Claimant has £200k costs paid despite winning only £10 damages

Claimant has £200k costs paid despite winning only £10 damages

A High Court judge has found that the county court was entitled to order costs in favour of a claimant who secured nominal damages of £10 at trial.

Mrs Justice Collins Rice said the claimant in Shah & Anor v Shah & Anor had made a Part 36 offer to settle the case for £1 and payment of their costs, and the judge had correctly applied the resulting costs rules.

She noted that the appellants disagreed with the costs judgment in the ‘strongest terms’ and said the intensity of their objection was a measure of their disappointment, the personal context the judge found to be driving the litigation, and the bill they would have to pay.

But she found that the test for finding a Part 36 injustice was not whether she agreed with the judge or whether all his decisions were the only ones he could have taken. ‘The test is whether in any respect he took a decision which it was not properly open to him to take at all, because he got the law wrong, went wrong in principle or reached a wholly unsustainable conclusion.’

The court heard that the parties were caught up in an ‘intense and protracted’ family dispute, including over a contractual obligation regarding an apartment in Goa. The claimants brought an action claiming breach of that obligation and sought £30,000 damages.

At trial last October, His Honour Judge Saggerson found the defendants in breach and awarded the £10 damages. He then ruled that the Part 36 offer had been ‘operative’ and so the usual rules around costs penalties for rejecting it should apply.

The court heard that both parties’ budgets had been set above £100,000 and the claimants’ costs now stood at more than £200,000.

In the costs hearing, the defendants had argued that the normal Part 36 consequences should not follow because the £1 proposal was ‘not a genuine offer to settle the value of the claim; it is simply an attempt to game the system in terms of obtaining a costs order’.

The judge acknowledged the ‘sometimes harsh, even brutal’ default consequences of civil procedure rules but said they should be applied in this case. The action was a disproportionate investment of time, energy and cost on both sides, but the claim itself was not an abuse or solely motivated by vindictiveness.

He said the claimants were at least prepared to bend with their Part 36 offer, but the defendants had been ‘unbendable’. In the event, the Part 36 was deemed a genuine offer to settle and got very close to the court’s final conclusion.

The judge had added: ‘I cannot depart from the default position under CPR 36.17 simply because the rules themselves may appear harsh or produce a harsh result.’

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