The defendant raised various counterclaims in the proceedings including allegations of corporate fraud and breach of fiduciary duty. One element of the counterclaim was withdrawn just before trial and another abandoned before the making of final submissions at trial. The claimant succeeded at trial and applied for indemnity costs against the defendant. It claimed that the defendant must have been aware from the evidence available to it before it issued its defence and counterclaim, and subsequently following service of witness statements, that the allegations that it subsequently withdrew or abandoned would be exceptionally difficult to prove and so should not have been pursued. Additionally, it argued that the case advanced by the defendant was not consistent with its pleadings and key features of the case were constantly changed.

The court found that in order to obtain an order for indemnity costs, the losing party’s conduct had to be such that there had been a significant level of unreasonableness or otherwise inappropriate conduct in the widest sense in relation to that party’s pre-litigation dealings with the winning party or in relation to the commencement or conduct of the litigation itself. The defendant’s withdrawn claim was based on far fetched assumptions and was deeply flawed from inception. The procedural history of the defendant’s claim evidenced a party casting around for a viable basis on which to claim in the face of very slender evidence. The defendant had been too reluctant to give up untenable points and had conducted the litigation unreasonably and unsatisfactorily and that justified an order for indemnity costs against it in relation to its counterclaim.

If an opponent’s claim is spurious from inception and the manner in which they pursue, or defend, the litigation is wholly unreasonable or inappropriate, consideration should be given to making such an order for costs.

National Westminster Bank Plc v Rabobank Nederland