Kerry Underwood

SMALL CLAIMS – UNREASONABLENESS AND COSTS

with 2 comments


In Dammermann v Lanyon Bowdler LLP [2017] EWCA Civ 269

 

the Court of Appeal had a rare opportunity to consider CPR 27.14(2)(g) which allows the court to order “such further costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably”.

 

Once the personal injury small claims limit is increased to £5,000.00 for road traffic matters, this is likely to be the single most important civil procedure rule as far as costs in personal injury work are concerned.

 

I deal with this extensively in my new book Personal Injury Small Claims, Portals and Fixed Costs, which runs to 1,300 pages over three volumes and costs £80.00 and can be ordered from Amazon here.

 

Here Mr Dammermann had defaulted on a mortgage and the bank appointment receivers to sell the property and those receivers instructed solicitors who sold the property and delivered a bill to the receivers and that became part of Mr Dammermann’s overall liability under the terms of the mortgage.

 

Mr Dammermann brought proceedings against Lanyon Bowdler LLP, the solicitors, challenging the amount of their fees.

 

His claim was dismissed at first instance on the basis that there was no contractual or agency relationship between Mr Dammermann and the firm of solicitors.

 

No order for costs was made at that first instance hearing.

 

Mr Dammermann appealed and that appeal was dismissed but the judge on appeal ordered Mr Dammermann to pay costs.

 

Generally, there can be no order for costs on an appeal from a small claims track unless and until it is in the Supreme Court, which has its own set of rules, and those rules do not allow costs on an appeal from a non cost bearing jurisdiction.

 

Thus the application for costs could only succeed if CPR 27.14(2)(g) was satisfied.

 

The appeal judge said this:

 

“I am satisfied he has acted unreasonably. I was not aware until just a moment ago, that an offer had been paid of £1,000.00 to seek to mollify his concerns in any way in respect of this bill. I would have thought that was a very generous offer that should have been accepted, but leaving that to one side, he has persisted in an argument, notwithstanding – and I agree with the submission made by Ms Tildesley – that it is entirely clear on the basis of this skeleton argument, very clearly argued and presented by Mr Millington, an argument which I noted is dated 16th October 2015 and probably would have been in the hands of Mr Dammerman six or seven weeks ago, that he could have backed off this appeal, not proceed with it, and matters probably would have rested there. He has not done so. It is obvious from that skeleton argument that he was barking up the wrong tree, he had confused himself, he was applying principles of general agency law which could not apply and did not apply, if he had even read those authorities, which are referred to in the skeleton argument and the extracts therein. In those circumstances, I do take the view he has behaved unreasonably, and in those circumstances, I do continue therefore with the assessment of these costs. I am not going to repeat myself in respect of what I have hitherto said in the course of this summary assessment.”

 

CPR 27.14(3) states:

 

“A party’s rejection of an offer in settlement will not of itself constitute unreasonable behaviour under paragraph 2(g) but the court may take it into consideration when it is applying the unreasonableness test”.

 

Mr Dammermann was granted leave to appeal to the Court of Appeal and made three substantive points:

 

  1. the unreasonableness of his behaviour must be seen in the light of the fact that the very same judge had granted him permission to appeal on the basis of the case that he went on to argue at the full appeal hearing;

 

  1. the point of law was somewhat obscure, as the mortgage deed indicates that the receivers were his agents but, as the judge found, the solicitors were not;

 

  1. the judge was wrong to take his rejection of the £1,000.00 offer into account and that, had he been allowed to by the judge, he would have told the judge of his counter-offer to settle at a higher figure, which Lanyon Bowdler had in turn refused.

 

The Court of Appeal agreed with Mr Dammermann that it was not an entirely straightforward point of law as case law demonstrated.

 

The Court of Appeal said that the point on which Mr Dammermann lost was the somewhat intricate point rising from a legal document which was artificial or contrived and apt to give a false impression and also pointed out that the judge himself took 12 paragraphs of his judgment to explain the legal position.

