Parties who play litigation hardball and drag claims out regardless of merit run the risk of having to pick up the costs of the proceedings on an indemnity basis.

When a defendant completes an acknowledgment of service, it is common to put a cross in the box indicating an intention to defend all of the claim in order to buy an extra 14 days in which to file his Defence. There is nothing wrong with doing this but, if a defendant does continue defending a case that is doomed to fail, then he runs the risk of significant costs sanctions being imposed.

Take the recent case of Gray & Sons Builders (Bedford) v Essential Box Company Limited [2006] All ER 285. The defendant’s solicitors opposed a claim brought to enforce an adjudication award. On the morning before the hearing, the defendant’s counsel indicated in his skeleton argument that the defendant did not contest the claimant’s application. The claimant asked for and was awarded costs on an indemnity basis, rather than the normal standard basis. The judge stated that “to maintain a claim you know, or ought to know, is doomed to fail…is conduct that is so unreasonable as to justify an order for indemnity costs”.

The Courts are also starting to ring-fence costs incurred in respect of pursuing a dishonest case. In Ultraframe v Fielding [2006] All ER 81, the claimant lost its claim but the judge found that some of the defendants had been guilty of dishonesty by forging and inventing documents. Although the judge ordered the claimant to pay the costs of the action, he made a reduction to reflect the defendants’ dishonesty.