England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(TECHNOLOGY AND CONSTRUCTION COURT
(HIS HONOUR JUDGE PETER BOWSHER QC)

		Royal Courts of Justice Strand London WC2A 2LL Friday 9 November 2001

1. LORD JUSTICE LATHAM: I will ask Mr Justice Burton to give the first judgment.
2. MR JUSTICE BURTON: The claim and counterclaim in these proceedings arise out of building works by the appellant to the respondents' listed premises at Moat House, Benenden, Kent. After the appellant left the site, in circumstances which the respondent alleges and the learned judge subsequently found to be repudiatory, a substantial number of factually detailed issues arose relating, first, to the quantum of the final account; secondly, being a claim by the respondent for damages for repudiation by way of claims in respect both of defective works and incomplete works, and including the cost of professional fees in supervising completion of remedial work; and, thirdly, a claim by the respondent for £10,000 liquidated damages.
3. As a result of interlocutory orders, a trial was to be held in the first instance in respect of certain issues only and, in particular, out of a substantial Scott Schedule served by the respondent, of eight of those scheduled items, which carried with them, largely, the question of the amount to be paid on final account, but in relation to some of them also carried with them the remedial or completion costs to which I have referred.
4. A trial took place before His Honour Judge Bowsher QC in the Technology and Construction Court, which started on 16 October 2000 and took 13 days. He reserved judgment, which he handed down prior to a hearing on 15 December 2000. As will appear in greater detail, he found that the appellant had repudiated the contract, but he only awarded a small amount of damages in respect of the completion and remedial work which he was trying. In respect of the final account items, he found substantially in favour of the appellant.
5. Skeleton arguments were exchanged between the parties in preparation for the hearing on 15 December which, among other things, was to deal with costs. By virtue of what the appellant submitted to have occurred at the trial and by virtue of what the appellant's counsel submitted in the light of the judge's findings on the first trial to be likely to be found in respect of the balance of items to be tried on any second trial, the appellant submitted that it should be awarded its costs. Further, relying on an open offer made in a letter 2 March 2000, the appellant submitted that in respect of its costs since 23 March 2000 the respondent should pay them on an indemnity basis.
6. In his skeleton, and subsequently in the oral submissions made at the hearing of which we have been provided with a transcript, the respondent resisted that claim but, through counsel, made no cross claim that the appellant should pay his costs. The submission of Mr Neville Clarke, for the respondent, who appeared then as he appears now before us, was that the costs should be reserved on the basis that it could not at that stage be anticipated who the overall winner was likely to be.
7. The judge ordered that the appellant should pay one half of the respondents' costs. Such costs are in a substantial sum and, to some extent, dwarf the amounts in issue or recovered in the proceedings. Mr Neville Clarke has before us candidly described that order as a rather extraordinary order.
8. Since 15 December 2000 the following has occurred. Although refused by the judge, this court granted leave to the appellant to appeal in respect of his order for costs. The respondent sought, first, from the learned judge who refused it and then, successfully from this court, leave to cross appeal in respect of two issues relating to works on the lake and on the museum floor at the respondent's premises. Although relatively small in themselves, those issues were said by the respondent to have been wrongly resolved by the judge, and particularly if the question of overall success in the action by setting off the claim against counterclaim were to be relevant, it would possibly have some impact on costs.
9. Arrangements for the second trial proceeded. Since the grant of leave to appeal and cross appeal, and in advance of such second trial, the parties have now settled the proceedings by a consent order dated 3 July 2001, to which I shall refer further. That leaves unsettled, and is subject to, the outcome of this appeal with regard to the three outstanding matters of the lake, the museum floor and the appeal against the judge's order for costs, to which I now turn.

The Lake

10. The learned judge dealt with the position of works to the lake in paragraph 119 of his judgment. He said as follows:

"This is a substantial item in the Scott Schedule. However the defendant's case is that the claimant and Mr Gray agreed a final account figure of £46,214.07 for the lake at a meeting on 27 November 1997 as was confirmed by Mr Gray by letter of 29 November 1997. That figure also appears in the claimant's overview of 22 July, 1998. That case was not seriously contested in evidence and was not contested at all in the closing submissions of counsel for the claimant. I therefore accept it despite evidence about disputed measurements made a considerable time after the agreement of the final account figure."

