Pursuing a hopeless case can warrant an order for indemnity costs. Where claims are speculative, weak, opportunistic or thin, such an award is only justified if, at any time after commencement, a reasonable claimant would conclude that they should no longer be pursued.
The court has considered cost claims in Hope Capital Ltd and another v Alexander Reece Thomson LLP [2023] EWHC 3157 (KB). In September 2023, the court decided that despite the defendant’s admission of negligence, the claimant suffered no actionable loss.
The defendant made several offers: Part 36 offers of £375,000 in March 2022, and £650,000 in October 2022; a Calderbank offer of £1.15m in May 2023 the net effect of which was unlikely to exceed the second offer; and a final offer of £720,000 following trial.
It was not in dispute that the defendant had been successful and that the claimants should pay their costs from expiry of the first offer. However, the claimants sought a 50% reduction on account of their partial success, principally on the question of breach, which was admitted at trial. The defendant sought indemnity costs throughout, or at least from expiry of the first offer.
The court has a wide discretion in relation to the award of costs, but it is accepted that the court should “avoid finely detailed divisions of issues and sub-issues”: F&C Investments (Holdings) Ltd v Barthelemy [2011] EWCH 2807 (Ch). The judge was satisfied that the defendant lost on breach but won on scope of duty and the causal nexus between that duty and losses caused by matters for which no duty was owed – the conduct of the borrower and Covid. It was not unreasonable for the defendant to keep breach an open issue since it did not significantly affect the evidence at trial.
The automatic consequence of beating its offer – unless it was unjust – was that the defendant was entitled to its costs on a standard basis and interest. The paying party’s conduct would need to be unreasonable to a high degree to justify indemnity costs: Elvanite Full Circle Ltd v Amec Earth and Environmental (UK) Ltd [2013] EWHC 1643 (TCC).
The claim for negligence was not, in any way, weak or speculative, as underlined by the late concession on liability. But for the scope of duty/nexus point, the judge would have found for the claimants in the sum of £438,000, allowing for contributory negligence, so it was not unreasonable for the claimants to pursue the claim after offers were made.
The defendant was entitled to its costs on a standard basis.
Louise Clark is a property law consultant and mediator
