A recent decision by the High Court has found that litigants may be unable to recover the full costs of proceedings if they have previously failed to accept settlement offers from the losing party.
The defendants built a property in 2005 which was subsequently bought by the plaintiffs. The property suffered from defects caused by poor ventilation. The plaintiffs were forced to vacate the property. As a result, the defendants issued proceedings against the defendants for breach of contract.
Following the 11-day hearing in July 2017, the Court made an order for specific performance to compel the defendants to carry out a number of repair works. The court also ordered that the defendants pay the costs of the plaintiffs' alternative renting accommodation while works were completed.
The court then turned to the issue of the award of costs. The plaintiffs sought to rely on the general rule that costs follow the “event” which means that the successful litigant is paid its costs by the other party.
The defendants relied on six different open offers made to settle the dispute, to argue that they had tried to engage with the plaintiffs throughout the litigation. The defendants further argued that the order for specific performance which the plaintiffs ultimately obtained in July 2017 was no more than they would have achieved, had they accepted the defendants’ offers prior to the trial.
The court agreed and found that there was no reason why the plaintiffs should not have accepted the defendant’s final offer made on 18 February 2016. The court further agreed with the defendants’ argument that throughout the litigation, they showed a willingness to engage with the plaintiffs, but that the plaintiffs had failed to acknowledge or consider the various open offers.
The court found that the defendants should be awarded all costs incurred by them in the proceedings from 18 February 2016 onwards, with the exception of costs incurred from the renting of alternative accommodation by the plaintiffs. The plaintiffs were entitled to an order for all costs incurred by them in proceedings prior to 18 February 2016 together with costs of alternative accommodation. This meant that the plaintiff recovered the cost of only 1 day out of the 11 day trial.
What did the plaintiffs do wrong?
The court stated that, in failing to engage, the plaintiffs had “caused almost all of the costs that followed”. The court was of the view that the approach taken by the plaintiffs had caused a 1 day hearing to run for 11 days. The court noted that parties to proceedings are to be encouraged to accept early resolution of litigation, which ultimately saves on both costs and court time.
Lessons to be learned from this case?
This decision is a lesson to litigants that an award of costs will not necessarily follow a successful claim. The courts will assess the parties' prior conduct and engagement when the issue of costs is being determined and, as a result, litigants should be aware of the requirement to properly consider reasonable settlement offers.