The pitfalls of not disclosing your hand early

In a recent High Court decision Ashfords were successful in recovering costs against the Environment Agency, as a result of the Agency's failure to set out the basis of its defence at an early stage.

Ashfords acted for two individuals (Mr & Mrs Webb) whose property was damaged by flooding in July 2007. Shortly before that time the Environment Agency had constructed a large grating in a watercourse adjacent to the property. During the well-reported flooding of July 2007, debris flowing down the watercourse quickly became trapped on the face of the new grating, causing the floodwater level to rise higher than it would have done if the grating had not been installed.

The Agency initially argued, prior to the commencement of proceedings, that it had no liability to the Claimants; an argument which it continued in its original Defence in the High Court. However, some six months later, it then submitted an Amended Defence, relying instead on the assertion that in constructing the grating it had acted under a statutory power. That statutory power, it claimed, meant that any compensation due as a result of the flooding fell to be determined by the Lands Tribunal (pursuant to the principles set out in the Water Resources Act 1991), and not the High Court; therefore the High Court proceedings were invalid and should be struck-out.

In the circumstances of this new assertion it was accepted that the correct tribunal in which the claim should proceed in order to benefit from the statutory compensation, was the Lands Tribunal, and that therefore the High Court proceedings should be discontinued.

The normal position for payment of legal costs when a claimant discontinues a claim is that they should pay the costs of the defendant; due to the defendant having been put to the burden and cost of defending a case which is then withdrawn. There are limited exceptions to this general rule, and at a hearing in December 2009, when the High Court proceedings were discontinued, the Agency sought payment of its costs. The judge then decided that the most equitable course was to leave the determination of who was liable for the costs of the High Court proceedings until the outcome of the matter had been determined in the Lands Tribunal.

The Mr & Mrs Webb were ultimately successful in the Lands Tribunal (although recovered substantially less than their original claim), and were awarded the majority of their costs in those proceedings.

The matter of the High Court costs was then referred back to that court for determination, in April 2011, before Mr Justice Sweeney. One week prior to that hearing, however, the Court of Appeal, in the case of Brookes v. HSBC Bank plc , had formulated six principles to be followed when dealing with the costs of a discontinued claim, and the presumption that the defendant should recover its costs.

In basic terms, the Court of Appeal determined that if a claimant is to succeed in displacing the presumption he will usually need to show (i) a change of circumstances to which he has not himself contributed, and that (ii) no such change in circumstances is likely to be sufficient unless it has been brought about by some form of unreasonable conduct on the part of the defendant, which, in all the circumstances, provides a good reason for departing from the rule.

Mr Justice Sweeney, after hearing the facts which led to the matter originally being discontinued, decided that the Mr & Mrs Webb should be awarded their costs, for two reasons. The first was the wholly exceptional circumstance that, having discontinued the High Court proceedings, they went on to win their claim in the Lands Tribunal in any event. The second, was that the Environment Agency had acted unreasonably due to a consistent failure throughout the pre-trial correspondence and even after the proceedings had been issued, up to the point of the Amended Defence, to identify the basic facts upon which it was relying as its defence, and to identify the basic proposition, which only it knew for sure, that it had acted on the basis of a statutory power.

The Judge said that if the Agency had made its position clear from the outset he had no doubt whatsoever that matters would have taken an entirely different course from that which they did, with a consequent and very substantial saving of costs. The Agency’s conduct was therefore unreasonable, and the High Court costs should be awarded to Mr & Mrs Webb.

Clearly, therefore, the Environment Agency suffered as a result of not putting forward its correct position at the outset.

Charles Hattersley acted for Mr and Mrs Webb in their claim against the Environment Agency: WEBB v ENVIRONMENT AGENCY (2011) QB (Sweeney J) 5/4/2011

 Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice or as an alternative to taking professional advice relating to specific circumstances.