Mahme Trust Reg & Ors v Lloyds TSB Bank Plc

Indemnity costs are justified where the conduct of the litigation or the circumstances of the case take it outside the norm. The court may consider the abandonment of claims, the absence of evidential support, the pursuit of collateral objectives, and serious unsubstantiated allegations. An indemnity costs order does not prevent the costs judge from disallowing particular costs caused by unreasonable conduct of the receiving party. The court may also allow costs in the case for interlocutory applications and permit reasonable use of additional counsel, subject to assessment.

The judgment concerned the costs consequences of proceedings brought by the claimants against Lloyds TSB Bank plc. In an earlier judgment handed down on 5 July 2006, the court dismissed four surviving claims pursued by Mahme Trust Reg. Most of the original claims had been abandoned or substantially amended during the litigation.

The bank sought its costs on the indemnity basis. The claimants argued that the bank’s conduct, disclosure, withdrawal from pre-action cooperation and use of three counsel should reduce or alter the order. The court therefore considered the appropriate basis of assessment, reserved costs orders and the effect of the parties’ conduct.

1. The court ordered the claimants to pay the bank’s costs of the proceedings on the indemnity basis. Under Part 44.3 and Part 44.4 of the Civil Procedure Rules 1998, the circumstances justified an order outside the ordinary case.

2. Following Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) & anr [2002] EWCA Civ 879, the relevant question was whether something in the conduct of the action or the circumstances took the case out of the norm. That threshold was met by the history of the proceedings. The claimants had abandoned most of their claims, failed to establish any basis for an account, pursued claims which were unarguable or legally defective, and made serious allegations which were unsupported and in some instances withdrawn without explanation.

3. The court found that the proceedings had also been pursued for the collateral purpose of obtaining information for use against third parties. The claimants’ pre-action demands extended beyond the pleaded issues, and the bank was not responsible for the commencement of the proceedings by ending its earlier cooperation.

4. The indemnity basis did not prevent the costs judge from examining particular complaints about disclosure, redactions, banking secrecy and document searches. If the bank’s conduct had unjustifiably increased the claimants’ costs, the costs judge could take appropriate action.

5. Reserved costs orders were made in the case, including in relation to the bank’s successful application of 22 July 2005. The employment of two junior counsel was reasonably justified by the original scope and complexity of the litigation, subject to the costs assessment reflecting periods when only one junior attended.

The judgment records an earlier judgment of the same court, handed down on 5 July 2006, dismissing the four surviving claims. This judgment determined the consequential costs issues.