Everyone's a loser

Nobody came out of this dispute smiling, not even the winner. They won £4,630.62. To win that modest sum, it cost a whopping great sum. The loser got nothing and it cost him too, a whopping great sum. Let me tell you the story.

Ralph Bailey owns and runs Elvanite Full Circle Limited. It is a demolition and recycling company. An opportunity presented itself to the company to acquire a parcel of land. If planning was then granted there was a buyer in the wings and a real chance of making a cool £800,000 profit. For a very modest fee of £14,000, Amec Earth & Environmental (UK) Limited agreed with Elvanite to make a planning application with all sorts of other bits and pieces to do with then selling the site to a major waste contractor for a profit.

This was back in October 2007, but the relationship with Amec Earth didn’t last, at least not last long enough for it to complete the job. The boss of Elvanite brought in another firm and paid them to deal with the planning permission. Snag is, the time lost in switching from one company to another saw the whole affair collide with the banking crisis in 2008.

That buyer in the wings lost its appetite for buying the site and the site never did sell. Elvanite put Amec Earth into its sights, arguing that the time lost at Amec Earth’s hands caused the loss of chance to make all that profit. So Elvanite sued Amec Earth for that £800,000.

That buyer in the wings lost its appetite for buying the site and the site never did sell. Elvanite put amec Earth into its sights, arguing that the time lost caused the loss of chance to make a profit

This fellow Ralph Bailey of Elvanite is the very essence of business and commercial folk, especially in our construction world. The judge described him as a “hands-on, no nonsense businessman […] a decisive man who talked a great deal but was not so good at listening; who wanted things done his way and to his timetable and could not understand when things did not go according to his plan and who made instant decisions based purely on instinct and emotion”. You might begin to see why, when Amec Earth didn’t jump when Ralph Bailey said jump, they fell out.

Ralph Bailey’s litigation via Elvanite was an utter failure. The case was all about the notion that Amec Earth’s lack of speed caused their client Elvanite to lose the chance of a sale. No, said the judge. That was not the cause. He awarded a fat zero to Elvanite. Amec Earth won its tiny counterclaim and won its legal costs. That’s because of the rule that “costs follow the event”, meaning the winner has his costs paid by the loser and the loser pays his own costs too.

How much? Well now, this is where the story takes another turn. For Amec Earth it was a turn for the worse. Yet they were the winner. Amec Earth wanted £498,000 in their legal costs from Elvanite in fighting this seven day trial. Yes, I know they only won £4,630 and I know they defeated a claim for £800,000 - still, that’s a lot of bread to invest in the legal system.

Amec Earth wanted £498,000 in legal costs in fighting this seven day trial. Yes, I know they only won £4,630 and I know they defeated a claim for £800,000

At the outset of the court process there was a procedural hearing, which discussed legal costs. Both sides had to give to each other and the court their anticipated legal costs. Elvanite said it would spend £317,000. Amec Earth said it would spend £265,000. A year later, just before trial Amec Earth had a re-think - their costs would now be £532,000 instead.

They told Elvanite and told the court but - and this is important - Amec Earth did not apply to the court to enlarge their costs budget. So the trial went ahead and the judgment was eventually handed down and so too the costs order in Amec Earth’s favour. But the ordinary rule is that it is the court that at the outset sets the upper limit for each side’s expenditure or, rather, recovery of legal costs.

True, the limit can be revised via a new costs order of the court. It is to be done as soon as it dawns that the budget is under threat. The court then carries out an inquiry into the reasons. Seemingly the original budget for expert’s reports was £30,000. But something went adrift here. The expert’s bill hit the roof at £200,000 instead.

So the winner Amec Earth spent £500,000 and got half.

So Ralph Bailey’s firm got nothing out of this adventure except a total bill for their own and Amec Earth’s costs of about £600,000. And all that happened, I dare say, because of the banking crisis and a crisis of confidence in the commercial world. What a waste.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple