Conduct Costs Despite Court Win

There is a general rule that the loser pays the costs of a legal dispute. When an offer to settle a claim is made by a defendant, the legal costs of the person making the claim will be paid by the defendant if the case goes to court and the claimant is awarded more by the court than the defendant’s offer. If the claimant does not ‘beat the offer’, the defendant will not be responsible for the claimant’s court costs.



How the rule can be applied in practice was shown when a well-known Essex nightclub (‘Sugar Hut’) had a dispute with its insurer over a claim relating to a fire at the nightclub’s premises.



The claim was for more than £1 million and the nightclub beat the insurer’s offer in court by less than £30,000.



The insurer argued that the difference was so trivial that it should not have to pay Sugar Hut’s legal costs subsequent to the offer being made.



The judge was sympathetic to the insurer, taking exception to the behaviour of the claimant. He considered that parts of Sugar Hut’s claim lacked merit and it had failed to be as cooperative as it might have been.



Nonetheless, he concluded that the nightclub’s legal costs after the offer had been made were recoverable from the defendant insurer, after a reduction of 30 per cent because of the claimant’s conduct of the case.



It is not always appreciated that the judges who decide the allocation of legal costs have a fairly wide discretion in their rulings and can take account of ‘all the circumstances’ of the case, including the conduct of the parties involved.



In this instance, the ‘cost penalty’ applied to the claimant will have been considerable.