A costs judge has endorsed a firm’s decision to switch funding arrangements less than two weeks before a trial date in a commercial dispute and allowed it to claim higher costs on the new deal.
Master James, sitting in the Senior Courts Costs Office in Dial Partners LLP & Anor v Eastern Airways International Ltd & Ors, found there was nothing unreasonable about the change and effectively handed the firm an extra £273,000 in costs.
London firm Candey Solicitors had been working on a damages-based agreement with its client before entering a conditional fee agreement on 2 November 2016, with the trial listed for 14 November.
The matter settled in Candey’s clients’ favour a day or two before trial for £625,000, but the defendants in the litigation insisted they should not be held liable for anything more than the amount generated had the original DBA remained in place, as they believed that to be the case when they settled. The DBA had stipulated Candey would receive 50% of any proceeds recovered in the claim.
The effect of the changing funding arrangements was significant. Under the DBA, costs were capped at £250,000 plus disbursements, whereas Candey could draw costs of £523,000 under the replacement CFA.
The defendants argued that Candey was ‘hoist by their own petard’: it was prepared to take a hefty profit when the claim was potentially valued in the millions, but was unwilling to accept the consequences of the valuation dropping.
Candey countered that both the DBA and CFA were valid and enforceable retainers and that there was no effective ground upon which they could be criticised for switching from one form of funding to another. The amount of work was the same, the firm pointed out, and if the defendants had settled believing the DBA to be in place then – in James’s words – that was their ‘hard luck’.
Even when the change was made, the claimants’ firmly-stated position was to fight on for £1.25m plus costs, while the defendants were standing upon their Part 36 offer of £300,000.
James said: ‘The claimants did not receive an offer of £300,000, craftily change their retainer and then accept that offer a day later; they received an offer of £300,000, changed their retainer but fought or at least negotiated on for almost two weeks.’
On the question of reasonableness, the judge added: ‘It is not that the claimants would wish to “punish” the defendants by incurring an extra costs burden just in order to pass it on to them, but why should the claimants not take the opportunity to ensure that their solicitors were paid (and that the defendants were liable to pay) something much closer to what the case actually cost to run?’