Esure Services Ltd v Quarcoo

Under CPR rule 44.3, the court must exercise its costs discretion judicially in all the circumstances. Indemnity costs are not confined to conduct involving moral condemnation. A dishonest claim, or its dishonest maintenance, is outside the norm because it is outside the ordinary and reasonable conduct of litigation. The expression does not depend on how frequently such conduct occurs. Where a dishonest claimant is the paying party, an indemnity costs order will normally be the appropriate means of marking the court’s disapproval.

The claimant alleged that his BMW had been stolen and claimed under his insurance policy. The insurer rejected the claim, primarily on the ground of dishonesty. The Recorder dismissed the claim, finding that the claimant had sent three genuine keys and one key from another vehicle, had lied about material matters, and had not proved that the car was taken without consent.

The Recorder ordered standard-basis costs but refused indemnity costs. He considered that the claim was not outside the norm. The insurer appealed that costs decision. The claimant did not attend or appear on the appeal.

1. Appeal allowed. Waller LJ, with whom Longmore LJ and Richards LJ agreed, held that the Recorder had misdirected himself and that the Court of Appeal should exercise the costs discretion afresh. The claimant was ordered to pay the insurer’s costs on the indemnity basis.
2. The starting point was CPR rule 44.3. The court has a wide discretion over costs and must have regard to all the circumstances, including the parties’ conduct. An indemnity order is not limited to conduct involving moral lack of probity or deserving moral condemnation. Rule 44.4 describes the different bases of assessment; it does not prescribe when each basis is to be ordered.
3. The Recorder had misconstrued Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson & Ors [2002] EWCA Civ 879. “Outside the norm” means outside the ordinary and reasonable conduct of proceedings. It does not mean that conduct is within the norm merely because it occurs with some frequency.
4. A claim dishonestly brought or maintained is outside that norm. Here the claimant had advanced a dishonest insurance claim, supported it by lies, and had initially accused the insurer’s claims handler of substituting a key. Indemnity costs were the appropriate means of marking the court’s disapproval and discouraging dishonest claims. The court proceeded on the assumption that the claimant did not wish to appear, but recognised that he could seek to reopen the appeal if that assumption proved wrong.

• Court of Appeal (Civil Division). The insurer’s appeal was allowed and the costs order was varied to require indemnity costs: [2009] EWCA Civ 595.
• Central London Civil Justice Centre (Recorder Baldwin QC). The claimant’s insurance claim was dismissed on 10 June 2008. The Recorder ordered standard-basis costs and refused the insurer’s application for indemnity costs.