What do Linda Evangelista and Dale Boucher have in common?

Linda E 020916

Dale B narrow 3 020916

What do Linda Evangelista and Dale Boucher have in common?

Slightly more than you think. They are both recognized authorities within their fields on costs disclosure.

The supermodel famously said, “I don’t get out of bed for less than $10,000 a day”.

Less famously, the Commissioner for Uniform Legal Services Regulation and CEO of the Legal Services Council in March this year signed into operation (see s 407 of the Uniform Law) his pronouncements on the need for single figure costs estimates under the Uniform Law. (See the Legal Services Council’s Guideline and Direction – Costs Estimate – LSC 01/2016 and its almost identical CULSR twin, Guideline and Direction – Costs Estimate – CULSR 01/2016.)

Ms Evangelista was succinct and presumably did not need to elaborate.

Mr Boucher was less concise. And, as if the Uniform Law jigsaw needed still more pieces, he accompanied his pronouncements with three “worked examples” of how lawyers are required to provide “single figure” estimates to their clients for the purposes of the Uniform Law.

Look at the examples closely. Identifying a “single figure estimate” in any of them is like identifying a snowflake in a blizzard. Easy. And meaningless.

Nevertheless it seems that Mr Boucher considers single figure estimates are compulsory, even if they are as a consequence contrived, almost certain to be superseded, or premised upon tenuous guesses about the likely course of litigation.

Note particularly paragraph 8 of both Guidelines and Directions. Estimates may be provided as a “range of figures PROVIDED [original emphasis] that the law practice … always gives the single figure estimate of the total legal costs in the matter that section 174(1)(a) requires” [my underlining].

My copy of the Uniform Law contains the following version of s 174(1)(a):

A law practice—

(a)       must, when or as soon as practicable after instructions are initially given in a matter, provide the client with information disclosing the basis on which legal costs will be calculated in the matter and an estimate of the total legal costs…

I will give a prize to the first reader who can find in s174(1)(a) the requirement for a “single figure estimate” to which Mr Boucher is referring in his Guidelines and Directions. And not just any prize. It will be a colour, A4-sized photo portrait of either Ms Evangelista or Mr Boucher – your choice.

I have blogged about this silliness before but I was reminded of it at a seminar yesterday on the Uniform Law. Three speakers. Engaged audience. Useful discussion. But beyond the single slide of Linda Evangelista on display, not much clarity.

 

Client complaints – a tool kit for solicitors

Some lawyers have never received a complaint from a client.

Or so they say.

Such prodigies, liars and recent arrivals to the profession are vastly outnumbered by the rest of us.

This might explain the big audience of solicitors who turned out this week at a seminar Gordon & Jackson hosted on the twin topics of client complaints and recent cases dealing with the Civil Procedure Act.

I delivered a paper on the first topic. The paper’s section headings will give you the flavour of its content:

  1. Complaints are inevitable;
  2. Try not to take complaints personally (and get help, of whatever variety);
  3. Categories of complaint under the Uniform Law;
  4. Categories of complaint beyond the Uniform Law;
  5. Your LPLC insurance – the good news and the bad;
  6. Avoiding complaints in the first place; and
  7. Professional standards scheme – you are a participant, aren’t you?

My colleague Monika Paszkiewicz spoke on the Civil Procedure Act. Her paper includes reference to Judd J’s recent observations (in ACN 005 490 540 Pty Ltd v Robert Frederick James Pty Ltd [2016] VSC 217 at paras 18 -19) that solicitors who threaten each other too willingly with personal costs applications under the Civil Procedure Act might themselves be breaching the very statute they are invoking.

Client complaints and the Civil Procedure Act have obvious potential overlap for litigation solicitors. Download the two papers (combined as a single document) here and file them away with your Civil Procedure Act resources.

Waiter! There’s a Chinese restaurant in my easement!