11. The relevant entry in the letter of 29 November 1997, to which Mr Neville Clarke has drawn our attention, is numbered 14.2:

"Excavate subsoil as per survey 20693.00m³

Agreed 20000m³

DDT shaping at rear of house by jetty CA 400m³

20000 - 400 = 19600 @ 1.10m³

£21560.00."

12. Mr Neville Clarke made submissions in a skeleton argument prior to the hearing of 15 December 2000. Under the heading "Lake Judgment" he said:

"It was admitted in evidence that there was an element of double recovery on the lake amounting to lake amounting to £ ."

13. Which sum he left blank:

"Although the finding is that there was agreement as to the valuation of the lake works, this does not alter the admitted fact that in the agreed figure was a sum of £which was incorrectly claimed."

14. He made oral submissions at the hearing as follows:

"My Lord, I do not think it is a matter of contention that there was an admission by the defendants of the degree of double accounting, in that they accounted the topsoil over the lake area once and then they accounted excavation of the top soil and the subsoil again. So there is a double accounting on the topsoil, amounting to £10,153.00....

My Lord, we do not challenge, at this stage, that judgment of your Lordship, but we say it is a factor which should be taken into account for your Lordship's exercising discretion as to interim damages or costs."

15. As far as the respondent is concerned, the Scott Schedule which was before the judge read as follows:

"Excavate subsoil

Total excavation 19600.00m³

LessTopsoil 1331.00m3

Subsoil 18269.00m³ @ 1.10."

16. The appellant's case was set out under "Defendant's Comments":

"The final account for the work to the lake was discussed by the parties at length at a meeting held on 27 November 1997 and was effectively agreed at that meeting in the sum of approximately £46,000. On 29 November 1997 the Defendant wrote to the Claimant setting out the details of the agreed final account in the sum of £46,214.07. This letter simply confirmed what had already been verbally agreed between the parties at the meeting held on 27 November. At no point during the whole of the remainder of the works did the Claimant take issue with the Defendant's confirmation of the agreed final account for the lake.

In November 1999, however, the Claimant produced a revised valuation of the lake totalling only some £27,799.99 - ie £18,414.08 less than had been agreed between the parties two years previously. That assessment was incorrect in some significant material respects. Not least it assumed, erroneously, that the excavations carried out by the Defendant were confined to the area covered only by the lake itself, whereas in fact the Defendant's operations covered an area over three times that size. The Claimant has now produced a revised assessment which accepts that the Defendant's operations covered an area beyond the footprint of the lake and extending into the adjacent field. The Claimant's assessment, however, still amounts to only £29,824.92 - ie £16,389.15 less than agreed by the Claimant in November 1997. The Claimant's assessment differs from his November 1999 assessment, however, by only £2,024.93 despite the Claimant having fundamentally changed the basis of his valuation in the meantime. The Defendant considers that the Claimant's current assessment remains fundamentally flawed in that (inasmuch that the Defendant can understand the Claimant's current assessment) it appears to arbitrarily exclude significant items of work which were in fact undertaken by the Defendant.

The Claimant's current valuation of the works to the lake is not properly understood by the Defendant. The Claimant's supporting calculations are confusing and appear to be based upon equally confusing sketches of the lake area. No proper explanation has been provided by the Claimant as to how his current assessment has been arrived at and why, having previously accepted the Defendant's assessment, the Claimant now disputes this. The Defendant stands by its assessment previously accepted by the Claimant of £46,214.07."

