Network Rail Infrastructure Ltd v Handy

Indemnity costs require conduct which takes the case out of the ordinary run and is unreasonable to a high degree. A party’s defeat, a robust judgment, or the failure of its expert evidence is insufficient by itself. Serious expert failings may justify indemnity costs where the evidence was deliberately or recklessly misleading.

When deciding whether delay justifies withholding or reducing interest, the court must take a realistic view of litigation conduct. Delay is unreasonable only where, allowing for the circumstances, the claimant has neglected or declined to pursue the claim for a significant period. The defendant’s use of the money during the delay is also relevant.

The claimant had obtained judgment on the substantive issues in five related claims. Quantum was agreed, but the parties disputed the appropriate basis of costs and the period from which interest should run.

The claimant sought indemnity costs, relying principally on the defendants’ unsuccessful arguments and expert evidence. The defendants sought standard costs and argued that interest should be withheld during an alleged period of delay in progressing four of the claims. The court therefore had to determine whether the conduct was sufficiently unreasonable to justify indemnity costs and whether the alleged delay warranted a reduction in interest.

1. Costs. The defendants were liable for the costs because the claimant had succeeded on all issues of principle save for a minor issue accounting for less than 1 per cent of the damages. The appropriate order was nevertheless costs on the standard basis. Defeat on the merits, even following a firm judgment expressed in robust terms, does not take a case out of the norm.
2. The defendants’ expert evidence was largely rejected and the expert made significant concessions. That did not justify indemnity costs. Such an order may be appropriate for serious expert failings where the party or expert deliberately or recklessly attempts to mislead the court. That was not established here. The defence was advanced bona fide on evidence which, although weak, remained arguable.
3. The court applied the approach in Claymore Services Ltd v Nautilus Properties Ltd [2007] EWHC 805 (TCC). In assessing delay, the court must take a realistic view, allow for the ordinary demands of business litigation, and consider the defendant’s use of the money. Network Rail’s conduct between August 2007 and July 2008 was not shown to be unreasonable or reprehensible. The parties were considering suitable test cases and had entered into standstill arrangements. No interest was therefore withheld.
4. Interest ran from the dates on which the expenditure and losses were incurred until judgment, at the agreed rates. The costs reserved at the first case management conference were costs in the case and, in the final result, were borne by the defendants.