Unreasonable Behaviour in Litigation Carries Cost Order Risk

It is a key principle in civil litigation that the unsuccessful party is ordered to pay the costs of the successful party. However, even if a party wins a case, courts still have discretion to order otherwise under Civil Procedure Rules 44.3 and 44.4; particularly where the winning party is deemed to have acted unreasonably.

Therefore, victorious but overly aggressive litigating parties might find that their Rottweiler tactics backfire when a cost order is made. Pursuing the right strategy requires experienced legal advice and a balanced approach.

How the Courts Consider Unreasonable Behaviour

One of the most prominent and important potential forms of unreasonable behaviour is where a party refuses to engage in alternative dispute resolution (ADR) without sufficient grounds. It should be noted that refusal of ADR would not automatically be deemed unreasonable. The landmark case on this issue is Halsey v Milton Keynes NHS Trust[2004] which set out the criteria that courts consider such as:

·        The nature of the dispute.

·        The merits of the case.

·        The extent to which other methods had been attempted.

·        The relative costs of ADR and if they would have been too high.

·        If delay would have been prejudicial.

·        If ADR had a reasonable prospect of succeeding.

These criteria highlight the two underlying factors that influence the courts general view of unreasonable behaviour: the facts of the individual case and the context of the behaviour.

Other, less common circumstances in which unreasonable behaviour might be cited to reduce costs are where a claim is pursued that is speculative and unsupported, where there is the fabrication of a defence and where a party persists with a claim despite overwhelming evidence against it.

Unreasonable Behaviour Tested

A recent example of unreasonable behaviour being tested in court was in ADS Aerospace Ltd v EMS Global Tracking Ltd[2012]. The claim followed the breach and repudiation of an agreement between the parties for the distribution of helicopter and aeroplane satellite tracking devices. In this case the claimant’s claim for $16 million was dismissed. The defendant had refused ADR and it arose as a factor in the consideration of costs.

The claimant argued for a substantial reduction in the cost award on grounds of unreasonable behaviour, following the defendant’s refusal to enter into ADR. The defendant maintained that it had acted reasonably in the circumstances having tried to engage in without-prejudice discussions and by offering to settle at various points. In making his decision, Akenhead J applied some of the criteria from Halsey and held that on the facts the claimant was unable to prove that the defendant had acted unreasonably.

Conclusion

The burden of proof lies on the losing party to show that there has been unreasonable behaviour and that this should reduce the cost award against them. The reasoning applied will depend on the nature of the unreasonable behaviour cited and the specific circumstances and context of the case.

If you are engaging in litigation it is essential that you seek the advice of an experienced solicitor, contact will@osmondandosmond.co.uk or c.dunbar@osmondandosmond.co.uk by telephone on 0207 583 3434 and we will help you assess your case.