Solicitor Negligence - When indemnity costs are more than what’s recovered

At Redress Law we are sensible about costs because we know how being faced with big bills is upsetting for clients, but when solicitors brought an application on behalf of a Claimant in a recent case sought indemnity costs, following a CPR Part 36 settlement, it faced a substantial amount of criticism from the court and a hefty bill for the client. The decision is a warning of the importance of avoiding legal disputes about disproportionate costs.

Courtwell Properties v Glencore

Akenhead J in Courtwell Properties v Glencore [2014] heard an application for indemnity costs of £42,000, but the costs making the application were a staggering £100,000! The parties had engaged leading counsel and submitted 12 witness statements amounting to 5 hours of judicial reading time. The original case was about an relatively uncomplicated leasehold dilapidations dispute.

The judge commented that the very fact that such a lot of evidence was put forward should have altered the Claimant to consider the difficulties in succeeding on such an application! Needless to say the application was refused and the costs dealt with on a standard basis. That decision would have left Courtwell footing the substantial bill of making the application for indemnity costs in the first instance!

Indemnity and court discretion

Indemnity costs are subject to the court’s very wide discretion. The principles considerations when seeking indemnity costs are:

1. There must be unreasonableness to a “high degree”, but dishonesty or moral blame does not have to be established;
2. The pursuit of a weak claim alone will not usually justify an indemnity costs order, providing it was reasonably arguable;
3. If the Defendant is required to meet an unreasonably wide case then the Claimant had forfeited its rights to seek indemnity costs;
4. The conduct of experts can be taken into account; and
5. A refusal to mediate or failure to comply with a Pre-Action Protocol.

Whilst it is tempting to make an application for indemnity costs, there must be good grounds for it. Unless there is a clear case of unreasonable conduct, the court is unlikely to consider that there is sufficient justification for making such an application. Applicants must therefore be wary of throwing good money after bad!

Evidence of the opponent’s unreasonable conduct must be presented to the court sensibly if its favour is to be found and the solicitor making the application should ensure that there is no counter evidence of its unreasonable conduct! Otherwise seeking indemnity costs, could be costly!

Solicitors who pursue costs applications on unreasonable grounds could face claims of professional negligence.

If you have incurred unreasonable costs as a result of solicitor negligence, contact us. We have a specialist team who deal with claims against solicitors who can help recover some of those costs.