Richmond Pharmacology Ltd v Chester Overseas Ltd & Ors

An indemnity costs order requires conduct or circumstances taking the case out of the norm. Where unreasonable conduct is relied upon, the conduct must be unreasonable to a high degree; mere error, weakness or hindsight is insufficient. The court must assess the litigation as a whole and exercise a wide, fact-sensitive discretion. A weak but arguable claim will not ordinarily justify indemnity costs, whereas persistence with a hopeless or grossly exaggerated claim may do so. The refusal of a settlement offer will rarely suffice by itself. The court may order different bases of assessment for different periods where the character of the litigation changes.

The claimant’s substantive claim had been dismissed in part and the defendants had obtained an order for their costs. The defendants then applied for those costs to be assessed on the indemnity basis, alleging that the claim was bound to fail, was pursued despite the factual evidence and was conducted unreasonably.

The court considered the applicable principles and reviewed the litigation chronologically, including the pleadings, disclosure, settlement offer and expert evidence. The central issue was whether, and from what date, the claimant’s conduct was sufficiently unreasonable to take the case out of the norm.

1. Applicable principles. The standard basis is the normal basis. Indemnity costs require conduct or circumstances taking the case out of the norm. Dishonesty or moral blame is unnecessary, but conduct relied upon must be unreasonable to a high degree, rather than merely wrong or misguided in hindsight.
2. The discretion is wide and must be exercised in the context of the litigation as a whole. The court must identify conduct which makes it just to remove the paying party’s protection against disproportionate costs and the benefit of resolving doubts in its favour. Individual examples of unreasonable conduct do not necessarily establish unreasonable conduct overall.
3. A weak but arguable claim will not usually justify indemnity costs. A hopeless claim, or one which the claimant should have recognised as hopeless, may do so. An excessively wide claim, a grossly exaggerated claim and persistence with allegations unsupported by disclosure may also justify indemnity costs. Rejection of a reasonable settlement offer will rarely suffice by itself, although it may contribute when coupled with other factors.
4. The claimant’s procedural complaints and its conduct before disclosure did not take the case out of the norm. After disclosure and inspection, however, it was unreasonable to a high degree to maintain very wide allegations and serve an expert report treating the whole reduction in turnover as attributable to the alleged breaches. The claim and damages case were grossly exaggerated and disproportionate.
5. The defendants’ costs were therefore to be assessed on the standard basis up to 30 November 2013 and on the indemnity basis from 1 December 2013.