Takhar v Gracefield Developments Ltd & Ors (Consequential Orders)

Indemnity costs may be ordered against either a claimant or a defendant where the conduct of proceedings is outside ordinary and reasonable conduct and therefore takes the case out of the norm. Forgery of key evidence, dishonesty under oath and attempts to mislead the court are sufficient examples. Where an order is set aside, the court may make consequential orders restoring parties to their pre-order position, including repayment of money paid under the order. The court may also order payment of costs wasted by an ineffective trial caused by a party’s misconduct, irrespective of the eventual outcome of the underlying litigation.

The court had previously set aside an order made in the original action and ordered the defendants to pay 90% of the claimant’s costs. This judgment determined the consequential matters arising from that decision: the basis of assessment of costs, payment on account, repayment of costs paid under the set-aside order, and payment of the claimant’s wasted trial costs.

The central issues were whether the defendants’ dishonesty justified indemnity costs, whether the court had jurisdiction to order repayment and wasted costs following the setting aside, and whether interest should be awarded.

1. Indemnity costs. The court followed the approach in Excelsior Commercial Holdings Ltd v Salisbury Hamer Aspden & Johnson [2002] EWCA Civ 879, as clarified in Esure Services Ltd v Quarcoo [2009] EWCA Civ 595. The relevant question is whether the conduct is outside ordinary and reasonable conduct of proceedings. The principle applies equally to claimants and defendants. Whaleys (Bradford) Ltd v Bennett [2017] EWCA Civ 2143 reinforced that frequent misconduct is not thereby within the norm.
2. The defendants had forged a key document, used it successfully at the original trial, lied on oath, and attempted to blame third-party professionals. That conduct was well outside the norm and justified indemnity costs. The claimant’s unsuccessful allegation concerning other forms justified the earlier 10% deduction but did not prevent indemnity costs on the balance.
3. Payment on account. The court ordered payment of £204,623 within 28 days under CPR 44.2(8), with liberty to apply.
4. Repayment. Setting aside the original costs order required restoration of the parties to the position they would have occupied had it not been made. The court therefore ordered repayment of £363,975.60 within 28 days, with liberty to apply concerning the disputed balance and interest. This was consequential relief supported by Flower v Lloyd (No 1) (1877) 6 ChD 297.
5. Wasted trial costs. The defendants’ fraud made the first trial ineffective. They were responsible for the resulting wasted trial costs, regardless of the eventual outcome of the underlying action. The court had jurisdiction under s51 of the Senior Courts Act 1981 and its inherent jurisdiction. Contractreal v Davies [2001] EWCA Civ 928 did not prevent the order because it was consequential on setting aside the judgment, rather than an order treating the earlier costs as costs of the present proceedings. The wasted trial costs were limited to trial costs and were payable on the indemnity basis.
6. The question of interest on the repaid and wasted costs was adjourned generally, with liberty to the claimant to apply.

High Court (Chancery Division): On 23 October 2020 the court set aside the order made by HH Judge Purle QC on 28 July 2010 in action number 8BM30468 and ordered payment of 90% of the claimant’s costs. The present judgment made consequential costs and repayment orders.