Webster & Ors v The Ridgeway Foundation School

The normal order is for costs on the standard basis. Indemnity costs require conduct or circumstances taking the case outside the norm. A claim which fails is not thereby unreasonable, but pursuing a claim that is so hopeless that it amounts to unreasonable conduct may justify indemnity costs. The court may assess costs on different bases for different issues where the costs can be identified with sufficient clarity. A claimant’s unsuccessful settlement offer, litigation funding arrangements, mixed motives, or possible compensation from another scheme do not, without more, justify indemnity costs.

The court had previously dismissed the claimants’ claims against the defendant school and ordered them to pay its costs, reserving the basis of assessment. The defendant sought indemnity costs for the human rights claim and two systemic negligence claims, relying also on settlement communications, a Part 36 offer, ATE insurance, the claimants’ motives, and possible compensation under the Criminal Injuries Compensation Scheme.

The issues were whether any part of the litigation involved conduct outside the norm, whether costs should be assessed differently by issue, and whether the defendant should receive a payment on account pending detailed assessment.

1. Basis of assessment. Under Civil Procedure Rules 1998, the court has discretion as to the amount and basis of costs, having regard to all the circumstances, including party conduct and admissible settlement offers. Standard costs are subject to proportionality; indemnity costs are not, and doubts are resolved in favour of the receiving party.
2. The ordinary order is for standard costs. A failed claim is not equivalent to unreasonable conduct. Indemnity costs may nevertheless be ordered where pursuit of a claim is so hopeless that it is properly characterised as unreasonable. An indemnity award is compensatory, not penal.
3. The human rights claim crossed that threshold. The claimants had no realistic prospect of proving that the school knew or ought to have known of a real and immediate risk of an assault of the requisite severity. The costs of that discrete issue were therefore ordered on the indemnity basis.
4. The systemic negligence claims concerning race relations and discipline were novel but not hopeless. Their pursuit did not amount to unreasonable conduct. The remaining costs were ordered on the standard basis. Different bases may be used for different issues where the attributable costs can be identified with sufficient clarity.
5. The defendant’s tentative settlement communication, the claimants’ Part 36 offer, ATE insurance arrangements, collateral motives, and possible Criminal Injuries Compensation Scheme payments did not justify indemnity costs.
6. Given the length of the trial and the substantial costs almost certainly recoverable, the claimants were ordered to pay £250,000 on account. Costs of the issues determined in this judgment were subject to no order, reflecting the mixed outcome. All costs were subject to detailed assessment if not agreed.

The judgment records that, on 5 February 2010, the court dismissed the claimants’ substantive claims and ordered them to pay the defendant’s costs. This judgment determined the reserved questions concerning the basis of assessment, payment on account, and costs of the costs issues.