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Earl of Malmesbury & Ors v Strutt & Parker, High Court, 2008

7 April 2008
The issues

Mediation – costs – split Order for costs – issue based Order – failure to comply with a pre-action protocol – exaggeration of claim – whether party’s conduct in mediation can be taken into account with regard to final Order for costs.

The facts

The Claimants brought an action against the Defendant alleging negligence in connection with leases entered into with Bournemouth International Airport of land used by the airport to provide the main car park for users of the airport. The matter went to a Hearing on the preliminary issue of liability when the Judge found that the Defendant had been negligent in respect of two of the three relevant leases. Damages were to be assessed on the loss of capital value basis rather than on a loss of income basis. The consequence was that damages in respect of the one culpable lease was £773,479.00 and in respect of the other “culpable” lease were £141,660.00. Had the matter been assessed on a loss of income basis, the damages would have been £6.9 million. The sum claimed by the Claimants at the Trial on liability had been upped to £87.8 million. There had been a Part 20 claim brought by the Defendants against Wilsons, the Claimant’s solicitors, who also acted in connection with the leases. At the Trial on liability the claims against Wilsons were dismissed and Wilsons were awarded indemnity costs against the Defendants and indemnity costs against the Claimants. The matter came back before the Judge on the issue of costs, which were put in respect of the Claimant at £1.84 million and in respect of the Defendant at £2.4 million. These costs were described by the Judge as “horrendous” and “wholly disproportionate”.

The decision

The Claimants maintained that they had won the litigation and should have their costs.

The Defendants submitted that the Claimants were not to be treated as winners because they had been awarded damages in respect of a small proportion of their claim and relied on the Claimant’s exaggeration of the claim which they said made mediation impossible. They also submitted that the Claimant had failed to comply with the professional negligence pre-action protocol and also relied on offers made to the Claimants by letter in the course of the litigation.

The Defendants costs incurred against Wilsons and the costs that they had had to pay Wilsons.
The decision to join Wilsons was a tactical one and there had been no proper thought given to whether there was any sufficient basis for making a claim against them. If they had properly considered, the Defendants would have realised that there was not any sufficient basis. The Defendant’s should bear the consequences of their own conduct. The Defendants costs that were payable to Wilsons should not be reimbursed by the Claimant and the Claimant should not have to pay the Defendant’s own costs incurred against Wilsons.

Two discrete issues.
Approximately 15% of the Defendant’s unassessed costs related to issues which should be paid by the Claimant. Accordingly, the Claimant would be ordered to pay the Defendant 15% of the Defendant’s costs, as determined on Detailed Assessment and should not recover 15% of their own costs, as determined on Detailed Assessment.

The protocol – pre-action behaviour.
The Court was satisfied that the Claimant intended to comply with the professional negligence protocol. There was no conduct which should be reflected in the Order for costs.

The Court had to consider whether what happened in relation to mediation should play a part in its Order as to costs. Where a failure to mediate is due to the attitudes taken by either side, it was not open to one party to claim that a failure should be taken into account in the Order as to costs. However, at the mediation itself, the Claimant’s position was clearly unrealistic and unreasonable. Had they made an offer which better reflected their true position the mediation might have succeeded. The Court had not yet had to consider a situation where a party had agreed to mediate but had then taken an unreasonable position in the mediation. It was not dissimilar, in effect, to an unreasonable refusal to engage in mediation. A party which agreed to mediate but then caused the mediation to fail by reason of its own unreasonable position in the mediation was, in reality, in the same position as a party which unreasonably refused to mediate. It was something which the Court could and should take account of in a costs Order.

Part 36 and Part 44 offers.
The first offer had been comfortably beaten by the Claimant and therefore no account would be taken of it. The second offer was £2million, which comfortably topped the Claimant’s recovery. This offer did not fall within Part 36 because it did not include costs and was only open for 7 days but was something which the Court would have regard to in accordance with Part 44.3(4)(c). The offer had been made 3 days before the Trial on liability was due to begin. It was designed, in terms of its timing, to be as disadvantageous to the Claimants as possible. The offer should have been made at least a week earlier, if not very soon after the failed mediation. Taking account of these circumstances it was not just to make an Order reflecting the Claimant’s non-acceptance of the offer within the time limited.

The Claimants had recovered £915,139.00 before interest, which was a large sum, but small in comparison with £87.8 million. It was not a satisfactory approach in the circumstances of this case (where the evidence on damages was complex and difficult) to nominate the winner as a means of deciding what Order for costs was appropriate. It was too simple a question. The Claimants had won on liability and had recovered various substantial damages but the Defendants had succeeded in cutting down the sum awarded to a fraction of what the Claimants were asking for. It was in line with the authorities for the Court to take account of how the exaggeration of the claim had come about. In this case, exaggeration meant no more than that the Claimants had recovered a fraction of the advanced claim. The worst case, from the Claimants view, would be where the exaggeration was deliberate and involved dishonesty, as in Painting v University of Oxford. Unreasonable conduct fell somewhere in the middle. The appropriate Order depended on the circumstances and the Court had to seek a solution which did justice between the parties. Taking into account all these matters, including the circumstances surrounding the mediation, justice would be done to order that the Claimants had 80% of their costs relating to damages. The outcome therefore would be that the Claimants would not get 15% of their liability costs by reason of the discrete issues and would only get 70% of what was left by reason of their having recovered so much less than they claimed. They would therefore get 59.5% of their costs incurred against the Defendants in connection with liability, as assessed or agreed.

The Claimants would not get 15% of their costs on damages and they would only get 80% of what was left by reason of their attitude in mediation. So they would only get 68% of their costs incurred in connection with damages, as assessed or agreed. The Claimants would have to pay costs to the Defendants in respect of 15% of the Defendants liability costs and 15% of their damages costs. For the avoidance of doubt in assessing these figures, 70% and 80%, the Claimants were not being ordered to pay 30% and 20% respectively of the Defendants liability and damages costs which Order would favour the Defendants more than was appropriate.


Another useful (if possibly somewhat extreme) case on exaggeration and re-emphasising the new approach to the concept of “winning” and “losing”. Rather alarming however is Mr Justice Jack’s statement that the Court should be allowed to take into account conduct in the course of mediation, which cuts across the principles of mediation itself, and in particular of course confidentiality. If this Judgment is right on that point it is hard to see how any mediator can properly tell the parties that the procedure is wholly confidential.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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