undesirable and wasteful satellite litigation, as the reasonableness of a negotiating stance may and almost certainly usually will depend upon a careful evaluation of the respective states of knowledge of the parties. The Part 36 regime is designed precisely to obviate this kind of enquiry.

…In all the circumstances the judge’s criticism of the defendant’s approach to settlement was in my view unjustified.

[Conduct at trial]

41 I take a different view however so far as concerns conduct of the trial…It was…the nature of the case which took it out of the norm. The case put against Mr and Mrs C was that they had dishonestly set out to mislead the professional advisers by exaggerating the difficulties involved in [C’s] care, and that their evidence at trial was in these respects similarly dishonest. It was suggested to them that they had been motivated by greed rather than by the interests of [C]. A particularly egregious example of this attack concerned their purchase of a Land Rover Discovery, a purchase of an eminently suitable vehicle for [C’s] needs about which they had consulted the Deputy Mr [G], a purchase nonetheless castigated by the defendant as unnecessary extravagance motivated by greed.
Furthermore the judge was very critical of the evidence given by the defendant’s experts in the field of care and occupational therapy, which criticism went beyond the “self-evident weaknesses in their evidence” to which the judge referred in her costs judgment. The evidence of …the care expert, was described in the judge’s substantive judgment as both “illogical” and “unrealistic”…The judge’s more serious criticism was reserved for the defendant’s occupational therapy witness [P] Her evidence was “wholly unrealistic” – [224] and, at [227], “extraordinary and … wholly out of kilter with awards made in this area”.
42 I have no doubt that had the judge acceded to the defendant’s suggestion that the claimant’s case was deliberately exaggerated the defendant would have sought an award of indemnity costs. What is sauce for the goose should be sauce for the gander. I bear in mind that litigation in this field is often hard-fought. Given that litigation is necessarily adversarial, and that litigation unfortunately cannot be avoided in this field, I guard against a feeling that sometimes it is conducted in a manner inappropriate to the subject matter. I appreciate that there were here serious issues which the defendant felt needed to be explored in the manner in which they were…Looked at in the round, the judge who heard the trial, and who I might add had heard many like it, plainly concluded that what had occurred fell outside the norm, although she did not express her conclusion in precisely that manner. That conclusion will I hope rarely be reached in litigation of this kind, but I do not consider that we would be justified in interfering with the judge’s conclusion that here it properly should be. I would therefore dismiss the …appeal on this aspect also.’

Edited for ease of reading.