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Nagindas Purshotamdas Patel Vs. Bajrang Lal Khemka and Rai Bahadur Motilal Chamaria - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 1562 of 1940
Judge
Reported inAIR1944Bom187; (1944)46BOMLR345
AppellantNagindas Purshotamdas Patel
RespondentBajrang Lal Khemka and Rai Bahadur Motilal Chamaria
Excerpt:
costs-third party-suit dismissed without order as to costs-whether defendant can recover his costs from third party.;where the defendant impleads in the suit a third party, who has indemnified him not only as to costs but in very wide terms and who adopts his defence, and the suit is dismissed without any order as to costs, the defendant is entitled to recover from the third party his own costs of the suit taxed as between attorney and client and those of the third party proceedings as between party and party.;howard v. lovegrove (1870) l.r. 6 exch. 43, simpson and miller v. british industries trust, limited-polikoff, third party (1923) 39 t.l.r. 286, williams v. lister and co.; lewellyn, bros., third parties (1913) 109 l.t. 699, and venkatarangayya appa rao v. varaprasada rao (1920)..........from the third party to the plaintiffs, judgment being given for the plaintiffs for party and party costs against the defendants. the court held that the defendants were entitled to an order against the third party for solicitor and client costs as between the plaintiffs and the defendants and for the costs of the proceedings of the defendants against the third party, the latter costs to be taxed as between party and party. mr. justice salter pointed out that unless costs of the suit were given to the defendants on attorney and client basis, they would not receive a complete indemnity. as regards the costs between the defendants and the third party, there was no difference in principle between the scale applicable in a claim to an indemnity and the scale applicable in any other form.....
Judgment:

Chagla, J.

1. In this suit the defendant claimed an indemnity against the third party in respect of the decree that might be passed against him and for payment of all costs, charges and expenses in relation thereto. At the instance of the defendant, a third party notice was taken out and Rai Bahadur Motilal Chamaria was added as a third party to the suit. The result of the action was that the plaintiff found that he could not sustain the suit and submitted to its dismissal. A consent decree was taken at the trial by which the suit was dismissed, and no order was made as to the costs of the plaintiff's action. I might point out that the third party was a party to this compromise. In other words the third party agreed to the defendant not claiming from the plaintiff the costs of the action. Mr. Murzban Mistree appearing for the defendant has argued before me the question of costs as between the defendant and the third party.

2. In the written statement filed by the third party the third party admitted that he had indemnified the defendant, and also adopted the written statement filed by the defendant. The indemnity relied upon by the defendant was given by the third party in certain proceedings taken out between the defendant and the third party in the High Court of Calcutta, and the terms of the indemnity are as follows :

The plaintiff (the third party here) will pay and meet all liabilities and carry out all outstanding contracts and obligations of the East India Film Company,... and or incurred by the defendant (B.L. Khemka) on account thereof and the plaintiff will keep the defendant indemnified and protected against all accounts, claims or demands in respect thereof.

Now the suit was filed by the plaintiff in respect of a contract and obligation of the East India Film Company, and there is no doubt that the defendant was entitled to resist that suit, and as it happens he resisted the suit successfully. In doing so he incurred costs. As the indemnity is admitted by the third party, there is no dispute that as between the defendant and the third party the third party must pay the defendant's costs of the third party proceedings. Mr. M.P. Amin appearing for the third party concedes that.

3. The only question that remains to be determined is what is the proper order that should be made with regard to the costs of the suit incurred by the defendant. Mr. Murzban Mistree contends that he is entitled to the costs of the suit as between attorney and client against the third party, and in support of this he refers to a decision in Howard v. Lovegrove (1870) L.R. 6 Exch. 43. That was an action by a lessee against the assignee of the lease for breach of a contract by the assignee to indemnify the lessee against a failure to perform the covenants contained in the lease. In that case the plaintiff sought to recover, among other heads of damage, the whole costs, as well as those paid by him on taxation as extra costs paid by him to his own attorney, incurred in unsucessfully defending an action brought against him by the lessor for breach of one of the covenants in the lease committed after the assignment, and the Court consisting of Chief Baron Kelly, Baron Martin and Baron Pigott held that the lessee was entitled to recover both the extra costs paid by him to his attorney and the taxed costs. At p. 44 in his judgment Chief Baron Kelly observes :

I am of opinion that all the costs the plaintiff incurred, both those allowed as between party and party, and also those properly incurred in addition between himself and his own attorney, were necessarily incurred. This being so, it would be unjust, and we should not give its full effect to the contract of indemnity entered into with him by the defendant if we were to deprive him of these extra costs.

In Simpson and Miller v. British Industries Trust, Limited-Polikoff Third Party (1923) T.L.R. 286 the defendants claimed an indemnity from a third party in an action which was settled by a payment from the third party to the plaintiffs, judgment being given for the plaintiffs for party and party costs against the defendants. The Court held that the defendants were entitled to an order against the third party for solicitor and client costs as between the plaintiffs and the defendants and for the costs of the proceedings of the defendants against the third party, the latter costs to be taxed as between party and party. Mr. Justice Salter pointed out that unless costs of the suit were given to the defendants on attorney and client basis, they would not receive a complete indemnity. As regards the costs between the defendants and the third party, there was no difference in principle between the scale applicable in a claim to an indemnity and the scale applicable in any other form of action. These two are cases where the plaintiffs obtained a decree against the defendants; but we have also got a case where the plaintiff's suit was dismissed and that one finds in Williams v. Lister and Co.;Llewellyn Bros., Third Parties (1913) 109 L.T. 699. In that case the plaintiff's action was dismissed for want of prosecution. Then the defendants took out a summons against the third party to show cause why the third party should not pay to the defendants the taxed costs of the action as between solicitor and client. Lord Justice Vaughan Williams, in delivering the judgment, said (p. 700):-

In my opinion the costs taxed as between party and party are not an indemnity, for there is something always remaining over and above those costs. I think that the defendants are entitled to their costs of the action, taxed as between solicitor and client, and the appeal must be allowed.

