Ferand Business Corporation & Ors v Maritime Investments Holdings Ltd & Anor

The discretion to order indemnity costs is wide, but the circumstances must take the case outside the norm. This includes conduct unreasonable to a high degree. A weak, mistaken or unsuccessful defence will not ordinarily justify indemnity costs for the whole claim. The court must assess the conduct in the round and by reference to the relevant period and costs incurred. Very late applications to amend pleadings or adduce evidence may justify indemnity costs where they lack good reason, threaten the trial timetable, introduce new issues or admissions, and cause substantial prejudice. Indemnity assessment removes proportionality from the assessment but does not permit recovery of costs not actually and reasonably incurred.

This was a costs ruling following the substantive judgment in proceedings brought by the claimants against the defendants. The issue was whether costs payable by the second defendant should be assessed on the indemnity rather than standard basis.

The court considered separately the costs of late applications to re-amend the defence and adduce further witness statements, the costs of the claim before trial, and the costs of the trial. Different considerations applied to the claimants and the first defendant.

1. Applicable test. The court held that the discretion to order indemnity costs is wide, but the circumstances must take the case outside the norm. That includes conduct unreasonable to a high degree: [2002] EWCA Civ 879; [2002] EWCA Civ 66.
2. A party’s loss, or the advancement of a weak, mistaken or misconceived defence, does not ordinarily justify indemnity costs for the whole claim. Conduct must be assessed in the round. Other remedies may be available where a defence is hopeless, including strike out, summary judgment or an effective Part 36 offer.
3. The second defendant’s applications were exceptionally late. They introduced new positive cases, sought to resile from admissions, raised a new fraud allegation and required further investigation, evidence and potentially disclosure. There was no good reason for the delay. The applications threatened the trial date and caused substantial disruption and prejudice. Applying the principles concerning late amendments in Quah Su-Ling v Goldman Sachs International and pleading requirements in Swain-Mason and Others v Mills and Reeve, the applications were outside the norm and unreasonable to a high degree.
4. The prejudice caused by the applications affected the claimants’ preparation and the trial only from service of the first application until the end of the first trial day. Indemnity assessment removes proportionality but permits recovery only of reasonable costs actually incurred.
5. The conduct during the trial, viewed together with the late applications, also crossed the relevant threshold. The claimants’ costs of the applications and their costs from service of the first application to the end of trial were therefore payable on the indemnity basis. The remainder of their claim costs were payable on the standard basis.
6. The first defendant was entitled to indemnity costs of the applications and of the trial, but its other costs were payable on the standard basis. The parties were directed to submit a draft order implementing those directions.