The judge with a flea in his ear: When costs outweigh damages

This is a case in which the judge got a flea in his ear from the Court of Appeal. The reason was that the trial dealt with a dispute over a tiddly sum of money, took eight days to do it and cost an enormous sum of money. But let me say this: it’s my guess that if the judge had put his foot down, slung out what he saw as the hopeless part of the case and ended it in a day, he would not just have got a bigger flea in his ear, he would have been slung out on it.

At times, those of us who decide disputes get sore backsides because we spend so much time sitting on the fence. On one side you hear a nonsensical case being advanced you and would love to tell the party to sling its hook. But you know damn well the cry of “unfair process” will go up, so you patiently sit there while the meter ticks. I bet the judge in Peakman vs Linbrooke Services would have loved to cut short the process, but feared the accusation of denying the parties their right to put forward their cases. Also, dispute deciders spend a lot of time looking over their shoulders at what a higher tribunal might say: adjudicators and arbitrators watch for what judges might say; the Court of Appeal watches out for the House of Lords.

David Peakman is a self-employed cable jointer. His job is to move between junction boxes along the side of railway lines, joining up all those pretty coloured wires. He was doing his stuff for Linbrooke Services, a subbie for railway contractor Thales.

Peakman and Linbrooke had a tiff. Linbrooke refused to pay him £900 for the work he’d done, plus £995 for giving him the boot, plus the value of some tools that went missing: a total of £2,232.40. Linbrooke complained about defects worth £3,019, and also claimed £40,000 because Thales was refusing to do further business with it.

Anyway, the dispute went to Sheffield county court, and so began the trial. Horror of horrors, the outcome after eight days was that Peakman was to pay Linbrooke £1,410 and Linbrooke to pay Peakman £1,145 – therefore a net balance of £265. Then came the fight as to who pays whose costs.

Now then, the rules about award of costs start by requiring the unsuccessful party to pay them. That’s the starting point. But then we look at all the circumstances, including the conduct of the parties: was it reasonable for a party to pursue a particular issue? In what manner was the case pursued or defended? Did the winning party exaggerate its claim?

On day one of the trial, Peakman’s advocate indicated that Linbrooke’s claim for £40k loss of business was unsupported, and invited the judge to throw it out. That is a tricky call. The responding outcry could be “you refused to hear my case”. The judge said he’d hear the counterclaim, but with benefit of hindsight he said of it on day eight: “I consider the conduct of the proceedings by or on behalf of the defendant (Linbrooke), to be shabby and bordering on the disgraceful.” Oh dear. The counterclaim should never have been brought in. As for defective work, some of it was proved. So you can see why Linbrooke “won” by a smidgen of a margin. Weighing all this up, the judge decided each party would bear its own costs. Peakman felt hard done by, because a lot of effort went into defending the £40k counterclaim. He complained to the Court of Appeal.

This three-man senior court robustly criticised Linbrooke for advancing the counterclaim. It resulted in Peakman incurring substantially more costs than would otherwise have been the case. The judge ought to have recognised this in his award. It decided Linbrooke should pay Peakman 50% of his costs.

The Court said this exemplified much of what was wrong with our civil justice system. The costs dwarfed the damages. The trial took too long. The advocates lost all sense of proportion

The Court of Appeal observed that this case exemplified much of what was wrong with our civil justice system. The costs dwarfed the damages. The trial took too long. The advocates lost all sense of proportion in their conduct. The extensive cross-examination ought not to have been permitted. The eight days were disproportionate.

It’s very well for the Court of Appeal to say all this, but we dispute deciders only obtain the confidence to behave like this, if the courts reassure us that those fleas in our ears will be swapped for kind words or coronets.