A recent case has shown the Court taking a new approach when it comes to assessing whether costs should be paid on an indemnity basis.
In civil litigation, the general rule of costs is that the loser pays the winner’s costs. When awarding costs, the Court can either award costs on a standard basis or an indemnity basis. A standard basis is simply the costs that the winning party accumulated as a result of the claim. An indemnity basis is more onerous and penalises the losing party for any unreasonable behaviour during the litigation.
In the recent case of MacInnes v Gross, the Claimant was unsuccessful in the claim for a number of reasons and as a result, the Defendant claimed costs were payable on an indemnity basis. Counsel for the Defendant submitted that the claim was “absurd”, “speculative” and “opportunistic” and argued that the amount of the claim had been grossly exaggerated. It was also argued that the Claimant’s evidence was unsatisfactory and that the claim was pursued in an unreasonable manner.
Counsel for the Defendant disagreed however and stated that the claim was nothing out of the ordinary. The Defence argued that the Claimant genuinely believed the basis of the claim and that there were many separate reasons why the claim failed and this therefore should not be a reason for indemnity costs to be awarded.
The Court’s Approach
When assessing the basis to award costs, the Court found that the Claimant did not deliberately lie to or mislead the Court. It was also held that although the Defendant did provide some unsatisfactory answers, this was part and parcel of the fact finding process in litigation and the Claimant’s reluctance to engage with offers made by the Defendant simply shows the strength of his belief in the claim.
An interesting approach taken by the Court is that the Claimant’s costs budget was assessed to see if the claim was conducted in a reasonable manner. The Claimant’s costs budget amounted to £234,000 for a claim for €13.5 million and this was seen as being proportionate to the claim. The Court therefore awarded costs on a standard basis, dismissing the application for indemnity costs.
This case shows us a different approach taken by the Court to assess costs. It might be argued that basis on which a party could be forced to pay costs, could simply depend on who was hearing the case. What this case does highlight is the importance of conducting the claim in a reasonable manner, which should be reflected in a costs budget that is proportional to the claim itself and this cannot be emphasised enough.
The approach taken by the Court in MacInnes v Gross could also be seen to protect a losing party, in that shows that a party cannot seek costs on an indemnity basis, simply because they are not happy with the way the other side has litigated. In almost every contentious matter, a party will believe that their argument is valid, whilst dismissing that of the other side. Therefore, this decision can be seen to raise the bar when it comes to claiming indemnity costs
If you require any advice or assistance in relation to a contentious civil matter, please call us and get in touch with our litigation team on 01792 648111