COSTS AND CONDUCT: A PERCENTAGE REDUCTION FOR A SUCCESSFUL CLAIMANT

In Harlequin Property (SVG) Limited -v- Wilkins Kennedy [2016] EWHC 3233 (TCC) Mr Justice Coulson reduced the claimant’s costs by 40% to reflect the lack of success on many of the key issues in the case.

  1. On the three main issues, the claimant was successful on part of one of them, and comprehensively lost the rest. I consider that it would be a rank injustice if, notwithstanding all of the work, time and cost generated by these failed claims, the costs order ignored that overall result.

  2. Thus, this is a case in which it is appropriate to depart from the general rule because of the scale and nature of the claimant’s lack of success.

THE CASE

The claimant claimed damages of US$60 million but recovered  US$11,630.00 plus interest. A large number of the claimants’ claims failed at trial.

THE JUDGMENT ON COSTS

5. LIABILITY FOR COSTS
  1. CPR Rule 44.2 can be summarised as follows:
(a) The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party (r.44.2(2)(a)).
(b) In deciding liability for costs, the court must take into account whether a party has succeeded (even if it has not been wholly successful); the conduct of the parties; and any admissible offers to settle (r.44.2(4)).
(c) Conduct covers anything relevant before or during the proceedings (r.44(5)).
(d) The court can make any manner of order as to costs including awarding costs of particular issues or a proportion of the costs otherwise due (r.44.2(6)).
  1. In one way or another, I was referred to what might be called the ‘usual suspects’, the well-known authorities on costs, including AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507; Multiplex Construction (UK) Ltd v Cleveland Bridge UK Ltd 2008] EWHC 2280 (TCC); HLB Kidsons v Lloyd’s Underwriters [2007] EWHC 2699 (Comm); and Fox v Foundation Piling Ltd [2011] EWCA Civ 790. Some of these cases were concerned with the difficult questions that can arise when neither party has been wholly successful, the claimant achieving something but losing on certain aspects of his case and the defendant defeating parts of the claim but not all of it. However, it might not unfairly be said that all they really do is to demonstrate the extent to which every case is different.
  2. It is right to note that, in recent times, there has been a tendency to emphasise the general rule that the unsuccessful party should pay the successful party’s costs. Kidsons is authority for the proposition that it is not every case where the successful party has lost on an issue that merits departing from the general rule. Indeed, in Travelers Casualty and Surety Co of Canada v Sun Life Assurance Co of Canada (UK) [2006] EWHC 2885 (Comm) at paragraph 12, Clarke J (as he then was) said:

“If the successful claimant has lost out on a number of issues it may be inappropriate to make separate orders for costs in respect of issues upon which he has failed, unless the points were unreasonably taken. It is a fortunate litigant who wins on every point.”

