23 August 2013Print This Post

From one-way costs shifting to part 36: this month’s costs cases summaries

Family proceedings: application for non-party costs order against local authority granted because its failures were “extensive” and “systemic”.

Our monthly summary of key costs-related court decisions is provided by CaseCheck

MacKay & Ors v Ashwood Enterprises Ltd & Ors [2013] EWCA Civ 959

Appeal against an order requiring the defendants to pay the costs of a without notice application and a subsequent order refusing to set aside the earlier order on the grounds, inter alia: it was outside the court's jurisdiction, or alternatively an improper exercise of the court's discretion, for a final costs order to be made without notice and without the opportunity to make submissions; and, the judge erred in holding that the right to apply to have the order set aside or varied could be lost by delay. Appeal dismissed.

Held: The court's power to make orders as to costs is conferred in fully general terms and extends to orders made on a without notice application (s. 51, Senior Courts Act 1981; CPR 44.10(2)(c)). Such an order is exceptional and only very rarely appropriate. Delay is relevant to the discretionary exercise, justifying an express time limit to the general liberty to apply.

Obiter, a costs assessment may only be challenged by way of an appeal but it does not follow that the same applies to an order made without notice. The party against whom such an order is made has a right, conferred by and confined to CPR 23.10, to apply and have the merits of the order reconsidered at first instance as well as (subject to obtaining permission) to an appeal (Bank of Scotland v Pereira [2011] EWCA Civ 241 analogous).

In the present case, it was not inconsistent with the court's general discretion nor the CPRs that the disputed order gave rise to an immediate obligation to pay the costs. At all material times, the order was subject to the right to apply to have it set aside or varied, which the judge was entitled to limit due to the defendants' conduct.

Full ruling here.

Vava & Ors v Anglo American South Africa Ltd [2013] EWHC 2326 (QB)

Dispute raising the issue as to whether a contractual agreement concerning one way costs shifting had the effect that the successful defendant, who sought to set-off an order for costs in its favour, could not seek to enforce any costs order against the claimants.

Held: A judgment or order for costs may be set-off against another. The right is not equitable but based on the court's inherent jurisdiction to do what is fair. There is no exact definition of the expression 'one way costs shifting'. It broadly means a regime whereby the court might exercise its power to make costs orders in favour of claimants but not in favour of defendants. The concept of enforcing a costs order has a wide interpretation, which includes enforcement by action as well as by execution.

No order for costs made. It was unfair for the defendant to set off an order for costs that it agreed should not be enforced.

Full ruling here and Litigation Futures report here.

Albion Water Limited v Dwr Cymru Cyfyngedig [2013] CAT 16

Costs ruling in a successful claim for damages pursuant to s. 47A, Competition Act 1998 (inserted by s. 18, Enterprise Act 2002) and an unsuccessful claim for exemplary damages.

Held: A party is not required to succeed on every point at issue before a claim can be regarded as a success (HLB Kidsons (A Firm) v Lloyds Underwriters [2007] EWHC 2699 (Comm)). If the defendant fails to made a sufficient without prejudice offer at the first opportunity, particularly where the infringement has been established and the only issues remaining are those of causation and quantum, it cannot expect to secure costs protection (Fox v Foundation Piling Limited [2011] EWCA Civ 790 analogous). As a matter of principle, an ATE insurance premium is recoverable. The amount recoverable depends on the circumstances of the case.

In the present case, the claimant clearly won its compensatory claims and was entitled to its costs. The defendant was ordered to pay 85 per cent, including the ATE insurance premium, reflecting the claimant's lack of success on the exemplary damages claim. The defendant's conduct justified that no order as to its costs for defending the claim be made.

Full ruling here.

Hammersmatch Properties (Welwyn) Ltd v Saint-Gobain Ceramics and Plastics Ltd & Anor [2013] EWHC 2227 (TCC)

Costs judgment following a successful dilapidations claim on the termination of a lease where the damages awarded were marginally more advantageous than a part 36 offer raising the issue of the application of the 'near miss' rule.

