Ayton v RSM Bentley Jennison and Others  EWCH 2851 (QB)
The Defendant was ordered to pay costs in a professional negligence claim, having rejected the chance to settle costs, where the High Court made an Interim Costs Order in the sum of £430,000.00, and costs were to be assessed on an indemnity basis.
The Claimant had sent the Defendants a Professional Negligence Pre-Action Protocol letter seeking £100,000.00 damages plus interest and costs. A cheque was sent by the Defendants for damages and interest. However the Defendants refused to pay costs.
The cheque was returned by the Claimant and proceedings were issued for £100,000.00 plus £1,500.00 for consequential losses and expenses, and further £30,000.00 in respect of a car upgrade.
The Defendants thereafter issued an application pleading a tender before claim and made a payment of £103,576.00 into Court. Prior to the hearing the Claimant made a Part 36 offer in the sum of £105,000.00, inclusive of interest. The Defendant made a without prejudice offer of £122,000.00, inclusive of £15,000.00 towards costs, following which the Claimant made a further Part 36 offer of £105,500.00, inclusive of interest.
The application was dismissed as the tender before claim was not available in the case of a claim for unliquidated damages.
Following the hearing the Claimant made a final Part 36 offer of £110,000.00, inclusive of interest. The Defendant returned with an offer £103,000.00 plus costs of £65,000.00, again not a Part 36 offer.
The claim proceeded to trial in December 2016, and on 23 May 2017 the Master gave her Judgment and awarded the Claimant £119,578.22. The Claimant was awarded 70% of its costs up to the Case Management Conference, and was ordered to pay 80% of the Defendant’s costs thereafter. The Defendant had not accepted a number of Part 36 offers made by the Claimant and the Master held that it would be unjust to apply the normal consequences of the Defendants’ failure to beat the Claimant’s offers.
The Claimant subsequently appealed the costs order of 9 May 2018.
The matter went before Mrs Justice May in respect of the Appeal who heard arguments from both sides. In Mrs Justice May’s view in considering the attendance note of 27 April 2012, it was clear the Defendants, on leading Counsel’s advice, was refusing to pay costs at all. The response to the claim was a defence rejecting any liability for cost, which was accompanied by an application to strikeout. It was only after, and well after the first Part 36 offer made by the Claimant, that the Defendants made any concessions on costs, and then in a fixed sum of £15,000.00, rather than to pay the Claimant’s reasonable costs.
The Pre-Action Protocol makes it clear that the onus is not just on the Claimant to avoid proceedings, and once the process had started with the issue of a Letter of Claim, it was for both parties to seek to resolve their disagreements. What the Defendants did at the pre-action phase in this case was to offer an ex gratia payment, with no admission of liability, of the full amount of damages claimed plus interest at 1 percent. There was no offer to pay costs, and when the Claimant enquired about costs, it was clear that the Defendants were adopting the position (of refusing to pay) which they intended to maintain and to fight, as they did, all the way to the Court of Appeal.
The Defendants submitted that the Claimant was to be criticised for not having sought judgment on admissions once the amended defence had been served. It was the Defendants case that had judgment been obtained, the arguments about costs could have happened then, and that all the costs up to trial of the car claim would have been avoided. There may have been some merit in this point, but the Claimant had made Part 36 offers, all of which the Defendants ignored, and the Defendant could have put a stop to proceedings at any time by accepting one of the Claimant’s offers.
In conclusion, Mrs Justice May said that the Master’s decision to dis-apply the Part 36 regime in this case could not stand, and it was wrong for the Claimant, who made several Part 36 offers, to effectively be out of pocket when the Defendants had conceded the first claim, and the Defendants should have realised the risk of running the ‘technical, tactical’ course that they did. The Defendants acted unfairly in adopting the position of refusing to pay the Claimant any of his pre-action costs.
Mrs Justice May further stated that the Claimant nor his solicitors, depending on the terms of the CFA, should be left out of pocket when the Defendant had effectively conceded the claim. It was open to the Defendant to choose to run a technical, tactical course that they did, seeking to rely upon the wording of the CPR in relation to a tender before claim, but where costs had been incurred in complying with the Pre-Action Protocol, the Defendants must have realised that the risk in adopting this course was that interest and costs would mount whilst they maintained that denial.
In dealing with the amount to be paid by way of an interim payment on costs Mrs Justice May ordered the Defendant to pay £430,000.00, as suggested by the Claimant.