Kerry Underwood

ENTITLEMENT TO ISSUE FOR COSTS ONLY

with 11 comments


In

Ayton v RSM Bentley Jennison and Ors [2018] EWHC 2851 (QB)

the Queen’s Bench Division of the High Court ordered a defendant to pay costs where terms of settlement of damages had been agreed before proceedings had been issued, but where the defendant had refused to pay costs.

The Court of Appeal has refused leave to appeal on the ground that it had no real prospect of success and did not concern an important point of principle or practice.

The claimant sent the defendant a Professional Negligence Pre-Action Protocol letter seeking £100,000 damages plus interest and costs.

The defendant sent the claimant a cheque for the full amount of damages and interest, but refused to pay costs, stating that there was no obligation to do so pre-issue and no mechanism for the claimant to claim costs when the defendant had paid the full amount due.

The claimant returned the cheque and issued proceedings for £100,000 plus £1,500 consequential loss and expense, and £30,000 in relation to a car upgrade.

The defendant pleaded tender before claim and paid £103,576 into court and defended the action and pleaded that it had no liability to pay costs.

At trial the claimant was awarded £119,578.22, including interest. The car upgrade claim was dismissed.

The claimant was awarded 70% of its costs up to the Case Management Conference and was ordered to pay 80% of the defendant’s costs thereafter.

The defendant had ignored a number of Part 36 offers, but the court held that it would be unjust to apply the normal consequences of the defendant’s failure to beat the claimant’s offers as the claimant had pursued the car claim to trial at disproportionate expense and that amounted to an abuse of process.

The High Court allowed the claimant’s appeal, stating that the Pre-Action Protocol places the onus to avoid proceedings on both parties.

It must have been obvious to the defendant that an investigation into serious allegations against a reputable professional firm would incur significant costs and the defendant had acted unfairly in refusing to pay any of the claimant’s pre-action costs.

The only option for a claimant where a pre-action offer is made to pay damages, but not costs, is to issue.

The High Court made interim costs order of £430,000.

The High Court held that it was legitimate and reasonable to issue proceedings purely to recover costs:

“Most parties who capitulate will bow to the inevitable and offer to pay the other side’s reasonable costs.” (Paragraph 46).

 

“The only option  left to a claimant in circumstances where a pre-action offer is made to pay damages  but  there  is  a  persistent  refusal  to  cover  legal  costs  is  to  issue  proceedings.” (Paragraph 48).

 

“It was wrong that a claim had had to be issued at all. It would not  have  had  to  have  been  if  the  defendants  had  made  an  offer  to  settle  the  claimant’s reasonable costs at the same time as (effectively) conceding his claim.” (Paragraph 55).

 

Comment

This is a difficult area. The starting point is of course that pre-action no costs are payable, and that is why pre-issue work is non-contentious.

However, the moment proceedings are issued, the successful party can recover pre-issue costs in the same way as post-issue costs, and that is why, upon issue of proceedings, pre-issue work retrospectively becomes contentious.

Thus where, as here, the defendant refuses to pay costs, then the claimant can issue, and upon issuing it becomes entitled to its pre-issue costs.

The issue will then be whether or not issuing proceedings was reasonable.

Personal injury lawyers will be well aware of this; it is standard practice outside the protocol procedure to create a contractual entitlement for costs if a matter is settled or pre-issued, and defendants virtually always agree, knowing that in the absence of agreement, the claimant can issue and will then be entitled to pre-issue costs.

As in many other areas, general civil litigation lawyers are often woefully ignorant of general costs principles.

Here, the unsuccessful defendant, who was fairly obviously bound to lose on this point, was represented by Clyde and Co, who specifically stated that they had Leading Counsel’s opinion stating that there was no liability for costs in these circumstances.

The claimant was represented by Mr Ben Williams QC, who does know the law on costs.

 

Postscript

As set out above the Court of Appeal refused permission to appeal and the notice refusing permission states:

  1. The judge recorded at [43] that it was accepted that it was legitimate for Mr Ayton to have issued proceedings in the face of the refusal to pay his costs.

 

  1. From that starting point it followed inevitably that the Part 36 regime would apply to the litigation. The only question for the judge was whether it would be unjust for Mr Ayton not to recover his costs in accordance with Part 36 having beaten the offer at trial.

 

  1. The cases are unanimous is stating that the test of injustice is a high hurdle; and is essentially a value judgment for the judge to make. In circumstances in which the point of the proceedings is to recover the costs, I find it hard to see how it could be unjust* to deprive Mr Ayton of his costs. As the judge pointed out, it was always open to the Defendants to accept the Part 36 offer.

 

  1. The appeal has no real prospect of success. Nor does it rise an important point of principle or practice.”

 

 

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Written by kerryunderwood

November 21, 2018 at 6:30 am

Posted in Uncategorized

11 Responses

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  1. These points, albeit against different facts, were dealt with in Citation Plc v Ellis Whittam Ltd [2012] EWHC 64 (QB) and Webb Resolutions Ltd v Countrywide Surveyors Ltd [2016] Ch Div (4 May 2016) going they other way. An application for permission to appeal has been lodged with the Court of Appeal in Ayton so the story may not yet be over!

    Nick McDonnell

    November 21, 2018 at 7:12 am

  2. Your comments are great.Quite ridiculous that the claimant had to issue .

    Stephen Parsons

    November 21, 2018 at 10:04 am

    • Thank you!

      kerryunderwood

      November 21, 2018 at 2:59 pm

      • If I was the Defendant I would not be paying Counsel’s invoice for that poor advice. Hopefully they had a CFA retainer in place.

        Richard fergusib

        November 29, 2018 at 4:39 pm

  3. Richard

    I could not possibly comment…………….

    Kerry

    kerryunderwood

    November 29, 2018 at 5:30 pm

    • And yet the vagueness of your reply speaks volumes Kerry! 🙂

      Richard Ferguson

      November 30, 2018 at 3:22 pm

  4. Well, if the appeal in the Court of Appeal succeeds then counsel’s fees for the advice is money well spent !!

    Nick McDonnell

    November 30, 2018 at 3:29 pm

  5. Yes, maybe I am being wise before the event…………….

    kerryunderwood

    November 30, 2018 at 3:34 pm


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