Indemnity costs for claimants who unjustifiably withdrew from settling

The High Court has imposed indemnity costs order on a property investment fund which 'drew back from the brink' of settling a commercial dispute by refusing to accept an offer they had previously put forward themselves.

"The message in this case is that a pattern of behaviour that appears to undermine rather than promote the possibility of settlement on a reasonable and sensible basis will be punished," said head of professional risk at Weightmans Mike Grant (pictured), who acted for the defendant in the case.  

Grant said this would be the case "particularly if cracks in the expert evidence supporting the claim are emerging".

Delivering judgment in Igloo Regeneration and Ors v Powell Williams Partnership [2013] EWHC 1859 (TCC), Mr Justice Akenhead said the 'overriding objective' that cases should be resolved justly and at proportionate cost applied to the parties as well as the courts.

"In my view, having regard to the overriding objective, parties do need to consider seriously the impact of costs and the like," he said.

"It is not just the court which is bound by the overriding objective, but parties are bound by the overriding objective as such.

"Where effectively both would be prepared to settle at exactly the same figure within a few days of each offer being put forward, for the claimants to have withdrawn does seem to be unjustifiable."

Akenhead J said nothing had happened between the time that the claimants' offer for £729,500 plus costs had expired and the offer made by the defendant for settlement at exactly that level a few days later. "An enormous amount of time and cost and court resource has been wasted thereafter as a result of the claimants' unwillingness to accept the figure that they themselves were prepared to settle at.

"Of course, contractually they were not bound to accept the same figure put forward by the defendant, but, with a view to saving costs, time and still ending up ahead of the game, it seems to me to have been unjustified not to settle at the very figure which they had first put forward."

Akenkead J said there was no justification for Igloo to go on with the case after concerns expressed to counsel in November 2012 by the judge who was originally due to hear the case, Judge Halbert, about how the claimants could succeed.

Mr Justice Akenhead imposed indemnity costs on Igloo from the Monday after the hearing before Judge Halbert.

The decision, said Grant, was "yet further evidence" of how judicial thinking was evolving against the backdrop of the new costs regime.

"The winner-takes-all approach may not only result in a failure to recover compensation but may, increasingly, be accompanied by an indemnity-based costs order as the judiciary expresses its disapproval of a party's conduct and imposes financial penalties."