Another cracking claim...

A firm of naval architects were instructed to design a vessel to be used for a new ferry service.

When completed, the owners alleged that the vessel suffered from structural inadequacies, which included continued cracking of the hull. They said that it could not perform in certain weather conditions as they had requested it should do, even following repeated repairs. At one point the Maritime and Coastguard Agency had to reduce the amount of passengers the vessel could safely carry. Eventually, the ferry service was completely suspended and the owners commenced legal action against the naval architects for USD 600,000. This covered the cost of repairs, loss of use, loss of profits and diminution of value of the vessel. Expert evidence was obtained on behalf of the naval architect, but it was not particularly helpful to the defence. 

It became apparent that the owners were suffering from financial difficulties, in part due to the fact that the ferry service could not run. On this basis, ITIC instructed lawyers to make an application for security for costs (to cover the defence costs incurred in the event that the owners became bankrupt) in the sum of GBP75,000. Legal costs and expert witness fees had already exceeded GBP40,000 and were estimated to exceed GBP100,000 if the matter progressed to a full trial.  

The application was granted in ITIC’s favour, but unfortunately only to the sum of GBP25,000, as the Judge had some sympathy with the claimant’s argument that they were in financial dire straits due to the mistake of the naval architect. Despite pleading poverty, the owners did manage to obtain the funds and pay them into court. 

The naval architect was left in an awkward situation, whereby, if the matter progressed to full trial, even if they were successful in defending the claim completely (which was very unlikely in light of the expert evidence received) the costs alone could have been in excess of GBP100,000 and there was only GBP25,000 security.  

The Judge suggested that the parties would benefit if they could reach a settlement between themselves, and after a full day of negotiations, the original claim of USD600,000 plus costs was settled for USD230,000 plus costs (which were a further USD100,000).

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