Parties willing to incur costs “without limit” in arbitration challenge

Costs: Judge says he would have assessed summarily had figures been 70% lower

A High Court judge has expressed his dismay at the “staggering” £1.2m costs bill racked up by parties in an arbitration dispute who appeared ready to incur costs “without limit”.

He suggested that a figure 70% lower would have been appropriate instead.

The section 68 challenge to an arbitration award “was not very complex, factually or legally”, said Mr Justice Andrew Baker, leading to a 1.5-day hearing involving only five lever-arch files, plus bundles of authorities.

The judge set aside the arbitration award in part, having established that it was affected by procedural irregularity causing substantial injustice and that it was inappropriate to remit.

But he rejected the claimant’s request to remove the arbitrator.

Ruling on the costs, Baker J said: “The total costs are a staggering £1.2m, split very close to 50:50. In defending that total, Mr Quirk for the claimants emphasised the importance of the claim to the parties, the sums at stake in the underlying arbitration, the fact that section 68 claims rarely succeed and are often hard fought, and the fact that… the defendant contested every aspect of the claim.

“Even allowing fully for those fair points, I regard the level of costs incurred as quite extraordinary. It seems to me explicable only by a willingness, as it happens on both sides, to incur cost effectively without limit, and certainly without any regard for what might be a reasonably sufficient and proportionate work effort for advising upon, preparing and presenting the case.”

He declined to attempt a summary assessment of the costs, but on the amount to be paid on account – while stressing that he did not intend to “tie the hands of any costs judge conducting a detailed assessment” – he said it was “prima facie surprising that the costs claimed should be more than c.30% of the actual totals (say, £180,000 on each side)”.

Had the costs been of that order, the judge said he would “most probably” have assessed them summarily “in an amount equal to a high percentage, perhaps 75%, of the sum claimed”.

He continued: “If the order were for either side to recover costs in full (subject to detailed assessment), the payment on account I would order would therefore be £135,000.”

Deciding the overall costs position, Baker J said it was “both startling and unrealistic for the defendant to contend, as he did, that he was the successful party” – even though the claimant did not succeed on every element of its appeal.

He rejected the defendant’s contention that the claimant’s real aim with the appeal was to remove the arbitrator – the defendant could have tested that view by conceding serious irregularity and the setting aside of affected parts of the award, he said.

Estimating that the unsuccessful elements of the appeal generated 15-20% of the costs, Baker J ordered that the defendant pay 80% of the claimants’ costs, and payment on account of £110,000, being roughly 80% of £135,000.

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