17. The respondent's notice for the purposes of this appeal, reads as follows in relation to the lake:

"The lake was excavated in two stages (i) top soil was removed for re-use (ii) subsoil was removed. In error, when calculating the amount of subsoil excavated, the Appellant included the volume of topsoil, 2903 cubic metres, for which there had been a separate charge. The Appellant therefore double accounted for a total of 2903 cubic metres of subsoil excavation at the rate of £1.10 per cubic metre, overcharging by £3,193.30. This error was partially conceded at paragraph 13.1.22 of the Appellant's expert's report, cf: Respondent's Bundle document identified as B101-102, and in evidence by the Appellant's expert. The transcript of evidence is not yet available. The Learned Judge dealt with the lake at paragraph 119 of his Judgment, Appeal Bundle page 135. He found that the Respondent had agreed a figure of £46,214.07 for the lake at a meeting in November 1997. He therefore ordered that this sum be paid, making no reduction for the double accounting."

18. The reference to the appellant's expert's report is to the report of Mr Robinson. In the relevant part of his report, having set out the facts in the earlier two paragraphs, as to the meeting on 27 November 1997 between the respondent and Mr Gray and the fact that the agreed figure appeared in Mr Gray's letter, Mr Robinson states as follows:

"I note, however, in the Claimant's Scott Schedule that he now considers that the ACAD Mapping figure [the company commissioned by the claimant at the time to carry out the survey of finished levels] of 19,600 cubic metres was inclusive of topsoil. He therefore omits from his total his assessment of the quantity of topsoil included (1,331 cubic metres) to arrive at a reduced total of 18,269 cubic metres in respect of subsoil.

I have examined the exercise carried out by ACAD Mapping and, whilst I do not have sufficient information to determine conclusively that their assessment was inclusive of topsoil, this would seem to have been the case. Unfortunately, the detail of Mr Gray's digitised assessment has not survived and it is now not possible to reconstruct his exercise. I cannot therefore determine as a matter of certainty whether Mr Gray's assessment is correct. However, what is apparent is that the matter was discussed between Mr Gray and the Claimant at the held on 27 November 1997 and that Mr Gray's figures were adopted in preference to those of ACAD mapping."

19. The significance of the respondent's notice is that it is now claimed that a figure of £3,193.30 at £1.10 per cubic metre is the alleged overcharge, which is considerable less than the previously unexplained assertion at the costs hearing, which began as a missing blank in the skeleton but was filled in, in submissions before the judge, as being £10,123. On the other hand, it is more than the figure of 1331 at £1.10 per cubic metre in the Scott Schedule.
20. Finally, the respondent's skeleton in support of the appeal says at paragraph 24 in relation to this issue:

"By his judgment on the Lake the learned Judge has caused the Claimant to pay an admitted overcharge. The Claimant was asked to pay for excavation of the Lake at a very early stage of the contract at a time when he had no cause to doubt the figures put to him. He did not measure the excavation. The figures put to him were Mr Gray's figures. There was an admitted mistake."

21. What had been said in the respondent's notice as "partially conceded" is thus now described as an "admitted mistake".
22. The appellant says as follows:

"1. No evidence was given by the respondent at trial of any mistake entitling him to resile from the agreement or at all. The case made at trial to be inferred was, if at all, that the ACAD report had included some, be it 1331 cubic metres or otherwise, in the total.

2. Contrary to what is there stated in the skeleton, there had been a measurement by, not the respondent himself but by those whom he instructed, so that it was not simply the fact that he was accepting what was put to him by Mr Gray but rather that, notwithstanding his own information, Mr Gray's figures were being accepted.

3. Mistake was not argued at trial, neither in opening nor closing submissions and, therefore, was not met by the appellant nor dealt with by the judge.

4. The case put forward is inconsistent and confusing and is not supported by Mr Robinson as asserted."

23. It seems to me that Mr Robinson's report does not amount to an admission, as the respondent submits. It indicates that although the ACAD assessment may have been inclusive of topsoil the matter had been subsequently agreed. Further, there was no cross-examination of Mr Gray in this regard, and the case was raised only at the costs hearing, and then in only very general terms.
24. In my judgment, the learned judge found, as was not disputed before him, that there was agreement; and there was no case put before him, and no case then, or now, made out, for disturbing the sum agreed at the meeting.

