Judges move to end 'cottage industry' of costs

The Court of Appeal this week warned solicitors not to challenge costs orders simply because the judge has not provided reasons for them.

The case of Michael Verrechia v Commissioner of Police of the Metropolis also effectively neuters part 36 offers, according to one of the solicitors involved.

Mr Verrechia sought payment of 141,500 damages for interference with goods by the police.

In November 2000, he said he would accept 98,600 to settle the action under part 36 of the Civil Procedure Rules, but the police paid only 5,500 into court as an offer to settle.

Mr Verrechia rejected the offer and subsequently won 53,225 damages in the High Court.

But the judge made no order as to costs - leaving both sides to pick up their own legal bills - and gave no reasons for the decision.

Mr Verrechia appealed on the grounds that the decision was defective for lack of reasons, and that it was wrong in all the circumstances of the case (after the part 36 offer).

But the Court of Appeal - including the Master of the Rolls, Lord Phillips of Worth Matravers - dismissed the appeal and said parties should be slow to make such challenges.

It was taken with two non-costs cases where lack of reasons was a ground of appeal.

Claiming that a 'cottage industry' in costs litigation needed to be stemmed, the appeal court found that the original trial judge had made no decision as to costs because she perceived that the case had been an effective draw.

The court stressed that it was in the interests of justice that a judge should be free to dispose of applications as to costs in a speedy and uncomplicated way.

Lord Phillips stated: 'An unsuccessful party should not seek to upset a judgment on the ground of inadequacy of reasons unless, despite the advantage of considering the judgment with knowledge of the evidence given and submissions made at the trial, that party is unable to understand why it is that the judge has reached an adverse decision.'

Cormac Cawley, a partner with London firm Gordon Dadds who acted for Mr Verrechia, said: 'This judgment gives cause for concern as it implies that facts surrounding trial judges' decisions on costs are unlikely to be revisited on appeal.'

He added: 'The court seems to be saying that it is possible for a defendant to make a part 36 offer which is beaten, and still have a chance of paying the claimant's costs.'

Jeremy Fleming