Manish Goyal & Anor v BGF Investment Management Limited & Ors

An unsuccessful allegation of fraud or dishonesty is a factor capable of supporting indemnity costs, but it creates neither an automatic entitlement nor a starting presumption in favour of that order. The court must assess the precise nature of the allegations, the reasons for advancing them and the reasons for their failure. Indemnity costs require a sufficiently high level of unreasonableness or inappropriateness. A claim may be speculative, weak and thin without necessarily meeting that threshold. However, continued pursuit after the real difficulties in the claim have become clear may justify indemnity costs from that point. Standard costs remain the default position.

The claimants brought claims against BGF Investment Management Limited, associated entities and individuals. Following trial, the court found that the claims failed for a number of reasons. This ruling determined consequential matters on which the parties could not agree: the basis of costs assessment, the payments to be made on account of costs, and the time for payment.

The defendants sought indemnity costs, relying on the speculative and weak nature of the claims, failed allegations of fraud and dishonesty, alleged deficiencies in pleading and valuation, and the claimants’ continued pursuit of the proceedings after drop-hands offers. The claimants contended that their conduct did not meet the required threshold.

1. Costs. The court adopted the approach summarised in Libyan Investment Authority and Others v King and Others [2023] EWHC 434 (Ch). Indemnity costs may be ordered where conduct is out of the norm and involves a sufficiently high level of unreasonableness or inappropriateness. The fact that allegations of fraud or dishonesty fail at trial is relevant, often strongly so, but does not automatically justify indemnity costs and is not a starting point requiring explanation from the paying party.
2. The weight of failed allegations depends on their precise nature, the reasons why they were advanced and the reasons why they failed. The court must avoid hindsight. Claims which are speculative, weak and thin do not necessarily reach the required threshold.
3. Here, the claims were speculative, weak and thin, but the claimants’ conduct before 25 January 2023 was not sufficiently unreasonable to justify indemnity costs. The court had not found conscious dishonesty in the claimants’ evidence.
4. From the date of the drop-hands offers, however, the continuing pursuit of the action was unreasonable in light of the clear difficulties concerning the beneficial ownership claim, conspiracy claim, causation and loss. The claimants were therefore ordered to pay costs on the standard basis up to 25 January 2023 and on the indemnity basis thereafter, subject to detailed assessment if not agreed.
5. Payments on account were ordered in the sums of £1.75 million for the first to fourth defendants and £1.1 million for the fifth defendant, payable within 42 days from 26 May 2023.