The recent case of Siegel v Pummell [2015] EWHC 195 (QB) demonstrates judicial willingness to make a costs order on the indemnity basis where circumstances exist which justify such an order being made.

Basic principles

Costs in civil litigation will either be assessed on the standard basis or the indemnity basis (Civil Procedure Rule 44.3); the default position is the standard basis (CPR 44.3(4)). However, a court may order costs on the indemnity basis if the circumstances of the case justify such an order being made.

The effect of an order requiring payment of costs on the indemnity basis is to disapply the requirement that, in addition to costs being reasonably incurred, they should also be proportionate to the sums and issues at stake in the litigation and that, in the event of the assessment judge having a doubt as to whether or not an item of cost has been incurred reasonably, the benefit of such doubt should go to the receiving rather than the paying party.

The Court of Appeal has declined to define the circumstances in which a court could or should make an order for costs on the indemnity basis. In Excelsior Commercial and Industrial Holdings v Salisbury Hamer Aspden & Johnson [2002] EWCA Civ 879, Lord Woolf, then lord chief justice, at paragraph 30, cited a judgment of Simon Brown LJ in Kiam v MGN Ltd (No. 2) [2002] 2 All ER 242 who, at paragraph 12, said: ‘I for my part, understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree.

‘To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight. An indemnity costs order made under part 44 (unlike one made under part 36) does I think carry at least some stigma. It is of its nature penal rather than exhortatory…’

In Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd [2008] EWHC 1391 (TCC), Mr Justice Coulson, at paragraph 3(iv), provided some guidance on what circumstances would justify costs being assessed on an indemnity basis. He said: ‘Examples of conduct that have led to such an order for indemnity costs include the use of litigation for ulterior commercial purposes… and the making of an unjustified personal attack on one party by the other…’

Siegel

The claimant was successful in his claim against the defendant. The court then considered whether the claimant was entitled to costs on the indemnity basis. The claimant contended that he should be awarded costs on the indemnity basis because of the manner in which the defendant conducted the litigation.

In particular, the claimant contended that the defendant’s expert’s conduct in personally attacking the claimant’s medical expert and his failing to engage with the medical issues were factors which justified costs to be assessed on the indemnity basis. Further, the claimant argued that the failure of both experts to agree on and file a joint expert’s report was due to the defendant’s expert’s obstructive attitude towards engaging in that process.

Finally, the claimant argued that the defendant had made allegations of dishonesty against the claimant without having properly pleaded them and that the defendant had filed witness statements late in the litigation process.

Wilkie J noted the combative and dismissive approach of the defendant’s expert but concluded that such conduct fell short of justifying an order for indemnity costs. As to the allegations of dishonesty against the claimant, Wilkie J found that the defendant did not make allegations of dishonesty.

Although there were occasions during the trial when the judge required clarification from the defendant as to whether or not he was alleging fraud against the claimant, the judge found that the defendant was clearly not alleging dishonesty but was merely suggesting that the claimant’s personal injuries were caused by other factors.

On the issue of late service of witness statements, the judge found that, in the circumstances where potential witnesses had made it clear that they would not co-operate in the proceedings, it was not surprising that the defendant eventually served their witness statements late. Further, the claimant had the benefit of seeing the witness statements before the trial.

However, Wilkie J found the conduct of the defendant’s expert in giving oral evidence to be so out of the ordinary that it justified an order for indemnity costs being made. At paragraph 37 the judge held: ‘In my judgment, however, the fact that the court was obliged to ask Professor Trimble, in the middle of his evidence, to provide a written statement as to what exactly his evidence was and the basis upon which he was saying that the claimant’s continuing symptoms were psychogenic did arise from serious shortcomings in the way in which Professor Trimble approached the giving of his evidence.

‘It was helpful to the court to have that material, but it was necessary for the claimant to recall Dr Allder to deal with this new basis upon which Professor Trimble was finally presenting his evidence.

‘In my judgement, that conduct on the part of Professor Trimble was so out of the norm that it justifies an order for indemnity costs.’

This case illustrates judicial application of the rules on indemnity costs. It serves as a fitting reminder of the need for litigating parties to proceed with caution and to behave reasonably throughout the litigation process. As the case clearly demonstrates, the obligation on litigating parties to behave reasonably extends to witnesses appearing on their behalf. 

Masood Ahmed, University of Leicester

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