Whaleys (Bradford) Led v Bennett& Anor

Indemnity costs may be ordered where conduct or circumstances take proceedings “out of the norm”. The comparison is with the ordinary and reasonable conduct of proceedings. Misconduct does not fall within the norm merely because it occurs frequently.

Courts should use the established formulation rather than ask whether a case is “exceptional”, since that word may suggest an unduly strict test. Deliberate disobedience of orders, evasion of service and obstruction of enforcement can justify indemnity costs where they needlessly cause substantial trouble and expense.

The claimant obtained judgment for damages and indemnity costs against the defendants, who had the means to pay but delayed payment and obstructed enforcement. They evaded service, failed to comply with orders for oral examination and production of documents, and became subject to suspended committal orders.

His Honour Judge Bartfield departed from the fixed enforcement costs regime under the Civil Procedure Rules 1998 but awarded costs on the standard basis. He considered that the case was not exceptional because many debtors avoided payment. The claimant appealed, contending that the judge had applied the wrong test and that the enforcement costs should be assessed on the indemnity basis.

1. Appeal allowed. Newey LJ held that the judge had applied the wrong test when declining to award indemnity costs. David Richards LJ agreed with his reasons and the resulting order.

2. The governing question was whether the conduct of the action or the circumstances took the case “out of the norm” in a way justifying indemnity costs. The norm concerns the ordinary and reasonable conduct of proceedings. It does not depend on whether comparable misconduct occurs frequently: Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879 and Esure Services Ltd v Quarcoo [2009] EWCA Civ 595 applied.

3. The word “exceptional” does not invariably demonstrate legal error. A judgment must be read fairly and in context, with proper respect for the first-instance judge's exercise of discretion: Piglowska v Piglowski [1999] 1 WLR 1360 applied. Here, however, the judge expressly relied on the frequency of debtors' attempts to avoid payment and on having seen more sophisticated attempts. That reasoning repeated the error identified in Esure.

4. David Richards LJ added that “exceptional” was apt to suggest a stricter standard and should be avoided. Judges should expressly apply the established “out of the norm” test.

5. Because the judge had applied the wrong test and considerations, the Court of Appeal exercised the costs discretion afresh. The defendants had deliberately prolonged enforcement despite having the means to pay. They disobeyed orders, evaded service, failed to cooperate with oral examinations, withheld required documents and pursued a totally without merit application to delay a hearing. This was unreasonable conduct which needlessly caused considerable trouble and expense and justified indemnity costs.

6. The order was varied to direct assessment of the relevant costs on the indemnity basis. The assessment was remitted to the County Court.

• Court of Appeal (Civil Division): In [2017] EWCA Civ 2143, allowed the claimant's appeal, varied the order to require assessment on the indemnity basis and remitted the assessment to the County Court.

• County Court at Bradford: His Honour Judge Bartfield departed from the fixed enforcement costs regime but ordered summary assessment on the standard basis, having concluded that the case was not exceptional because many debtors attempted to avoid payment.