Counting the costs in the tribunal

Talking early can prevent compensation claims becoming bitter battles over legal costs, writes Raj Gupta, partner at Town Legal LLP. Many claims that come before the Upper Tribunal (Lands Chamber) (the UT) are for compensation of less than £1m, but often involve complex legal, factual and valuation issues requiring the competing parties to appoint specialist legal and expert teams. In other words, litigation conducted in an expert tribunal is expensive. Three recent decisions, all involving Transport for London (TfL), have reinforced the importance of considering costs when formulating a litigation strategy and throughout the life of the claim. Offers and costs In Bishop and another v Transport for London [2017] UKUT 405 (LC) (in which we represent TfL), the claimants sought compensation following the compulsory purchase of land they used as scrap metal merchants. Although the various operating businesses had suffered significant losses for some time, the claimants sought around £4m for their losses as leaseholders and as owners of the various companies paying directors’ fees to them. TfL rejected the claim and pleaded that no compensation should be awarded. Nevertheless, a sealed offer was made part way through the proceedings for £378,000. The UT rejected the main claim but did award £46,000 for site clearance costs. When it came to litigation costs, the parties agreed that TfL should be awarded its post-sealed offer fees but disagreed about the pre-sealed offer fees. The claimants argued that as an award was made, they were entitled to fees incurred before the offer – the size of the award was irrelevant. TfL argued that almost all of the parties’ fees concerned the loss of profits claim which had been rejected. TfL therefore sought all of its costs. The UT agreed with TfL, but said that it could have made an offer earlier and applied a 20% discount accordingly. The question of whether costs should be awarded to a party who has secured an award higher than the offer made or according to the party successful on the main issues has been the subject of numerous inconsistent decisions in the higher courts. The Court of Appeal will again be asked to consider the point in January in Bishop. Indemnity costs A different costs issue arose in Mann and others v Transport for London [2018] EWCA Civ 1520; [2018] PLSCS 121. The proceedings concerned a number of claims for depreciation in the value of property caused by highway improvements. Early in the proceedings, the claimants had made an offer to TfL to settle their claims. It was open for 21 days and stated that if it was not accepted and an award higher than the offer was made, then costs would be sought on an indemnity basis. Where costs are assessed on the standard basis, it is for the receiving party to show that the costs claimed are reasonable. On an indemnity basis, the onus is on the paying party to show that the costs are unreasonable. As a rule of thumb, the successful party will get back 60-75% of its costs on the standard basis and 95% on an indemnity basis. In the event, the claimants were all successful in beating the offer and sought indemnity costs. This was important to the claimants’ solicitors, who had taken the claims on a “no-win, no-fee” basis. The total compensation awarded was around £200,000, but the claimants’ costs were remarkably high at £1.35m. If assessed on the standard basis, the claimants would have to show that the fees incurred were proportionate to the sums claimed and the issues at stake. The UT held that in order to be successful in their claim for indemnity costs, the claimants would need to show that TfL had acted unreasonably in not accepting the offers. They had not. The claimants appealed on the basis that the UT had wrongly created a test – whether TfL had acted unreasonably in not accepting the offer. Alternatively, if that was indeed the test, TfL had failed it. Those arguments were rejected by the Court of Appeal, which upheld the UT’s wide discretion in costs matters. Settlement costs In City of London v Transport for London [2018] UKUT 345 (LC), both parties claimed costs relating to a £18.75m claim for compensation arising from injurious affection alleged to have been caused by the construction of Crossrail tunnels in subsoil under Billingsgate market. The claim was settled by agreement that would allow the redevelopment of the market. Section 4 of the Land Compensation Act 1961 states that where a claimant fails to provide sufficient details of its claim to enable the acquiring authority to make an offer, the UT should award costs to the authority unless there are special reasons not to. TfL argued the City had failed to provide details both before commencing the proceedings and even when ordered to do so by the UT. The City argued that it had requested information from TfL several years before the proceedings commenced. Had it been provided, an agreement could have been reached and there would have been no need for litigation. The UT agreed the claimant had failed to comply with section 4 – a claim should have been submitted at least six months before proceedings were commenced. On the other hand, although the claimant’s statement of case may not have provided full details of the claim, there was sufficient detail to show there was potentially a genuine claim and to enable TfL to make an offer. The parties could at any point have reached the settlement that they did. It was therefore proper to order both parties to bear their own costs. Following protocol The UT has a wide discretion to determine costs. These cases are the culmination of a trend over the past few years for it to take a more active approach in considering whether parties have acted reasonably and proportionately in pursuing litigation. It is hoped that practitioners will embrace the Compulsory Purchase Association’s Lands Claims Protocol which, if followed properly, will help parties avoid litigation or encourage active dialogue between them. Main image © Rex Shutterstock