In Fox Jackson LJ noted that there had been a growing and unwelcome tendency to depart from the general rule “too far and too often”.
  1. Unsurprisingly perhaps, Mr Davidson QC relied on Kidsons, Travelers and Fox to urge me to apply the general rule with no, or alternatively only a small reduction, from the claimant’s costs. In support of that stance, he also referred to the fact that in July 2016, during the trial, the claimant offered to take £9,750,000 plus a fixed amount of costs. Although that is slightly more than the claimant will recover, given my ruling on interest, it is still very close to the Judgment Sum plus interest. It was a realistic reflection of my indication to the parties at the end of the factual evidence in July that neither side’s witnesses had come out of the process well. Although, as Mr Fenwick QC has pointed out, the offer was only available for acceptance for a total of eight days, it was much closer to the eventual result than any offer of the defendant, which never got above £2,500,000.
  2. In additional support of his position, Mr Davidson QC sought to criticise the defendant’s conduct and, in particular, their stubborn refusal to accept the findings and criticisms made by McGovern J in the Dublin litigation[3], many of which were precisely the same as those which I reached in the main Judgment. Although Mr Fenwick QC sought to deflect that by saying that Mr MacDonald was entitled to give his evidence in this trial, since he was not a party to and did not give evidence in the Dublin litigation (despite his close involvement behind the scenes), there was force in Mr Davidson QC’s riposte that, even if Mr MacDonald was entitled to take his chance a second time, he had done so and had lost, and that result should be reflected in the costs order which I made.
  3. The defendant’s position on the liability for costs was completely different. The defendant said that, so great was the nature and scale of the claimant’s losses, and so poor their conduct during the proceedings, that the court should reduce any costs order which might otherwise be made in the claimant’s favour to such an extent that the right order was that there should be no order as to costs. In the alternative, Mr Fenwick QC argued for a small percentage of costs to be paid by the defendant to the claimant.
  4. Mr Stapleton’s sixth witness statement on behalf of the defendant sets out in section 3 an analysis of all of the issues on which the claimant lost, and identified that those issues amounted to some 60% of the defendant’s costs. The argument was that, making the usual ‘double discount’ for the costs of issues on which the defendant was successful, as against the costs of issues on which the claimant had been successful, a nil order was achieved. In addition, the defendant, via section 4 of Mr Stapleton’s sixth witness statement, made various criticisms of the claimant’s conduct of the case before and during the trial, particularly in relation to disclosure, and various late applications. Unlike in section 3, the section 4 matters were not quantified in any way.
  5. In my view, the starting point is the application of the general rule. The claimant has succeeded in the sum of £7,443,821.12, plus an amount by way of interest which will be in excess of £1 million, which is likely to take the claimant’s overall recovery to around £9 million. Without any doubt, the claimant is therefore the successful party.
  6. But, notwithstanding the clear warning in Fox, justice would manifestly not be done if I made no allowance for the raft of issues on which the claimant was unsuccessful. My main Judgment runs to 897 paragraphs. A large part of that is spent explaining, doubtless in too much detail, how and why most of the claims against the defendant failed, either because liability had not been made out, or causation could not be established, or both. On the three main issues, the claimant was successful on part of one of them, and comprehensively lost the rest. I consider that it would be a rank injustice if, notwithstanding all of the work, time and cost generated by these failed claims, the costs order ignored that overall result.
  7. Thus, this is a case in which it is appropriate to depart from the general rule because of the scale and nature of the claimant’s lack of success. Both parties agreed that this should be done by a percentage reduction of the claimant’s costs, rather than making issues-based costs orders.
  8. In relation to the points raised about the claimant’s conduct, I am not persuaded that they are of any great significance. Disclosure is always a difficult exercise in a large claim like this and I do not consider that the claimant’s conduct of the disclosure exercise was particularly open to criticism. The defendant’s successful application for specific disclosure was dealt with by Edwards-Stuart J, and I have already awarded the defendant the bulk of their costs in relation to that application. Similarly, I consider that the defendant’s conduct of the litigation was not such that it should be reflected in any significant way in the costs order that I make.
  9. In addition, I consider that the claimant’s realistic – if short-lived – offer is a point in their favour. Even though it was only available for short time, the claimant’s offer was much more reflective of the final result than any offer made by the defendant, and was also a realistic reaction to my indication to the parties at the end of the factual evidence.
  10. I said at the hearing that I would make an order for costs in the claimant’s favour but that I would make a significant percentage reduction, in particular to reflect the nature and extent of the issues on which the defendant was successful. Taking into account all the matters noted above, I reduce the claimant’s costs by 40%. In other words, I order that the defendant pay the claimant 60% of its costs, to be assessed on the standard basis if not agreed.
6. ISSUE 5: INTERIM PAYMENT ON ACCOUNT OF COSTS
  1. It is agreed that there should be an interim payment on account of costs. The claimant’s overall costs bill is just over £5.1 million, with the defendant’s total costs put at £4.7 million. 60% of the claimant’s costs is therefore approximately £3 million, which then becomes the maximum that the claimant will be able to recover by way of costs.
  2. The parties are agreed that, in accordance with CPR r.44.2(8) there is no good reason not to order a reasonable sum on account of costs.
  3. Mr Fenwick QC was at pains to point out that the figures included in the claimant’s draft bill, for the costs of solicitors and counsel, are not figures that had been incurred, but were instead indicative only. That is because the claimant entered into a damages-based agreement with its lawyers and these figures are therefore only estimates. He also demonstrated that the claimant’s legal costs were higher than the figures for the defendant’s lawyers, although the difference is not vast; between £3.6 million odd for the claimant and £3 million odd for the defendant.
  4. As to the damages-based agreement, I note that r.44.18 stresses that the fact that there is such an agreement “will not affect the making of any order for costs which otherwise would be made in favour of that party”. It is not therefore a directly relevant factor, particularly as I was told by Mr Davidson QC that the costs of the claimant’s solicitors were recorded on the conventional basis and are not therefore an estimate. Further, although I am conscious of the need to exercise some caution in relation to the figures put forward by the claimant as a result of the agreement, I have already noted that there is not a huge difference between the legal costs incurred on each side. The fact that the claimant’s costs are higher than those of the defendant is almost inevitable in cases of this kind.
  5. A point was also raised by Mr Fenwick QC concerning the increase in the claimant’s costs beyond the figures in its earlier estimates. Again I consider that there is no real force in that point, given the general parity between the total costs incurred by both sides. In any event, I regard those increases as relatively modest in the circumstances and predictable in proceedings where there has been no costs management.
  6. In accordance with the principle laid out by Jacob J (as he then was) in Mars (UK) Ltd v TeKnowledge Ltd [1999] EWHC 226 (Pat), I have to arrive at a figure for the interim payment which I am confident will not be higher than any amount following a final assessment. I do not accept Mr Fenwick QC’s submissions that there is a general rule that the right figure is 40% – 50% of the draft bill, or that the right figure here is 30% of the draft bill. On the contrary, given the general parity between the total costs on both sides (£5.1 million plays £4.7 million), I have concluded that I can make an interim payment at two thirds of the costs in the claimants’ draft bill, and be confident that not less than that will be recovered on final assessment.
  7. As noted above, the total amount of costs due to the claimant, as a result of the reduction to 60%, is around £3 million. Two thirds of that figure is £2 million. I therefore order an interim payment to be made by the defendant on account of the claimant’s costs in the sum of £2 million. That amount will also be paid into court, until further order.

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