Liability of partners for partnership debts
A recent case handled by our litigation department demonstrates just how unpredictable litigation can be and highlights the potential costs implications for a party acting unreasonably.
Background
We acted for the Defendant in this case, a specialist IT recruitment company. Our client had placed one of its consultants (the Claimant) in a position overseas, where it was required to implement new IT systems for a third party.
Two weeks into the job, the Claimant’s involvement was terminated by the third party on the basis that it had failed to provide satisfactory services. The Claimant invoiced our client for its work (under the contract our client was responsible for paying the Claimant). The third party refused to pay the whole of the sum claimed, but was prepared to pay a sum that it maintained was greater than the value of the work undertaken by the Claimant. This was unacceptable to the Claimant. The Claimant commenced legal proceedings against our client for the full amount that it alleged was due, including payment for the period after the Claimant’s involvement had been terminated.
The Court intervenes
The case was initially listed for a one-day trial. However, on the day of the trial the judge indicated that it would assist the Court if an expert was appointed to report on whether the Claimant’s work had been performed to a satisfactory standard. The trial was relisted with a revised hearing length of three days, partially to accommodate the new expert evidence.
Neither of the parties had previously considered that expert evidence would be required. Budgets and commercial expectations had been set on the basis that the matter would require one day in court. Instead, both sides were now looking at trial costs more than three times greater than anticipated. Costs now threatened to dwarf the sum in dispute.
More twists and turns
The case proceeded.
One week before the commencement of the three-day trial, the Claimant abandoned its claim for pay for the period post-termination. In its place, the Claimant indicated that it wished to introduce an entirely new claim, based on what was effectively EU law. No hint of this claim had previously appeared in the dispute. The formal application to amend the claim was made on the first day of the trial.
The Court refused to allow the amendment. It noted that even if it had been allowed, the claim would have failed.
In a complete about turn, the Claimant also attempted to reinstate the claim that it had abandoned, just a week before (ie its claim for pay for the period post-termination). The Court refused that, too. Instead, the trial proceeded on a pared down set of issues.
Even so, it took three days of evidence and submissions before the Court found in favour of our client, the Defendant. The Defendant was awarded costs. These included some “indemnity” costs – costs awarded at a higher than standard rate, typically to reflect the unreasonableness of the unsuccessful party’s conduct.
Conclusion
Litigation is an uncertain process and the risk/reward ratio in fighting any case needs to be carefully considered and regularly reviewed. This ensures that sound commercial, as well as legal, decisions can be made.
Litigants also need to appreciate that new claims are capable of being introduced late in the day. In this case, the Claimant’s application to amend at a late stage failed (and the claim would, in any event, have failed). However, we have seen cases where amendments have been permitted very late in the day.
The case demonstrates once again that litigation is not for the faint-hearted.
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