THE MUSEUM FLOOR

25. The learned judge dealt with this at paragraphs 85 and 86 of the judgment.

"The tender documents show, (when one is led to the appropriate figures amongst all the scribbles) that the parties agreed on £36,304 for the museum floor and £4,895 for the entertainment area floor. The parties now want the whole floor to be remeasured and priced at prices on which they differ, even though there was no one supervising to say what was done. There is a dispute about what materials were used. I see no basis at all for remeasuring this item. The work was done for an agreed price though not completed. If either party was wrong in the initial measurements, that is part of the risk they bear with a fixed price contract. I do not accept that there is any credible evidence that the defendants did not do what they agreed to do or use the agreed materials except that they did not finish the work (as I have mentioned when discussing repudiation) and there is also an allegation of a defect in the floor.

In those circumstances, it seems to me that the defendant is entitled to be paid the agreed sum less the cost of completing the work and less any damages payable for any proved defect."

26. The reference to the page of the "tender document with scribbles" on it is to a document which is also before us. This has handwriting showing totals of £36,304 and £4,895, the total of which amounts to the sum of £41,200 awarded by the judge, as well as other hand written items.
27. We have before us the relevant Scott Schedule entry which was before the judge. Figures are set out by both sides on a remeasured basis. In relevant part, the "Defendant's Comments", which set out the appellant's case, read as follows:

"The Claimant's current assessments of £36,304 in respect of the museum floor and £4,896 [a misprint for £4,895] in respect of the entertainment area appear to have been taken from a manuscript note in the top left hand corner opposite page 23 of the Defendant's tender document. Neither of these sums was in the event adopted. Taken together they simply represent one of the alternatives referred to above which were rejected by the Claimant as being too expensive. They were not the basis of the Defendant's contract price.

A manuscript note located centre right opposite page 23 of the Defendant's tender document sets out the Defendant's breakdown of its proposed price of £23.50/m² for a floated concrete floor."

28. There is then set out for clarity the summary of the handwritten scribble on the document showing that breakdown.
29. In his skeleton Mr Neville Clarke, prior to the 15 December meeting, stated as follows in relation to this issue:

"Paragraph 85 states correctly that each party presented its case in the Scott Schedule on the basis of a remeasurement. However, judgment has been given on an agreed price....Because, at trial, each party was working on a remeasurement basis, though the Claimant worked by reference to the figures set out in the agreed fixed price, neither party argued the effect of a finding a fixed price agreement. In fact Mr Van Dijk supplied the brick and the floor sealer and the labour for the floor sealer himself for the museum floor. This is implicitly set out in the Scott Schedule where each party claims for 'lay only' brick pavers. Further, in the Entertainment Area no epoxy resin was laid. On the basis of the judgment, Mr Van Dijk's case is that, in relation to the museum floor, the award should have been...."

30. He then sets out the sums and asserts that there should be deductions from the £41,200 of three figures for the bricks, floor sealer and epoxy coating; totalling £9,584.
31. There were submissions at the 15 December hearing, when Mr Neville Clarke referred to paragraph 85 of the judgment, and then submitted:

"My Lord, neither party argued your Lordship's finding of the agreed price. I fully understand how your Lordship came to that finding because the figures appear on both tender documents. In fact, though, Mr Van Dijk supplied materials and paid for materials himself for the museum floor. He supplied the brick, the floor sealer and labour for the floor sealer for the museum floor. He also in relation to the entertainment area, no epoxy resin was laid. This appears to be conceded because when [one] goes to the Scott Schedule the allowance by both parties is for laying only brick pavers. Your Lordship's judgment was not one which reflects the arguments of either party. This matter has not been canvassed before your Lordship. We say if there is a fixed price then the sums for the materials for which we paid should be deducted from that fixed price."

32. Miss Hannaford, counsel then appearing for the appellant, responded:

"My Lord, I do not accept that the claimant is entitled to take that point at this stage. Can I remind your Lordship of your Lordship's finding that led to paragraph 85, which is at the end of paragraph 85, you said:

'I do not accept that there is any credible evidence that the defendants did not do what they agreed to do or used the agreed materials, except that they did not finish the work.'

