Wessanen Foods v Jofson Ltd

An unsuccessful claim does not, by itself, justify indemnity costs. The court must assess all the circumstances, including admissible settlement offers and the parties’ conduct. A non-Part 36 offer may be considered under Civil Procedure Rules 1998, Part 44, but it gains the enhanced costs consequences of Part 36 only if it satisfies the applicable requirements. Failure to beat a Part 36 offer is not independently sufficient. Indemnity costs require conduct unreasonable to a high degree or a comparable feature, and remain appropriate only in relatively extreme cases. A claim shown to be weak after trial is not necessarily one which the claimant knew, or ought reasonably to have known, was hopeless before trial. The court should avoid assessing the position with 20/20 hindsight.

The claimant’s substantive claims had failed on liability and causation in [2006] EWHC 1325 (TCC). The defendant was therefore entitled to its costs, but the parties disputed whether costs incurred after 11 April 2006 should be assessed on the indemnity basis. The defendant relied on an offer made on 3 April, alleged deficiencies in the claimant’s conduct, and the weakness of the claim. The central issue was whether those matters justified departing from the standard basis.

1. Disposition. The defendant was entitled to the costs of the claim and counterclaim, but those costs were to be assessed on the standard basis. The application for indemnity costs was refused.
2. Offers. The court had to consider admissible settlement offers, including offers outside Part 36, under Part 44.3(4)(c) of the Civil Procedure Rules 1998. An offer has Part 36 costs consequences only if it satisfies the four requirements identified in Trustees of Stokes Pension Fund v Western Power Distribution Power (South West) plc [2005] EWCA Civ 854; [2005] 1 WLR 3595, including remaining open for at least 21 days. The defendant’s 3 April offer was open for only eight days. It could therefore be considered, but did not operate as a Part 36 offer. In any event, failure to beat a Part 36 offer or payment into court was not, by itself, enough to justify indemnity costs, following Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879.
3. Conduct. Indemnity costs are not confined to conduct deserving moral condemnation, but conduct must be unreasonable to a high degree and not merely wrong or misguided in hindsight: Reid Minty v Taylor [2002] 1 WLR 2800; Kiam v MGM Ltd (2) [2002] 1 WLR 2810. The claimant’s conduct was, in the round, largely exemplary. Its non-disclosure of earlier signed witness statements was unusual, but did not justify an adverse inference.
4. Weakness of the claim. A claim may be weak after careful analysis at trial without having been hopeless before trial. Indemnity costs may be justified where a claimant pursues a claim it knew, or reasonably ought to have known, was hopeless, as illustrated by Atlantic Bar & Grill Ltd v Post House Hotels Ltd [2000] CP Rep 32 and Wates Construction v HGP Greentree Alchurch Evans [2006] B.L.R. 45. Here, the real weakness emerged from the claimant’s witnesses’ oral evidence and cross-examination during the trial.
5. Orders for indemnity costs remain appropriate only in relatively extreme cases. The court declined to apply 20/20 hindsight. An interim payment of £165,000 was ordered within 21 days, and judgment costs were limited to £2,000.

First-instance costs judgment following the substantive judgment in [2006] EWHC 1325 (TCC), in which the claimant’s claims failed on liability and causation.