The lawyer who acts for himself is commonly thought to have a fool for a client. But what about the lawyer who acts for the company of which he is a director and shareholder?

A Melbourne solicitor who acted in several capacities for a private company must now be pondering this question following the non-party indemnity costs order made against him personally in 1165 Stud Road Pty Ltd v Power & Ors (no 2) [2015] VSC 735. (The case was decided just before Christmas but somehow was published on Jade only this week).

The solicitor was (indirectly) one of the main shareholders in 1165 Stud Road Pty Ltd (“Stud Rd”). He was also its company secretary and one of its two directors. He dealt on its behalf in several controversial transactions and also acted as its solicitor in both litigation and conveyancing contexts.

In 2007, Stud Rd bought a block of land in Rowville. The block’s only road access was via an easement. But two years earlier a neighbour had built a Chinese restaurant on that easement.

In 2012, Stud Rd sold its landlocked block for $2.3 million. Its s 32 statement neglected to mention the slight issue of the obstructed easement. That sale then fell over before settlement and Stud Rd sued the purchaser and also the owner of the offending restaurant (“Palms”).

Early in the litigation, Palms demanded security for costs from Stud Rd. Stud Rd’s solicitor/company director/company secretary/etc. wrote back refusing and saying that Stud Rd had ample equity in the Rowville land and could afford to meet any likely costs order against it. That much was true.

But things changed when Stud Rd subsequently sold the land afresh. The new sale wasn’t disclosed to the other litigants nor was the new contract of sale discovered pursuant to Stud Rd’s continuing discovery obligations. Stud Rd also omitted to mention to the other parties its distribution of the net sale proceeds to various of its own related interests.

As the trial loomed closer, Stud Rd went into voluntary liquidation. The proceeding was discontinued before trial as a consequence.Palms had nevertheless spent over $300,000 preparing for the trial. There being no prospect of recovering those costs from the liquidated company, Palms applied instead for non-party costs orders against Stud Rd’s solicitors and its two directors personally.

Palms succeeded – but only against the director who had also acted as the company’s solicitor. His multi-faceted role as the company’s director, shareholder AND external solicitor was said by Vickery J to constitute “exceptional circumstances”.
Here is a taste:

138. It is clear that [the solicitor], in conducting the Proceeding as a solicitor on behalf of the Plaintiff, in respect of which he was not only a director but also, through a corporate vehicle, a shareholder, was in breach of paragraphs 9.2 and 13.4 of the Professional Conduct and Practice Rules 2005 and placed himself at serious risk of being in breach of paragraph 13.1 of the rules. As a solicitor in active practice, [the solicitor] ought to have been aware of the effect of these Rules.
139. This placed [the solicitor] in a conflict of interest and rendered his conduct of the litigation on behalf of the Plaintiff improper.
140. This was so despite the fact that, during the life of the Proceeding, neither Palms nor its solicitors … ever once raised the issue of conflict of interest or demand that [the solicitor], or any of the firms at which he worked, cease to act in the Proceeding due to his conflict.
141. Reference is made to paragraphs 9.2, 13.1 and 13.4 of the Professional Conduct and Practice Rules 2005 published by the Law Institute of Victoria, which was tendered in evidence:
9.2 A practitioner must not accept instructions to act or continue to act for a person in any matter when the practitioner is, or becomes, aware that the person’s interest in the matter is, or would be, in conflict with the practitioner’s own interest or the interest of an associate.
….
13.1 A practitioner must not act as the mere mouthpiece of the client or of the instructing practitioner and must exercise the forensic judgments called for during the case independently, after appropriate consideration of the client’s and any instructing practitioner’s wishes where practicable.
13.4 A practitioner must not unless exceptional circumstances warrant otherwise in the practitioner’s considered opinion:
13.4.1 appear for a client at any hearing, or
13.4.2 continue to act for a client,
in a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence material to the determination of contested issues before the court.

