COSTS, CONDUCT, PART 36 AND THE “WINNING PARTY”: AVB -V TDD CONSIDERED

The case of AVB -v- TDD [2014] EWHC 1442 has received a lot of publicity in the legal press and beyond, involving a relationship between a solicitor and a law student.  However the surprising aspect of the reporting is that it missed the really interesting part of the case. That is, of course, the subsequent  judgment on costs.  There are relatively few cases where a judge’s consideration of the costs of an action are concerned, this is worth reading in full.

WHO SHOULD PAY THE COSTS AND WHO HAD WON?

The judge considered a number of issues: who had won; the “conduct” of the parties and a Part 36 offer made by the defendant. The judge considered all three factors and made an order as to costs which reflected his view of the merits of the application, its conduct and a  relevant Part 36 offer.

“Mr Justice Tugendhat :
  1. This is my judgment on the costs of this action. The Court has discretion to be exercised in accordance with CPR r44.2. That includes:
“(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order…

(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings …;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim…”

  1. The sub-rule (4)(a) refers first to the conduct of the parties and then to the success of the parties and to offers of settlement ((4)(b) and (c)). But success is referred to first in sub-rule (2), and I shall start with the question who succeeded?
Who succeeded?
  1. Mr Bennett submits that the Claimant has been successful in part. He compares the interim orders of 24 May and 17 June 2013 with the final outcome. He submits that the Claimant has succeeded in obtaining a permanent injunction, and that includes most of what he was asking for. On the other hand he submits that the Defendant did not succeed at all because she did not obtain any injunction or other relief. (The costs of those applications were reserved).
  1.             Mr Wilson submits that the injunction that the Claimant has obtained is significantly less beneficial to him than the one              that he sought. He failed on his claim in contract and harassment. the Defendant succeeded in her counterclaim on                      liability. The reason why I have made no injunction against the Claimant is not related to the merits of the cause of                      action, but only to my assessment of the risk of a future disclosure by him.
  1. Mr Wilson submits that my findings on harassment, namely that his claim failed and hers succeeded on liability, represents a significant degree of success for her, or what he calls a moral victory. In substance she is the winner.
  1. In my judgment the Claimant has succeeded on a part of his case which is important, but is relatively minor in relation to the substance of his complaint. His success is primarily in obtaining protection of the rights of third parties rather than of his own rights. But viewed overall in my judgment the Defendant has come out of this trial better than he has. It is only my assessments that the risk of his making disclosure in the future is insufficient to justify an injunction that he can be regarded as having had greater success than her.
Conduct
  1. Mr Bennett refers to the unreasonable conduct of the Defendant, as found by Nicola Davies J in December 2013, and in respect of which she ordered the Defendant to pay indemnity costs. There are reserved costs arising from the enforcement of that order which Mr Wilson accepts the Defendant must pay to the Claimant.
  1. Mr Wilson submits that the Defendant has already been ordered to pay for her conduct in November and December 2013. And insofar as the Claimant has succeeded, he notes that I have found (in para 221 of my judgment) that the excessive reactions of the Defendant were the result of the Claimant’s provocation. He submits that relevant conduct on the part of the Claimant includes my findings that he lied to the court on important issues.
  1. Mr Wilson submits that conduct in CPR r.44.2(4)(a) encompasses conduct at any time, including conduct before the action was brought. He refers to a decision of Gray J in Devine v Franklin [2002] EWHC 1846 (QB), which was noted in the White Book 2013, but not in the White Book 2014.
  1. In my judgment I criticised the conduct of the action by both parties, finding both to have lied. But these findings are far more serious in relation to the Claimant who is a solicitor. The court is entitled to expect behaviour of the highest standard from officers of the court.
  1. As to the meaning of conduct in CPR r.44.2(4)(a), I note that that word is unqualified. I respectfully agree with Gray J, that it is capable of referring to relevant conduct whenever it occurred. Conduct prior to the action, may be relevant.
  1. In my judgment the provocative and unreasonable conduct of the Claimant, as I have found it to be, is what has given rise to this action, and that is highly relevant to the exercise of my discretion on costs. And in my judgment it was not reasonable for him to raise or pursue his claims in contract and harassment, or to contest her allegation of harassment.
Admissible offers
  1. Amongst the correspondence exchanged without prejudice save as to costs there is a letter of 26 March 2014 from the Defendant’s solicitors. It includes a number of alternative offers including that the action be settled by the grant of an injunction in favour of both parties, but no damages, interest and costs.
  1. Mr Wilson submits that that the outcome is substantially in accordance with that offer. The fact that the Defendant has obtained no injunction is of no benefit to the Claimant, because the reason for not granting such an injunction does not reflect any success on his part on the merits, but only on the risk of his making a wrongful disclosure in the future.
  1. In my judgment the Claimant has achieved nothing of value to himself since 26 March that he could not have obtained by accepting the offer of 26 March. To the extent that he has not had to submit to an injunction, that is of no benefit to him.
Conclusion
  1. In my judgment, taking all of the foregoing into account:
i) the interests of the third parties concerned, and the behaviour of the Defendant at the time justified the Claimant in obtaining the order of 24 May 2013, and the Defendant should pay his costs of that application;
ii) there should be no order as to costs in respect of the period from 24 May 2013 to 26 March 2014, save that the Defendant must pay to the Claimant the costs of the enforcement of the orders that the Claimant obtained on the applications in November and December 2013;
iii) for the period after 26 March 2014, the Claimant must pay the costs of the Defendant.”

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