Courtwell Properties Ltd v Greencore PF (UK) Ltd

Indemnity costs require conduct that is unreasonable to a high degree and takes the litigation out of the norm. A merely weak or misguided claim or defence will not usually suffice; a hopeless case may do so. The court must exercise its broad discretion in the context of the litigation as a whole. Relevant matters may include disproportionate pleading, expert conduct, non-compliance with a pre-action protocol and refusal to mediate, but each must be evaluated fairly and cumulatively. Where factual disputes cannot sensibly be resolved on written evidence, they should not ordinarily support an indemnity costs order. Applications concerning settled litigation must themselves be pursued proportionately.

The claimant pursued a leasehold dilapidations claim concerning three industrial units. The claim settled when the defendant accepted the claimant’s Part 36 offer of £800,000 inclusive of interest. The claimant then sought indemnity costs, relying on alleged non-compliance with the Dilapidations Pre-Action Protocol, failure to mediate, maintenance of a no-loss defence and the conduct of the defendant’s experts.

The court considered whether the defendant’s conduct, individually or cumulatively, was sufficiently unreasonable to justify indemnity costs under CPR Part 36.10(4).

1. Application refused. The claimant was entitled to its litigation costs assessed on the standard basis. The court declined to order indemnity costs.
2. The governing principles, summarised in Elvanite Full Circle Ltd v Amec Earth & Environmental (UK) Ltd [2013] EWHC (TCC), require conduct unreasonable to a high degree and conduct taking the case out of the norm. A weak or misguided claim is ordinarily insufficient, whereas pursuit of a hopeless claim may justify indemnity costs. The discretion is broad and must be exercised in the context of the litigation as a whole.
3. The defendant’s experts had plainly experienced serious friction, but the evidence contained substantial conflicts. The court could not fairly determine responsibility, professional misconduct or dishonesty from the written evidence, particularly given the without-prejudice nature of expert discussions. Expert conduct therefore did not justify indemnity costs.
4. The claimant had substantially failed to comply with the Dilapidations Pre-Action Protocol. Its schedules and quantified demands were served late, and its subsequent conduct was aggressive and inflexible. However, the defendant had also failed to respond promptly and both sides had contributed to the lack of co-operation. The breach therefore did not justify indemnity costs.
5. The parties’ failure to mediate was not decisive. The correspondence showed some co-operation, but disclosure issues, the state of the expert relationship and the commercial circumstances meant that mediation might not have succeeded. This factor did not justify an indemnity order.
6. The no-loss defence was arguable in the context of the premature proceedings, the absence of disclosure and the possible relevance of the tenant’s continued occupation to the Landlord and Tenant Act 1927 section 18 valuation. Its later settlement did not establish that the defence had been hopeless or unprofessionally advanced.
7. The court added that costs applications following settlement must be conducted proportionately. A purported trial of settled issues, supported by extensive evidence, may itself warrant serious scrutiny of the applicant’s costs.

First-instance decision. The claim had settled before trial by acceptance of the claimant’s Part 36 offer, leaving the issue of costs for determination.