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When conciliation falls apart - counting the cost of court action

legal matters

The infamous case of Jarndyce v Jarndyce - the leviathan Chancery action that provides the backdrop to Bleak House , Dickens' idiosyncratic observation on life, love and the law in Victorian England - involved a protracted legal wrangle over a contested will which ground on for many decades. At the end of the case the lawyers left court laughing, because all the money at stake had been consumed by the costs of the action.

Well, things have moved on a bit since then but the cost of litigation is justifiably still of great concern to those who become involved in it.

Not for nothing has the experience been likened to being locked in a taxi with the meter running, on a journey of indeterminate distance, to an unknown destination. Similar concerns have been expressed about arbitration and other formal dispute-resolution processes.

Contrary to popular belief, the object of these processes is not to line the pockets of contentious lawyers but to resolve disputes between disputing parties. If the combatants sorted out their own quarrel quickly and sensibly, they would not only save money but would quickly put the lawyers out of business. But the pressures of the modern commercial world are such that this is easier said than done, and anyway, it takes two to tango.

What if you have the misfortune to become caught up in a dispute and, although you want to be sensible and broker a deal, the other side insists on holding out for unrealistic sums of money, or will not offer you a bean? Are you bound to go the whole hog and risk all?

This was the subject of a recent address to the Society of Construction Law by well-known construction barrister and arbitrator John Tackaberry QC. Tackaberry described 'the old days' before the Civil Procedure Rules (CPR), when the system did offer conciliatory defendants the opportunity to assess their likely liability, and show the claimants the colour of their money by paying it into court, thereby offering to pay the claimant £. plus their costs.

The payment-in would operate something like a 'put option' on the money market. If the claimant rejected the offer and recovered more at trial, they were justified in refusing it and entitled to the costs of the action. If they recovered less, they were unreasonable to refuse the offer and not only did not recover their costs, but also had to pay the defendants' costs from the date when they ought to have accepted the offer.

CPR Part 36 has put what Tackaberry described as 'teeth' on the old regime, and allowed the courts to award indemnity costs and penal interest against greedy claimants - while permitting realistic claimants to revise their claim downwards in the quest for compromise.

Furthermore, Part 44 of the CPR gives the courts wide discretion when deciding who should pay what costs and from when. They can take into account factors such as the conduct of the parties, whether they have exaggerated their claim or made any serious attempt at compromise.

It was Tackaberry's view that the old practice of keeping mum when an offer came in, in the hope that it would be improved, is contrary to the overriding objective, and that the courts now expect a pro-active response to settlement offers. He confessed, however, that the various permutations between the crystallisation of a dispute and its resolution - of likely sums to be offered, revised claims and whether they should include interest and costs - makes the drafting of Part 36 offers very difficult. This is particularly the case in arbitration, where the Part 36/Part 44 regime does not necessarily apply and where there is no facility to make a payment into court. Instead, the defendant must make a written or 'sealed offer'.

He was therefore delighted that the Technology and Construction Court had recently endorsed his drafting of a sealed offer in Lindner Ceilings Floors Partitions v How Engineering (2000), which made an offer but not costs, providing instead that the claimant's costs be determined by the arbitrator. Tackaberry's message was that, although the new costs regime offers more options to conciliatory litigants, it is tricky and requires careful drafting to ensure its objectives.

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