Stuart Pemble draws some important lessons from the end of a high-profile dispute between neighbours who fell out over garden design services provided for free.
Key point
- Costs consequences offer a sobering warning for anybody considering suing a friend or neighbour.
After two High Court trials and two hearings in the Court of Appeal, and facing a large legal bill, Peter and Lynn Burgess may well be regretting the decision in 2013 to ask their friend and former neighbour, Basia Lejonvarn, to help with the design and project management of landscaping work in their back garden.
The opening paragraph in the leading judgment of Coulson LJ (with whom Rose LJ and Sir Jack Beatson agreed) from the second of those appellate hearings – Burgess and another v Lejonvarn [2020] EWCA Civ 114; [2020] PLSCS 18 – helps to set the rather sorry scene:
“There was a time, 30 or 40 years ago, when construction litigation was a byword for expense and delay, and where costs were often out of all proportion to the sums at stake. Subsequently… construction litigation has become a much more efficient and cost-effective method of dispute resolution. But occasionally, circumstances conspire to create a construction case with echoes of the bad old days. Unfortunately, this is one such case.”
The facts
The Burgesses had obtained a quote for landscaping work which they felt was too expensive. At that point, Lejonvarn agreed to help. The Burgesses then became unhappy with the increased cost and alleged poor quality of the work being done. They blamed Lejonvarn and sued her for the increased costs they said they had incurred as a result of her breaches of contract and negligence.
The first High Court hearing ([2016] EWHC 40 (TCC); [2016] PLSCS 21 – see “A friend in need is not always a friend in deed”, EG, 19 March 2016) had to decide, as preliminary issues, whether there was a contract (there wasn’t) and if Lejonvarn owed a duty of care in tort when providing professional services for free (she did). That finding was upheld (in slightly modified terms – the duty of care only applied to the services actually provided and there could be no obligations in relation to anything Lejonvarn was alleged not to have done) following the parties’ first visit to the Court of Appeal ([2017] EWCA Civ 254; [2017] PLSCS 87 – see “True friends stab you in the front”, EG, 24 June 2017). So far, so good for the Burgesses.
The parties then returned to the High Court to see if, as a matter of fact, Lejonvarn had breached those duties. And this is where things took a turn for the worse for the Burgesses. On every point, the deputy judge (Martin Bowdery QC) found against them. There was no evidence to support their case, which was also criticised for an unhelpful scatter-gun approach and a lack of clarity and focus which undermined their attempt to bring a global claim ([2018] EWHC 3166 (TCC); [2018] PLSCS 208 – see “More facts, less law”, EG, 26 January 2019). Quite simply, Lejonvarn had not breached any duties of care. Every claim against her failed, often for more than one reason.
Costs
In February 2019, the judge then considered the correct costs order to make. The Burgesses were liable to compensate Lejonvarn for the costs she had incurred. The judge had to decide whether those costs should be assessed on a standard or indemnity basis. Costs awards on an indemnity basis are rare and benefit the receiving party because the court gives them the benefit of any doubt as to whether the costs were reasonably incurred or a reasonable amount.
The judge decided that costs should be awarded on a standard basis. Lejonvarn appealed.
The appeal
The Court of Appeal had no difficulty in deciding that costs should be awarded on an indemnity basis. Relying on a number of leading authorities, including Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson (a firm) [2002] EWCA Civ 879 and Shalaby v London North West Health Care NHS Trust [2018] EWCA Civ 1323, Coulson LJ (citing Excelsior) stressed that, before an indemnity costs order can be made, “there must be some conduct or some circumstance which takes the case out of the norm.” He felt that the Burgesses should have realised, no later than one month after the first Court of Appeal trial (May 2017), that their remaining claims were so speculative and weak that they were likely to fail and should be withdrawn. That finding was sufficient to take the case out of the norm and justify indemnity costs from that date.
Another factor was that Lejonvarn had made a Part 36 offer to settle the case for £25,000 three weeks after the start of the original proceedings. This had been rejected by the Burgesses. There is a quirk in CPR 36 in that claimants who beat an offer are automatically entitled to indemnity costs, whereas defendants who beat an offer, like Lejonvarn, are not. Although Coulson LJ was not willing to interpret the Civil Procedure Rules (through the increased emphasis on proportionality in CPR 44.3) so as to award Lejonvarn indemnity costs simply because she had beaten her offer, the Burgesses’ refusal to accept the offer once they had been able to consider the Court of Appeal’s first judgment was a separate example of behaviour sufficiently out of the norm to justify an award of indemnity costs from May 2017.
Finally, and relying on Kellie v Wheatley and Lloyd Architects Ltd [2014] EWHC 2886 (TCC), Coulson LJ also dismissed an argument that the fact that the actual costs incurred by Lejonvarn exceeded the approved costs budget was not a reason to count against the award of indemnity costs.
Stuart Pemble is a partner at Mills & Reeve
