Receiving Party Beating Its Own (Non Part 36) Offer Did Not Warrant Indemnity Costs Award

Parties and Background

The Underlying Dispute

Tanka Thakali & Others (the Claimants) brought an action against Navin Kumar Gauchan & Another (the Defendants) in the High Court over a dispute related to the Thakali Welfare Society UK, a company limited by guarantee.

This litigation between the parties which led to cost orders requiring the Defendants to pay the Claimants’ costs.

The Bill of Costs and Detailed Assessment

Arising from the court orders in the Claimants’ favour on costs, the Claimants served a bill of costs on the Defendants totalling £105,133.49.

The Defendants disputed and challenged many aspects of this bill of costs. Detailed assessment proceedings were commenced and the matter came before Costs Judge Rowley. The opening lines of the judgment are self explanatory:

“The first judgment dealt with challenges to routine items and to the documents’ item. Those challenges remained after a day’s hearing of the points of dispute and replies. That hearing itself was the second day of the detailed assessment because the first day was very largely taken up with questions surrounding the terms of the claimants’ retainer with their solicitors. Those questions could not be satisfactorily answered on the (first) day and so the case was adjourned.

“The bill of costs claims the sum of £105,133.49 and has been assessed at £88,409.44. A bill of this size would normally be assessed comfortably within a day, but as can be seen from the first paragraph of this decision, in fact two days of court time together with two written decisions have been required to deal with this detailed assessment.”

Issue to be decided

The key issue to be decided was:

• Who should pay the costs of the detailed assessment proceedings, including the costs of the first hearing, and on what basis?

Costs Judge Rowley said:

“I do not need to recite the offers that have been made save to record that the claimants have beaten their own offers and not just the offers made by the defendants. The reduction of the bill is in the order of 15% which is modest and there is no suggestion by either side of any particular item being pursued or disputed inappropriately. In these circumstances, it might be thought that there was no doubt that the costs would be awarded to the receiving party in the usual fashion.

“However, …..”

Parties’ Respective Positions

The Defendants

The Defendants contended for there to be no order as to costs on the basis that 

• the first day of the detailed assessment was essentially wasted due to the claimants’ failure to be able to meet the retainer issues set out in the points of dispute. Whilst this might lead to an order for costs in the defendants’ favour, the defendant say that it should be weighed in the balance when making no order as to costs.
• furthermore, following the adjournment, the claimants produced a 10 page witness statement and an electronic bundle of more than 3,000 pages in order to deal with, they contended, the shortcomings of the evidence before the court at the first hearing. They said that this was “surely overkill” and as such were not costs that should be allowed between the parties.

The Claimants

The Claimants argued that:

• costs should be awarded to them as receiving party under CPR 47.20, which presumes costs will go to the receiving party unless the court orders otherwise.
• they had beaten their own offers to settle the detailed assessment proceedings. Their offers were more favourable than the Defendants’ offers. 

The Claimants also sought their costs on an indemnity basis rather than the standard basis on the basis that:

• the Defendants’ conduct during negotiations was “out of the norm” sufficient to justify indemnity costs. Specifically, the Claimants relied on:
  • the Defendants’ rejection of settlement offers which the Defendants would have been better accepting with hindsigh; and
  • the Defendants’ overall positions taken in negotiations

Decision

Costs Judge Rowley decided the Defendants should not pay the Claimants’ costs of the first adjourned hearing:

“I reserved the costs of that adjournment and that is a clear indication to me that I was not certain at the time as to who was at fault for the hearing having to be adjourned. That uncertainty seemed to stem from the relatively limited documentation put forward by the paying party regarding the existence of a fixed fee, but which could not be answered by the claimants, notwithstanding their full files seemingly being in the court and, in particular, the fact that there was some question about the hourly rate terms within the documentation that I had seen. [9]

“At the next hearing, I found in favour of the claimants in respect of the retainer issues. Nevertheless, I think there is some weight in the defendants’ argument on this point and I note that the claimants’ submissions seek to concentrate on settlement negotiations around the time of the first hearing rather than the cause of the adjournment. [10]

“From the correspondence (and the submissions on the day) it is apparent to me that the claimants thought that the case would settle upon their offer to accept a further £25,000 in addition to the £55,000 which had been ordered on account of costs. That was a reasonable assumption based on the sum actually allowed, but it is not, in my view, sufficient to justify being unable to deal with retainer issues at the first hearing. It is plain from the numerous pieces of correspondence in the bundle I have been sent that negotiations were protracted and there was no guarantee that the case would settle prior to the hearing. [11]

“In these circumstances, I take the view that the defendants should not have to pay for the costs of the attendance on the day which I am defining as counsel’s brief fees and the attendance times of the solicitor and costs lawyer on the day, not the time spent beforehand.” [12]

HHJ Rowley declined to award indemnity costs to the Claimants:

“…the claimants’ offer is not, in my view, sufficient to make the order for costs (excluding the first day) one to be assessed on the indemnity basis. The offer could have been made via Part 36 which would almost inevitably have resulted in an indemnity basis order in accordance with CPR 36.17, but it was not couched in those terms. Instead, the claimants have to show that the defendants’ conduct was “out of the norm” to obtain an indemnity basis order. There is only a single paragraph in the claimants’ submissions on this point and it refers solely to the defendants’ conduct in relation to negotiations and offers. [14]

“There is no amplification of this point and, in my view, it clearly cannot be sufficient for an indemnity basis order for a party simply to point to the opponents’ rejection of an offer which, as it turns out, the opponents would have been better off accepting. [15]

“In any event, I have looked at the correspondence and I do not see anything outside the norm in terms of the positions taken which would justify an indemnity basis order. [16]

“To sum up, I award the claimants their costs of the detailed assessment proceedings on the standard basis save for the costs of the hearing on 25 May 2023.” [17]

The Costs Judge went on to summarily assess the Claimants’ costs in the sum of £21,339.08.