142. It is likely that [the solicitor] was not able to bring an independent mind to decisions made on behalf of the Plaintiff in the conduct of the Proceeding by reason of his conflict of interest and it is likely that a number of the decisions he made were infected with this conflict.
143. An order for costs against a non-party is not dependent upon, but can take into account, any improper conduct by the non-party….

The upshot was that the solicitor personally [cf the firm that employed him] was ordered to pay Palms’ cost of the proceeding on a standard basis until the date of the undisclosed sale and on an indemnity basis thereafter.
A final point is worth noting. Palms’ application was brought partly in reliance upon s 29 of the Civil Procedure Act [as discussed in Yara v Oswal blogged here] but that limb of the application was held to be statute-barred as it had not been made before the proceeding was “finalised” as required by s 30. However, this missed deadline did not matter for Palms as the Court held that it had power to order the costs against the solicitor under s 24 of the Supreme Court Act and/or in its inherent jurisdiction.

The lessons from this case? Four occur to me.

  • Acting for yourself and/or interests close to you is perilous.
  • A lawyer and client with apparently aligned commercial interests might still have a conflict of interest if the lawyer’s forensic judgment is thought to be compromised as a result of that close association.
  • Lawyers should not act in matters in which they are likely to be material witnesses.
  • And finally, never be too reassured by the fact that no conflict of interest is suggested by your opponents.

Estimating the costs of an impending litigation for disclosure purposes

You are a solicitor about to open a new potential litigation file. It might go all the way to the High Court. But it also might settle in response to your very first letter of demand.

The only real certainty about it is that the new Uniform Law requires you to give your client a written disclosure “as soon as practicable after instructions are initially given” which  must include “an estimate of total legal costs.”  You must then promptly update that disclosure ever thereafter when there is a “significant change to anything previously disclosed” (see s 174 of the Uniform Act).

What does that all mean? This early in the life of the Uniform Law, nobody can be certain but if you get your disclosure wrong (initially and/or subsequently) your costs agreement is likely to be rendered void as a consequence (see s 178(a) of the Uniform Act) and collecting payment will become slow and problematic as a consequence.

So get your costs disclosure right.

Here are some suggestions (but no promises) as to how to go about it.

  1.  Start with one of the Law Institute of Victoria’s disclosure template documents available here. By all means modify the LIV’s wheels to suit your particular situation but don’t reinvent them altogether.
  2. Make your costs estimate sensible. Your client might be dismayed with the bottom line estimate but everyone will be happier to see that figure upfront in an estimate than to be ambushed by something similar in the final bill.
  3. Make the costs estimate transparent to your client. An Excel spreadsheet where you (and the client) can manipulate the variables might be a great way to start. (Help yourself to the template version below.)
  4. Be candid with your client as to the vagaries of both litigation and your estimate. Maybe your client’s case will be quick and simple. But maybe it will become the Battle of the Somme instead, complete with counterclaims, interlocutory skirmishes, third and fourth parties and some stern appellate action to top it all off. Your guess at the very start is possibly only slightly better than your client’s. Don’t pretend otherwise.
  5. Sign the client up to a costs agreement. Again, be guided by the Law Institute precedents.
  6. Having done all of the above, test your client’s comprehension of the strategy and costs being embarked upon. File note it. (Seriously, file note it. You might need those file notes years down the track if your client suggests that language/stress/other issues impeded his/her comprehension of the costs disclosure sufficiently to constitute a breach by you of s 174(3) of the Uniform Law.)
  7. When your costs disclosure then seems complete – remind yourself that it probably isn’t. Your ongoing disclosure obligations endure until the file is actually closed.

Some thoughts on the accompanying spreadsheet
I have drawn the spreadsheet below as an aide-memoire for solicitors attempting to estimate future solicitor/own client costs for Uniform Law disclosure purposes. Inevitably, it will need modification for each actual case.

