Palmali Shipping SA v Litasco SA (Costs)

A court may order indemnity costs where the claimant’s conduct takes the case outside the norm. The assessment may be limited to the period or work affected by that conduct, but several factors may justify a wider period when considered cumulatively. Relevant factors may include pursuing a claim after the legal implications of known facts should have become clear, materially false evidence which increases the costs and length of the trial, and without-prejudice offers made save as to costs. Offers need not fall within the Part 36 regime to be considered for this purpose.

This was a costs decision following the defendant’s success in the 2017 claim. The court had made serious adverse findings concerning Mr Mansimov’s evidence and conduct. The defendant sought indemnity costs for the whole claim, relying on the knowingly false basis of the claim, the quality and consequences of Mr Mansimov’s evidence, and two settlement offers.

The central issue was whether those matters, individually or cumulatively, took the case outside the norm so as to justify indemnity costs, and, if so, from what point.

1. Outcome. Palmali was ordered to pay the costs of and occasioned by the 2017 claim on the standard basis up to 28 days after the Swiss law issues were first pleaded. Thereafter, the costs were to be assessed on the indemnity basis.
2. The governing consideration was whether the circumstances took the case outside the norm, applying the approach identified in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA Civ 879. The claimant’s knowledge of the relevant facts alone did not establish that the claim was knowingly false in the legally relevant sense. Once the Swiss law defences were pleaded, however, Mr Mansimov either knew, or could reasonably have obtained competent advice concerning, the relevant legal propositions and their application to facts within his knowledge. A period of 28 days was sufficient. From that point, indemnity costs were justified.
3. Mr Mansimov’s materially untrue evidence was substantially outside the norm. It diverted attention from the real issues, materially increased preparation costs, and lengthened the trial. If considered separately, it would have justified indemnity costs for the preparation for and conduct of the trial, rather than the entire claim.
4. Although the defendant’s offers were withdrawn and were defendant’s offers, rather than claimant’s offers, they could still be taken into account. The Part 36 regime did not prevent the court from considering offers made without prejudice save as to costs when deciding whether indemnity costs were warranted. The offers were material, but did not extend the period already justified by the Swiss law issues.
5. The relevant factors justified the order both individually and cumulatively.