4. Mr. M.P. Amin has relied on a decision in Blore v. Ashby (1889) 42 Ch.D. 682. In that case an action was brought for specific performance of a contract. The defendant pleaded that he was not liable on the ground that he signed the contract as agent for another person, and the defendant served a third party notice on that other person. The Court held that the defendant having set up a defence which failed must pay the costs of the action as between the plaintiff and the defendant and he was not entitled to be indemnified by the plaintiff. In his judgment at p. 684 Mr. Justice Kekewich says that the defendant in that case was fighting the action for his own benefit and that he was relying on something better and higher than an indemnity, namely, the fact that he was not liable at all.

5. In this case before me the defendant has put in a defence on merits, and the third party in his written statement has adopted the whole of that defence. Therefore the defence put forward by the defendant was as much in his own interest as in the interest of the third party as he was bound to defend the suit on merits. I do not, therefore, think that the decision in Blore v. Ashby helps Mr. Amin. The principle, it seems to me, to be deduced from that: decision is that where you have a defendant setting up a defence which would not be open to a third party but which is taken up by the defendant solely for his own benefit, and if the defendant fails in that defence and fails in the action, he cannot go against the third party for indemnity in respect of the costs of the action.

6. But Mr. Amin has strenuously urged that even if I am inclined to make the third party pay the costs of the action between the plaintiff and the defendant, I should do so on the party and party scale and not as between attorney and client. In support of his contention he has relied on a decision in Maxwell v. British Thomson Houston Company [1904] 2 K.B. 342. In that caseMr. Justice Kennedy allowed as against the third party only the party and party costs of the defendant incurred in the action. I must frankly confess that with great respect to the learned Judge it is a little difficult to understand his decision because on the facts it seems that the indemnity given by the third parties, Messrs. Blackwell and Co., was very wide. By a contract with the Corporation of Leeds the defendants undertook to carry out the necessary work for applying electric power to the tramways belonging to the Corporation. The defendants employed the third parties who agreed to be answerable for all accidents and damages personal, consequential, or otherwise that might occur during the progress of the work and agreed to indemnify and bear the defendants harmless therefrom. The plaintiff sued the defendants for injuries received by her while travelling on a tram car, and recovered judgment for damages and costs. But the principle on which Mr. Justice Kennedy decided that case was that if a third party indemnified the defendants against the costs of an action, then those costs, unless there were some special circumstances to the contrary, should be party and party costs and not costs as between attorney and client. Although the judgment of Mr. Justice Kennedy was based on this principle, when one looks to the facts of the case, as I have pointed out, the indemnity was much wider than an indemnity for costs. It also appears from the report in the authorised series that the attention of Mr. Justice Kennedy was not drawn to the precedent in Seton's Forms of Judgments and Orders, Sixth Edition, Vol. III, Chap. XLVIII, Form 12, p. 2142. That Form appears in Seton, Seventh Edition, Vol. III, Chap. XLVIII, Form 10, p. 2072, and from that Form it is clear that the defendant is entitled to taxed costs between party and party against the third party for the third party proceedings and as between attorney and client with regard to the costs of the action. I also find that both in the Yearly Practice and in the Annual Practice this decision of Mr. Justice Kennedy is noted to enunciate the principle which I have already stated, viz. that when a third party indemnifies the defendant only against the costs of the action, the defendant is entitled as against the third party only to party and party costs and not to attorney and client costs.

7. Now the indemnity before me, as I have pointed out, is a very wide indemnity. It is not confined or restricted to the costs of the action. There is no reason why the fullest effect should not be given to the contract of indemnity between the defendant and the third party, and I do not think that such full effect would be given to that contract of indemnity if the defendant is deprived of those extra costs which he would have to pay to his solicitor which would exceed the taxation of the bill on party and party footing.

8. The only Indian case to which my attention has been drawn is the one reported in Venkatarangayya Appa Rao v. Varaprasada Rao I.L.R. (1920) Mad. 898 and there a division bench consisting of Sir John Wallis, Chief Justice, and Mr. Justice Seshagiri Ayyar took the same view of the nature and extent of the contract of indemnity, and they expressed as their opinion that unless the defendant got attorney and client costs from the third party there would really be no indemnity at all. The whole object of the indemnity is that the defendant should be saved from all losses, and if he has got to fight a litigation really in the interest of the third party, then it would not be equitable that he should be out of pocket by any amount whatsoever in fighting that litigation.

9. I therefore order, following the Form in Seton, that the defendant do recover from the third party his own costs of the action and of the third party proceedings, to be taxed, those of the action as between attorney and client, and those of the third party proceedings as between party and party.


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