For template purposes, I have done it for a hypothetical commercial case in the Victorian County Court. The rates I have utilized are derived from the County Court scale (which is, of course, 80 per cent of the Supreme Court scale – see this blog.)

I have made the following viable (but not inevitable) assumptions which might or might not apply to your case. (Change the variables and add or delete new row items to suit your particular client’s anticipated case.)

  • The spreadsheet is for a prospective plaintiff;
  • There is no conditional costs agreement (eg no win/no fee) arrangement proposed;
  • There will be a single claim against a single defendant;
  • There will be no counterclaim, third party claim or similar;
  • There will be no pleading amendments by either side;
  • All directions will be made ‘on the papers’ and by consent;
  • There will be a single contested interlocutory application;
  • There will be a single mediation;
  • There will be a four-day trial with a reserved judgment handed down on an eventual fifth day with short argument that day as to costs, interest and the final form of the Court’s orders;
  • There will be two expert witnesses, (eg an accountant and an engineer) for the plaintiff and no lay witnesses for the plaintiff requiring payment for their attendance;
  • Everything will happen in Melbourne without anyone claiming circuit fees, travel expenses or similar;
  • The barrister will do an initial advice as to merits, draw the statement of claim, do an advice as to evidence, remain involved incidentally throughout the matter and will charge the equivalent of 10 hours’ preparation for each anticipated full day in Court;
  • The solicitor and the single (senior) junior barrister will each charge the client the maximum County Court scale rates applicable to them as of November 2015 (ie solicitor $302.40 per hour and the barrister $432 per hour / $4316 per day in Court) (plus GST in both cases); and
  • There will be no appeal.

Note that because of the technical limitations of WordPress (which hosts this blog) the Excel / Numbers functions formerly embedded in the table below have been lost in posting it here. You can resurrect the table and its functions for your own use by –

  • copying and pasting the table from this blog back into your own Excel / Numbers spreadsheet;
  • restoring the functions manually (eg in Excel you make the formula in D2 read “=PRODUCT(B2:C2)” and then replicate it for the remaining rows;
  • insert/delete rows and increase/decrease the rates and duration estimates to suit the circumstances; and
  • use “AutoSum” to calculate the total.

You might even email a version of your spreadsheet to your client so he/she can also manipulate some of the variables. Emphasize to your client that you are providing an estimate – not a quote and that the defining characteristic of commercial litigation is that it never goes entirely according to the script.

Some parting cautions
Three final issues occur to me that might be prudently flagged as part of your disclosure to your client. (Neither is apparent in the Uniform Law or my spreadsheet.)

  • Most litigation settles well before trial. Some settles during the running of the trial. Of the relatively few cases that run to judgment, some are appealed but most are not. The combined effect of these disparate possibilities is that your initial estimate might legitimately undershoot or overshoot the eventual total that you charge your client drastically.
  • Losers will usually be ordered to pay the winner’s costs. This means that the figure in your compulsory Uniform Law estimate is likely to be substantially wrong in practical net terms. The final, post-trial, net figure your client pays for lawyers’ involvement in the litigation is likely to be much higher or lower than your Uniform Law estimate, depending on whether your client is on the right or wrong end of a substantial costs order.
  • Once embarked upon, litigation can seldom be unilaterally abandoned without adverse costs consequences – see for example Victorian Supreme Court Rule 63.15 and County Court Rule 63.15 about the cost presumptions upon the filing of a notice of discontinuance. This makes dangerous the widely-held view that costs can and should be estimated to prospective litigants as a sequence of distinct figures. Lay clients might reason from an overly segmented disclosure that if they are not enjoying the litigation ride, they might easily and cheaply, unilaterally quit along the way as if alighting from a bus at one of its usual stops. Alas, life and litigation just isn’t as simple as the authors of the Uniform Law apparently believe.

What guarantees do I offer about the spreadsheet? None but any bouquets or brickbats about it are welcome all the same.

