Which situation may lead to the awarding of costs on an indemnity basis?

Costs can be awarded on an indemnity basis in certain situations, and option B highlights a key scenario that justifies this approach. When one party unreasonably fails to accept a settlement offer, it indicates a lack of regard for minimizing costs or a refusal to engage in reasonable negotiation tactics. This failure can lead to increased legal costs that the other party should not have to bear due to the unreasonable behavior of the resisting party. Awarding costs on an indemnity basis in this context is intended to discourage parties from acting unreasonably and to encourage them to settle disputes amicably when possible.

In contrast, the other scenarios do not inherently warrant an indemnity costs order. The prompt acceptance of an offer (option A) suggests cooperation rather than a failure to negotiate. A prior record of litigation (option C) does not automatically reflect on the conduct of the current proceedings and may not influence costs decisions. Lastly, when both parties reach a mutual agreement (option D), it typically implies that neither party has acted unreasonably, hence there is no basis for indemnity costs. Indemnity costs are focused on addressing unreasonable behavior, which is precisely why option B is the correct answer.