“Mark of disapproval” - Justice Parker provides a refresher on indemnity costs
Two recent decisions of Justice Parker provide useful analysis on the exercise by the Grand Court of its discretion to order costs on an indemnity basis.
In the Matter of Avivo Group (Unreported, 25 January 2023), Justice Parker rejected an application for indemnity costs following the dismissal of an application to appoint an inspector to examine a company’s affairs. In doing so, he referred to the critical factors to be taken into consideration when indemnity costs are sought, namely that (inter alia):
- The usual order made against an unsuccessful party is that costs are taxed on the standard basis
- The Court should have regard to all the circumstances of the case and the discretion to award indemnity costs is extremely wide
- The Court should focus on the conduct of the losing party, not on the substantive merits of the case – there should normally be an element in the losing party’s conduct which deserves a "mark of disapproval" which involves the conduct being particularly unreasonable, ie conduct that is improper, negligent or unreasonable to "a high degree"
- If there is nothing unusually unreasonable about the paying party’s conduct, the appropriate order is for standard basis costs
The Court found that the application in this case was not an application that was manifestly hopeless, nor was the litigation conducted so unreasonably as to warrant a "mark of disapproval" from the Court by way of an indemnity costs order.
By contrast, in another recent decision of the Grand Court, In the Matter of Jian Ying Ourgame High Growth Investment Fund (In official liquidation) (Unreported, 27 January 2023), Justice Parker considered an application for costs following unsuccessful applications to set aside permission to serve proceedings out of the jurisdiction. We have blogged on the substantive judgment, dated 21 December 2022, here.
The dispute concerned an arbitration agreement which the Court determined was not authentic and/or did not exist. It was therefore a significant factor that the applications were premised “on a document the authenticity of which the Court has found to be manifestly incredible”, which the Judge noted was an “unusual finding”.
In the circumstances, it was held that the overall conduct of the unsuccessful party, in relying on a fictitious document, should attract moral condemnation and was conduct that was unreasonable to a high degree. The party’s conduct caused delay, legal fees and expenses that would not otherwise have been incurred, which made this a clear case where a “mark of disapproval” ought to be applied.
Both cases provide a valuable reminder to practitioners of the factors that must be taken into account in order for costs to be ordered on an indemnity basis.
We note that indemnity costs were ordered against the Petitioner in the recent decision of Justice Doyle in Seahawk China Dynamic Fund, as discussed in our post here.