A frequently occurring issue we find in respect of costs is to what extent a receiving party is entitled to recover specific items of costs from one paying party which relate, in part, to another party to the proceedings. This is a particular issue on cases involving claims and counterclaims, but also in relation to failed/abandoned issues in a claim and often depends on the wording of the order made. In the recent case of Reed –v- Woodward Property Developments Ltd & Woodward, Costs Judge Leonard in the SCCO considered this question in a matter in which a Defendant sought their costs.
Background
The Claimant issued proceedings against the First Defendant, a building company of which the Second Defendant was a director, and against the Second Defendant himself. The claims against each Defendant were separate; against the First Defendant he claimed the sum of £73,506.97 representing the cost of rectifying allegedly defective building works, with damages as an alternative remedy, but against the Second Defendant he claimed the sum of £33,530, representing the cost of rectifying unlawful dumping of building materials and waste upon the Claimant’s land. He also claimed damages against the Second Defendant based on the proposition that the Second Defendant had accepted personal responsibility (as project manager) for the performance of the building works undertaken by the First Defendant.
During the course of the proceedings, the Second Defendant applied to strike out the claim against him and was initially successful, but the claim was restored on subsequent appeal. In the meantime, the First Defendant went into voluntary liquidation and had neither assets nor indemnity insurance to meet the Claimant’s claim, following which, the Solicitors who had previously been dealing with the matter on behalf of both Defendants came off the record as acting for the First Defendant. The First Defendant took no active part in the proceedings thereafter.
At trial, the parties identified the factual issues to be addressed, which were 1) whether the Second Defendant had assumed personal responsibility for project management and 2) whether the Second Defendant was personally responsible for the dumping of waste on the Claimant’s land. The claim against the Second Defendant was dismissed but Judgment was entered for the Claimant against the First Defendant based on the Judge’s findings in respect of the fitting of a wrong roof and the dumping of waste.
After costs submissions, the Second Defendant was awarded 75% of his costs on the standard basis.
Prior Authorities
Costs Judge Leonard was referred to the earlier cases of Haynes -v- Department for Business Innovation and Skills [2014] EWHC 643 (QB) and Dyson Technology Ltd –v- Strutt [2007] EWHC 1756 (Ch).
Haynes concerned a claim by the widow of a Mr Haynes, who had died of lung cancer occasioned by exposure to asbestos. Mr Haynes had been employed by ten employers, and proceedings were issued against all of them. The claimant subsequently accepted a Part 36 offer from one of the Defendants and abandoned the claim against the other nine.
On appeal, Jay J found that the common or generic costs of the case effectively fell into two categories:
- non-specific costs such as court fees, medical reports and travel expenses which would have been incurred in any event, regardless of the number of other defendants. Those were recoverable in full against the paying party.
- specific common costs which were, in principle, capable of identification and division: for example, a conference with Counsel concerning the liability of all ten defendants. Specific common costs fell to be divided.
In undertaking the division of specific common costs, the general rule is that evidence-based decisions are required, rather than an approach which simply identifies the number of defendants. Such an approach requires careful consideration of the work being done and how much time would have been spent in relation to the recoverable element, with that amount to be claimed in the bill of costs. However, where it would be disproportionate to conduct a more thorough exercise, the general rule can be departed from and a more broad-brush approach justified.
Dyson concerned proceedings for injunctive relief, based upon two clauses in a contract of employment between the claimant and the defendant. The claimant relied upon two provisions in the contract, referred to as clauses 18 and 19.1, but abandoned the clause 18 claim during the trial.
The Defendant was ordered to pay the Claimant’s costs of the proceedings, with three exceptions:
- the cost of expert evidence, as to which no order for costs was made;
- of the costs of the clause 18 claim (the Claimant to pay the Defendant’s costs); and
- the costs of an application to amend the Claimant’s particulars of claim (the Claimant to pay the Defendant’s costs)
Applying the same principles as in Haynes, Patton J found that “non-specific costs such as travelling expenses which are general to the action in the sense that they do not relate to the handling of any particular issue and would have been incurred whatever issues were involved” should be recovered in full and “specific common costs… which relate to work done on more than one issue in the case, but which are not separated for the purposes of charging out time or as disbursements” fell to be divided. Notably he found that “the identification of the fees or charges for time spent in relation to work on the cl. 18 claim excludes work that would have had to be done anyway because it also relates to the cl. 19.1 claim.”
The matter before Costs Judge Leonard
The Second Defendant’s bill was prepared on the basis that all costs solely attributable to the First Defendant’s case were excluded, but costs incurred during the period that DAS (the Defendants’ Solicitors) was acting for both Defendants were claimed in full, without any division, on the basis that it was the Claimant’s case that the Second Defendant was personally responsible for all the acts and omissions of the First Defendant. The Second Defendant’s position was that there was no proper ground for dividing non-specific common.
Costs Judge Leonard disagreed. He accepted that the claims were closely linked but found they were two distinct cases against two distinct defendants. The fact that the two defendants were not separately represented for a period was not justification for those costs to be recovered in their entirety from the Claimant:
“In summary, it is not open to the Second Defendant, for the period when DAS were acting for both defendants, to treat as indivisible all costs not exclusively incurred on behalf of the First Defendant. The majority of those costs will be divisible, and it will be necessary to consider how the items of work performed by DAS up to 15 June 2018, when DAS was advised of the fact that the First Defendant had gone into liquidation, should be divided.”
Conclusion
This case highlights the importance of ensuring that sufficient thought is put into the drafting of a bill of costs and the recoverability of items within it with reference to the costs order made. Too often, a receiving party prepares a bill of costs which simply includes all costs in full and does not consider the effect of costs orders made against them or whether their final costs order entitles them to include all of the costs they are seeking.
Costs Judge Leonard explained that the effect of his decision was likely to result in substantial reductions to the part of the bill of costs which had been drafted in this way and made a point of airing his concerns as to the proportionality of the likely assessment costs given the arguments being raised by the parties in the assessment proceedings.
When considering what costs you wish your bill of costs to include, it is worth bearing in mind CPR 47.20, the presumption that the receiving party will recover their costs of assessment from the paying party, is rebuttable:
“(3) In deciding whether to make some other order, the court must have regard to all the circumstances, including –
(a) the conduct of all the parties;
(b) the amount, if any, by which the bill of costs has been reduced; and
(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.”
If a substantial reduction is made to your bill of costs due to a lack of thought being given to whether costs ought to have been excluded/divided, you may find yourself on the wrong side of a costs order in relation to the assessment proceedings!