A costs judge has endorsed a firm’s decision to switch funding arrangements less than two weeks before a trial date in a commercial dispute and allowed it to claim higher costs on the new deal.
Master James, sitting in the Senior Courts Costs Office in Dial Partners LLP & Anor v Eastern Airways International Ltd & Ors, found there was nothing unreasonable about the change and effectively handed the firm an extra £273,000 in costs.
The matter settled in the Claimant’s favour a day or two before trial for £625,000, but the defendants in the litigation insisted they should not be held liable for anything more than the amount generated had the original DBA remained in place, as they believed that to be the case when they settled. The DBA had stipulated the Claimant’s Solicitors would receive 50% of any proceeds recovered in the claim.
The effect of the changing funding arrangements was significant. Under the DBA, costs were capped at £250,000 plus disbursements, whereas the Claimant’s Solicitors could draw costs of £523,000 under the replacement CFA.
James said: ‘The claimants did not receive an offer of £300,000, craftily change their retainer and then accept that offer a day later; they received an offer of £300,000, changed their retainer but fought or at least negotiated on for almost two weeks.’
On the question of reasonableness, the judge added: ‘It is not that the claimants would wish to “punish” the defendants by incurring an extra costs burden just in order to pass it on to them, but why should the claimants not take the opportunity to ensure that their solicitors were paid (and that the defendants were liable to pay) something much closer to what the case actually cost to run?’
Whilst the decision will no doubt cause controversy within the Costs world, it seems entirely reasonable to me, that the Claimant should be able to change their funding as the risks of the Claim increase. The matter was proceeding to an extremely costly and lengthy Trial and the costs capped under the DBA would only allow a small portion of the costs incurred to be recovered. As the old saying goes…..the Defendant had the remedy in their own hands…had they put forward a more protective Part 36 offer at an earlier stage in Proceedings, the matter would not have proceeded to a contested Trial and the Claimant’s costs arrangements would not have required updating.