Category of legal work estimated time estimate in hours (assume 1 day =10 hours) hourly /unit charge approx total charge
Pre-litigation investigation & negotiation (solicitor) 20 $302 $6,048
Brief to advise (barrister) 10 $432 $4,320
Writ & statement of claim (barrister) 10 $432 $4,320
Filing fee $814 $814
Brief as to evidence (barrister) 10 $432 $4,320
Preparation for and attendance at mediation (solicitor) 6 $302 $1,814
Preparation for and attendance at mediation (barrister) 10 $432 $4,320
Mediator’s fee (half share) $2,000 $2,000
Mediation venue hire (half share) $300 $300
Interlocutory application (solicitor) 10 $432 $4,320
Interlocutory application (barrister) 10 $432 $4,320
Fees for Expert # 1 – report and appearance as expert witness 30 $362 $10,860
Fees for Expert # 2 – report and appearance as expert witness 30 $362 $10,860
Solicitor’s general preparation (including attendances on client, experts, counsel and court, correspondence, offers of compromise, discovery, notices to admit, expert witness notices, preparation of court book etc) 100 $302 $30,200
Trial preparation (barrister) 45 $432 $19,440
Setting down fee $962 $962
Hearing fee (per day of trial from day 2) 3 days $500 $1,500
Solicitor instructing in Court 45 $302 $13,590
Barrister – appearance at trial 40 $432 $17,280
Barrister – taking judgment 5 $432 $2,160
Misc disbursements (eg process servers, company searches, couriers, subpoenas etc) $2,000 $2,000
Trial transcript (4 days @$2250 per day) $10,000 $10,000
TOTAL ESTIMATE $155,748 (plus GST)

Our dishevelled new Uniform Law

What a shambolic creature is the new Legal Profession Uniform Law.

I attempted to translate its provisions relating to costs disclosure and recovery in a presentation for the Goulburn Valley Law Association this week. I reckon I did a reasonably accurate job. I could tell this because my attentive audience seemed to be suitably irritated and confused by the end.

Anybody who claims an entirely confident understanding of the Uniform Law has obviously not read it properly.

By itself, the Uniform Law is frequently unintelligible without reference to the local (ie state) law which adopts it.Because of this, the Uniform Law in Victoria is actually a schedule to the zippily-named Legal Profession Uniform Law Application Act 2014.

This unattractive combination adds up to a combined total of approximately 570 pages and 120,000 words. And that’s before you reach for a third necessary document, the Legal Profession Uniform General Rules 2015 (and disregard other related subordinate legislation).

Between them, these three documents are ostensibly organised into various chapters, parts, divisions and schedules. Indeed, they seem to have more chapters than the Freemasons, more parts than Shakespeare, more divisions than Stalin and more schedules than V/Line. But you can’t be entirely sure because the centrepiece document, the Uniform Law itself, has no index whatsoever and the pagination doesn’t help.

That is bizarre in any legislation but particularly in something that presumably is meant to be accessible to, among others, disgruntled clients looking as lay people to the law for guidance about their rights and obligations vis-a-via their lawyers.

But given the sheer bulk of the Uniform Law package, it must be extraordinarily precise, right?

Wrong again.The mandarins responsible for administering it (for Victorians that means a combination of the Sydney-based Legal Services Council and the Melbourne-based Victorian Legal Services Board and Commissioner) have separate websites, each featuring information sheets for clients and for legal practitioners.

Alas, some of the Victorian Legal Services Board and Commissioner’s info appears to relate to superseded legislation and not to the Uniform Law at all.

And at least one of the Legal Services Council’s flyers makes the confident assertion that the Uniform Law “does not permit” lawyers to express estimated future costs to their clients as a range.

This “cost-estimates-must-not-be-expressed-as-a-range” view is an urban myth also gaining currency at high levels in Victoria.

But it is wrong. (Look, at least, at s 182(3) of the Uniform Law regarding conditional costs agreements and then look (in vain) for any prohibition on cost estimates being expressed as a range in other contexts.)

