If the cap fits…

In a previous article in Building (21 July 2006, page 54), I predicted that cost capping orders would become more mainstream. And indeed they have now been considered in several recent cases.

Cost capping orders give judges the power to limit the parties’ recoverable costs at different stages of litigation. At first these were only sought and granted in group litigation, but in a defamation case against The Daily Telegraph (2004), it became clear that courts could use them in other situations.

At the time I wrote my previous article, in July last year, there was no evidence that a cost capping order had ever been sought or granted in a construction case. This appears to have remained the case, but their use overall has increased.

A case that was not reported until after my article in Building was that of Patricia Tierney, the alleged prostitute that Wayne Rooney may or may not have visited, who sued The Sun’s publishers for defamation. A cost capping order was granted on the grounds that her costs were likely to be substantially higher than her recovery, if she was successful. Lawyers claimed her costs could amount to £500,000, but her damages would not exceed £150,000.

Other cases reported in 2007 clarified the extent to which cost capping orders could apply. In Kelly vs Fannon, a personal injury case, a judge in Oldham county court said capping orders should only apply to future costs, as their purpose was to prevent these escalating rather than cut down past excesses.

He commented that case management techniques should be used to control costs, if possible.

In Willis vs Nicholson, another personal injury case, the Court of Appeal considered whether a cost cap that had been refused in the lower court, should have been ordered.

The costs of assessing the quantum were estimated at just short of £500,000. There had been an earlier estimate of about £250,000. The defendant applied for a cost capping order on the basis that the original estimate had increased. The judge refused to impose a cap because he could not find that there was a real risk that the future costs would be unreasonable and disproportionate.

Because of his unease at the high level of costs that had been incurred, the judge ordered that the future costs should not exceed £500,000

However, because of his unease at the high level of costs that had been incurred to date, the judge decided that, rather than imposing a cost capping order, he would limit the claimant to his latest estimate of costs, and ordered that future costs should not exceed £500,000.

His main reason was that it would involve further time and costs in asking a costs judge what the cap should be.

The importance of this case is that the Court of Appeal made general observations about cost capping orders. It endorsed their use, not only in group litigation, but in other types of litigation.

However, it declined to issue further guidance on cost capping, even though it said that to come to a decision it had drafted a comprehensive set of principles to be applied. Instead, it referred the issue to the Civil Procedure Rule Committee for a decision as to whether and to what degree cost control should be applied. Its decision is pending.

It was also recently reported in the legal press that a cost capping order was obtained against a law firm in relation to a claim by 151 holidaymakers, against the travel agent First Choice. The estimated future costs of £726,000 were subjected to a capping order and were slashed by 70% to just £215,000.

The cost of litigation has always been and continues to be a hot topic, and is likely to see a period of consultation and change. In the meantime, it is possible to obtain a cost capping order if there is a real risk that future costs will be unreasonable and disproportionate.

Even if a cost capping order is not granted, the courts are increasingly willing to use the full range of their case management powers to limit the recoverable costs incurred by a party during litigation. You have been warned.