The successful party in litigation used to nearly always get their costs paid by the loser. How things have changed…
The judge in this case said: “On those rare occasions when civil litigation goes wrong, costs become a critical issue.” Well, actually it seems to me that costs in litigation are always a critical issue. The only time they are not a worry is when your side is the clear winner and the judge orders the loser to pay your costs – or rather, pay your reasonable costs. And even then there is litigation as to what is or was reasonable. Meanwhile, both parties have piled up their chips on the litigation blackjack table.
“This litigation has gone wrong for everybody.” So said Mr Justice Coulson in the case of Brit Inns Ltd vs BDW Trading and others. Brit claimed £660k odd on one limb of claim and spent £528k on legal costs! They won £158k! Their second limb of claim was for £522k. They won - wait for it - £16,403! Yes, that’s just 3%. The legal costs here were £157k. Now, the rule in commercial cases is that “costs follow the event” - in other words, the successful party gets his costs and the successful party is the outfit that recovers money from the other. The story is worth telling because it’s not all that long ago that the net winner, of any money, would get his costs unless he had been a very naughty boy in conducting the litigation.
The net winner rule still applies. But as we shall see in this case, things have got much more exciting. That rule is only the starting point. The winner in this case took a real bashing when it came to the award on costs. Look at the second limb of claim, in which Brit recovered 3%. The court refused to keep the base rule in place. With this outcome, it would have been grossly unfair had the so-called winner of a mere 3% not been ordered to pay almost all of the costs. So the judge decided that the winner would recover none of his own costs of £157k and pay 90% of the loser’s costs. That decision by the way was helped by a technical point as to how this second claim was dealt with - it was actioned by a separate legal team, which the judge thought was wasteful.
The court refused to keep the base rule in place. It would have been grossly unfair had the so-called winner of a mere 3% not been ordered to pay almost all of the costs
As to that first claim, the judge opens with a real kick in the pants for the “successful” claimant and its two expert witnesses. There were, said the judge, “fundamental inadequacies” in the two experts’ evidence. First, the claimant expert QS had to carry out a valuation exercise. He merely took supplier and subcontractor invoices at face value. His opponent expert on the other hand looked at the actual work done, carried out a typical QS remeasure and then built up values. The judge liked that. He certainly didn’t like the approach of merely looking at invoices from the supply chain. That, he said, was not “quantity surveying” at all. Take that on board, my QS friends. You are supposed to use your professional opinion, irrespective of what is plonked in front of you.
The second expert also caught flak. She had acted on instructions in calculating loss of profit. In doing so she took a “blinkered and unrealistic approach”. In other words, her qualifications to be an expert accountant ought to have caused her to question the facts. The expert, being an expert, is meant to test the information given.
The upshot was that the judge denied the winner any costs order that would pay for these experts’ reports, nor preparing for and attending experts’ meetings nor the lawyers’ costs in dealing with experts. Red faces here. As to the claimant’s remaining legal costs, the judge decided that their “success” entitled them to claim 60% of their reasonable and proportionate costs. True, their original claim of £660k netted only £157k at trial. True, it was exaggerated, even grossly so in parts - but it was not dishonest nor deliberately exaggerated. The judge also took into account ‘“behaviour” – “I consider that the claimants and their solicitors adopted a consciously unhelpful attitude in the correspondence … They provided the bare minimum of explanation for many of the claims and the disclosure of documents was slow and reluctant.” As the claimant’s team came nearer to trial, a more realistic approach was taken. That helped their position in this matter of costs.
“Costs follow the event” still stands, but winners ought not gloat. The tribunal will look very hard, lift stones, to see what is fair.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple