CLAIMANT OBTAINED COSTS OF ACTION EVEN AFTER DISCONTINUANCE: WATCH THE WORDING OF CORRESPONDENCE

In Rokvic -v- Peacock [2014] EWHC 3729 (TC) the claimant obtained an order for costs against the defendant even though the claimant had discontinued the action.  It is, if anything, a warning to be totally precise in wording when making offers and to ensure that there is express reference to costs. It further shows that the costs orders made on discontinuance are not automatic and the court can take into account the reality of the situation.

THE CASE

The claimant had obtained two adjudication decisions against the defendant. Proceedings were issued to enforce those adjudications and an offer made by the claimant that if the defendant “pays our client for the £43,892.37 our client will discontinue the court proceedings and will thereafter negotiate in good faith with a view to achieving overall settlement. However, unless and until that sum is paid by Peacock our instructions are to continue with court proceedings and obtain a judgment to enforce the full amount claimed with interest thereof.”

There was no mention of costs in the correspondence.

The defendant duly paid the sum of £43,892.37. Thereafter the claimant sought costs and the defendant denied liability to pay on the basis that there was a binding agreement which did not include payment of costs. The issue of costs was then put before the court for the judge to decide.

THE JUDGMENT: THE CLAIMANT WAS ENTITLED TO COSTS

1. I am satisfied that there was a binding agreement judged objectively as between Holman Fenwick and Thomas Egger on behalf of their respective clients. The offer in the second letter of 22 September 2014 was, effectively, “if Peacock pays Miss Rokvic £43,892 our client will discontinue the court proceedings”. That was the offer. It was capable of acceptance by conduct by payment: so to speak, if Thomas Egger had turned up with that amount in cash and placed it on Holman Fenwick’s reception desk, that would have been acceptance by conduct. The letter of 22 August effectively is calling for payment as the method of acceptance, and the only question, therefore, which remains in terms of whether there was a binding agreement created by the payment is Thomas Egger’s email letter of 23 September when it said that the payment was made without admission of the enforceability of the decision in adjudication 2. That said, it seems to me that there is little more than – as in many final and binding agreements – the fact that the payment is made without admission of liability. It does not add anything or take away anything from the settlement. The reality is, of course, it would prove commercially and probably legally impossible to challenge the enforceability of the decision in Adjudication 2, certainly insofar as it called for payments of identified express sums. I should say that I have been told that Adjudication 2 also provided for an indemnity in relation to certain defects, liability for which was found by the adjudicator in Adjudication 2 because costs had not yet been incurred. It seems to me that the question of enforceability of that indemnity remains in issue and it was never really part of Holman Fenwick’s second letter of 2 September, nor indeed in the acceptance, so I do accept that that issue as to whether the un-quantified part of the adjudicator’s decision in adjudication 2 of enforceability remains in issue.
2. So there is a binding agreement. But does that still leave open the question of costs? The offer of Holman Fenwick on behalf of their client was to “discontinue”, and the effect of CPR Part 38 is that a claimant always, virtually, has an entitlement to discontinue. There are certain examples identified in the rule which say that discontinuance can only occur with leave of the court. This is not a case where permission is required because there is agreement, in effect, that there should be discontinuance and this is at a very early stage of proceedings. CPR 38.5 identifies that discontinuance takes effect on the day when notice of discontinuance is served. I am assuming that notice of discontinuance has not yet been served, but I need to consider the substantive issue on costs. CPR 38.5(3) says discontinuance “does not affect proceedings to deal with any question of costs.” 38.6(1) says:

“Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant.”

So the presumption is made, subject to the court’s discretion, that the claimant remains liable for the defendant’s costs, and that is wholly understandable, because when discontinuance occurs in many cases it is because the claimant is acknowledging that it does not have any or much of a case against the defendant, and therefore it is quite right and proper that there is such a presumption as such but that is a rebuttable presumption. It seems to me, however, that the offer that was accepted was on the basis that the claimant would discontinue. That must mean discontinuance in accordance with the rules; that leaves open the question of costs. This is a case where the default rule, in my view, simply does not apply as a matter of discretion because the claimant has succeeded through this settlement, which includes an obligation to discontinue, in recovering every penny in net terms which it was claiming from Adjudications 2 and 3. It has taken into account the sum due to the defendant, Peacock, in Adjudication 1, and that was a sensible commercial decision on the part of both parties; but it seems to me that Ms Rokvic had to commence these proceedings because the defendant was challenging the enforceability of the adjudicator’s decsions and was challenging whether, even if Adjudication 3 was enforceable, Adjudication 2 was enforceable. By paying the whole net sum it was acknowledging, in effect, that Adjudication 2 was to be considered as enforceable at least in respect of the liquidated or specified sums were concerned.

1. It seems to me therefore that this is a case in which the claimant should, as a matter of discretion, be entitled to her costs of the proceedings.

ASSESSMENT OF THE COSTS

It is always interesting to read the robust way in which assessment takes place.

1. I ought to deal, but I will hear the parties, on her costs, which, I have to say, if I am to do a summary assessment, the sum of £17,000 seems to be a very large and, it might be said, disproportionate sum.
2. Sensibly, if I summarily assess the costs, the claimant has put in a bill of £17,426, but one needs to look at the clip of documents with which the court has been provided: a simple claim form, particulars of claim that refer to the two adjudications and seek their enforcement. It is clear that there were without prejudice discussions which went not only to the settlement of the adjudication issues but also to the substantive underlying disputes. In the claimant’s solicitor’s costs bill of £17,426 there is £11,000 for work on documents, and in seems to me inherently unlikely, or at least inherently unreasonable, that for a claim like this, which is settled relatively early, that £11,000 is anywhere near an appropriate or reasonable figure for the defendant to have to bear.
10. . I have suggested in argument that an appropriate amount would be nearer to £6,000. I am going to split the difference and say £5,500, which obviously includes the court fees and some time consulting with the client; it includes some of the correspondence between the parties which led to the settlement. I cannot see that work on documents would amount to more than £2,000 in terms of what is reasonable for the defendant to have to bear. I have been told, quite properly, that at least some of the extra costs may be attributable to the fact that, at least in part if not in full, a new legal team or legal personnel were deployed in respect of the enforcement from those who engaged in the adjudication; but it does not seem to me that that is a factor that should be held against the defendant. Bearing in mind that the claimant has succeeded today on an argument that was not expressly raised by the claimant and had not been floated by the defendant beforehand, it seems to me in those circumstances £5,500 inclusive of any VAT, which may not be applicable in any event, is an appropriately reasonable and fair figure and that should be payable within 14 days.

THE PRIMARY LESSON: MENTION COSTS EXPRESSLY IN CORRESPONDENCE

It is probable that the application could have been avoided if the claimant had, expressly, referred to payment of costs in the correspondence.