Costs disproportionate to claim at costs management

In Willis v MRJ Rundell & Associates Ltd & Anor [2013] EWHC 2923 (TCC) (25 September 2013) the defendant was a firm of construction professionals.

The claims concerned building works carried out to the claimant’s property in Notting Hill.

The principal claims were threefold. First, there were claims for the cost of rectifying defects, which were originally pleaded in the sum of about £480,000 together with a claim for alternative accommodation costs. The second was a claim for overpayment of monies to Grovecourt, the contractor, by way of VAT, in the sum of £335,000. The biggest claim of all, for £617,000, was in relation to the alleged overpayment of monies to Grovecourt for the works themselves.

The overpayment claim broke down into three parts. First, there were the additional costs because of what is alleged to be the unsuitable form of contract. Secondly, there were the claims that various elements of the contractor’s claim had not been justified or supported by reference to invoices or similar. Thirdly, there were criticisms of the defendant’s approach to valuation generally which, so it is said, led to significant overpayment.

The total value of the claim originally pleaded was in the order of £1.6 million. But this had now been reduced.

The VAT had largely been repaid by Grovecourt and the proposed remedial works could be carried out in a differenly thereby reducing the cost and the total value of the remedial work claim to around £250,000

In this way the total value of the claim was now put at a maximum of about £1.1 million. Accordingly, by the standards of most litigation in the Technology and Construction Court, the sums claimed were relatively modest.

The original case management conference took place on 14 December 2012. The court set a timetable for the case, with the trial fixed for early October 2013. At that hearing each side produced a costs budget. The claimant’s costs budget was in the sum of £821,000 together with VAT and the defendant’s cost budget was in the sum of £616,000. The court then expressed the view that in the context of a claim worth up to £1.6 million those figures were high and appeared disproportionate.

As noted above, the claim now had a maximum value of £1.1 million. The total amount of the costs in the costs budgets (excluding VAT on the claimant’s costs), was about £1.6 million. In other words, it would cost significantly more to fight this case than the claimant would ever recover.

The costs in the costs budgets were both disproportionate and unreasonable.

The court accepted that a professional negligence claim of this kind can involve costs that other commercial disputes may not. For example, expert evidence would almost always be necessary to demonstrate that a professional fell below the standard required and a professional reputation was at stake.

But even making due allowance for both these factors, the budget costs figures in this case were disproportionate and unreasonable, particularly given the relatively limited nature of the disputes between the parties.

The individual dispute which was worth the most was the overpayment/overvaluation claim. That would involve some quantity surveying evidence.

However experience of such disputes led the court to suspect that this would not necessarily be extensive The involvement of such experts ought to be relatively limited.

The court declined to waste further time and costs convening any further cost management hearings but warned that the successful party faced cost recovery limited to say £450,000.

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