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Background of the case
The First Claimant was successful in receiving £2,000.00 for partial remedial works that had to be undertaken as a result of negligent designs developed by the Defendant. The Second Claimant’s claim was dismissed in its entirety. Remember, the sum sought by the claimants was £3.7 million. The damages awarded were not nominal damages but rather based on the experts’ evidence on remedial works required to rectify the defects in the foundations.
A Good Part 36
As with any claim, the importance of a well-timed, well-considered Part 36 offer can prove to be a party’s best weapon. In the substantive matter, the Defendant made a (first) Part 36 Offer on 21 December 2020 in the sum of £50,000.00 plus costs of certain elements of the claimants’ claim. The offer was open for the standard 21 days, i.e. until 11 January 2021. You, as the practitioner, know that by relying on this offer, the Defendant would be entitled to their costs from 12 January 2021, with the claimants being entitled to their costs up to that date, as per the provision set down in CPR Part 36.17(3) and CPR Part 44.2. Rightly so (in the author’s opinion), the Defendant sought an alternative costs order.
What did the Defendant seek in relation to their costs?
Not surprisingly, the Defendant did not seek their costs under the terms of CPR Part 36.17(3) and CPR Part 44.2, they sought an order for costs for the whole action from the start, to be assessed on the indemnity basis. Some of the arguments utilised by the Defendant for seeking such a costs order were on the basis that the case had settled for £2,000.00 (let’s remember that falls within the scope of small claims where costs are not awarded even when successful, save for very limited fixed costs!), the claimants ignored the factual causation issue at the heart of the claim along with attempts by the defendant to narrow the issues, and the claimants’ expert evidence was subject to such criticisms that would justify indemnity costs. The claimants, of course, sought to argue for their costs using the conventional terms of Part 36, also stating that the Defendant had refused to mediate during the substantive matter and only agreed to mediate in early 2021 but by a specific type of mediation (the type of mediation is not recorded in the judgment).
Let’s take a look at the CPR
CPR 44.2 (2) allows the court to make an order on costs at its discretion. CPR 44.2(4) provides that the court can consider various factors when deciding on an order for costs. These predominantly relate to conduct before and during proceedings, reasonableness of a claimant’s decision to pursue a particular allegation, the manner in which the claimant pursued the case, and the extent of exaggeration of the claimant’s claim (see CPR 44.2 (5)). Further to this, CPR 36.17(3) provides the ability for the court to grant an alternative order if it considers it unjust to allow a conventional order.
The relationship between Part 36 and Part 44 has been addressed by many in the past. It is noted that what the courts do not want to do is set a precedent in relation to indemnity costs. The caselaw referred to in the judgment certainly supports this statement and the courts confirm that indemnity costs should be considered on a case-by-case basis in accordance with the CPR. However, one critical requirement identified in the cases is that there must be a circumstance or some conduct which takes the case outside ‘the norm’ such as to warrant the indemnity costs order.
Case Law Arguments
The Defendant referred to three key pieces of case law* (Excalibur, Three Rivers and European Strategic Fund) in an attempt to sway Fraser J to the argument that indemnity costs should be awarded on the grounds that the claim was exaggerated, lacked foundation in documentary evidence, and was very weak from the beginning. The First Claimant opposed these arguments. However, it should be reiterated from the substantive judgment, the First Claimant avoided direct questions put to them thereby continuing to pursue a claim that was factually inaccurate.
Is the case ‘outside the norm’?
Fraser J considered a variety of factors including the conduct of both parties and the evidence relied on by both parties. He concluded that the case did indeed fall ‘outside the norm’ for the purposes of indemnity costs.
So, who got what in the end?
It was determined that no party should be awarded their costs up to the date of service of the Further Information on 13 March 2020. Following this date, the Defendant was granted all of their costs of proceedings on the indemnity basis. This was due to the First Claimant “conducting the litigation on a wholly false factual basis”. Given the Defendant’s budget which was filed early in the proceedings in the sum of £637,000.00 which covered the whole action, the First Claimant was ordered to make a payment on account of costs in the sum of £500,000.00 pending the detailed assessment.
Let’s cast an eye back over what happened…the First Claimant pleaded a factually inaccurate case against the Defendant. Despite the extent of the allegations, some breach of duty did attach to the Defendant which would have required remedial works to resolve. The partial remedial works were awarded to the First Claimant in the sum of £2,000.00. The First Claimant was therefore ‘successful’ in their claim. However, due to the conduct before and during proceedings, the Defendant sought indemnity costs for the entirety of the claim. Whilst the Defendant was not awarded their entire costs, they did recover costs on the indemnity basis from 13 March 2020, with the First Claimant not recovering any costs at all.
It highlights the protection that a well-timed and sensible Part 36 offer can bring.
At A&M Bacon Ltd, we have a team of costs experts who can assist with any of your queries in relation to legal costs, please do contact our specialists and award-winning team. You can contact a team member on 01733 350 880 or visit our website www.aandmbacon.co.uk for more information.
Published 8 August 2021
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