Indemnity costs and the impact of costs budgeting (Kellie & Kellie v Wheatley & Lloyd Architects)

Table of contents

• Practical implications
• Facts
• Indemnity costs pre-Jackson reforms
• What is the position in relation to indemnity costs in the CPR?
• Recent case law
• What are the applicable principles when dealing with indemnity costs
• Why indemnity costs were not awarded in this case
• Rejection of reasonable settlement offers
• Issues to consider when dealing with proportionate costs orders
• Payment on account of costs

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Article summary

Dispute Resolution analysis: HHJ Keyser QC considers the impact of the Jackson Reforms, ie costs management orders and costs budgeting, on the ability to recover indemnity costs. The approach taken is contrary to that previously set out in an obiter decision in Elvanite by Coulson J. For practitioners, there is a clear need for Court of Appeal authority as to the impact of the costs budgeting regime on indemnity cost orders. Also considered in this judgment were proportionate costs orders with views as to the counsels’ strategic decisions and payments on account of costs.