Reid Minty v Taylor

The discretion to award costs on the indemnity basis under the Civil Procedure Rules is not confined to conduct involving moral lack of probity or deserving moral condemnation. Rule 44.3 requires a judicial assessment of all the circumstances, including litigation conduct and admissible offers to settle. Rule 44.4 governs how costs are assessed on the standard or indemnity basis; it does not prescribe when either basis should be ordered.

The standard basis remains normal. Indemnity costs may nevertheless be justified by unreasonable conduct of litigation. A defendant cannot obtain that result merely by inviting discontinuance, nor by applying the claimant-only consequences of rule 36.21 by analogy. The value and reasonableness of settlement proposals depend on the circumstances.

In a libel action, the jury accepted the defendant's defence of justification after a 12-day trial. The defendant sought indemnity costs. Gray J ordered costs on the standard basis because he considered that indemnity costs required moral lack of probity or conduct deserving moral condemnation.

The defendant appealed. The central issues were whether that was the correct test under the Civil Procedure Rules, whether the defendant's settlement proposals justified indemnity costs, and whether the Court of Appeal should exercise the costs discretion afresh.

Disposition

1. The court unanimously allowed the appeal. Lord Justice May gave the leading judgment, with Lord Justices Kay and Ward agreeing. The costs order was set aside and the question of costs was remitted to Gray J.

2. Gray J had applied an unduly restrictive test. Under rule 44.3, the court has a broad discretion as to the amount of costs. That includes deciding whether costs should be assessed on the standard or indemnity basis. Rule 44.4 explains the consequences of each basis of assessment. It does not confine the circumstances in which indemnity costs may be ordered.

3. The normal basis is the standard basis. An indemnity order will often convey disapproval of the manner in which litigation was conducted, but it does not require moral blameworthiness. Unreasonable conduct may justify indemnity costs even though it does not amount to moral lack of probity or conduct deserving moral condemnation. The discretion must be exercised judicially in all the circumstances identified by rule 44.3.

4. The claimant-favouring consequences of rule 36.21 could not be applied by analogy to a defendant's offer. The defendant's letter of 1 September 1999 was relevant but was largely an invitation to abandon the claim and made little real concession. It could not, by itself, entitle a successful defendant to indemnity costs. A genuine effort to reach a reasonable solution may carry greater weight, but the significance of any offer depends on the circumstances.

5. The Court of Appeal declined to make a fresh costs order. It lacked the trial judge's full understanding of the evidence, the preparatory history, the merits as they emerged at trial, and the parties' conduct in the round. The proper course was remittal for a fresh exercise of the discretion.

• Court of Appeal (Civil Division) — In Reid Minty v Taylor [2001] EWCA Civ 1723, the court allowed the defendant's appeal, set aside the standard-basis costs order, and remitted the costs issue to Gray J.

• High Court of Justice, Queen's Bench Division (Gray J) — On 19 December 2000, following the defendant's success at trial, Gray J ordered the claimant to pay costs on the standard basis and refused indemnity costs.