星空传媒

A worst-case scenario

If you measure a firm by how much MILK its tea-drinking staff consume, Woodgrange in east London is a one-pinta. Peter Jackson, the director of works, says as much as he stops off at the shops on his way to the firm鈥檚 office in Stratford, east London: 鈥淚t鈥檚 the end of the week, and with only four of us in the office we won鈥檛 get through more than a pint.鈥�

Woodgrange has a turnover of 拢1.5m; it is the the type of firm that makes up 90% of the construction industry. This was its first encounter with the courts, and it has lost spectacularly. Jackson and his boss, Steve Prizeman, found the experience harrowing, and are keen to tell their side of the story.

鈥淪teve used to be a lighterman on the Thames,鈥� said Jackson. 鈥淲hen there was no more work, he moved into construction. He worked his way up and set up this company in 1979.鈥�

Prizeman is waiting in the office. He is tall and imposing, with a gravelly voice and a strong East End accent. It鈥檚 clear that he feels more at home organising workmen than talking about the legal system, and as he talks he shifts about on his chair, tapping his fingers and chaining smoking. It鈥檚 easy to see how he might not come across well in court.

Woodgrange brought the case against a timber supplier called Southgrange, which then made a counterclaim. In November 2004 His Honour Judge Simpson found in favour of Southgrange at the Mayors and City of London Court and ordered Woodgrange to pay the sum of the defendant鈥檚 counterclaim and its costs. It had gone to court to fight over 拢12,000 and it ended up with a bill for 拢60,000.

The dispute arose after Woodgrange won a contract to put up oak cladding on a building in Clarence Mews in Hackney, north-east London, in 2002.

Southgrange had been a supplier for Woodgrange for years and there had never been a dispute between them. Woodgrange placed an order for 1518 m of cladding. The dispute began when the supplier demanded full payment for a second order for 3000 m of cladding worth about 拢27,000, which it said Prizeman had ordered and for which it had paid a deposit of 拢12,000. Prizeman and Jackson denied that any order had been made and claimed that the sum of 拢12,000 was paid because they had mistakenly thought the demand for payment referred to part of the original order. Southgrange鈥檚 counterclaim sought payment for the allegedly outstanding sum of about 拢15,000. It is the type of small-scale dispute that happens all the time in construction, what is unusual is that it went to court.

Victoria Russell of solicitor Fenwick Elliott, who represented Woodgrange, says she has not seen a case like it for years. 鈥淚t鈥檚 one of those awful cases where the costs are out of all proportion with the amount at stake. I have worked in construction law for more than 20 years and I have never seen a case that has been fought so vehemently over a comparatively small amount of money.鈥�

The reason Woodgrange was hit by such high costs was that the judge ordered it to pay the Southgrange鈥檚 costs on an 鈥渋ndemnity basis鈥�. In court, costs are awarded on two levels: one is standard basis, which is about two-thirds of the actual legal costs; the other is on an indemnity basis of costs, a rarity, where the losing party pays closer to 100%.

Shifting about on his chair, tapping his fingers and chain-smoking, it鈥檚 easy to see how Prizeman might not come across well in court

The judge said he was awarding costs on an indemnity basis because he thought Prizeman had been lying under oath when he was giving evidence. He said that he was satisfied that the defendant had proved its case and that the paperwork existed to back it up.

Looking back, Russell says, the best thing would have been to have never have brought the claim. 鈥淲e tried to settle it for a long time. Steve Prizeman wouldn鈥檛 settle on a basis that the other side would accept. He insisted on fighting.鈥� It seems that the dispute was driven by personalities rather than by the strength of Woodgrange鈥檚 case 鈥� with disastrous consequences.

Bill Croft, the managing director of Southgrange, says all the aggravation could have been avoided. 鈥淚t shouldn鈥檛 have gone to court, it was totally unnecessary. It鈥檚 sad because Mr Prizeman is a nice guy. He鈥檚 also a proud man and he wouldn鈥檛 admit that he鈥檇 made a mistake. We tried to help. We鈥檙e a small company like he is.鈥�

For a small company, going to court can be a major disruption, says Croft: 鈥淚t was an inconvenience 鈥� myself, my fellow director and my general manager had to lose three days business by attending court for this ridiculous action. I鈥檓 very annoyed about it.鈥�

For Woodgrange the experience has been even more damaging. Whatever the weaknesses of its case, it is hard not to sympathise with a company that goes to court over a disputed 拢12,000 and suffers such a defeat.

鈥淲e have lost about 拢18,000 in solicitors鈥� and barristers鈥� fees, close to 拢19,000 in material costs [Southgrange鈥檚 counterclaim plus interest], and we could be looking at another 拢20,000 of Southgrange鈥檚 legal fees,鈥� says Jackson.

鈥淭hat will have a massive impact on our business, it could take us a year to 18 months to recover; if it鈥檚 a tight market it will take us three years.鈥�

Of course, the reason this small claim cost so much money is that Woodgrange lost its case and its main witness incurred the wrath of a judge. Taking a claim to court is a risk, so firms need to be sure they can prove their case 鈥� and that they can pay out if the worst comes to the worst.