Costs liability during pre-litigation “sparring”

The case: Greater Manchester Fire and Rescue Service v Veevers 25th September 2020 EWHC 2550 (Comm) (on appeal).

The outcome: Inquest costs recoverable in absence of full and frank admission of liability.

The issues: Tactics available to minimise costs exposure, whilst retaining a claim against another potential tortfeasor. Linked issue to joinder and PPOs.

Background:

The estate of a deceased firefighter brought a claim for damages against the employer, the Fire Service, following a fire on the 13^th July 2013. A potential cause of action also existed against the owner/occupier of the business premises where the fire took place.

Shortly before the inquest, solicitors for the Fire Service advised the widow’s legal team that whilst not admitting liability, their client was prepared to pay damages and would not seek to allege contributory negligence. The laudable aim in writing this letter was to alleviate stress for the family of the deceased. It was also made clear that the Fire Service were exploring the potential culpability of the owner/occupier of the business premises too, therefore explaining why they were unable to make an open admission of liability at that time.

The widow’s solicitors acknowledged the position but insisted upon an open admission of liability on the basis that the willingness to pay compensation could be withdrawn at any time.  No such admission was made prior to the inquest, but the Fire Service made clear that it was investigating a potential claim against the third party.

The legal costs of attending a lengthy inquest were claimed in a bill on conclusion of the fatal accident civil action in the sum of over £135,000 (subject to detailed assessment).

On appeal from the Regional Costs Judge, the defendant Fire Service lost on its application to have the inquest costs disallowed. His Honour Judge Pearce held that inquest costs were recoverable if they were incidental to the claim and the central issue was whether the defendant had admitted liability or showed a willingness to satisfy the claim.

Comment:

The approach adopted by the defendant’s lawyers was understandable and an approach we have used on many similar cases where it is clear that a claimant has an undeniable cause of action and will succeed against one or more defendants, but where no single defendant is able or willing to formally admit liability during the initial claim skirmishes at a time when evidence is being gathered.

It is perhaps understandable that claimant lawyers will be wary of the risks of sitting on their hands in such cases. A clear tension exists between taking a reasonable and proportionate approach on costs and achieving certainty for the claimant.

This decision highlights the significant cost risks associated with withholding an open admission from an innocent claimant. We examine below the potential ways of avoiding the claimant lawyer having a free run on costs where they are guaranteed a successful outcome against one or more of the potential defendants.

Suggested remedies:

1. Bang heads with the other potential defendants to agree (on clear terms) a joint and binding admission of liability to the claimant but without apportionment and entirely without prejudice to any future civil action required to determine how liability should be apportioned. The agreement should identify that any damages and costs paid to the claimant pursuant to the admission will be re-apportioned according to the eventual outcome This approach saves significant costs and costs the defendants nothing in the long term as long as the parties do not engage in posturing and acknowledge that such an approach is undertaken on a commercial basis rather than a reflection of the likelihood of finding of culpability.
2. If the other defendants refuse to engage in such an approach, then consideration should be given to a carefully worded Calderbank offer on the proposal to be made which would have the potential to put the obdurate defendant in significant cost difficulties, regardless of the apportionment of the damages.
3. If steps one and two do not secure a degree of pragmatism, consider making an open admission of liability to the claimant, but with the express provision that the admission is made on a commercial basis in order to save costs and that the defendant will seek to recover its outlay from the other defendant(s) by way of contribution and/or indemnity proceedings. Before taking this step, approaches (1) and (2) should be attempted to set the scene and potentially set up an argument to establish an adverse costs order against an uncooperative defendant. (However, see the caveat below concerning potential periodic payments and joinder).

Periodical payment conundrum:

In cases where a periodical payment is a real possibility a defendant insurer should be wary of making a singular admission of liability because this could lead to the other tortfeasor(s) not being named as a defendant on any future PPO (absent subsequent joinder by the Court).

It is critical in such cases to make sure that any agreement with the co-defendant includes an express provision concerning a shared obligation to apply to be joined into any future proceedings, or to consent to such an application, pursuant to Part 19 of CPR.

 For more information, please contact Andrew Underwood.