Allegations of fraud – indemnity basis costs


Ch D (David Richards J) 02/10/2015

A Defendant was awarded costs on the Indemnity basis where the Claimant issued a Notice of Discontinuance the day before the Defendants Application to strike out its claim was due to be heard. The Claimant had also failed more than once to provide a satisfactory draft of its proposed amended Particulars of Claim, which contained allegations of fraud.

As a result, the Eleventh Defendant (D11) applied for its costs on the Indemnity basis.

The Claimant had brought a claim against various Defendants for damages in the tort of deceit and/or negligence. The claim alleged that D11 had been involved in obtaining representations in respect of third parties, which it knew to be false or should have known were false, that a bank passed on to the Claimant.

D11 issued an application to strike out the particulars of claim as they did not set out the relevant facts. The Claimant was ordered to provide a draft amended Particulars of Claim and D11 was to state whether or not it consented.

D11’s strike-out application was put on hold pending the outcome of the amended Particulars. C was ordered to pay D11’s costs of the hearing and make an interim payment.

D11 did not consent to the Claimant’s proposed amended Particulars of Claim. At the hearing of D11’s strike-out application, the Claimant accepted that its proposed amended Particulars needed to be redrafted. The Master adjourned the hearing, ordering a further interim payment and that the claimant pay D11’s costs of and up to that hearing.

The day before the return date, the Claimant discussed with D11 removing its application from the list; D11 refused. The Claimant then served on D11 a Notice of Discontinuance in respect of the entire proceedings.

D11 submitted that an Order for costs on the Indemnity basis would be appropriate as the Claimant had made serious allegations of fraud, accepted that its particulars of claim were not clear and failed to take the opportunities given to amend them; in addition, the Claimant had made a failed attempt to remove its Application following which it issued a Notice of Discontinuance without explanation or apology.

HELD: The usual practice under CPR Pt 38 for a Notice of Discontinuance was to order costs on the Standard basis, but the court retained a discretion to order otherwise.

Allegations of fraud were serious and if they failed at trial costs should be awarded on the Indemnity basis. If a Claimant served a Notice of Discontinuance where allegations of fraud had been made, it was appropriate for the court to proceed in the same way.

D11 had incurred significant expense in defending the allegations and therefore the court considered that allegations of fraud which had been discontinued generally justified costs on the Indemnity basis, Jarvis Plc v PricewaterhouseCoopers [2001] B.C.C. 670 applied.

Accordingly, the Application was granted and the Claimant was ordered to pay D11’s costs on the Indemnity basis.