Contact: Stephen James; Clarkslegal LLP (Reading, England)
The rule of thumb in English litigation is that the loser pays the winner’s costs. There are three occasions where the Court might depart from this presumption:
- Where the successful party has failed to beat an offer made by the losing party earlier in the proceedings
- The legal costs of the parties are entirely disproportionate to the sums in dispute
- Where the conduct of the successful party is such that they should be disqualified from receiving their legal costs
The recent case of Saigol –v- Thorney brought into play all of these factors.
In 2008 Mr Saigol took his 20 year old BMW to Thorney to have it converted into a car fit for racing. There followed a dispute over the work that was done and the price to be paid for it. Thorney refused to return the car until it was paid and threatened to sell it. Mr Saigol issued proceedings in 2009 and obtained an interim injunction to stop Thorney selling the car.
Mr Saigol’s underlying claim for the return of the car continued, together with a claim for damages. Thorney counterclaimed for payment that it said was still due.
On 7 March 2012 there was an unsuccessful mediation and a case management conference was scheduled for 3:00 p.m. on 8 March 2012. At 1:48 p.m. on 8 March Thorney’s solicitors made a written offer to return the car and pay Mr Saigol £2,000 in full and final settlement of the claim, with both sides to pay their own costs. Even though the trial was still 10 months away the offer was only made open for acceptance until 12 Noon the following day, a period of 22 hours. The offer was not accepted and it lapsed.
When the trial eventually took place both the claim and counterclaim succeeded to a limited extent, leading to an order for a net payment by Thorney to Mr Saigol of £370. To put this in context, Mr Saigol’s costs were by that time £67,000 and Thorney’s costs were £77,000. The Judge ordered that although there was a net payment to be made to Mr Saigol, as he had refused Thorney’s offer, he should pay Thorney’s costs from the date of the offer. Thorney appealed.
The Court of Appeal upheld the appeal and set aside the Trial Judge’s order for costs. The Court of Appeal was critical of the Judge’s decision to treat Thorney’s offer as if it had been made under Part 36. Part 36 offers must follow strict rules and, in particular, to attract costs protection must be open for acceptance for at least 21 days. It was not fair to allow Thorney the benefit of a properly made Part 36 offer when its own offer was open for such a short period. In fact, Mr Saigol was in hospital when the offer was made and did not even read the offer letter before it expired.
The Court of Appeal also took into account two Part 36 compliant offers by Thorney before and after the 22 hour offer. However, these were on far less generous terms and did not in the Court’s view demonstrate a real attempt to settle the litigation. The Court was similarly critical of Mr Saigol’s failure to make a proper attempt to settle the claim.
Although Mr Saigol’s appeal succeeded, the Court of Appeal was of the view that neither party could be declared the winner in the overall litigation. Accordingly, it ordered that both sides should pay their own costs, except in relation to Mr Saigol’s limited costs for his injunction when he was acting in person.
The case is an expensive reminder that the Courts expect parties to approach litigation in a proportionate manner and to keep in mind at all times the need to make sensible attempts to settle claims.
