Can you recover costs on a Defendant’s application to dismiss witness evidence?
Below is a short summary detailing the Court’s stance in relation to the submission of an application to strike out witness evidence, the application of CPR PD57AC and the affect this has on your recoverability of costs.
These areas are addressed in the case of Curtiss & Ors v Zurich Insurance Plc & Anor (Costs) [2022] EWHC 1514 (TCC) and is of specific relevance to any costs advocate or indeed, any receiving party who rely on witness statements as key evidence.
The case involved an application by the Defendant to dismiss certain statements and have others partially dismissed due to an infringement to the directions set out in CPR PD57AC.
Background to the case
The proceedings had been brought by approximately 150 Claimants, who were the owners of flats in the Meridian Quay development in central Swansea.
The claims against the Defendant were for damages for deceit. The Claimants alleged that they were induced to purchase their flats by fraudulent misrepresentations that were contained in cover notes issued by the Defendant, to the effect that the flats in question had been given a final inspection by the Defendant’s surveyor and that the final inspection was satisfactory, whereas in fact the flats had not been inspected and any inspection would have shown that their condition was far from satisfactory. These claims were strongly contested.
A key factor in this claim was the witness evidence relied upon by the Claimants. The Claimants served a total of 49 witness statements, of which 39 were relevant to the issues that were to be considered at the forthcoming trial. Witness evidence was provided by the individuals bringing the claim; conveyancers; mortgage lenders; the Defendant’s surveyor who undertook warranty inspections at the development, and the solicitor who acted for the developer. The total length of the witness statements, excluding exhibits, exceeded 400 pages.
Upon review of the evidence, the Defendant declared that the evidence submitted was in breach of PD57AC and provided a 109-page schedule giving particulars of non-compliance. The Claimants position was that these directions were not intended for the purpose of scrutinising statements on a line-by-line basis as had been done by the Defendant. The Defendant proceeded to apply for an order pursuant to CPR PD57AC, para 5.2, striking out the entirety of four of the trial witness statements served on behalf of the Claimants and parts of a further 29 of their witness statements, on the grounds that the witness statements did not comply with the provisions of PD57AC and the Statement of Best Practice appended to it.
The Judge’s decision on the application
Following the hearing Judge Keyser ruled that the witness statements of four witnesses, two conveyancers (one of whom had made two witness statements) and two mortgage lenders, were struck out, essentially because they contained no relevant evidence from the personal knowledge and observations of the makers but tended to introduce opinion evidence on matters on which the Judge had refused to permit expert evidence. Various parts of the lengthy witness statement of the Defendant’s surveyor were also struck out, because they contained commentary or opinion on documents or on matters that the Judge did not consider fell properly within the scope of the maker’s evidence.
Certain other parts of the application that were pursued were unsuccessful. In particular: the Judge declined to order that the developers solicitor make a new witness statement as per the Defendant’s request for the same. The Judge further declined to strike out “stock phrases”, possibly indicative of a common draftsman, from six witness statements; and left in place some other parts of statements which the Defendant asked to be struck out.
The submission of the parties with regards to the costs of the application
The costs pertaining to this application was a major point of dispute as total costs from both parties exceeded £275,000, excluding VAT. The Defendant argued that the bulk of these costs would have been incurred anyway in the litigation process and should be assessed on a standard basis. The award of costs is in the discretion of the Court. Where costs are to be paid, they will generally be assessed on the standard basis. However, the Court may order that they be assessed on the indemnity basis where the conduct of the parties or the circumstances of the case take the case “out of the norm”, which may be taken to signify something outside the ordinary and reasonable conduct of litigation.
The Claimant submitted that their costs should be paid by the Defendant on an indemnity basis as they claimed the application was wholly disproportionate and unreasonable. The Claimant argued that the Defendant only acquired a small amount of success with their application and that most of the arguments raised where trivial in nature and not sufficient to justify an application. The Claimant alleged that the Defendant used the application as a means to disrupt the case in the lead up to the Trial. The Claimant offered to accept 85% of their costs considering the sections of the application that the Defendant succeeded in.
The Defendant argued that although large parts of the application were dismissed that the application was still successful in nature. The Defendant highlighted that even where the application had been unsuccessful it still brought to the Court’s attention the use of “stock phrases” which showed that the claim that statements had been written in the witnesses’ own words were “implausible”. The Defendant further argued that the Claimant’s conduct and the value of the claim should be further taken into consideration. The Defendant claimed that it was reasonable for the application to have been prepared and advanced in its initial form, because (a) the decision of HHJ Stephen Davies in Blue Manchester Ltd v BUG-Alu Technic GmbH & Anor [2021] EWHC 3095 (TCC) showed that the Courts would be willing in principle to give detailed consideration to schedules of objections and (b) Zurich was entitled to take guidance from the remarks of Fancourt J in the Greencastle case, to the effect that it was not convenient or appropriate to leave such objections to be disentangled at trial by protracted cross-examination.
The Judge’s decision as to costs
Judge Keyser was critical of the conduct of the Defendant in that the application was deemed to be unjustified and unreasonable. Judge Keyser ruled that while the application was successful in some regards this does not justify the scope and legitimacy of the application. The Judge further commented that a large number of points raised within the application were trivial in nature and not worth raising within an application. This can be seen where the Defendant raised an objection to part of a statement on the basis that the witness had failed to draft the statement in third person.
As such the Judge ordered the Defendant to pay 75% of the Claimant’s costs on the indemnity basis. The Judge confirmed his judgement with consideration to the modest gains that were achieved by the determination of the points pursued by the application. It also reflects the fact that, although the generality of the witness statements for the Claimants by no means demonstrated an egregious disregard for good practice, some witness statements and some parts of other witness statements did not accord with the requirements of the Practice Direction, a fact that ought to have been acknowledged and is reflected in the ruling.
Judge Keyser further stated that if parties make such oppressive and disproportionate applications, resulting in the incurring of very substantial and quite unnecessary costs, they can hardly be surprised if their conduct is marked by an award of costs on the indemnity basis.
Conclusion
The key finding within this case is that costs can still be recoverable by the Respondent even if the Applicant technically “wins” the application. This is especially prevalent in high value cases where a large amount of evidence is relied upon, increasing the chances that some evidence may stray from the relevant practise directions.
The case thus demonstrates the responsibility of the submitting party to ensure that their application is justified, and that the Claimant can recover costs of the application should the Defendant fail to do so. In order to determine the justification of an application the Court will consider:
- the merit of the application based on the quality of the disputes raised and not on the quantity of the disputes
- the conduct of the respective parties in attempting to address the disputes outside the means of an application
- whether the application was raised in order to ensure the efficiency of the Trial or whether to target and attack key pieces of evidence
- whether the objections raised could have been raised at Trial therefore disregarding the need for an application hearing
- whether the proportionate sanction is being sought for the alleged breach
In the Lifestyle Equities case Mellor J said at [98]:
“[I]n my view, before an application is brought seeking to strike out passages in a witness statement based on PD57AC, careful consideration should be given as to proportionality and whether such an application is really necessary. Indeed, in my view, an application is warranted only where there is a substantial breach of PD57AC (as, for example, in Greencastle). If there really is a substantial breach of PD57AC, it should be readily apparent and capable of being dealt with on the papers. That might provide a mechanism for dealing with objections in an efficient and cost-effective manner.”
The case also provides guidance regarding how parties should conduct themselves. If there has been any violation of the practice direction, then it should be acknowledged, accepted and addressed where possible prior to Trial, thus negating the need for an application. Should the Opponent pursue an application to rectify the position, which the Court ultimately finds to be unreasonable and in turn orders that the Applicant is responsible for the Respondent’s costs, then there is a risk that the Court may well reduce the Respondent’s costs on the basis that the violation of the practice direction should have been addressed.
How can PIC help?
Here at PIC Legal we have a team of Costs Lawyers, Costs Consultants and Costs Advocates who are experienced in dealing with complex legal matters and arguments to ensure the best outcome for our clients. This is especially prevalent in cases where a party seeks to reduce a large sum of costs on a subjective interpretation of the Practice Directions. Our Legal Costs Professionals are well versed in arguing on the reasonability of such applications and protecting the Client’s interests.
Wagdi Mohamed
Costs Consultant
18.08.22