Professional negligence: A dispute over costs

Citation: D Morgan Plc v Mace & Jones [2011] EWHC 26 (TCC) 17/1/11

The Facts

In an earlier judgment, four out of five allegations of negligence made by the Claimant (C) against the Defendant (D) were dismissed.  In relation to the one allegation of negligence that was upheld and the four that were rejected, C’s case on causation failed on both of the relevant limbs and, in any event, the vast bulk of C’s claim for damages was irrecoverable.  If that were not the case, any damages recoverable by C were within the sum of £2.6 million which had already been paid out by the original co-defendant.  It was accepted that D was generally entitled to its costs but there were various disputes between the parties in respect of the level of those costs.

Issue: The court had to determine (1) whether there should be a reduction in the amount of costs that C otherwise had to pay D because of their success on the one ground of negligence, (2) whether D was entitled to indemnity costs, either from the outset of the proceedings or the date on which their Part 36 offer had expired and (3) the amount of the interim payment on account of costs due to D.

Held (Coulson J.)

(1) C was not entitled to a reduction in the amount of costs otherwise payable to D because of their success on the one ground of negligence because the arguments on liability, causation and loss were all intertwined and even if D had admitted that allegation it would have had no significant effect on the course of the trial or the costs incurred. 

(2) The exaggerated and fundamentally flawed nature of the claim against D took the case close to the boundary of what might be considered “the norm” within the test set out in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspeden and Johnson [2002] EWCA Civ 879.  The fact that there had been a lack of proper disclosure by C and dilatory conduct of the proceedings by them was not of any real significance when determining the basis of the costs assessment. 

On balance, as at July 2010 this was not a case where indemnity costs would have been appropriate.  However, the position then changed because C settled its pleaded claim against the party who was, on any view, the principal defendant and the exaggerated and flawed claim against D became the subject of an offer. 

The refusal to accept that offer, when seen against the background of the real problems with maintaining the claim against D alone, was unreasonable to a high degree and therefore very similar to the situation in Excelsior.  Costs would be assessed on an indemnity basis from the date when the offer expired because of the failure to accept the offer despite the speculative nature of the claim against D and the wholly unsatisfactory and unreliable nature of the evidence of C’s principal witness.