Counting the cost of a dishonest defence

The Court of Appeal recently dismissed the appeal in TMO Renewables against a costs order awarding the successful defendants only 30% of their costs for pursuing a dishonest defence - a salutary reminder for parties who pursue a dishonest claim and/or unreasonably refuse to consider settlement offers or mediation, that there will be severe costs consequences. 

In the case of TMO Renewables, the claimant had alleged that certain former directors of the company in question had breached their fiduciary duties by manipulating a vote at an extraordinary general meeting in order to defeat certain resolutions that sought to change the control of the board.

Whilst the claimant was ultimately unable to establish every aspect of the alleged liability on the part of the former directors, the High Court and subsequently the Court of Appeal crucially applied a 30% and further 40% discount in recoverable costs for the successful defendants. In both instances, it held that as the defendants had not acted honestly in advancing their case on liability and continuously refused to mediate the dispute, a discount on recoverable costs had to be applied to reflect the gravity of the parties’ conduct.

In an article first published by the Law Society Gazette, John McElroy elaborates on this important judgment.

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