ADVISING YOUR CLIENT ON LITIGATION RISKS 5: IF YOU DON’T PAY COSTS BEFORE ISSUE IT COULD BE VERY EXPENSIVE AFTERWARDS
I am grateful to Sam Hayman from Bolt Burdon Kemp for sending me a copy of the High Court decision in Ayton -v- RSM Bentley Bennison & Ors  EWHC 2851 (QB). It is one of those cases that illustrate the risks of litigation. Prior to the issue of proceedings the defendant elected to run the argument that it would not pay the legal costs of a claim for damages. The defendant ignored Part 36 offers. After many interlocutory hearings, a trial and an appeal the defendant ended up being ordered to pay costs of £460,000 (on an interim basis). The final bill could end up being considerably higher. This was a very dangerous strategy to take…
“In my view, this whole unfortunate train of events was unnecessary from the outset. The defendants acted unfairly in adopting the position of refusing to pay the claimant any of his pre-action costs.“
The claimant instructed solicitors to recover £100,000 owed by the defendants. A letter of claim was sent. The Defendant failed to respond fully and comply with the Pre-Action Protocol. However the defendant sent a cheque for £100,000 plus 1%. The defendant refused to pay costs.
A copy of the case is available here. Ayton v Jennison Approved Judgement
The claimant returned the cheque and issued proceedings. The defendant defended the action, amongst other things it pleaded that it had no liability to pay costs. Eventually (after much interlocutory wrangling) there was a trial and the claimant was awarded £119,578.22.
THE COSTS AWARD BY THE MASTER
However the Master who gave judgment did not award the claimant all his costs. Rather she awarded the claimant 70% of his costs up the date of a CMCC and ordered that the claimant pay 80% of the defendant’s costs thereafter. The defendant had not accepted a number of Part 36 offers from the claimant. However the Master held that it would be unjust to apply the normal consequences of the defendant’s failure to beat the claimant’s offers.