IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr Justice Gray)
Monday 29th October, 2001
B e f o r e :
LORD JUSTICE MAY
LORD JUSTICE KAY
|REID MINTY (A FIRM)|
|- v -|
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 020 7421 4040
Official Shorthand Writers to the Court)
appeared on behalf of the Appellant
MR N BACON and MR A MONSON (Instructed by Messrs Reid Minty, London W1K 4PS)
appeared on behalf of the Respondent
Crown Copyright ©
"We would also emphasise to you that the Defendant has every intention of resisting this claim as strenuously as possible for as long as necessary.
In these circumstances we are instructed to invite the Claimant to discontinue its claim on the following terms as to costs, namely the Claimant will pay the Defendant's costs of the action on the standard basis up to the date of service of the notice of discontinuance pursuant to CPR Part 38.3, including all costs not already provided for by Orders of the Court, to be taxed if not agreed.
Should this offer of terms for the disposal of these proceedings not be accepted, the Defendant will draw its terms to the attention of the Court on his succeeding at trial and seek all costs incurred after seven days from the date of this letter on an indemnity basis."
"I am by no means unsympathetic with the application that is made on behalf of the Defendant that the Claimant should be ordered to pay the costs of the action on an indemnity basis. But I have to say that it appears to me that Mr Shields is unable to bring himself within Part 36 and, in particular, sub-rule 21 of Part 36. That sub-rule is concerned with the position where the claimant does better than his Part 36 offer. There is, in the Rules, no, as it were, converse provision which governs the position that arises where a defendant has made a proposal as to the way in which an action may be compromised. In those circumstances, it appears to me that I am driven back, when considering an application for indemnity costs, to the more general basis on which costs can be ordered on an indemnity footing.
The relevant rule is 44.4, the note to which I think accurately summarises what I understand to be the effect of the authorities on this topic by saying that indemnity costs should only be awarded on an indemnity basis if there has been some sort of moral lack of probity or conduct deserving of moral condemnation on the part of the paying party. I do not think that I can go so far as to say that applies in this case. Accordingly, I order that the Defendant should have his costs on a standard basis, not an indemnity basis."
"These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly."
"(1) This rule applies where at trial-
(a) a defendant is held liable for more; or
(b) the judgment against a defendant is more advantageous to the claimant, than the proposals contained in a claimant's Part 36 offer.
(2) The court may order interest on the whole or part of any sum of money (excluded interest) awarded to the claimant at a rate not exceeding 10% above base rate for some or all of the period starting with the latest date on which the defendant could have accepted the offer without needing the permission of the court.
(3) The court may also order that the claimant is entitled to-
(a) his costs on the indemnity basis from the latest date when the defendant could have accepted the offer without needing the permission of the court; and
(b) interest on those costs at a rate not exceeding 10% above base rate."
"44.3 (1) The court has discretion as to-
(a) whether costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to be paid.
(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including-
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36).
(5) The conduct of the parties includes-
(a) conduct before, as well as during, the proceedings, and in particular the extent to which the parties followed any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim."
"(1) Where the court is to assess the amounts of costs (whether by summary or detailed assessment) it will assess those costs-
(a) on the standard basis; or
(b) on the indemnity basis,
but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount."
"However, it would be wrong to regard the rule [36.21] as producing penal consequences. An order for indemnity costs does not enable a claimant to receive more costs than he has incurred. Its practical effect is to avoid his costs being assessed at a lesser figure. When assessing costs on the standard basis the court will only allow costs `which are proportionate to the matters in issue' and `resolve any doubt which it may have as to whether costs were reasonably incurred or reasonably proportionate in amount in favour of the paying party'. On the other hand, where the costs are assessed on an indemnity basis, the issue of proportionality does not have to be considered. The court only considers whether the costs were unreasonably incurred or for an unreasonable amount. The court will then resolve any doubt in favour of the receiving party. Even on an indemnity basis, however, the receiving party is restricted to recovering only the amount of costs which have been incurred (see Part 44.3 and Part 44.5).
63. The ability of the court to award costs on an indemnity basis and interest at an enhanced rate should not be regarded as penal because orders for costs, even when made on an indemnity basis, never actually compensate a claimant for having to come to court to bring proceedings. ...
64. The power to order indemnity costs or higher rate interest is a means of achieving a fairer result for a claimant. If a defendant involves a claimant in proceedings after an offer has been made, and in the event, the result is no more favourable to the defendant than that which would have been achieved if the claimant's offer had been accepted without the need for those proceedings, the message of Part 36.21 is that, prima facie, it is just to make an indemnity order for costs and for interest at an enhanced rate to be awarded. However, the indemnity order need not be for the entire proceedings nor, as I have already indicated, need the award of interest be for a particular period or at a particular rate. It must not however exceed the figure of 10 per cent referred to in Part 36."
"If a defendant's lawyers choose not to send a representative with appropriate authority to attend a pre-trial review and choose not to ensure that the client (who in this case should be equated with the defendant's insurer) attends the review, the judge, who is likely to be the trial judge, is likely to note their absence. If he considers that that party has acted unreasonably in this way in connection with the litigation in breach of a direction of the court, there may come a time when he decides that it is appropriate to make an order for indemnity costs against that party, or to exercise his power to award interest on damages at a much higher rate than what is usual, if those powers are available to him. The whole trust of the CPR regime is to require the parties to behave reasonably towards each other in the conduct of the litigation. The old antagonistic point scoring, which used to drag personal injuries cases out and run up costs, should now be at an end."
"When dismissing the principal appeal, we left over for decision whether The Times should pay the respondent's costs of that appeal on a standard or an indemnity basis. Clearly rather more of a stigma attaches to an indemnity costs order made in this context than in the context of a rule 36.21 offer - although even then no moral condemnation of the appellant's lawyers is necessarily implied ..."