Recovering the costs of related hearings

Published on
6 min read

In many disputes, parties will run up legal costs long before court proceedings begin. If these are incurred preparing for the court proceedings, often by following a pre-action protocol, they can in principle be recovered from an unsuccessful party as “costs of and incidental to” the proceedings under section 51 of the Senior Courts Act 1981.

If, on the other hand, evidence has been gathered at an inquest, an adjudication or a stand-alone mediation, recovering those costs in subsequent proceedings can be tricky if not impossible. In some instances, where the costs are not “costs of and incidental to the proceedings”, it may be possible to recover them as damages.

The courts have recently reviewed the law about costs and inquests in Fullick v Commissioner of Police for the Metropolis. We take Fullick as the springboard for a general review of when related costs can, in principle at least, be recovered in subsequent proceedings.

Inquests

Coroners have no jurisdiction to award costs but where civil proceedings follow an inquest, a claimant can recover costs incurred in relation to the inquest as “costs of and incidental to” the civil proceedings if they are incurred gathering evidence for the proceedings (Roach v Home Office).

Under the principles established by Re Gibson’s Settlement Trust to determine which costs are “incidental” to proceedings, the work in question must have been:

  • Of use and service in the claim
  • Relevant to the matters in issue in the claim
  • Attributable to the defendants' conduct

Each test is equally significant and the work must pass all three tests.

Fullick v Commissioner of Police for the Metropolis applies the tough CPR 44.4 proportionality test introduced in 2013 to the costs of an inquest in the context of the Coroners (Inquest) Rules 2013. Rule 13 enables an interested person to obtain disclosure of documents held by the coroner and, where available, the recording of any inquest hearing held in public.

The claim in Fullick arose out of a death in police custody and was settled before the issue of a formal letter of claim. The Met argued that the Rule 13 mechanism could have been a more cost-effective way of obtaining evidence than attending the inquest hearing and pre-inquest hearing. On that basis, it suggested that attendance at pre-inquest hearings, preparation for the inquest and time spent on documents and conferences with counsel were not a reasonable and proportionate way of gathering evidence for the subsequent civil claim.

The court rejected the Met’s arguments in the context of this claim because it raised issues of public importance. It is necessary to ask whether the total costs of participation in the inquest are proportionate to its utility and relevance to outstanding issues in the civil claim. Douglas v Ministry of Justice (not referred to in Fullick) offers practical guidance about assessment in these circumstances.

Preparation for related proceedings

Newall v Lewis considered the question of whether preparation for proceedings of one type should be regarded as giving rise to costs of and incidental to subsequent proceedings of a narrower scope. The court applied the Re Gibson principle that it should investigate whether the work product created constituted "materials ultimately proving of use and service in the action". It concluded that the work product created by costs incurred in preparing for Part 7 breach of trust proceedings (including a pre-action mediation) was ultimately of some use and service in subsequent narrower Part 8 proceedings.

Recovery of costs as damages

It may be possible to claim the costs of previous related proceedings as damages in a subsequent action. Where it is appropriate for costs to be awarded as damages in this way, the courts will assess the costs on the indemnity basis - see Hawksford Trustees Jersey Ltd v Halliwells LLP. In Playboy Club London Ltd v Banca Nazionale del Lavora SpA, the court allowed the club to amend its particulars of claim in a deceit action to add a novel claim for the adverse costs of a previously unsuccessful related negligence claim involving the same parties. The club argued that it should be able to contend that the failed negligence action flowed directly from the alleged deceit and therefore the costs of the failed action should be recoverable as a reasonable attempt to mitigate its loss.

Mediation

Coulson J – now Coulson LJ and deputy head of civil justice – commented in Lobster Group Ltd v Heidelberg Graphic Equipment Ltd that “… unlike the costs incurred in a pre-action protocol, I do not believe that the costs of a separate pre-action mediation can ordinarily be described as ‘costs of and incidental to’ the proceedings. On the contrary, it seems clear to me they are not".

In contrast, where the mediation takes place as part of the pre-action protocol process they may be recoverable as costs incidental to the litigation (Roundstone Nurseries Ltd v Stephenson Holdings Ltd). Parties should take care to check any provision about costs in the mediation agreement – they will not be able to recover the costs of a mediation where they have agreed to bear their own mediation costs.

Adjudication in construction claims

There is no statutory provision in the Housing Grants Construction and Regeneration Act 1996 (known as the Construction Act) giving an adjudicator power to make orders as to the payment of the parties' costs (in contrast to their own fees and expenses). For this reason, adjudication costs are not usually recoverable in subsequent litigation but the position is not entirely straightforward.

In National Museums and Galleries on Merseyside (Trustees of) v AEW Architects and Designers Ltd Akenhead J held that the adjudication costs were recoverable as a foreseeable head of damage in the subsequent proceedings. This decision was not followed in WES Futures Ltd v Allen Wilson Construction Ltd. Coulson J drew a parallel with the position regarding stand-alone mediations (see above) and concluded that adjudication costs are the subject of a different regime and are not recoverable.

It may be possible for a party to claim its adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998 where it is claiming a debt that relates to the whole or part of the contract price but the case law is not clear. See Lulu v Mulalley where such an argument succeeded and Enviroflow Management Ltd v Redhill Works (Nottingham) Ltd which held that an adjudicator did not have jurisdiction to award a party its "debt recovery costs" under the 1998 Act.

Adjudication in professional negligence claims

The Professional Negligence Bar Association’s adjudication scheme (details here) takes the Construction Act adjudication regime as its model. It allows the parties to choose how they want the issue of costs to be dealt with. They could choose, for example, to give the adjudicator power to award the costs of the entire dispute (not just the adjudication), or to make a costs award only where a party has behaved unreasonably. It seems unlikely in the circumstances that a claim for the costs of the adjudication would be recoverable as costs in court proceedings but arguments could arise along the lines of those discussed under Adjudication in construction claims above.

You may also be interested in our briefing on Front-loading – when can defendants recover costs incurred pre-action?

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