Litigation Costs – is the sky really the limit?

Published on
4 min read

The recent case of The Sky’s the Limit Transformation Ltd v Dr Mohammed Mirza [2022] outlines a judge’s view as to a way forward in resolving domestic building disputes in a time and cost effective manner.

The facts of the case are nothing out of the ordinary. The Claimant was the building contractor and the Defendant the homeowner and the contract was for a double story extension.

Works began in late 2016 and the contract was terminated in April 2017 as a result of a dispute regarding unpaid invoices. The contractor issued proceedings and following a 5-day trial, HHJ Davies found there was nothing due to the Claimant (the Defendant having paid enough when allowing for the judge’s determinations about the dispute on the final account).

In delivering his judgment, the Judge suggested that steps ought to be taken to address the challenges of dealing with such disputes proportionately and in a time and cost-effective manner. He suggested (albeit points (a) to (d) are already part of the CPR procedure);

(a) disclosure limited to documents relied upon and known adverse documents;

(b) a single joint expert to address both liability and valuation;

(c) a stay for mediation.  If the parties are not willing to mediate and the judge does not order it, then there should be an order for compulsory early neutral evaluation before another TCC Judge. 

(d) witness statements, limited to matters remaining in dispute and limited in length and/or number;

(e) a trial, which should not normally exceed 1 day in length, at which:

(i) each party produces detailed written opening submissions in advance;

(ii) no oral openings;

(iii) no more than 1 hour each for cross examination of witnesses;

(iv) the single joint expert answers questions for no more than 1 hour (remotely)

(v) there should be 1 hour each for oral closing submissions.

(f) Judgment (oral or written), which would be a summary. 

Interestingly, the Judge also suggested that approved costs should not exceed £25,000 per party broken down as to £2,500 for disclosure; £5,000 for expert evidence; £5,000 for mediation; £2,500 for witness statements; and £10,000 for trial preparation, trial and post judgment matters.

Comment

Whilst the facts of this case itself, and the judgment are uncontroversial, it is interesting to note the comments the Judge made with regards to streamlining claims involving residential property disputes. It is another example of the judiciary commenting upon costs in litigation and overlooking the stringent (and costly) process in place which litigants have to adhere to anyway. The aim is clearly to save time and money and the suggestion to streamline the directions and overall process seems sensible and is certainly not without merit but is it the way forward?

The level of costs may be disproportionate to the value of the damages claimed in some cases but that is influenced, in many ways, by the extensive preparation that must go into complying with the Court’s own requirements relating to preservation and disclosure of documents and, more recently, the witness statements pilot.

A significant amount of work would have been undertaken at the point of the directions being ordered once in litigation. It is now the case that parties’ representatives cannot avoid the front loading of costs at the outset of an instruction, and pre-proceedings, in order to protect the client’s position against the potentially stringent penalties for non-compliance in the event a claim ends up at trial. Of course, this process does help parties assess the merits of their claims and the majority of claims are resolved without needing to go to trial. 

The Judge’s suggestions could be used as a tool going forwards in trying to focus a claimant’s mind on resolving the dispute rather than running up costs – it is clear that the Judge considers this type of claim ought to be capable of resolution rather than head to trial.

It is also interesting that the Judge made no mention of the shorter trial scheme which is already in place in the TCC. Whilst this is not always applicable to construction claims (given the heavy reliance on expert evidence), that also aims to streamline the process. It does however remain to be seen which way the courts will go but it is clear the desire is to try and save time and costs wherever possible.

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