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“Hindsight” remains inappropriate test for award of Indemnity Costs

“Hindsight” remains inappropriate test for award of Indemnity Costs

The doctrine that hindsight is an inappropriate test to apply when determining any issue is one that has long been held in high regard by the courts. Indeed, it is as far back as the matters of Francis v Francis andDickerson [1956] P 1887 and Argyll (Duchess) v Beuselink [1972] 2 Lloyd’s Rep 172, in the latter of which Megarry J noted

“In this world there are few things that could not have been better done if done with hindsight. The advantages of hindsight include the benefit of having a sufficient indication of which of the many factors present are important and which are unimportant. But hindsight is no touchstone [of negligence]… The standard of care to be expected of a professional man must be based on events as they occur, in prospect and not in retrospect.”

and which was carried through Callery v Gray [2001] EWCA 1117 and Atack v Lee [2004] EWCA Civ 1712though to KU (a minor) v Liverpool City Council [2005] EWCA Civ 475 and beyond which has made the prohibition to the utilisation of hindsight such an enduring concept.

It is, therefore, perhaps entirely unsurprising that, just last week, Mr Justice Coulson has again reinforced this concept.

Giving judgement in the matter of Bank of Ireland (Governors and Company of) & Bank of Ireland (UK) Plc v Watts Group Plc [2017] EWHC 2472 (TCC), a matter which involved negligence claim against a property developer, Coulson J found that the claim was not hopeless, but was supported by expert evidence and witness statements, and therefore it would be unjust to punish the unsuccessful party automatically without good reason to do so.

In this matter, the claimants had failed in their claim for professional negligence against the defendant, a developer, and had agreed to pay the defendant’s costs, however the issues as to the basis of those costs and the amount of any interim payment to be made remained outstanding.

Pertinent to the overall consideration of the matter was also that the defendant had received approval to a budget totalling some £384,424, with actual costs claimed of £616,000 (albeit it was acknowledged that there had been no application to amend the budget), and further the defendant had also made three Part 36 Offers, all of which had been rejected by the claimant.

Taking these factors into account, at [5], the defendant contended that the claimant’s claim from the outset had been “…unreasonable and hopeless and should never have been brought. Secondly, they say that they have made offers which they have beaten…Thirdly, they say that the evidence of Mr Vosser, and the court’s criticisms of that evidence, also make this an unusual or extreme case…” which together with the claimant’s concession that they had “..lost the litigation “badly”…” strongly militated towards an award of indemnity costs.

In response, the claimants very strongly warned against the dangers of utilising hindsight, contending that whilst they had clearly been unsuccessful and made the according concession thereto, the claim had not been either unreasonable or hopeless, and any judgement that it should never have been brought was one which could only be concluded with the benefit of hindsight.

In considering whether to find in favour of the defendant, Coulson J undertook a full and detailed consideration of the circumstances in which an order for indemnity costs could be made, acknowledging that, whilst this matter was one which was likely to raise issues, none of those challenges ought to be seen as insurmountable, noting (at [8]) that

“When considering the proper basis of the assessment of costs, the court must avoid the dangers of hindsight. It must be wary of the suggestion by the successful party, in this case Watts that, in truth, the result in the case was inevitable. Amongst other things, such an approach runs the risk of unfairly denigrating the presentation of the successful party’s case at trial.”

acknowledging also that there was potentially a “misalignment” in the fact that successful claimants automatically were entitled to indemnity costs, whereas defendants were not (CPR 36.17), but also that additional factors must equally be taken into account, such as the fact that the defendants had made 3 offers, indicating that they took claim seriously, and also balancing the same against the claimant’s expert evidence, which was criticised by the trial judge.

Accordingly, adopting this balance, Coulson J found that he could make an exception to the usual rule that a successful defendant was only entitled to their costs on the standard basis, even having bettered their own Part 36 offer, but rather was entitled to all or part of their costs on an indemnity basis, noting (at [10] & [11]) that whilst he considered it inappropriate that the claimants should pay the entirety of the defendant’s costs on the indemnity basis

“I consider that…[Mr Vosser’s]…conduct should be reflected in the costs order that I make….they lost the case in part because of the inadequacies of his evidence, so to order indemnity costs as well would be penalising the Bank twice over for the conduct of their independent expert. It would also be disproportionate, particularly because, as Mr Vosser admitted, this was the first time he had given evidence at a trial (although it was far from the first time he had advised the Bank).

“There is authority for the proposition that, where a court concludes that the conduct of an expert should be marked in the costs order, it may be appropriate to order that the specific costs generated by that expert should be assessed on an indemnity basis: see Balmoral v Borealis [2006] EWHC 2531 (Comm) and Williams v Jervis [2009] EWHC 1837 (QB)….”

concluding that the correct order to make in these circumstances was one in which

“…the costs of the defendant’s QS expert, Mr Whitehead, should be assessed on an indemnity basis, as should the costs of and occasioned by Mr Vosser’s oral evidence at the trial. Beyond those two specific exceptions, and for the reasons that I have given, I consider that the appropriate order in this case is that costs should be assessed on the standard basis.”

This judgement, once more, serves to re-enforce the more flexible approach allowed by the very broad discretion afforded to the judiciary in making costs orders, even where there is a perceived imbalance within the rules, to reflect the (mis)conduct of any given party or one of their experts.

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