Nazirali Sharif Tejani v Fitzroy Place Residential Limited & Anor

An indemnity costs order requires conduct or circumstances taking the case out of the norm. The assessment is discretionary and must reflect all relevant circumstances. A weak claim, unsuccessful settlement decisions, pleading amendments, abandoned causes of action, pre-action deficiencies and additional work caused to the opponent may be relevant, but they do not necessarily justify indemnity costs. A failure to accept a settlement offer is not, by itself, sufficient. Parties should engage properly with settlement offers, particularly offers under Civil Procedure Rules 1998 Part 36. Where indemnity costs are refused, the court may order an appropriate payment on account. Interest on costs may run from when the costs were incurred to judgment, with statutory interest thereafter on the judgment debt.

Following the trial, the claimant accepted that he had suffered a resounding defeat and should pay the defendants’ costs. The defendants sought assessment on the indemnity basis, relying on alleged weaknesses in the claim, failures to accept settlement offers, repeated amendments, abandoned causes of action, pre-action protocol deficiencies and additional work caused to their lawyers.

The claimant submitted that the costs should be assessed on the standard basis. The court also had to determine the payment on account, the payment date and the appropriate interest rate under Civil Procedure Rules 1998 rules 44.2(6)(g) and 36.17(3)(b).

1. Indemnity costs. The claimant was liable for the defendants’ costs, but assessment on the indemnity basis was refused. The discretion is broad, but there must be conduct or circumstances taking the case out of the norm: per Waller LJ in Excelsior Commercial and Industrial Holdings Ltd [2022] EWCA Civ 879.
2. The claim was weak, had been poorly formulated, substantially amended and reduced in value, and included causes of action later abandoned. The claimant also failed to acknowledge or accept the defendants’ offers. These were relevant matters. However, considered cumulatively, they did not take the case sufficiently outside the norm to justify indemnity costs. The failure to accept an offer was not, by itself, sufficient. Deficiencies capable of being addressed by the costs judge were not independently sufficient.
3. The defendants’ own conduct was relevant, but their costs exceeding the approved budget did not alone establish disproportionate conduct. The defendants’ having beaten their Part 36 offer did not militate against indemnity costs.
4. Payment on account. The court ordered payment of £535,000 on account of costs within 14 days.
5. Interest. Interest was ordered at 2% on the defendants’ costs from the date those costs were incurred until judgment, pursuant to Civil Procedure Rules 1998 rule 44.2(6)(g). Thereafter statutory interest applied to the judgment debt as a whole under rule 36.17(3)(b).