The claimant, Mr Islam, sought remuneration in respect of his services as the chartered accountant during the period May 1999 to July 2001, when he ran the defendant Mrs Ali's late husband's accountancy business. He had received around £72,000 for part of this period and sought about a further £84,000, but was awarded £12,746.41. Mrs Ali maintained that Mr Islam ran the business as an agent and was only entitled to a reasonable remuneration, although her only offer to settle the action was that Mr Islam should pay her legal costs of £15,000 plus disbursements. Mr Islam had offered to settle for £45,000 plus interest plus £15,000 in respect of his legal costs. The trial judge ordered Mrs Ali to pay Mr Islam's costs.
Mrs Ali argued on appeal that the judgment sum was not a true representation of a "win" for Mr Islam, but merely a relatively small sum contrasted to his much larger claimed sums, and that the judge should have asked himself who in truth succeeded in the action when the case was looked at as a whole, and then consider what costs order was required.

Reference

The Court of Appeal agreed with Mrs Ali that the effect of the judge's decision was that he accepted her arguments as regards Mr Islam's status in the business, and consequently her contention that he was only entitled to a reasonable remuneration. The Court therefore found that in reality Mrs Ali was the winner. The judgment sum was held to be an award that was of relative insignificance to the sum claimed by Mr Islam. For this reason, the judge's order that Mrs Ali pay Mr Islam's costs was substituted with no order as to costs. For further information, call Tony Francis or Nicholas Gould on 0207 956 9354

Postscript

This was a case about two methods of calculating remuneration owed to the claimant. It was not disputed that the claimant was entitled to some level of remuneration. It was therefore perhaps surprising to find that although he was kept out of a significant amount of money, the Court of Appeal was not prepared to uphold the judge's decision to award him his costs of the action. The case is not authority, however, for a defendant being able to escape a costs order simply because the claimant has claimed a much larger amount of money than the amount eventually recovered. The defendant must also have argued for an identifiable principle that leads to the conclusion that the lower award is the correct one. The defendant did not fare particularly well in this litigation either, as taking into account her legal costs she was out of pocket by more than double the amount she would otherwise have been had she offered to pay the claimant in accordance with the principles she argued for prior to the action. The case is a warning to claimants that they cannot have a free punt at arguing for a more favourable basis of payment in the knowledge that they will get their costs if a court finds that they are owed payment on a less favourable basis. From the defendant's point of view, a well pitched Part 36 offer still seems by far the more sensible course than reliance on this decision.