When you are referring, my Lord to not finishing the work, that relates to the completion of the tarmac road, which was an item of claim by the claimant and has been dealt with in your Lordship's judgment. The position is that your Lordship has found that there was not credible evidence of anything other than the agreed price and both parties have to live with that.

What my learned friend is seeking to do is, without any evidence having been advanced or even now being advanced in relation to these items, to cherry pick certain deductions, whilst not allowing me to put in the additions which I obviously did put into the Scott Schedule and would wish to put in. As I say, my learned friend cannot ask your Lordship to make deductions without allowing your Lordship to make additions. That would involve rehearing the whole issue and would be, in my submission, wholly inappropriate."

33. The respondent's notice in this regard, under the heading "The Museum Floor", reads:

"The parties put their cases for quantifying the museum floor by re-measurement....The learned judge, however, decided the case by reference to a fixed tender figure. He found that there was no credible evidence that the Appellants did not do what they agreed to do or use the agreed materials....In fact the Respondent purchased the following items directly, brick pavers at £6,996.52 and Sealer at £2,634.37. Epoxy chippings which had formed part of the quotation were not used."

34. He consequently sets out the deductions which he seeks of £8,280, £1,656 and £1,700, totalling £11,636.
35. His skeleton before this court reads, at paragraphs 25 and 26:

"The learned judge found a sum due in relation to the museum floor by finding that there was an agreed fixed price, an argument not advanced by either party. Neither party therefore had the opportunity to address him on his approach. In fact both parties know that the Defendant did not supply all the materials and labour which were included in the fixed price. This was the basis for both parties adopting a different approach in the Scott Schedule. The Claimant is therefore being ordered to pay for materials not supplied to him.

Although revisiting the museum floor may seem disproportionate, the amount involved may be crucial to the question of costs. There is, in any event, at the moment to be a further trial. The Court may accept the Claimant's figures set out at paragraph 7 of the Grounds of Appeal or remit the matter back to the trial Judge for further evidence and/or argument during the further trial."

36. The appellant submits:

1. It is indeed right that neither party put his case at trial on the basis of the agreed sum, but both put forward figures by way of remeasurement. The respondent's case amounted to £32,069. If the respondent is now permitted to deduct from the judge's figure of £41,200 sums totalling £11,636, it will result in a lower figure than was conceded by the respondent at trial.

2. The learned judge found, contrary to the case of both claimant and defendant, that by examination of the evidence there was an agreement.

3. There was no evidence given to support the case set out in the respondent's notice as to what the respondent did and did not do. Inference from the absence of provisions in the Scott Schedule is not sufficient. If the respondent were now permitted to give evidence in accordance with paragraph 7 of the respondent's notice, then the appellant would wish to be in a position both to challenge that and also to make its own case for additions.

37. Mr Neville Clarke has accepted the difficulty he is now in by virtue of the fact that there is to be no further trial, and that to pursue this head of appeal would be disproportionate if it were to lead only to his alternative case, namely of the matter being sent back for further trial.
38. For the persuasive reasons the appellant has given, I would not disturb the learned judge's finding.

COSTS

39. This the most substantive issue on this appeal. I have indicated the order that the learned judge made, namely that the respondent should have half his costs of the action. It has been necessary to resolve the two issues raised by the respondent in case they might have had some influence on the conclusion on costs, but, for the reasons I have given, they do not. Therefore, this main issue of the appeal remains unaffected.
40. The context appears to be as follows:

1. There was a claim by the claimant/respondent for the following:

(i) £65,000 "over payment" of which £27,985 was in respect of completion or remedial work, such that the alleged overpayment in respect of the final account was £38,000;

(ii) £27,985 was thus the claim for completion/remedial work;

(iii) £7,500 plus VAT was claimed in respect of professional fees with regard to that completion/remedial work; and

(iv) £10,000 was claimed in respect of liquidated damages.

