Andrew Evans v R&V Allgemeine Verischerung AG

Indemnity costs require conduct or circumstances outside the ordinary and reasonable conduct of proceedings. The discretion is fact-specific and must be exercised by considering the litigation as a whole, including conduct before and during trial.

Loss, a weak case, or the decision to proceed to trial does not by itself justify indemnity costs. Nor is moral condemnation required. Poor preparation, late applications, failure to negotiate, or refusal to engage with a voluntary rehabilitation code may be relevant, but they justify indemnity costs only where, individually or cumulatively, they take the case outside the norm. The court must avoid hindsight assessment. Part 36 consequences operate separately and do not automatically justify a wider indemnity-costs order.

The claimant succeeded at trial on liability and was entitled to his costs. The court had already accepted that, under the Part 36 consequences, those costs should be assessed on an indemnity basis from 7 July 2022, being 21 days after expiry of the relevant offer.

The claimant then applied for the whole action to be assessed on an indemnity basis under the court’s general discretion. He relied on the defendant’s failure to engage with rehabilitation and alternative dispute resolution, failure to narrow issues, inadequate preparation, late applications and amendments, pursuit of an allegedly hopeless case, and failure to respond to the Part 36 offer. The issue was whether the conduct, separately or cumulatively, was outside the norm.

1. General approach. Under the Civil Procedure Rules 1998, Rule 44.3, the court has a wide discretion to order costs on an indemnity basis. The relevant threshold is conduct or circumstances outside the ordinary and reasonable conduct of proceedings. The authorities provide guidance, but do not determine the exercise of this fact-specific discretion.
2. Assessment of the defendant’s conduct. The defendant’s refusal to engage with the voluntary Rehabilitation Code was not sufficient, particularly because the defendant was an overseas insurer and was not shown to be bound by the code. The failure to pursue ADR until it was too late was regrettable, but did not cross the threshold. Disagreement over expert evidence and issues of German law was reasonable. A late expert-evidence application was weak and unsuccessful, but not wholly without merit. Late material and preparation failures were unfortunate and frustrating, but did not significantly disrupt the trial or take the case outside ordinary litigation conduct.
3. Strength of the case and hindsight. The defendant’s case was not so hopeless that it was unreasonable to pursue it. The court must not assess conduct retrospectively with knowledge of how the evidence was ultimately resolved. A party is entitled to run a case which is not the strongest and take its chance at trial.
4. Part 36. The claimant’s successful Part 36 offer already produced indemnity costs from the appropriate date. Failure to respond did not justify a further or earlier indemnity-costs order.
5. Disposition. The conduct was imperfect and fell below good practice, but was not outside the ordinary and reasonable conduct of proceedings. The claimant was awarded costs on the standard basis up to 7 July 2022 and on the indemnity basis thereafter.