Esure Services Ltd v Quarcoo

Factual and Procedural Background

This is an appeal against the refusal by Mr Recorder Baldwin QC to make an order for indemnity costs against the Plaintiff after dismissing his claim against his insurers, with judgment given on 10 June 2008. The Recorder found the Plaintiff to be dishonest but refused indemnity costs on the basis that the case was not "outside the norm," referencing the Court of Appeal decision in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson & Ors [2002] EWCA Civ 879.

The Plaintiff did not appear or make submissions in the appeal, and there was uncertainty whether he was notified of the appeal date. The insurers' solicitors undertook to serve the Plaintiff with the order and judgment, allowing him the opportunity to seek to reopen the appeal if he had good reason for non-appearance.

The claim arose from the Plaintiff’s allegation that his BMW was stolen, leading to an insurance claim under a policy with the Defendant insurers. The insurers refused payment primarily on the basis that the claim was dishonest, relying on investigations revealing that one of four keys sent by the Plaintiff purportedly for the insured BMW was actually for a different stolen BMW. The Plaintiff commenced proceedings, denying dishonesty and suggesting the claims handler had substituted a key, though this was not pursued at trial.

The Recorder found the Plaintiff dishonest, noting multiple inconsistent stories and lies, including underestimating the car’s mileage to affect its value. The Recorder concluded the Plaintiff failed to prove the vehicle was stolen without consent and dismissed the claim. The question then arose whether the Plaintiff should pay costs on an indemnity basis.

Legal Issues Presented

1. Whether the court should order indemnity costs against the Plaintiff following a finding of dishonesty in the claim.
2. The proper interpretation and application of the phrase "outside the norm" in relation to awarding indemnity costs under the Civil Procedure Rules (CPR).
3. The extent of the court’s discretion under CPR Rule 44.3 in awarding indemnity costs in cases involving dishonest claims.

Arguments of the Parties

Appellant's Arguments

• The insurers argued that the case was "out of the norm" due to the Plaintiff’s dishonesty, warranting indemnity costs to mark the court’s disapproval and discourage dishonest claims.
• They emphasized that indemnity costs are appropriate not only because of the extra cost incurred in defending dishonest claims but also in the interests of insurers, defendants, and the court to deter such conduct.
• They relied on the Court of Appeal’s guidance in Excelsior and Reid Minty v Taylor to support a broad discretion under CPR Rules 44.3 and 44.4 to award indemnity costs where conduct justifies it.

Respondent's Arguments

• The Plaintiff, through his former Counsel at first instance, conceded that failure to prove the claim would amount to a finding of dishonesty but argued that the case was not "outside the norm" and thus did not warrant indemnity costs.
• The Plaintiff’s Counsel submitted that it is common for witness evidence not to be preferred and that there was no established guidance that every finding of dishonesty should lead to indemnity costs.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by reviewing the Recorder’s refusal to award indemnity costs despite finding the Plaintiff dishonest. It examined the precedent in Excelsior, noting that the phrase "outside the norm" was intended to capture conduct outside ordinary and reasonable litigation behaviour, not merely conduct that is frequent or common.

The court observed that the Recorder misapplied this test by equating "norm" with frequency rather than the quality of conduct. It emphasized that CPR Rule 44.3 confers broad discretion on the court to consider all circumstances, including the conduct of the parties before and during proceedings, and that dishonest claims are properly regarded as outside the norm.

The court further analyzed Reid Minty, which clarified that indemnity costs do not require moral condemnation but may be awarded for unreasonable conduct. The court rejected any suggestion that dishonest claims could be considered within the norm or that indemnity costs were inappropriate in such cases.

Applying these principles, the court found that the Plaintiff’s conduct—bringing and supporting a dishonest claim with lies—justified an order for indemnity costs to mark disapproval and deter similar conduct. The court held that insurers who establish a dishonest claim should generally be entitled to indemnity costs, reflecting both the extra costs incurred and the public interest in discouraging dishonesty.

Accordingly, the court exercised its discretion anew and allowed the appeal, ordering indemnity costs against the Plaintiff.

Holding and Implications

Appeal allowed.

The court overturned the Recorder’s refusal and ordered the Plaintiff to pay the Defendant insurers’ costs on an indemnity basis. This decision reinforces that bringing a dishonest claim is conduct outside the ordinary course of litigation and justifies indemnity costs under CPR rules. The ruling underscores the court’s role in deterring fraudulent claims by marking disapproval through costs orders. No new precedent was established beyond clarifying the proper application of existing CPR provisions and case law principles.