PAUL RICHARDS & Anor v SPEECHLY BIRCHAM LLP & Anor

An unreasonable refusal to mediate does not automatically justify indemnity costs. It is one factor within the court’s broad discretion under Civil Procedure Rules 1998, CPR 44.2, considered alongside all the circumstances and the parties’ overall conduct.

A payment on account of costs should reflect the lowest figure in a likely range of recovery, or an appropriate deduction from an estimate. It need not represent an irreducible minimum.

Pre-judgment interest is assessed broadly by reference to the general attributes of the claimant. In commercial cases, the borrowing rate is ordinarily the starting point. In loss-of-chance damages, actual receipts must be credited in full where they are established facts, rather than discounted by the percentage chance. Benefits are creditable only where legally caused by the breach.

This was a consequential judgment following the claimant’s successful professional-negligence claim against their former solicitors. The court determined costs, a payment on account, pre-judgment interest, permission to appeal, and the costs of the consequential hearing.

The claimants argued for indemnity costs because the defendants had declined several mediation proposals, a higher payment on account, an 8% interest rate, and permission to appeal on the calculation of loss of chance. The defendants opposed those applications and sought permission to appeal on liability, quantum, and alleged credits against damages.

The central issues were how unreasonable mediation conduct should affect costs, how a loss-of-chance award should be calculated where actual receipts were made, and whether employment-related receipts were legally caused benefits requiring credit against damages.

1. The claimants were the successful parties, but the defendants’ unreasonable failure to engage constructively with mediation did not justify indemnity costs. Under CPR 44.2, that conduct was only one factor in the overall discretion. The defendants’ success in resisting a substantial part of the claim and their performance against the claimants’ Civil Procedure Rules 1998, Part 36 offers weighed against indemnity costs. Costs were ordered on the standard basis.

2. A reasonable payment on account was £713,000 including VAT. The court applied the approach in Excalibur Ventures LLC v Texas Keystone Inc, using discounted incurred and budgeted costs and allowing for the defendants’ benefit of the doubt on detailed assessment.

3. Pre-judgment interest was fixed at 2% above base rate. The assessment was broad and objective, taking account of the claimants’ general characteristics rather than speculation about their individual use of the money. Interest ran from 1 December 2015, reflecting the timing of part of the loss while rejecting any finding that the commencement delay was exceptional or inexcusable.

4. The claimants’ proposed loss-of-chance appeal had no real prospect of success. The 75% chance applied to the hypothetical £8m value and relevant costs, while the sums actually received under the Transaction had to be credited in full. Hartle v Laceys and Ministry of Defence v Wheeler were distinguished because they concerned mutually exclusive hypothetical outcomes requiring reciprocal percentage treatment.

5. The defendants’ proposed appeals were refused. The relevant articles were not so clear that a reasonably competent solicitor had no duty to warn of the risk of an adverse construction. The proposed factual challenge to quantum was unlikely to satisfy the restricted approach to appellate review of findings of fact. The claimed employment-related receipts were not benefits legally caused by the breach and, in any event, the suggested alternative employment evidence was speculative.

6. Each side was ordered to bear its own costs relating to the consequential judgment.

This was a first-instance consequential judgment following the court’s earlier judgment dated 29 April 2022, cited as [2022] EWHC 935 (Comm), in the same litigation.