Julie Hamilton: Expenses claims are much more than a numbers game

AS ANYONE who has ever been involved in a court action will tell you, and as I tell my clients – litigation is expensive. No matter how confident parties and their legal advisers are as to the merits of a case, there is no guarantee of success.

Parties may be encouraged by the thought that if they are successful in a court action they will always recover their legal costs. But will they?

While the award of any costs (“expenses” as they are called in Scotland) is strictly a matter within the discretion of the court, expenses are normally awarded in favour of the successful party. However, an ongoing case has highlighted some interesting issues.

Penny Uprichard sought to challenge the approval of a proposed housing development, a business park and a science park in the west of St Andrews. Following two unsuccessful challenges in the Court of Session, she was ordered to pay her own expenses, as well as those of the Scottish Government ministers and Fife Council. The combined legal bill was about £173,000.

Miss Uprichard tried to resist the award of expenses in favour of Fife Council on grounds including asking the court to exercise its discretion to relieve her of the burden of expenses. However, in ordering her to meet the £173,000 bill, Lord Gill, the Lord Justice Clerk, said: “Those who challenge decisions of this nature enter into litigation with their eyes open. They have to expect that if they should fail, the normal consequence will be that they will be liable in expenses. It would be reckless for a litigant to embark on a case of this kind in the hope that if he should fail, the court would relieve him of his liability for the expenses that he caused thereby. It is significant that the applicant [Miss Uprichard] was not deterred from raising this application by the possible extent of her liability should she fail.”

Penny Uprichard took her fight to the Supreme Court – her appeal is due to be heard in March 2013. In the meantime, the Supreme Court has granted her a protective costs order (PCO; known as a protective expenses order – PEO – in Scotland) of £6,000. A PCO is a departure from the usual rule that the loser pays. There are currently no rules of court in Scotland governing PCOs but, having been developed by the courts in England, they are recognised in Scotland. They are available in public interest cases and there are certain governing principles, as well as various types of order that can be made, including an order that each side meets its own costs. In the present case, it means that should Miss Uprichard’s appeal to the Supreme Court fail, Scottish ministers and Fife Council will be limited to recovering a maximum of £3,000 each.

Despite the PCO, Miss Uprichard is of the view that the appeal to the Supreme Court will cost her somewhere in the region of £50,000.

The issue of expenses is contentious in any litigation. In extreme cases, a dispute can be prolonged because of the level of expenses incurred on both sides. An award of expenses is currently measured on a fixed table of fees, which is normally lower than the commercial rates charged by many law firms. As such, it is not unusual for a successful party to recover approximately 50 per cent of the legal costs actually incurred.

In his 2009 report of the review of the Scottish civil courts, Lord Gill recommended that there should be a review of the costs and funding of litigation in Scotland. Former sheriff principal James Taylor began this review in May 2011. It is an extensive consultation, and includes sections on greater certainty and greater predictability of costs, as well as affordable justice. The review will ask whether the power to apply for a PEO should be limited to environmental cases or should they be available in all public interest cases. Additional questions include whether limits should be set on the level at which a PEO is made or should this be a matter for judicial discretion.

The deadline for consultation has closed and all responses are being considered. He intends to report by the end of the year. I, like many commercial litigators, await with interest his recommendations.

• Julie Hamilton is a partner with MacRoberts, specialising in commercial dispute resolution, construction, and health & safety