Optimares S.p.A. v Qatar Airways Group Q.C.S.C.

Indemnity costs are exceptional, but may be ordered where the conduct of the litigation or the circumstances of the case take it outside the norm. A speculative, weak or opportunistic claim pursued at disproportionate expense, with exaggerated or unsustainable allegations and extensive unnecessary evidence, may justify indemnity costs. The unsuccessful party’s poor result or the size of the claim is not, by itself, sufficient. The court may also order an appropriate payment on account, having regard to the likely recoverable costs.

Optimares had to pay Qatar’s costs of its unsuccessful claim, although not the costs of Qatar’s counterclaim. The issue was whether those costs should be assessed on the standard or indemnity basis and, if indemnity costs were appropriate, what sum should be paid on account.

The court considered the conduct of Optimares’ contractual construction, good faith and unjust enrichment claims, including the evidence and allegations advanced at a three-week trial.

1. The claim was ordered to be assessed on the indemnity basis. The court applied the approach summarised by Christopher Clarke LJ in Excalibur Ventures LLC v Texas Keystone Inc [2013] EWHC 4278 (Comm). The discretion is wide, but indemnity costs require circumstances which take the case outside the norm.

2. The relevant features included the extreme weakness of the construction arguments, the attempt to disregard the plain wording of professionally drawn contractual documents, the hopeless good faith argument, the vague and unsustainable allegation of bad faith, and the inadequately pleaded unjust enrichment claim.

3. The claim was speculative and carried a high risk of failure. Optimares pursued it on every issue to the end of trial, adducing voluminous factual and expert evidence without sufficient regard to proportionality or reasonableness. Its initially exaggerated quantum was also materially reduced by trial. These matters justified indemnity costs.

4. The court rejected the submission that Qatar should have avoided costs by seeking preliminary issues, declining to cross-examine witnesses, or otherwise refraining from responding to Optimares’ evidence and serious allegations. Optimares had created the need for that response.

5. A payment on account of £2 million was ordered. Qatar’s bill of £4.2 million appeared excessive for a three-week trial, particularly given that many solicitor charge-out rates exceeded the guideline hourly rates.