Blog - Friday 1 May 2015

Court of Appeal urges pragmatism in relation to costs of repleaded cases

In Begum v Birmingham City Council [2015] EWCA Civ 386 the Court of Appeal has provided guidance on the appropriate costs order which should be made where a party repleads their case and succeeds on the basis of the repleading.

Summary

1.Beoco v Alfa Laval [1995] QB 137 turned on its own facts. It is not authority for the general proposition that, in all cases where an amendment to a claim makes the difference between failure and success, the Claimant must pay the Defendant's costs up to the moment of the amendment.

2.Where, notwithstanding the amendments, the remedy sought remains relatively consistent and no prejudice is suffered by the Defendant it is not appropriate to deprive a successful party of its costs simply because it has attached different labels to the way in which its case was presented.

Facts

The substantive litigation arose out of the purchase of a property under the Right to Buy Scheme by the Claimant and her husband. The Defendant had provided a report pursuant to s.12(4A) of the Housing Act 1985 which had identified certain defects but nothing unduly serious.

Following the completion of the sale, cracks had appeared in the property. The Claimant and her husband had attempted to claim for the cost of remedial works under their insurance, but the claim had been rejected on the basis that the damage related to pre-existing defects.

A claim had been intimated against the Defendant. The claim had originally been brought in the name of the Claimant’s husband, but the Claimant had been substituted to reflect the fact that she was the legal owner of the property.

The claim had originally een pleaded on the grounds of negligence and misrepresentation.

On 14 May 2012 the claim was amended to include a claim for breach of statutory duty.

The matter proceeded to trial in the High Court in May 2013. Judgment was handed down on 4 June 2013. The claim in relation to breach of statutory duty succeeded, but the other heads of claim failed. 

The Court concluded that there were two defects which had caused the damage. The Defendant was liable for the loss caused by one defect but not the other. The Court held that the way in which the claim had been presented meant it could not determine the relative causative potency of each defect at that stage so the claim was listed for a further trial to determine this issue.

On 18 December 2013 a further judgment was handed down in which it was concluded that the Defendant was liable for 90% of the Claimant’s losses.

Costs Judgment

The Court made the following costs Orders:

1)No order as to costs pre-issue

2)Claimant pays the Defendant’s costs between issue and 14 May 2012 (save that the Defendant pays the costs of the Claimant’s expert evidence). This was because the claim was bound to fail to this stage because the Claimant’s only pleaded claim was for negligence and misrepresentation, both of which failed at trial.

3)Defendant pays 40% of the Claimant’s costs between 15 May 2012 and 4 June 2013. This was because the Claimant was pursuing three causes of action during this period, only one of which succeeded.

4)Defendant pays 80% of the Claimant’s costs between 5 June 2013 and 18 December 2013. This was to reflect the inefficient way in which the case was conducted and because, if the case had been properly pleaded, all issues would have been dealt with in the trial in May 2013. Therefore the Claimant's inadequate pleading caused matters to be dealt with at two hearings rather than one. On the other hand all the evidence at both hearings needed to be deployed in any event.

The effect of the costs judgment was that the Claimant was liable for more in adverse costs than she recovered in damages.

Appeal

The fourth decision was not challenged by either party.

The Claimant argued that her case from the beginning had been that the Defendant had failed to disclose the serious structural defects in relation to the property which should have been, but were not, disclosed. The Claimant succeeded on that case. The fact the Claimant originally applied the wrong legal label to the claim was immaterial.

The Defendant maintained that the High Court had not made an error of law or an error of principle, so the Court of Appeal should not interfere with its Order.

Decision

The starting point was that the Claimant had been successful: she had recovered damages of almost £75,000.

The fact that the Claimant’s husband was initially named as the Claimant was a technical error which had no impact on the costs that were incurred. It should be ignored.

The 20% reduction (under the fourth decision) was considered “eminently fair” and reflective of the requirement for two trials as a result of the Claimant’s deficient pleadings.

The lack of success on the negligence and misrepresentation points did not justify the second or third decisions. The Claimant’s case had always been that the Defendant was at fault in failing to refer back to its own records and to alert the Claimant to serious structural defects before selling the property to her. The Claimant's pleaded claims for negligence, misrepresentation and breach of statutory duty were different labels which were applied to the same underlying facts. The factual and expert evidence which both parties assembled was directed to those facts. Both parties would have prepared and adduced substantially the same evidence, even if the Claimant had only ever pleaded her claim as one for breach of statutory duty.

The Court accepted that a modest amount of time was spent at trial debating legal issues. The proper way to reflect this would be to apply a 15% reduction to the costs incurred prior to 5 June 2013.

It was concluded that the instant matter was very different from Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137, which is often relied on as authority for the proposition that in all cases where an amendment to a claim makes the difference between failure and success, the Claimant must pay the Defendant's costs up to the moment of the amendment. The Court identified that the late amendments in Beoco substantially altered the case and prevented the Defendant making a payment into Court; whereas in this matter the substance of the claim remained, for all intents and purposes, the same and the Defendant had a significant opportunity to make a Part 36 offer but did not take it.

The decision of the High Court was therefore varied to provide that the Defendant was to pay 85% of the Claimant’s costs to 4 June 2013, and 80% of the Claimant’s costs thereafter.

By Alex Bagnall, Associate and Costs Advocate