Rybak & Ors v Langbar International Ltd

The award of costs on the indemnity basis is a matter of judicial discretion. The court must apply established guidance, but should not impose rigid rules. Indemnity costs may be appropriate where a claim is speculative, weak, opportunistic or thin, particularly where serious allegations are pursued forcefully after the evidential basis for them has become clear. A failed wasted-costs application does not automatically justify indemnity costs. The court must distinguish between a case where the legal representative has merely received the benefit of the doubt and one where the alleged wrongdoing has been decisively disproved. Applications for wasted costs against legal representatives require particular caution.

Langbar’s application for a wasted-costs order against Withers had been dismissed on the facts. Withers then sought its costs on the indemnity basis. Langbar accepted liability for the costs but contended that they should be assessed on the standard basis.

The court considered the differences between the standard and indemnity bases, the guidance governing the discretion, the character of Langbar’s allegations of serious professional wrongdoing, and the manner in which the application had been pursued. The central issue was whether the circumstances justified departing from the standard basis and awarding indemnity costs.

1. Order for costs. Langbar was ordered to pay Withers’ costs, including costs reserved on an earlier directions hearing.
2. Basis of assessment. The standard and indemnity bases differ principally as to the burden of persuasion on reasonableness and as to proportionality. The choice of basis is discretionary, but the discretion must be exercised judicially.
3. Relevant guidance. The court should have regard to the paying party’s conduct and to recognised categories such as speculative, weak, opportunistic or thin claims, particularly where grave allegations are pursued aggressively. The authorities, including Ridehalgh v Horsefield [1994] Ch 205, Medcalf v Mardell [2003] 1 AC 120 and Hedrich v Standard Bank London Limited [2009] PNLR, warned against an over-ready resort to wasted-costs applications against legal representatives.
4. Application of the guidance. The allegations against Withers were grave and exposed the firm and individual solicitors to serious reputational consequences. Reasonable costs reasonably incurred in defending them should not be reduced merely on proportionality grounds. Once Withers’ detailed evidence had been served, it should have been apparent to an objective observer that the application would fail. Langbar nevertheless intensified the allegations, served further material and continued with substantial oral argument.
5. The court therefore considered that indemnity costs were justified throughout. This was not a case of a legal representative obtaining a merely fortunate escape or the benefit of the doubt. The costs were ordered to be assessed on the indemnity basis.
6. A payment on account of £120,000 was ordered, payable within 21 days, against costs identified at approximately £234,000 pending detailed assessment.