REUTERS | Rebecca Naden

Adding costs of previous unsuccessful claim: Playboy Club London Ltd v Banca Nazionale del Lavora SpA

In Playboy Club London Ltd v Banca Nazionale del Lavora SpA, leave was given to amend particulars of claim to add the adverse costs of a previously unsuccessful related negligence claim involving the same parties.

The cases involved a credit reference relied upon by the claimant. Although the earlier negligence claim was initially successful in the High Court, it was overturned in the Court of Appeal. The Court of Appeal’s decision was upheld in the Supreme Court, leading to a costs award in favour of the defendant bank.

In this subsequent case, one for deceit on essentially the same facts, the defendant initially, and unsuccessfully, sought to strike out the claim. The claimant was later successful in obtaining leave to amend the particulars to include the costs awarded to the defendant in the earlier negligence proceedings. Although these were quantified at the time, an updated schedule of costs was to be provided before trial to deal with any amendment to the figures made by way of assessment (or, no doubt, possibly even by agreement).

The claimant’s position was that the negligence claim, although lost, had been reasonable by virtue of a “reasonable prospects” test and that the costs in those proceedings formed part of the “total costs exposure” in the deceit proceedings. The defendant pointed out that there was no authority to back this up.

Recognising that the position was novel, unprecedented and that it may prove difficult to establish, the judge adopted a test that the amended elements of the claim were more than merely fanciful. It was decided that they should be decided at trial rather than refused at an amendment stage.

Without speculating on the ultimate result which, if unsuccessful, is unlikely to take up many column inches, the “more than merely fanciful” notion can lead us to speculate on circumstances where the claimant proves to be ultimately successful. The case appears pretty discrete, with the judge recognising that damages are recoverable to a greater extent in a case of fraud than in negligence. Any practical extension of the principle is difficult to imagine in the costs forum.

The only current juxtaposition that springs to mind is the “material change” required to obtain an increase in a budgeted case and “good reason”, which can be used to enhance a budget on detailed assessment. In that regard, permission is not required and the judgment is unhelpful.

However, it does highlight a degree of flexibility on the part of the court where conflict arises. In my opinion this could, ultimately, provide justification for seeking good reason on assessment where a paying party’s dispute is based on a position that an application to increase the budget could, and should, have been issued contemporaneously.

It has already been recognised that the tests are different (although, in practice, time is usually the stalling factor with updating budgets during the course of proceedings; applications of this nature are invariably dealt with after the horse has bolted).

More interesting in this case are the practicalities of dealing with the position. Should the detailed assessment proceed in parallel with the deceit proceedings and is it clear who will be paying for the costs of that process? Although it is arguable that a stay would be sensible, the Supreme Court assessment must proceed due to the prescriptive timeline for assessment in that forum. There is scope for application to extend the procedure in the Supreme Court, but that is unlikely to be indefinite.

In addition, the undoubtedly more significant costs claims in the lower fora will require an agreement on interest if there is to be a stay. Assuming the parties cannot agree on interest, this could easily become a significant figure if the deceit proceedings stall the assessment of the negligence costs.

Finally, the assessment procedure will become a merits indicator in the deceit proceedings. No doubt the defendant will simply proceed with the detailed assessment of the negligence costs to send a clear message that it considers the merits of this aspect of the claim weak (in addition to seeking to mitigate any perceived bank-rolling of the claimant’s deceit case).

Similarly the claimant will, I suspect, be doing all it can to stall the assessment process. Insofar as that is unsuccessful, it will be drawing a significant level of correspondence to the attention of the court should it ultimately prove to be vindicated in the amended claim.

All in all, it seems unlikely that an expensive side battle will not ensue. Although I have not seen the details, I anticipate that a good book could be run on which of the deceit proceedings and detailed assessment of the negligence costs will finish first. That is very much a red or black bet in my opinion, no house advantage and the hare, or rabbit, is no doubt running.

Francis Kendall is a costs lawyer at Kain Knight and vice-chair of the Association of Costs Lawyers

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