How a case with an award of £10 in nominal damages was awarded costs of £200,000
Litigation is a costly process that shouldn’t be entered into lightly. Here’s a recent example of how the litigation process comes as a risk and reward, depending on what side of the table you are on…
Fundamentally, Shah & Anor v Shah & Anor is a case that concerned a family dispute over an apartment in India. The Claimants sued the Defendants and pleaded damages for the amount of £30,000. The Claimants, however, brought a Part 36 offer to the Defendants to settle the dispute for £1 and to pay their costs of above £200,000. The Defendants rejected this. If this offer was accepted, both parties would have avoided litigation. Though the incurred costs were already high, future costs could have been avoided for both parties and savings could have been made.
What is a Part 36 offer?
A Part 36 offer is made under part 36 of the Civil Procedural Rule which allows either party the opportunity to settle. The Court is always regarded as the last resort, and a refusal to settle usually results in costs consequences unless the costs are considered to be unjust under Part 36.17. Neither party is entitled to the costs and the interests on these costs. It is highlighted that the Court will only depart from the costs consequence if it is unjust – not because it seems harsher and more consequential on a party.
Shah & Anor vs Shah & Anor
The trial judge, Judge Saggerson held that the Claimants had succeeded and found the Defendants to be in breach of their obligations. Unfortunately for the Claimants, it was decided that they had not effectively quantified the extent of their recoverable loss and would only be awarded £10 in nominal damages.
In the costs hearing, the Defendants argued that the Claimants Part 36 offer of £1 and payment of costs 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 decided against the Defendants and ordered them to pay the Claimants’ costs under CPR 44. This requires the unsuccessful party to pay the costs of the successful party.
The defendant’s appeal
The Defendants appealed the decision on the basis that “because it’s 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 Court, however, upheld the decision made by the trial judge and maintained that despite the Claimant being awarded nominal damages, they are still the successful party. The judge acknowledged that “whether the [Defendants] over-estimated their prospects of success, or whether, they valued the chance of inflicting litigation defeat on the [Claimants] so highly they were prepared to take that chance whatever the cost, their choice to litigate was one which Part 36 is designed to discourage…”
Though this decision was highly consequential to the Defendants, it was not unjust. With the judge echoing “I cannot depart from the default position under CPR 36.17 simply because the rules themselves may appear harsh or produce a harsh result.” The judgment highlighted that the objective of Part 36 is to prepare all parties to “give” as well as to “take” if they are willing to take the risk of being entrenched in their positions.
About the author
Iain heads Beeston Shenton Solicitors’ commercial litigation department.
Iain has 30 years of experience in Commercial Debt Recovery and Insolvency fields having worked in both Private Practice and Industry and has extensive experience working across all industry sectors and has particular expertise in working with Insolvency Practitioners in advising and recovering outstanding insolvent company ledgers.
Iain brings a pragmatic and commercial approach to legal claims and disputes.
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