NUA Facades Ltd & Ors v Brady (t/a Terry Brady Developments Ltd

An indemnity costs order requires conduct or circumstances taking the case outside the norm. The court must consider all the circumstances, including the conduct of all parties. Unreasonableness to a high degree is a common basis, but is not an additional universal requirement. Thin, speculative or weak allegations, particularly serious allegations of fraud or dishonesty pursued on limited evidence and abandoned or unsuccessful at trial, may justify indemnity costs. The court must balance the parties’ conduct overall. An honest belief in allegations does not itself prevent such an order where the relevant test does not require bad faith or moral condemnation.

The claimants had been very largely successful in substantive proceedings concerning agreements relating to construction works. The defendant’s pleaded defences included fraud, dishonesty, bribery, fraudulent conspiracy and dishonest assistance. Those allegations were substantially abandoned, narrowed or unsuccessful by the trial. The court had previously determined the substantive claims in [2019] EWHC 2184 (TCC) and adjourned consequential matters.

The present hearing concerned the claimants’ application for their costs to be assessed on the indemnity basis. The principal issue was whether the defendant’s conduct and the circumstances of the litigation took the case outside the norm, having regard also to the claimants’ own conduct and the parties’ interlocutory disputes.

1. Applicable principles. Under Part 44, the court must consider all the circumstances, including the conduct of all parties. The discretion to award indemnity costs is wide. There must, however, be conduct or circumstances taking the case outside the norm. Conduct unreasonable to a high degree is a common, but not exclusive, basis for the order.
2. Relevant features. The court may consider conduct before and during proceedings, whether it was reasonable to raise or pursue particular allegations, and the manner in which the case was advanced. A speculative, weak, thin or opportunistic case may justify indemnity costs if pursued and lost. Serious allegations of fraud or dishonesty that are abandoned or fail may be a particularly strong factor.
3. Application. The defendant advanced wide-ranging allegations of bribery, conspiracy and dishonest assistance on thin evidence. The allegations were insufficiently particularised in important respects, changed materially at trial, and were abandoned or narrowed only shortly before or during the trial. Disclosure applications produced no material evidence supporting the central conspiracy allegations. The defendant continued to advance a generalised and inferential case without concession.
4. The defendant’s honest belief in the allegations did not answer the application. Nor did the claimants’ own unsuccessful forgery allegation, their conduct in interlocutory applications, or their ethically questionable conduct outweigh the defendant’s litigation conduct. The court also considered the defendant’s disclosure conduct and found that it fell short.
5. After balancing the conduct of both sides, the defendant’s conduct was unreasonable to a high degree and clearly took the case outside the norm. The claimants’ costs were therefore ordered to be paid on the indemnity basis.

The decision concerned consequential costs following the substantive judgment in the same proceedings, reported at [2019] EWHC 2184 (TCC). No appellate decision was stated.