Tudor v (1) Dean & GCOL Limited – Detailed Assessment of Costs – Court Strikes Out Defendant’s Points of Dispute & Approves Good Reason to Depart from An Approved Costs Budget
Clarke Willmott acted for the Petitioner Mr Tudor in a section 994 unfair prejudice petition in the Manchester District Registry of the High Court.
Mr Tudor was one of the founders of a group of companies (“GCOL Group”) which specialised in software development for businesses operating in the travel industry. The GCOL Group also owned valuable freehold and long leasehold commercial properties in Oldham, Greater Manchester. The Respondent, Mr Dean, was a director and shareholder in the GCOL Group and a former business partner of Mr Tudor.
Mr Tudor presented a petition for unfair prejudice further to section 994 of the Companies Act 2006 on grounds that he had been unfairly prejudiced by the actions of Mr Dean and that the GCOL Group’s affairs had been conducted on a basis unfairly prejudicial to his interests as a shareholder.
The litigation was hard fought. The Respondent and GCOL Group instructed no less than five different firms of solicitors to oppose the petition and threatened a separate claim against Mr Tudor via lengthy and detailed pre-action correspondence, although no such claim was ever issued.
GCOL Group instructed its own solicitors on the matter, although its role ought to have been limited to assisting with disclosure. The court approved a budget of £214,644.88 for the GCOL Group, of which £57,269.88 were incurred costs and £157,375 were approved by the court or agreed between the parties. GCOL Group’s approved budget included £48,741 for disclosure.
In the event, GCOL Group exceeded its budget for disclosure by 512%, anticipating total costs of £298,641.60. Against the wishes of Mr Tudor, GCOL Group elected to use an electronic disclosure expert and platform, vastly complicating what should have been a relatively straightforward disclosure exercise. This resulted in a “data dump” of several million documents which unsurprisingly resulted in very significant additional costs for Mr Tudor.
Settlement was achieved in the early hours of the morning of the first day of trial, including terms that the GCOL Group would purchase Mr Tudor’s shares and that the Respondent would be liable for Mr Tudor’s costs on the standard basis to be assessed if not agreed.
The parties could not agree Mr Tudor’s costs and he issued detailed assessment proceedings on a bill of costs for £550,833.36. Mr Tudor’s approved/agreed budget had been for £389,022.31, of which £164,089.07 were incurred costs and £224,933.24 were estimated costs approved by the court or agreed between the parties. The Respondent served Points of Dispute. Mr Tudor subsequently served Replies to the Points of Dispute.
The Points of Dispute served by the Respondent were wholly unhelpful. They were broad brush and did not comply with the requirements of CPR PD 47.8, namely that Points of Dispute should identify specific and individual points of dispute against the Bill of Costs stating concisely the nature and the grounds for the disputing the costs and/or disbursements in question.
The court listed a preliminary costs hearing on the following two issues:
1. Whether the Respondent’s Points of Dispute on his unbudgeted incurred costs prior to the CCMC on the case should be struck out for being improperly pleaded and lacking the detail required by the CPR; and
2. Whether Mr Tudor’s ought to be allowed to depart from his approved budget.
Mr Tudor was successful on both counts. In respect of his application to strike out elements of the points of dispute, Regional Costs Judge Harris ruled:
“Common sense dictates that the points of dispute must be drafted in a way, which enable the parties and the Court to determine what is in dispute and why. That is the very purpose of such a document. It is necessary in order to enable the receiving party to be able to reply to the
complaint. It is also necessary in order to enable the Court to deal with the issues raised in a manner which is fair, just and proportionate.
There has been an abject failure in this matter by the Respondent to comply with this requirement. In such circumstances the objections set out at points 6, 7 and 8 of the points of dispute are struck out.”
On Mr Tudor’s application to depart from his approved budget, the Judge also found in his favour:
“So far as disclosure is concerned there has been in brief, to put it mildly, revision of the number of documents to be produced and then the involvement of E disclosure experts. This then led to witness statements, which led to an increase of some five witness statements, including unexpected witnesses […] and generally an increased time on the lengthy witness statements. This in turn then was triggered into the trial preparation which was greatly increased, and there was substantial consolidated disclosure where the number of lever arch files were more than doubled.
There is throughout this, and I have read the whole history, a general picture of a snowballing effect throughout the stages. Doing the best I can, I am persuaded that the facts of the witness statements and the submissions, as well as the documents, show there was good reason to exceed the budget…”
On whether Mr Tudor ought to have made an application during the proceedings to amend his budget, the Judge decided:
“Procedurally any amendment to a budget should take place during the course of the litigation and before they exceed them. However, in this case the reasons are set out in depth. Firstly in Mr Lee’s skeleton, secondly in the witness statements, which I accept reflect very different positions and thirdly, by my analysis of the very detailed solicitors bundle that has been produced to me”.
These decisions meant that:
1. Mr Tudor was entitled to recover 100% of his incurred costs because the Respondent’s Points of Dispute were struck out and so those costs were therefore unopposed.
2. Mr Tudor was entitled to recover more than his budgeted costs contained in his costs budget because Regional Costs Judge Harris agreed the conduct of the GCOL Group meant Mr Tudor had good reason to depart from his budget.
Following these findings and before the judge conducted a detailed review of Mr Tudor’s costs, a deal was reached and Mr Tudor ended up with a total costs settlement (including the costs of assessment) which was more than his original bill of costs, which was remarkable in the circumstances.
Mr Tudor had previously made an effective Part 36 offer to settle his costs and the increased risk this placed the Respondent under following the judge’s findings no doubt helped settlement to be reached on highly favourable terms for Mr Tudor.
What this case highlights is that:
1. Points of dispute should comply with the rules. If they do not comply, they may be struck out.
2. Good reasons to depart from an approved costs budget can be established, even if no application was made at the time to revise the budget.
3. A well-pitched Part 36 offer is priceless. The extra 10% and receiving costs on the indemnity basis are a massive incentive to settlement.
Clarke Willmott acted on behalf of Mr Tudor on a conditional fee basis. Mr Tudor was represented by Richard Moore & David Stedman of Clarke Willmott LLP & Nicholas Lee & Claire Kretzmann of Paragon Costs.