Indemnity Costs Order against the Defendant following failed settlement agreement.

In the main action of Denny v Babaee & Ors [2023] EWHC 1490 (TCC), the Claimant purchased a new build property which had been sold by the First Defendant. The Claimant contended that there were significant defects in the property causing dampness and making the property inhabitable. The Claimant’s claim was for Breach of Contract and the Claimant obtained default Judgment against both the Second and Third Defendant.

The parties had entered into a settlement agreement, after mediation, on 29th November 2022. This provided for the house to be valued and after which, the Defendant would purchase the property at valuation price. Following purchase, the Defendant was to pay the Claimant £200,000.00 in damages. The house was valued at £1.3m however, the Defendant failed to fulfil their side of the agreement as they did not purchase the house.

The Defendant had stated that they had wanted to obtain their own valuation in order to raise funds to buy the house however, this was not in line with the agreement. This meant that there were grounds for indemnity costs, after the Defendant failed to make good on the agreement.

The Claimant made an Application for some or all of their costs to be assessed on the indemnity basis and the Judge stated that there where ample grounds to penalise the Defendant and that after the Defendant revoked on the agreement, an order for indemnity costs should be made. The Judge also stated that the Order was to mark disapproval of conduct that was likely to incur the Claimant unnecessary costs. Indemnity costs where ordered from 1st January 2023.

The Defendant went on to seek reduction in the costs they had to pay however, the Judge stated that their failure to file submissions on the issue meant that he could not properly consider it.

This is a good reminder that it is always important to keep to the agreement in place and not risk further costs to either party. Had the Defendant stuck to the initial agreement then further costs and Hearings would have been avoided.

For further information on this case, or any other costs matters, please do not hesitate to contact the writer, Caroline Flight, here.


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