Leighton Denny v Kambiz Babaee & Ors

The court has a broad discretion on costs and must consider all the circumstances. A change in the valuation of a successful claim does not, without evidence of deliberate or reckless exaggeration or causally wasted costs, justify reducing the claimant’s costs. Indemnity costs require conduct or circumstances taking the case out of the norm. Weak arguments, rejected evidence, non-cooperation and failure to participate in proceedings will not necessarily meet that threshold where ordinary costs sanctions are available. However, deliberately or unjustifiably failing to perform an agreed settlement can constitute conduct outside the norm and justify indemnity costs from the point at which the breach caused further litigation, subject to avoiding a costs windfall.

The claimant brought proceedings concerning defects in a newly built house. Default judgment had been entered against the defendants under the Defective Premises Act 1972, and the remaining trial issues were causation and quantum. Judgment was entered for the claimant in the sum of £549,773.90, with an order for his costs and £180,000 on account.

The court then determined the claimant’s application for indemnity costs and the defendants’ contention that costs should be reduced because the claim had initially been valued at a higher figure. The claimant also relied on the defendants’ failure to complete a mediated settlement concerning the property.

1. The defendants’ argument for reducing costs because the claim had initially been valued more highly was rejected. The court had no sufficient material to determine whether the overstatement was deliberate or reckless, whether it resulted from misconduct by the claimant, or whether it caused avoidable costs. The defendants had also failed to advance a coherent case enabling the claimant to respond.
2. The broad discretion under CPR 44.2 requires consideration of all the circumstances, including conduct, partial success and exaggeration. The principles identified in Widlake v BAA Ltd [2009] EWCA Civ 1256 were relevant, but the necessary factual and evidential foundation for a costs reduction was absent.
3. Under Excelsior Commercial and Industrial Holdings Ltd [2002] EWCA Civ 879, indemnity costs may be ordered where conduct or other circumstances take the case out of the norm. A weak case, rejected evidence, non-cooperation and failure to engage in proceedings did not, in the circumstances, justify indemnity costs. Those matters had already attracted ordinary costs consequences.
4. The defendants had agreed to purchase the property at the price fixed by an independent joint valuation, without reserving any right to obtain a further valuation. Their failure to complete the purchase was outside the norm and justified indemnity costs for the subsequent period. The order ran from 1 January 2023, since an earlier date risked giving the claimant a costs windfall.
5. The defendants were ordered to pay the claimant’s costs on the standard basis up to and including 31 December 2022, and on the indemnity basis from 1 January 2023.

The judgment records that permission to appeal was refused and that, when judgment was handed down, no appellant’s notice had been filed.