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The Dangers of Overstating Your Case
Written by Dr Elena Moran
In Pell Frischmann v. Bow Valley Energy Crill Canavan acted for the Canadian oil company Bow Valley Energy and its two Jersey subsidiary companies.Mourant acted for Pell Frischmann Engineering Limited, an English engineering company.The dispute revolved around the award of the development contract for the Balal oil field off the coast of Iran.In 1997 Bow Valley was part of a consortium that was awarded the development contract.Pell Frischmann complained inter aliathat in obtaining the development contract Bow Valley had wrongly used confidential information owned by Pell Frischmann.The total damages claimed were in excess of $10 million.The Royal Court upheld the claim of misuse of confidential information and awarded damages of £500,000.
Had this been the totality of Pell Frischmann’s complaint the case would have been unremarkable.However, Pell Frischmann chose to overplead its case to such an extent and to conduct the litigation in such an unreasonable and oppressive manner that it ended up having to pay 80% of Bow Valley’s costs with the trial costs being payable on an indemnity basis.
Instead of restricting its case to the one point on which it was successful, Pell Frischmann chose to plead a catalogue of other claims including conspiracy, deceit, breach of contract, unlawful interference with business relations, procuring breaches of contract and malicious falsehood.All of these allegations were unsuccessful and in relation to the main theme of conspiracy the court found that the allegations were unrealistic and unsustainable.
In considering costs the court held that the conspiracy allegation had a profound effect of the course, scope, tenor and duration of the whole litigation.Pell Frischmann refused to exchange witness statements or affidavits prior to the trial and filed only a cursory skeleton argument in an attempt to keep its powder dry.The result was that Advocate Speck’s oral opening lasted for over five days.The trial itself lasted 35 days in total with over 60 lever arch files of documents and 17 witnesses.Pell Frischmann’s closing submissions were over 800 pages in length.
The court found that had Pell Frischmann limited itself to the claim for misuse of confidential information the scale of the litigation would have been radically different.Because of the disproportion between the claims made and the extent of the judgment the court ordered that costs should be apportioned on a 80:20 basis.In other words Pell Frischmann should pay 80% of Bow Valley costs and Bow Valley should pay 20% of Pell Frischmann’s costs.
In a further criticism of the way in which Pell Frischmann conducted its case, the court held that from the start of the trial Pell Frischman should pay 80% of Bow Valley’s costs on an indemnity basis.The award of indemnity costs was made because “of a wholesale loss of judgment on the part of Pell Frischmann….. The result was litigation pursued, for the greater part, on a scale and in a manner what was wholly unreasonable and oppressive”.
While Pell Frischmann has refused to disclose the level of its costs, given the catalogue of claims, the length of the trial and the army of lawyers working on Pell Frischmann’s case it is not unreasonable to assume that its costs were in excess of £3 million.While Pell Frischmann has indicated that it intends to appeal both the liability and costs judgments, the current position remains that by seriously overstating its case and by pursuing the litigation in an unreasonable and oppressive manner, Pell Frischmann has ended up seriously out of pocket.