Libyan Investment Authority & Ors. v Mr Roger Milner King & Ors.

Under the Civil Procedure Rules 1998, r 44.2, standard costs remain the default. Failed allegations of fraud or dishonesty are relevant but do not automatically justify indemnity costs or create a presumption requiring the paying party to displace indemnity assessment. The court must make a just order after considering all the circumstances, including conduct before and during proceedings. Indemnity costs may be appropriate where conduct shows a sufficiently high degree of unreasonableness or is out of the norm. A speculative claim, serious allegations maintained despite evident weaknesses, thin evidence, pleading departures and unreasonable rejection of substantial settlement offers may cumulatively justify indemnity costs. The assessment must avoid hindsight.

The claimants accepted that they were liable for the defendants’ costs after all their claims had been dismissed, but disputed the basis of assessment. The defendants sought indemnity costs, relying on the persistence of serious fraud and dishonesty allegations, the speculative and weak nature of the claims, evidential and pleading deficiencies, and the rejection of settlement offers. The claimants contended that the case had been properly arguable and that failed dishonesty allegations did not automatically justify indemnity costs. The central issue was whether the claimants’ conduct was sufficiently unreasonable or out of the norm to warrant departing from the standard basis.

1. Outcome. The defendants’ application succeeded. The claimants’ costs were ordered to be assessed on the indemnity basis.
2. Applicable approach. Under Civil Procedure Rules 1998, r 44.2, the court had to make the order it considered just, having regard to all the circumstances. Relevant conduct included conduct before and during proceedings, the reasonableness of raising or pursuing allegations, and the manner in which the case was conducted. The general requirement could not be replaced by a rigid gloss or formula. Standard costs remained the default.
3. Fraud and dishonesty allegations. The failure of fraud or dishonesty allegations was a factor which could be taken into account, but did not automatically justify indemnity costs or create a starting point requiring the paying party to explain why standard costs were inappropriate. Indemnity assessment required a significant degree of unreasonableness or otherwise inappropriate conduct, assessed without hindsight.
4. Application. The deceit case had evident difficulties after the earlier pleading and strike-out hearings. The implied representation case was conceptually challenging. Other claims were inferential, unsupported by direct evidence and pursued despite the impact of the claimants’ own evidence. The claimants also strayed beyond their pleaded case, relied on thin evidence concerning reliance, and maintained serious allegations of fraud and criminal conduct. The defendants’ drop-hands offers should have received careful consideration when made. The fact that the claims had survived the low threshold for avoiding strike-out did not answer the costs application.
5. Considering those matters in the round, the litigation was sufficiently speculative and out of the norm to justify indemnity costs.

The judgment was a first-instance decision on the basis of assessment of costs. It records that the claims had survived earlier strike-out and amendment hearings before Judge Barker and that an attempted appeal had been dismissed.