Williams v Jervis (Komatsu)

An indemnity costs order requires conduct or circumstances taking the case outside the norm. The court must assess the conduct without hindsight. A party does not incur indemnity costs merely because it lost, its evidence was rejected, or its case was exaggerated. Where only a distinct part of the litigation falls outside the norm, indemnity costs may be confined to the costs attributable to that part. The court may otherwise order costs on the standard basis and make proportionate or issue-based orders under the Civil Procedure Rules 1998.

The claimant had succeeded at trial, with judgment entered for just under £512,000 on the basis of 100% liability. The parties disputed the consequential costs order. The defendant sought a reduction in the claimant’s recoverable costs, while the claimant sought indemnity costs, relying principally on alleged disclosure failures, the conduct of expert witnesses, and other litigation conduct.

The court had to determine whether the claimant’s costs should be reduced, whether the defendant’s conduct justified indemnity costs, and, if so, whether any indemnity order should apply to the action as a whole or only to a distinct part.

1. The claimant was entitled to her costs against the defendant. The defendant’s proposed reduction to 60% was unsupported and the matters relied upon did not justify reducing the claimant’s costs.
2. Under CPR 44.3.1 and CPR 44.3.2, costs are discretionary. Although the unsuccessful party will ordinarily pay the successful party’s costs, the court may make a different order having regard to the parties’ conduct, the reasonableness of raising or pursuing issues, and the manner in which issues were conducted. Proportionate or issue-based orders may also be made under CPR 44.3.6 and CPR 44.3.7.
3. The distinction between standard and indemnity costs was material. Indemnity costs remove the proportionality requirement and give the receiving party the benefit of any doubt on reasonableness. Following Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879, indemnity costs require conduct or circumstances taking the case outside the norm.
4. That threshold was not met by the claimant’s alleged exaggeration, rejected evidence, late medical evidence, late disclosure, or other complaints about the conduct of the litigation. Those matters had to be assessed in context and without hindsight. The defendant’s complaints about disclosure and the conduct of the surveillance evidence did not justify a costs penalty.
5. The conduct of Dr Gross and Mr Hay as expert witnesses was materially different. Their approach to their responsibilities fell well below what could properly be expected and was outside the norm. Indemnity costs were therefore justified, but only for the claimant’s costs attributable to dealing with their evidence. The remaining costs were payable on the standard basis.
6. The claimant’s costs of her unsuccessful attempt to adduce further evidence after the parties had closed their cases were payable by her on the standard basis.