Transomas Limited & Anor v Kheri Trading Limited & Anor

The court has a wide discretion to award indemnity costs where the conduct of proceedings takes the case outside the norm of ordinary and reasonable litigation. Indemnity costs are ordinarily appropriate where serious allegations of fraud are abandoned without an adequate explanation. The court may also consider the cumulative effect of unsupported allegations, disclosure failures, misuse of privileged material, peripheral or inconsistent claims, breaches of court orders and poor engagement before trial. Individual matters may be insufficient alone but may collectively justify indemnity costs where they substantially increase the opponent’s costs and obstruct the proper conduct of the proceedings.

Following dismissal of the claim on the first day of trial, the defendants sought their costs on the indemnity basis. The claimants had alleged that Mitch Gill fraudulently induced his father to sell a hotel business at a considerable undervalue. The claimants maintained the allegation until trial, but their director, Ms Kaur, then declined to represent the companies and made no application under Civil Procedure Rules 1998, rule 39.6, with the result that the action was dismissed.

The defendants relied on the abandonment of the fraud allegation without adequate explanation and on wider conduct said to take the proceedings outside the norm. The issue was whether indemnity costs should be ordered.

1. Disposition. The defendants were entitled to their costs on the indemnity basis.
2. The court possesses a wide discretion when determining whether indemnity costs are appropriate. The absence of an adequate explanation is an important feature where a claim involving allegations of fraud is abandoned. The claimants’ failure to provide representation at trial was tantamount to abandonment because it inevitably led to dismissal. Ms Kaur’s explanation, based on the claimants’ best interests and her personal position, did not justify the conduct. The court declined to determine whether the claim had originally been brought primarily to advance her personal interests.
3. The proceedings were also outside the norm. The relevant matters included serious unsupported allegations of misconduct; the misconceived allegation that electronic evidence had been destroyed; delayed and supplemental disclosure; access to privileged information and failure to provide details; apparently abusive and inconsistent peripheral claims; repeated failures to comply with court orders; and woeful engagement before trial.
4. The matters had to be assessed cumulatively. Although some individual matters, including the disclosure failures, might not alone justify indemnity costs, together they substantially increased the defendants’ costs and obstructed the proper process of the court. Litigant-in-person status did not excuse compliance with court rules.

First-instance decision. The judgment records that the substantive proceedings had previously been dismissed on 13 November 2023 and that the present judgment determined the consequential issue of costs.