Which condition may lead to denying indemnity costs despite a successful application?

Indemnity costs are often awarded in litigation to compensate a successful party for their legal expenses when the other party has behaved unreasonably. A party’s unreasonable rejection of an offer can justify the denial of indemnity costs even if the application is successful. This is because the court may determine that the rejection was not in good faith and may have unnecessarily prolonged the proceedings.

When a party rejects a reasonable offer without sufficient justification, they may be viewed as engaging in conduct that disrupts the efficient resolution of the case. Such behavior can lead the court to find that indemnity costs should not be awarded to reflect the principle of encouraging parties to engage meaningfully with settlement opportunities. This provides a disincentive to parties that might otherwise be tempted to act in a manner that increases litigation costs unnecessarily.

In contrast, indications of good faith in negotiations, ambiguous claims of damages, or a lack of substantiated evidence might not necessarily equate to behavior that would warrant denying indemnity costs. Each of those factors may influence the court’s view on the case, but an unreasonable rejection of an offer stands out as a strong basis for denying indemnity costs due to the implications of such behavior on the litigation process.