Indemnity basis

National Westminster Bank plc v Rabobank Nederland [2007] EWHC 1742 (Comm)

Where a court is considering whether a losing party’s conduct was such as to justify an order for costs on the indemnity basis, the minimum nature of that conduct required to engage the court’s discretion was, except in very rare cases, that there had been a significant level of unreasonableness or otherwise inappropriate conduct in its 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. In the present case, the entire underlying foundation of the defendant’s core allegation of fraudulent design by senior officials of the claimant bank showed itself, from the very commencement of the counterclaim, to be deeply flawed and the allegation involved an assumption so improbable has to be farfetched <sense?>. The defendant had vigorously pursued claims of dishonesty throughout a long trial, despite the fact that such allegations were highly speculative, if not doomed from the start. The defendant had crossed the frontier into a party conducting litigation in a manner so unreasonable or so unsatisfactory as to justify an order for costs against it on the indemnity basis in respect of its counterclaim.