Brit Inns Ltd & others v BDW Trading Ltd & another [07.09.12]

High Court decides costs when claims inflated, recovery limited and the parties' conduct in issue.

Previously we reviewed the main judgment in Brit Inns Ltd & others v BDW Trading Ltd & another [31.07.12]. As promised, we now turn to the judgment concerning the issue of costs.

To summarise, in the subrogation action the First Claimant recovered about 25 per cent (£158,000) of the £660,000 claimed but it cost £528,000 to do so. In the uninsured claim, the Second Claimant recovered just 3 per cent (£16,000) of the sum claimed but it cost them £157,000. The First Claimant sought their costs in full, whilst the Second Claimant claimed 50 per cent.

During the proceedings, the Defendants made a Part 36 settlement offer, which was rejected. They also made a Part 44 offer, which was open for acceptance until 30 May 2012, but was not accepted.

Decision

The usual starting position when determining costs is that they "follow the event", meaning the winning party recovers its costs. However, exaggerating a claim might deprive a claimant of some or all of its costs and, if the exaggeration was deliberate, the claimant could be ordered to pay the defendant’s costs. In this case, the High Court held that the exaggeration was not deliberate.

Moving on to consider the consequences of the Defendants’ settlement offers, the court held that, as the Defendants did not better their Part 36 offer at trial, the First Claimant was the successful party up until the Part 44 offer deadline of 30 May. Accordingly, the usual position on costs applied as a starting point, subject to issues of conduct. In that regard, it would be manifestly unjust to allow them all of their costs to 30 May as the claim was inflated, unsupported and because their solicitors "adopted a consciously unhelpful attitude in the correspondence. They provided the bare minimum of explanation for many of the claims, and the disclosure of documents was slow and reluctant".

Consequently, the court allowed the First Claimant only 60 per cent of its costs to 30 May, with the further proviso that "because of the fundamental inadequacies of the claimants’ expert evidence, the defendant should not have to pay any part of the claimant’s costs incurred in connection with their experts".

As for the costs after 30 May, it was found that the First Claimant was responsible for all of the Defendants’ costs, including the entire costs of trial, as the Defendants won every substantive argument at trial, whilst the claimants’ expert evidence was rejected and they failed to better the Defendants’ Part 44 offer.

Finally, with regard to the Second Claimant’s claim for costs, it was held that the instruction of separate lawyers for the uninsured claim was a luxury, for which they had to pay. Accordingly, they should pay 90 per cent of the Defendants’ costs of the uninsured action.

Comment

The starting point remains that costs usually follow the event. However, this decision issues a clear message to litigants that just because you "win", does not mean you are assured of your costs.

A litigant seeking to recover its costs should keep in mind the following throughout the case:

  • Their solicitor’s attitude towards the other side. The First Claimant’s solicitor’s approach was described by the court as "high-handed" and they had an "uncompromising stance, particularly in regard to the provision of disclosure".
  • Their expert’s conduct and the strength of their evidence. One of the First Claimant’s expert’s evidence "involved no expert input at all", whilst the other expert had a "blinkered and unrealistic approach".
  • Whether a realistic and reasonable view is being taken on the value of the claim and the likely recovery.

Ignoring these factors could result in a pyrrhic victory if your costs exceed what you recover.