Establishing the Absence of a Presumption for Indemnity Costs in Failed Dishonesty Allegations: Thakkar v Mican [2024] EWCA Civ 552

Introduction

In the case of Thakkar & Ors v Mican & Anor ([2024] EWCA Civ 552), the England and Wales Court of Appeal (Civil Division) addressed pivotal issues surrounding the awarding of indemnity costs in the context of alleged dishonesty. The appellants, who were successful claimants in an underlying Road Traffic Accident (RTA) claim, appealed against the trial judge's refusal to grant indemnity costs against the respondents. Central to this appeal was whether a default entitlement or presumption exists for indemnity costs when a defendant's allegations of fundamental dishonesty against a claimant fail.

Summary of the Judgment

The appellate court upheld the decisions of both Richard Smith J and HHJ Backhouse. The trial judge had previously refused indemnity costs to the appellants, despite the respondents' unsuccessful attempt to allege fundamental dishonesty. The Court of Appeal affirmed that there is no default entitlement or presumption for indemnity costs in such circumstances. The judges emphasized the broad discretion afforded to trial judges in assessing costs and rejected the appellants' argument for a presumption favoring indemnity costs when dishonesty allegations fail.

Analysis

Precedents Cited

The judgment extensively referenced several key cases to elucidate the principles governing the award of indemnity costs:

Howlett v Davies [2017]: Established that allegations of dishonesty do not automatically necessitate indemnity costs.
Clutterbuck v HSBC PLC [2015]: Highlighted that while allegations of fraud can lead to indemnity costs upon failure, there is no absolute rule mandating such awards.
Natixis S.A. v Marex Financial Limited [2019]: Reinforced the discretionary nature of cost awards irrespective of failed dishonesty claims.
Bishopsgate Contracting Solutions Limited v O'Sullivan [2021]: Clarified that failed allegations of dishonesty do not automatically result in indemnity costs.
Libyan Investment Authority v Roger Milner King & Ors [2023]: Affirmed that there is no presumption or mandatory rule for indemnity costs following failed dishonesty allegations.

These cases collectively underscore the judiciary's stance that indemnity costs are not to be automatically conferred based on failed dishonesty claims but remain contingent upon the specific circumstances of each case.

Legal Reasoning

The court underscored the discretionary power vested in judges to determine cost awards. It was emphasized that the decision to grant indemnity costs should be based on whether the specific circumstances of the case meet the high threshold required for such an award. The appellants' contention that there exists a default entitlement or presumption for indemnity costs when dishonesty allegations fail was systematically dismantled. The judges clarified that maintaining such a presumption would unduly constrain judicial discretion and potentially lead to unjust outcomes.

Moreover, the court highlighted the importance of adhering strictly to the Civil Procedure Rules (CPR), cautioning against the creation of additional presumptions or default positions that are not explicitly outlined within the CPR framework.

Impact

This judgment has significant implications for future litigation involving cost awards in cases where dishonesty is alleged. It reaffirms the principle that indemnity costs are not to be granted automatically or presumed in favor of claimants merely because dishonesty allegations by the defendant have failed. Instead, each case must be evaluated on its merits, with judges exercising their discretion based on the unique facts and conduct of the parties involved.

Legal practitioners must now approach such cases with a nuanced understanding that indemnity costs remain a discretionary tool, to be employed only when the case presents extraordinary circumstances that justify such an award. This maintains the balance between deterring unfounded dishonesty allegations and safeguarding the claimant's access to justice without the threat of onerous cost penalties.

Complex Concepts Simplified

Indemnity Costs: A higher level of costs awarded to the winning party, covering a broader range of legal fees incurred during litigation. Unlike standard costs, indemnity costs are less likely to be contested and are awarded in cases where the losing party's conduct has been particularly egregious.

Qualified One-Way Costs Shifting (QOWCS): A cost regime under the Civil Procedure Rules (CPR) that typically allows defendants to recover their costs only if the claimant fails to establish a case, with specific exceptions like fundamental dishonesty.

Fundamental Dishonesty: A serious allegation in legal proceedings implying that a party has been deceitful or fraudulent in their conduct or assertions within the case.

Conclusion

The Thakkar & Ors v Mican & Anor judgment serves as a crucial precedent in the landscape of civil litigation, particularly concerning the awarding of indemnity costs. By rejecting the notion of a default entitlement or presumption for indemnity costs in cases where dishonesty allegations fail, the Court of Appeal reinforced the importance of judicial discretion and the necessity for a high threshold to be met before such costs are awarded. This ensures that indemnity costs remain a tool to be used judiciously, preserving the fairness and integrity of the legal process while preventing potential abuses stemming from unfounded allegations of dishonesty.