The High Court has recently confirmed and clarified the case law on how the behaviour of parties and the making of without prejudice offers should affect costs.

In a claim arising from material damage to premises, the defendants quickly admitted liability but there was considerable dispute concerning quantum. The claimants maintained an unrealistic expectation of quantum until trial and had been obstructive in providing disclosure to support their position.

The claimants claimed in the region of £600,000. Approximately a year before trial, the defendants made a Part 36 offer of £139,000. On 16 May 2012, the defendants made an increased without prejudice offer of £267,046 plus £85,000 in respect of costs which was open for acceptance until 30 May 2012. At trial, in mid June 2012, damages of £173,871.13 were awarded.

On costs, the court found:

  • The claimants were the successful party for the purposes of awarding costs;
  • The claimants did not beat the defendants’ second offer and, therefore, the defendants were entitled to their costs from 30 May 2012 (consequently, the defendants will recover their costs of the trial);
  • Although the claimants had massively exaggerated their losses, the judge found that they had not done so dishonestly and, therefore, the defendants were not entitled to their costs for the period before 30 May 2012;
  • Despite the massive exaggeration, the claimants recovered a sufficiently large sum to rule out an order of “no order as to costs” (such an order should normally only be made where nominal damages are awarded);
  • The claimants’ unrealistic attitude to quantum (in comparison to the defendants’ realistic attitude as evidenced by their first offer which, although too low to actually shift costs, was in the right order of magnitude) and their obstructive stance on disclosure adversely affected the prospects of settlement resulting in a 40% reduction to the claimants’ costs up to 30 May 2012; and
  • Due to fundamental inadequacies with their expert evidence, the claimants were not entitled to their costs of instructing experts.

This decision once again emphasises the importance of taking a realistic approach and making well placed without prejudice offers from an early stage. Further, parties should be careful when instructing experts as the court might disallow the costs of wholly inadequate expert evidence.

Further reading: Brit Inns Ltd (In Liquidation) v BDW Trading Ltd (Costs) [2012] EWHC 2489 (TCC)