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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.
This article was written for Law-Now, CMS Cameron
McKenna's free online information service. To register for
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Law-Now information is for general purposes and guidance
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articles are not necessarily comprehensive and do not purport to
give professional or legal advice. All Law-Now information relates
to circumstances prevailing at the date of its original publication
and may not have been updated to reflect subsequent
developments.
The original publication date for this article was
19/09/2012.
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