In August 2015, the Victorian Law Institute Journal breathlessly introduced the Uniform Law to its readers with a cover story entitled “Empowering Clients”. What nonsense. If any lay client can navigate the Uniform Law without professional assistance (which seems improbable) he/she would almost certainly have found (substantially) the same answers much faster under the now-repealed Legal Profession Act.

How did we get lumbered with the Uniform Law? It seemed a good idea to the Council of Australian Governments back in 2009 to have uniform nationwide legislation for the various jurisdictions’ barristers and solicitors. This might have made sense if most of our lawyers and clients were dealing with each other on a nation-wide basis.

But in the real world only substantial commercial and government clients generally operate on that basis. So guess which class of clients is largely excluded from the “protections” offered to clients by the costs provisions of the Uniform Law? You guessed it. Commercial and government clients.

What a mess. Little wonder that since the idea’s inception in 2009 every jurisdiction except Victoria and New South Wales has slipped off the Uniform Law bandwagon.

But enough venting from me.

I ended my Goulburn Valley Law Association presentation this week with what I hope are four practical observations:

  • As ever, costs are only recoverable by solicitors to the extent those costs are fair and reasonable. Costs agreements are prima facie evidence only as to what is fair and reasonable – see s 172(4).
  • Solicitors’ enforcement of costs agreements against clients hinge first and foremost on adequate costs disclosure at the front end. Position yourself to be able to demonstrate this. Employing the LIV’s template disclosure and costs agreement document will be a good start.
  • Even perfect front-end written costs disclosure of itself might still not be sufficient. For the purposes of s 174 of the Uniform Law, solicitors should ideally verify and document the client’s receipt and apparent comprehension of that written disclosure. (The Law Society of NSW suggests a short (and documented) Q & A exchange with the client about the client’s expectations as to costs and strategy following delivery of the written material as one mode of evidencing the client’s apparent understanding of that material.)
  • Perfect disclosure should ensure a valid costs agreement but even a perfect costs agreement isn’t bullet-proof either – see s 199 and s 200. Because of this, there will probably be situations where it will be fastest and cheapest for solicitors to grasp the nettle and initiate a costs assessment (aka a taxation) of their own bills rather than to sue for fees only to have their proceeding stayed pending an assessment anyway. But don’t think about this idea  too long if you are a solicitor because you might be statute-barred by s 198(4) if you wait more than 12 months from the date of your bill before seeking the costs assessment.

Need further clarification? Then reach for the Uniform Law with trepidation.


					

Retail tenant ordered to pay its landlord’s costs. Again.

In May this year I blogged (here) about the retail tenant that won a VCAT claim and received nothing but an adverse costs order for its trouble. Subsequently the tenant appealed the costs order (but, interestingly, not VCAT’s refusal to allow it damages) to the Court of Appeal.
The Court of Appeal (comprising Hansen JA, Ferguson JA and McLeish J) delivered its decision last Thursday. The joint judgment was more bad news for the tenant.The decision is 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSC 8216.
In a nutshell, the Court of Appeal said that VCAT’s Judge Jenkins sitting at first instance had set her reasoning out sufficiently and that it was “only in exceptional cases” that leave to appeal from a costs order would be granted. Leave to appeal was accordingly refused with the further comment that even if leave to appeal had been granted the appeal would still have been dismissed.
My colleagues Robert Hay QC and Sam Hopper have respectively blogged about the appeal decision here and here with Hopper suggesting that the decision might discourage some weaker retail claims in what is usually a ‘no costs’ jurisdiction.
The Court of Appeal, of course, has never been a ‘no costs’ jurisdiction. Although it is not apparent from the judgment, the landlord last Thursday made a Calderbank-based application for costs of the appeal on an indemnity basis. Finally there was a small win for the tenant. It was ordered to pay the landlord’s costs of the appeal but only on the standard basis.

