RESOURCE RECOVERY SOLUTIONS (DERBYSHIRE) LIMITED v DERBYSHIRE COUNTY COUNCIL & Anor.

Indemnity costs are exceptional and depend on the particular circumstances. They require conduct that takes the case out of the norm and is unreasonable to a high degree. A weak or unsuccessful application will not ordinarily justify indemnity costs if it was arguable. A hopeless application may justify them, particularly where it was pursued for an ulterior commercial or tactical purpose unconnected with its merits. Dishonesty or moral blame is unnecessary, although an indemnity order carries a penal stigma. The court should determine costs itself where it is best placed to assess the application and the conduct relied upon.

After dismissing the defendants’ application for summary judgment and strike out, and dismissing most of their application to strike out parts of the claimant’s Reply, the court dealt with consequential costs.

The defendants sought reservation of the summary judgment costs and their costs of the initial period of the Reply Strike Out application. The claimant sought its costs, including indemnity costs. The central issues were whether costs should be reserved, which party should bear the costs of each period, and whether the defendants’ conduct justified indemnity costs.

1. Summary judgment application. Costs should not be reserved. The judge had heard and determined the application and was best placed to assess its success and the conduct relied upon. The claimant succeeded and was entitled to its costs on the standard basis.
2. Indemnity costs. The governing principle from Excelsior Commercial & Industrial Holdings Limited v Salisbury Hammer Aspden & Johnson [2002] EWCA 879 was applied. The conduct had to take the case out of the norm. Under the principles summarised in Elvanite Full Circle Limited v Amec Earth and Environmental (UK) Limited [2013] EWHC 1643 (TCC), relying on Kiam v MGN Ltd [2002] EWCA Civ 66, unreasonable conduct meant unreasonable conduct to a high degree; it did not mean merely wrong or misguided conduct.
3. The defendants’ arguments were ambitious and unlikely to succeed, but they were not so unreasonable as to justify indemnity costs. The attempt to limit disclosure was openly advanced as a case-management reason and was not an improper collateral purpose. Allegations concerning motive were unhelpful but amounted only to a minor sideshow.
4. The court considered the guidance in Wates Construction Limited v HGP Greentree Allchurch Evans Limited [2005] EWHC 2174 (TCC) and Arcadia Group Brands Ltd & Ors v Visa Inc & Ors [2015] EWCA Civ 883. Pursuit of a weak case was insufficient; a hopeless case, especially one pursued for an ulterior purpose, might justify indemnity costs.
5. For the period before service of the Amended Reply, the defendants were entitled to their costs because the original pleading was materially open to criticism and was improved after the application. For the period after the Amended Reply, the claimant was entitled to its costs because the defendants’ continuing complaints were unsuccessful. The defendants’ conduct was not unreasonable to a high degree.