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Indemnity costs will only be awarded in exceptional circumstances

In the case of BTP v BTN [2021] SGHC 38, the Singapore High Court confirmed that an unsuccessful application to set aside an arbitral award or to resist enforcement of the same will be awarded costs on a standard basis rather than on an indemnity basis.

In this case, the plaintiffs made an unsuccessful application to set aside a partial arbitral award. Subsequently, the defendants claimed that the plaintiffs had caused them considerable costs to fend off “unmeritorious proceedings” that should not have been brought, taking also into account that that the parties had agreed to resolve their disputes in arbitration and to honour any award made by the tribunal. Therefore, they should be entitled to costs on an indemnity basis.

The High Court expounded that the discretion to award indemnity costs is a judicial one and should only be made in exceptional circumstances. The court held that an unsuccessful application of this nature is not an exceptional circumstance warranting a departure from the usual course of awarding costs on a standard basis, based on the following reasons:

  • An unmeritorious application is not necessarily an unarguable case that hints to bad faith.

  • Although the plaintiffs' application had turned out to be unmeritorious, the plaintiffs had conducted their case in an economical way without undue prolongation of the hearings or submissions.

  • On the contrary, the defendants' conduct (for instance, instructing senior counsel at the last minute): (i) demonstrated that the defendants thought that there was merit in the plaintiffs' application; and (ii) invariably extended the hearing.

The following categories of conduct may provide good reason to order indemnity costs:

  • Where the action is brought in bad faith, as a means of oppression;

  • Where the action is speculative, hypothetical or clearly without basis;

  • Where a party's conduct in the course of proceedings is dishonest, abusive or improper;

  • Where the action amounts to wasteful or duplicative litigation or is otherwise an abuse of process.

From this judgment, it is clear that an application for the court to decide the quantum of costs will not be an opportunity for a party to switch the basis of the costs order from a standard to an indemnity basis.

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