Retail tenant wins VCAT fight but gets nil damages and an adverse costs order

VCAT’s no costs presumption is more elastic in some parts of the tribunal than in others.

In building cases, the losers commonly pay the winners’ costs. In retail tenancies disputes the losers very rarely do. But the winner paying the loser’s costs? Calderbanks and their equivalents aside, it is almost unheard of  anywhere at VCAT or beyond it.

So imagine the winner’s chagrin in the retail tenancies case of 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VCAT 596 when it won the liability stoush, produced an expert report seeking just over $3m in damages and then received nothing but an order to pay the ostensible loser’s costs.

The case is an illustration of one of the hazards of compartmentalising a single business within separate corporate vehicles.

24 Hour Fitness Pty Ltd was the tenant. A gym operated on the premises. Unremarkably, the landlord understood that the tenant owned the gym.

Back in 2013, the tenant claimed the landlord had breached a provision of the lease. VCAT agreed. The matter was eventually relisted three years later for an assessment of damages the tenant had suffered by reason of the landlord’s breach.

But in March this year, on day 1 of what was to have been a five-day hearing, the evidentiary penny dropped.

The tenant had never owned or operated the gym (or even any other business). Instead, a company associated with the tenant, ran the gym business. That associated company was a complete stranger to the lease. It occupied the premises and operated the gym entirely without the landlord’s knowledge or permission. Its business might have suffered by reason of the landlord’s non-compliance with the lease but, being a stranger to the lease, it couldn’t recover from the landlord for that breach.

And because the ostensible tenant had no direct interest in the business which claimed to have suffered the financial loss, it could not show any compensable loss referable to the landlord’s breach either.

In the costs decision published last month, Judge Jenkins took a dim view of the tenant conflating itself, its associated company and the associated company’s business for the purposes of the VCAT litigation.

Necessarily, her starting point was s. 92 of the Retail Leases Act 2003. That section proscribes costs orders in VCAT retail tenancy disputes unless a party has “conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding”. (The other exception, refusal to participate sufficiently in mediation or ADR, did not arise.)

What does “vexatious” mean? The tribunal’s answer includes a handy survey of authorities dealing with exceptional costs orders in both courts and tribunals and (at para 19) this checklist of matters to be taken into account when considering whether to order indemnity costs:

  1.  Whether a party has been forced to take legal proceedings entirely through the wrongful or inappropriate conduct of the other party;
  2. Whether an action has been commenced or continued in circumstances where the applicant, properly advised, should have known he had no chance of success;
  3. Where a party persists in what should, on proper consideration, be seen to be a hopeless case;
  4. Whether the party against whom indemnity costs are sought has made a false allegation of fraud;
  5. Particular misconduct that causes a loss of time to the Court and the parties;
  6. Commencing or continuing proceedings for an ulterior motive or in wilful disregard of known facts or clearly established law; 
  7. Making allegations which ought never to have been made or undue prolongation of a case by groundless contentions; and
  8. An imprudent refusal of an offer of compromise.

Judge Jenkins found five of the eight matters on that list present in the case before her. She ordered the tenant to pay the landlord’s costs relating to the preparation of the damages hearing dating all the way back to 2013.

The tenant did have one minor win. The landlord had asked for indemnity costs but failed. Judge Jenkins found there was insufficient evidence to justify an inference that the tenant was motivated in its claim by an ulterior motive. She held that indemnity costs were reserved “for the most exceptional circumstances” and that solicitor and client costs (which she suggested were similar if not equivalent to standard basis costs) would suffice.

The lesson? If a lease (or any other type of contract for that matter) has been breached but the resulting loss has been suffered by a stranger to that agreement, any resulting commercial litigation might not be very commercial at all.

POSTSCRIPT: The Court of Appeal subsequently upheld Judge Jenkin’s decision. See my brief blog on the appeal decision here.