Only a month after the staggering level of costs in the latest Wembley case provoked strong words from Lord Justice Jackson, the Court of Appeal has again criticised the management of cases in the lower courts and the failure to keep litigation costs proportionate to the amount at stake. Good thing a costs review is coming soon…
The case that gave rise to the criticism was straightforward enough. A specialist subcontractor brought claims in the county court for payment and damages against a contractor. The contractor contested his claims and counterclaimed in respect of defective work. The sums in question were a few thousand pounds on either side.
The contractor brought a second counterclaim for loss of profits on contracts said to have been lost as a result of the subcontractor’s work. The loss of profits claim qualified the action for the multi track procedure (which meant that an elaborate set of rules and procedures came into play and legal representation was necessary), rather than the small claims track procedure (where both parties could have represented themselves and the legal costs would have been minimal).
It turned out that the loss of profit claim had always been a try on. All the procedures required by the multi track were thus unnecessary. Despite this, and the modest amounts of the other claims, the trial judge still allowed the trial to last for 8 days. The result was a draw: the amount awarded in respect of the claim and counterclaim in effect cancelled each other out. No order was made for costs as there was no outright “winner”. It was the decision not to order costs that was the subject of the appeal.
The decision of a trial judge as to costs is not lightly disturbed. It was not disputed in this case that the trial judge had a wide discretion in this respect. In order to interfere with the trial judge’s decision the Court of Appeal had to be satisfied that he was wrong in principle or that for some other reason he was plainly wrong.
In this case, the Court of Appeal was satisfied. The trial judge should have taken more account of the contractor’s reprehensible behaviour in relation to the spurious loss of profit claim. Accordingly, the subcontractor was entitled to 50% of his costs from the date of allocation to the multi track, even though he had not achieved a “win”.
This case again emphasises the court’s concern about the costs of litigation and the failure of some judges to exercise their wide powers to manage and control the conduct of cases so as to keep costs in proportion to the value of the claim. If a civil justice system is unaffordable to users, then the civil justice system itself fails.
Only this month Lord Justice Jackson was appointed by Master of the Rolls Sir Anthony Clarke to conduct a root and branch review of legal costs in litigation. This review will commence in January 2009. Opportunities to contribute your views on the current system and any new proposals put forward by Lord Justice Jackson will be available from time to time next year. We shall be covering the progress of this review closely and it will be the subject matter of regular Law-Now updates.
Reference: Peakman v Linbrooke Services Ltd [2008] EWCA Civ 1239
