The High Court has condemned the costs of a straightforward breach of confidence case as “completely out of proportion”.
The court said the focus had wrongly been put on how much one of the claimants had invested in the business under scrutiny, and what they expected from the litigation, rather than what the actual loss was.
White Winston Select Asset Funds LLC & Anor v Mahon & Anor  EWHC 1381 (Ch) concerns a Savile Row tailor called Thomas Mahon whose business was put into administration by the first claimant (C1), a floating charge holder.
Mr Mahon used email addresses belonging to the company, English Cut Ltd, to contact clients and inform them of what had happened, in a bid to drum up work for himself after leaving it.
In the liability-only trial, His Honour Judge Simon Barker QC, sitting as a High Court judge, made a “time-constrained and limited” finding that Mr Mahon was in breach of fiduciary duty and in breach of his duty to the company as a director.
He went on to comment on the proceedings’ case management. The claim form put the estimate of damages at £50,000 to £100,000, and the judge said both the particulars of claim and defence were brief, while no expert evidence was envisaged or required on liability issues.
However, the procedural judge, Deputy Master Collins, was told that the first claimant had “invested” $3.3m, mainly in goodwill – which he would not have done unless he expected the company to provide a return on that investment – and that the claimants put the value of the claim at £2m.
HHJ Barker said: “Consideration of the claimants’ costs budget was then postponed generally. At various stages during the hearing, the deputy master did attempt to raise and focus on what might constitute or amount to the claimants’ loss but was diverted onto the wrong track by reference to the amount that the claimants, or C1, had ‘invested’.
“In my view, neither the amount of C1’s investment nor C1’s expectation should drive or justify the costs budget for this litigation.
“This is not a case about misrepresentation in relation to or breach of warranty in relation to ECL’s business and business assets; it is primarily a case about short-term misuse of a customer list in breach of an obligation of confidence.
“The driver for costs is reasonable and proportionate expenditure necessary to bring the real issues in the case forward for a just determination, either by ADR or at trial.”
The judge went on to criticise the size of the trial bundle, which comprised 35 lever-arch files.
He said Mr Mahon had characterised the litigation as oppressive. “I regard the scale of this litigation as completely out of proportion. I do not regard this to be the wisdom of hindsight.”
The scale of English Cut’s operations “must have been readily apparent” to the claimants, he noted; Mr Mahon “could not have made or make any significant use in the bespoke and made-to-measure market of a customer list comprising some 5,000 names and email contact details”.
The judge noted: “At the material times, bespoke suits cost more than £2K each and made to measure suits more than £500 but less than £1K each. It must have been obvious that the genuine customer base was to be measured in the low hundreds of people, not thousands.”
This would be relevant to costs, the judge said, adding that the claimants’ revised costs budget for the case through to conclusion of the liability trial prepared shortly before the pre-trial review totalled more than £600,000 before VAT.
That was a “very substantial sum to expend on a straightforward claim” worth up to £100,000, HHJ Barker observed.