 

The Court of Appeal also considered Mr Dammermann’s point that the very same judge who ordered him to pay costs for behaving unreasonably was the judge who had given him leave to appeal in the first place.

 

In relation to the offer of £1,000.00, or rather its rejection, the Court of Appeal did not accept that the judge was in error as he did not base his decision on unreasonable behaviour on this point, but he was entitled by CPR 27.14(3) to take it into account and in the view of the Court of Appeal he was justified in so doing.

 

The fact that Mr Dammerman was prepared to settle for a substantially higher figure was irrelevant. The court had decided that the offer made to him was “a very generous offer that should have been accepted.”

 

Here the Court of Appeal redetermined the matter itself and held that it was not possible to hold that Mr Dammermann had behaved unreasonably in pursuing his appeal.

 

The court then had this to say about the offer:

 

“the rejection of the £1,000.00 settlement offer is the only remaining factor that might be supportive of a finding of unreasonableness, but that, on its own, is incapable of satisfying the test in Part 27.14(2)(g).”

 

That appears to be a correct statement of the law given the wording of CPR 27.14(3):

 

“A party’s rejection of an offer in settlement will not of itself constitute unreasonable behaviour under paragraph 2(g) but the court may take it into consideration when it is applying the unreasonableness test.”

 

That leaves open the question of what on earth that rule means. It is not well worded. I had assumed that it meant that a rejection of an offer may be unreasonable so as to satisfy the test, but does not of itself constitute unreasonable behaviour.

 

Thus a party who is offered say £9,000.00 and goes to court and gets £1,000.00 is more likely to be found to have behaved unreasonably than a party who rejected on offer of £1,100.00 and went to court and got £1,000.00.

 

What the Court of Appeal appear to be saying is that the rejection of an offer, however unreasonable, cannot without other unrelated factors, be capable of constituting unreasonable behaviour.

 

It should be noted that Part 36 has no application in the small claims track and therefore the issue of whether the rejection of an offer can ever constitute unreasonable behaviour is a very important one.

 

If the answer is no, then it appears that any party in a small claims track matter is free to carry on without costs consequences, however objectively unreasonable their behaviour is in rejecting an offer.

 

Indeed it appears that a party could reject an offer to settle the whole claim and still not be at risk on cost.

 

That cannot be right.

 

This needs urgent clarification prior to the influx of 750, 000 road traffic small claims a year from 1 October 2018.

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Written by kerryunderwood

May 23, 2017 at 8:54 am

Posted in Uncategorized

2 Responses

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  1. “Generally, there can be no order for costs on an appeal from a small claims track matter, wherever it ends up, be it the Court of Appeal of Supreme Court or whatever”

    Not sure its quite correct to say costs cannot be ordered in an SCT matter in the Supreme Court as the Supreme Court has its own procedural rules indepedent of CPR being issued under S45 CRA2005 which I think might be an escape route from CPR 27.14 for the costs incurred in the SC. Not sure the Akhtar-v-Boland point has ever been considered specifically in the SC? Of course that wont enable the SC to make any award of costs in any lower appeals decisions overturned. Mark Walker

    Mark Walker

    October 11, 2017 at 6:04 pm

    • Mark

      You are absolutely right and I am wrong and I have amended the blog accordingly.

      The Civil Procedure rules do not cover matters in the Supreme Court and indeed CPR 52, dealing with appeals, specifically states at CPR 52.1(1)(a) to (c) that the rules in that Part apply to appeals in the Civil Division of the Court of Appeal, the High Court and the County Court, and therefore not the Supreme Court.

      It is a curious anomaly, as a matter will only ever reach the Supreme Court if it is a matter of public importance, and therefore an appeal concerning just the parties’ rights is costs protected, but once it is declared to be a matter of public importance the parties are at risk of costs.

      As I am sure you are aware it is proposed to unify the Civil Procedure Rules, the Tribunal Rules and the Family Rules, and if that is done it seems to me that it would make sense to incorporate the Supreme Court Rules in their new unified set of rules.

      Many thanks for bringing this to my attention.

      Kerry

      kerryunderwood

      October 12, 2017 at 5:07 pm


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