- Professional liability
Partner - London. United Kingdom
AMEY LG Ltd v Cumbria County Council [18.11.16]
The Technology and Construction Court gives a helpful reminder regarding the value of proportionate costs awards.
The Court retains a wide discretion in relation to costs, including proportionate costs awards or issues based costs orders. Both can have a significant impact on the paying party’s liability for costs, which can be central to the economics of any claim.
If faced with a case that may succeed as a whole (but fail in significant part) and/or unreasonable conduct, it may be helpful during negotiations to query with the other side the financial consequences of a proportionate costs award. Litigation is often run on tight budgets. If the claimant is unable to recover a significant percentage of its costs, even before detailed assessment, it may be possible to paint a bleak financial picture that punctures the commercial rationale for the claim.
Invoking the mere prospect of a proportionate costs award may help to achieve a more favourable settlement. The key considerations may be whether:
During litigation, it is all too easy to make the mistake of spending too much money relative to the amount at stake. The judgment highlights the importance of thinking about the value of every pound spent, especially as a defendant.
AMEY provided highways maintenance services to the Council. It made a final account claim against the Council of circa £30 million. The Council counterclaimed for alleged defects of circa £20 million. At trial, AMEY was the victor:
After set-off, His Honour Judge Stephen Davies awarded AMEY £3.698 million, plus contractual interest of £1.697 million. AMEY claimed costs of £8.848 million. The claim fell outside the cost budgeting regime.
The Council argued that AMEY should be able to recover no more than 50% of its costs. It contended that:
Davies J ordered a proportionate costs award of 85%. Although AMEY won the claim, its limited success in relation to part two of its claim was a significant factor in the 15% (or circa £1.32 million) deduction from its entitlement to costs. To a lesser extent, Davies J also accepted the Council’s arguments regarding AMEY’s failure to allow access to an e-disclosure facility for a period of several months.
Davis J held that deductions for proportionately (i.e. the amount of costs set against the sums at stake) should be applied by a costs judge. This was to avoid the risk of “double jeopardy” discounts, with the receiving party being penalised twice by the court.