Carver’s last stand?
27 September 2011
The October update to the Civil Procedure Rule will amend Part
36 to reverse the decision in Carver v BAA. However, when
it comes to disputes as to which party should pay costs, Carver is
only the tip of the iceberg. That is hardly surprising in a system
in which costs frequently exceed damages.
Recent cases emanating from the Court of Appeal give a flavour
of the new fronts which may open up in the costs war.
Winning a battle but losing the war
In Medway v Marcus, the claimant sought £730,000 in
damages for an amputation. Causation of the amputation was not
established, but the claimant received £2,000 for additional pain
and suffering suffered due to negligence in the course of
treatment.
At first instance, the claimant recovered 50% of his costs: He
had recovered some damages and so was the successful party. On
appeal, the order was reversed. The defendant was awarded costs,
reduced by 25% to reflect the small recovery made by the claimant.
The damages awarded were minimal compared to the pleaded claim, and
so the defendant should be considered the successful party.
Jackson LJ dissented, suggesting that if the defendant wanted
protection then it should make an early Part 36 offer. He rejected
the complaint of the defendant that (as a Part 36 offer must
include costs), this could expose a defendant to an excessive costs
liability.
Jackson’s rebuff
Fox v Foundation Piling Ltd gave Jackson LJ the
opportunity to give further consideration to the circumstances in
which the courts should depart from the normal costs rules.
The claimant sought £280,000 in relation to an injury claim.
This valuation was called into question by both surveillance
obtained by the defendant and by medical evidence obtained in the
course of proceedings.
The defendant made two Part 36 offers. Excluding recoverable
benefits, they were £24,000 in 2008 and £32,000 in 2009. The second
offer was accepted following disclosure of surveillance
footage.
At first instance, the judge found that the defendant had
“succeeded” on the claim since the 2008 offer. Alternatively, the
claimant’s conduct in relation to the claim (ie the value of his
claim was not borne out by the evidence) justified a costs order in
favour of the defendant from 2008. The Judge refused to find
misrepresentation on the part of the claimant.
Jackson LJ gave the leading judgment on appeal, and stood by his
view that Part 36 generally held the key to determining costs
liabilities. The claimant had succeeded in recovering damages, and
these exceeded the 2008 offer. The starting point was that he
should not be denied his costs.
Conduct would rarely justify a departure from that rule. While
the settlement of this claim fell far short of the pleaded value,
the judge had refused to find misrepresentation on the part of the
claimant and so there were no grounds for depriving the claimant of
his costs.
Choosing your battles
Lowe v W Machell Joinery Ltd provides another example
of the Court of Appeal examining the parties’ conduct in order to
make a costs order. The claimants alleged the defendant had sold
them a staircase which was unsuitable as it did not comply with
building regulations, contrary to an express term in their contract
for building work.
On appeal, the claimants succeeded in their claim, but on the
basis of an implied term as to suitability rather than the express
term they had alleged throughout proceedings.
Lloyd LJ’s costs judgment was prefaced with the comment that the
court’s discretion in this situation was “unusually wide”. Options
included allowing the claimant to recover costs; applying a
discount for time expended on unsuccessful issues; reducing the
costs recovered by the claimant by a percentage to reflect their
approach; or ordering the claimant to pay the defendant’s costs
because they had persisted in perusing an unrealistic line of
argument.
Having considered the manner in which the claimants had focused
their efforts upon the unproven implied term, the Court made no
order as to the costs of the first instance claim, but to permitted
claimants to recover costs of the appeal, which had been properly
pursued and was successful.
Neutralising Carver
Carver dealt with the question of when a judgment was to be
considered ‘more advantageous’ than a Part 36 offer and established
that the test was not limited to a strict comparison of monetary
values. In his final report, Jackson LJ bemoaned the uncertainty
which arose as a result, and recommended that Caver be reversed.
This will be achieved in the October update to the CPR, by defining
‘more advantageous’ for money claims in strict monetary terms.
New fronts
However, while Jackson and the CPR committee are seeking to
impose greater certainty on the costs outcome of claims, the Court
of Appeal’s approach favours judicial discretion.
That discretion is likely to be tested as increased use of fixed
fee schemes for particular types or stages of claims increases the
costs-impact of conduct and erroneous valuations.
In a post-Carver era, we can expect further disputes around
questions of whether a party has ‘succeeded’ where a small recovery
is made, when percentage discounts or issue based costs should be
imposed, and whether a party’s conduct justifies a decision to
penalise them in costs.
The battle lines may be redrawn, but it is likely that the
satellite litigation of the costs war will continue.
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