Indemnity Costs ' When Does A Party Become Liable?

• Published date: 07 November 2022
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Arbitration & Dispute Resolution, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Debevoise & Plimpton
• Author: Mr Christopher Boyne and Doreena Hunt

Introduction. The judgment following a consequentials hearing in the case of Mr. Pisante and ors v Mr. Logothetis and ors was handed down by Mr. Justice Baker on 13 October 2022 and provides some helpful guidance on when a party will become liable for indemnity costs.

By way of reminder, costs assessed on the indemnity basis are not subject to a principle of proportionality and, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.

The trial of the main proceedings took place across two weeks in July 2021, and judgment was handed down in January 2022. The first defendant, Mr. Logothetis, was found to have fraudulently misrepresented the basis on which his company, Lomar, would be contributing to a joint venture and the first claimant, Mr. Pisante (acting via his company, Swindon Holdings), was induced by that misrepresentation to indirectly invest in the joint venture.

Indemnity Costs. The Claimants sought their costs on the indemnity basis on two grounds:

First, they submitted that the Court should recognise a presumptive rule that where fraud is proved, the successful claimant's costs should be assessed on the indemnity basis, similar to the way in which a defendant who successfully defends a fraud claim is ordinarily entitled to his or her costs on the indemnity basis. It was argued that a general policy along these lines would reflect the court's policy of fully compensating victims of fraud, as well as reflecting the fact that a defendant who exacerbates his or her dishonesty by continuing to deny it, acts unreasonably.

Second, they argued that the Defendants' conduct of the litigation was so unreasonable and outwith the norm that it was appropriate to make an order for indemnity costs.

The court rejected the first argument noting that "the fact that the allegation successfully made was of dishonest wrongdoing does not, without more, make it more appropriate than in any other kind of case that a claimant's costs should be recoverable though incurred disproportionately or that the claimant should not have to show that its costs were reasonably incurred and reasonable in amount".

However, the Court was far more sympathetic to the Claimants' submissions concerning the Defendants' conduct of the litigation. As Mr. Justice Baker put it, "the conduct of the defence in this case involved significant unreasonable behaviour that went beyond the norm, from...