Held: The court should resist invitations to speculate whether part 36 offers to settle litigation which were not in fact made might or might not have been accepted if they had been made (Johnsey Estates (1990) Limited v Secretary of State for the Environment, Transport and the Regions [2001] EWCA Civ 535). The principle that a party be penalised in costs where it rejects outright, without any attempt to negotiate, an offer which is near but not quite sufficient, should no longer apply (Multiplex Construction (UK) v Cleveland Bridge UK [2008] EWHC 2280 (TCC) and Carver v BAA Plc [2008] EWCA Civ 412 departed from). If there is an unreasonable refusal to negotiate then that is a matter which comes within the circumstances which the court can take into account under CPR 44.2(4): it is doubtful that a 'near miss' offer can add anything to what otherwise would be conduct in the form of unreasonable refusal to negotiate.

In the present case, the unsuccessful part 36 offer could not be treated as a successful part 36 offer: there was no unreasonable refusal to negotiate. Taking into account all the circumstances, the claimant was awarded 80% of its costs to be assessed on a standard basis.

Full ruling here and Litigation Futures report here.

Sud v London Borough of Ealing [2013] EWCA Civ 949

Appeal against, inter alia, a decision of the Employment Appeal Tribunal to uphold an order awarding the respondent 50% of its costs, raising the issue of whether the appellant conducted proceedings unreasonably. Appeal dismissed.

Held: Although the Employment Tribunal has a broad discretion, orders for costs following unreasonable conduct are exceptional. The basis of any such order must be clearly specified, taking into account the whole circumstances of the case (Lodwick v London Borough Of Southwark [2004] EWCA Civ 306; Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255). The tribunal must adopt a broad brush approach, without attempting to identify a precise causal link between the unreasonable conduct and the specific costs awarded. Although withdrawal of one or more claims is not usually treated as unreasonable behaviour, it may constitute a contributory factor. As can, in certain circumstances, a failure by a party to respond to or consider a reasonable offer of settlement (Kopel v Safeway Stores Plc [2003] UKEAT 0281_02_1104). An appeal against such an order is restricted to questions of law. Where the discretion has been exercised contrary to principle, the appellate body may substitute a different order or remit the matter for a fresh hearing (McPherson v BNP Paribas (London Branch) (1) [2004] EWCA Civ 569).

In the present case, the tribunal's decision was not reached contrary to principle nor plainly wrong. It adopted the correct approach: it precisely identified separate heads of unreasonable conduct; sufficiently explained why the behaviour was criticised; and, it was self-evident that the consequence was either to cause additional discrete costs or extend the proceedings.

Full ruling here.

Neumans LLP (A Firm) v Andrew Andronikou & Ors [2013] EWCA Civ 916

Appeal against a finding that, in the absence of an express provision in the Insolvency Rules 1986, the court had no jurisdiction to order payment of solicitors' fees for work done in an unsuccessful opposition to a winding up petition as an expense in a company's subsequent out of court administration. Appeal dismissed.

Held: There is no jurisdiction, either generally, inherently or under the 1986 Rules to direct administrators to treat fees not incurred in connection with the performance of their functions as an expense.  Such fees are not 'costs' within the meaning of s. 51, Senior Courts Act 1981 but claimed by the firm against the company. In such a case, solicitors are on the same footing as unsecured creditors. If there is in fact a lacuna or an anomaly in the 1986 Rules, then the point should be addressed by express amendment.

In the present case, the judgment under appeal (at [2012] EWHC 3088 (Ch)) was impeccable: the judge was right in law to rule that the fees in relation to the company's defence of a winding up petition were payable as an expense of the liquidation and not payable as an expense in the out of court administration.

Full ruling here.

HB v PB [2013] EWHC 1956 (Fam)

Application for a non-party costs order against a local authority for wasted hearings caused by its failure to adequately prepare a report pursuant to s. 37, Children Act 1989. Application granted.

Held: An order against a non-party in family proceedings, although within the wide discretion of the court, is exceptional. Whether the circumstances relied on make it just to make such an order is a matter for judgment determined by comparison with the ordinary run of cases (Globe Equities Ltd v Globe Legal Services Ltd & Ors [1999] EWCA Civ 3023). Where the non-party is a public body, the courts may make an order against it where it fails to perform its statutory functions in such a way as to hinder the proper and expeditious conduct of litigation (Kelly v South Manchester Health Authority [1997] 3 All ER 274).

In the present case, the local authority's failures were extensive, systemic and had a profound effect on the conduct of the proceedings. The sum claimed was within the reasonable recoverable costs of the wasted hearings.

Full ruling here.

By admin