2. The counterclaim by the defendant/appellant was for £44,000 in respect of underpayment on the final account, exclusive of claimed VAT, which was initially said to amount to some £23,000, although the appellant's estimate has now increased.

3. As a result of the combination of the first trial and the subsequent settlement, the following has occurred. In respect of the final account, there was no overpayment, so the respondent recovered nothing: the appellant recovered £23,350.50. In respect of completion/defects the respondent recovered £12,006.64. In respect of professional fees the respondent recovered £3,750 plus VAT, and in respect of liquidated damages the respondent recovered £5,000.

4. This overview was not available to the learned judge at the hearing of 15 December 2000, because the settlement, which contributed to this end figure, did not occur until July 2001.

5. With regard to the first trial before him, which was limited to the eight items to which I have referred, the following position was reached. In respect of a claim by the appellant in respect of the final account for £166,425, as to which the respondent's position was £113,542, the appellant recovered £165,308. In respect of a claim by the respondent with regard to completion/defects for £23,800, as to which the appellant's position was £1,593, the respondent recovered £7,373.64, of which sum £3,500 was strictly monies due in respect of completion work, being the increased cost of the completing of works arising out of the repudiatory breach.

It can be seen that this was a substantial victory for the appellant in relation to the final account, and the recovery by the respondent of much less than he claimed in respect of the completion/defects issue.

6. Before the learned judge on 15 December there was much argument as to what the likely outcome, so far as overall winner or loser would be, after the trial of the balance of the claims. This was, in my judgment, somewhat premature. The appellant would probably have been best advised to have concentrated on the costs of the hearing, reserving its indemnity costs argument for later. But we now know what has occurred as a result of the settlement of July 2001, although that was a settlement which left over (a) the questions left in this appeal; (b) VAT; and (c) interest. Subject to that, there was a balance payable by the respondent to the appellant of £2,593.86. In the event, this has been unaffected by the outcome of the appeal because the respondent has failed on both the issues raised. Interest is obviously dependent on the principal owed, but the question of VAT still remains outstanding to be decided by the relevant authorities. On the submissions before us, that outstanding sum, in so far as it would be relevant to the matters before us, has ranged somewhere between £3,500 and £36,000. This outcome, however, could not be known to the judge as of 15 December.

41. In this context, I turn to the factors which have been argued before us for consideration on the issue of costs.

(1) Substantial success for the appellant on the final account, rebutting the respondent's claim for overpayment entirely and recovering half of its claim.

(2) Success for the respondent on the issue of repudiation by the appellant, and some success in relation to damages resulting from such repudiation, although only some 50 per cent of what he was claiming, some of which was conceded.

(3) There was an open offer by letter dated 2 March 2000 made by the appellant's solicitors to accept the sum of £15,000, inclusive of interest, in full and final satisfaction of the appellant's claim, ie its counterclaim, taking into account the respondent's claim plus costs. This offer was not accepted by the respondent, nor indeed was any response made to it at all. Subsequently, by letter dated 22 September 2000, he made an offer without prejudice as to costs that he would receive £50,000 in full and final settlement of both parties' claims with no order as to costs. This was the basis of the appellant's case before the judge on 15 December, namely that, as it was likely, based on the results of trial 1, to do at least that well by the end of trial 2 (ie receiving £15,000), it should have its costs, and indeed indemnity costs, since the date of the offer. The learned judge recorded the existence of the offer in his judgment on costs, but he gave no reasons as to why he was paying no account to it as, pursuant to CPR 44.3(4)(c), he would have been obliged to do. When giving his reasons for his conclusions that the appellant should pay half the respondent's costs, it did not figure in his reasoning.

(4) Before the judge, while the appellant sought its costs (including indemnity costs), there was no claim by the respondent that he should have his costs. His submission, through Mr Neville Clarke, was that the question of costs should be reserved. There was thus no apparent need, and no opportunity, for counsel for the appellant to respond to any such application, none being made. Nevertheless, the judge not only rejected the appellant's claim for costs, but made the order I have indicated in favour of the respondent.

(5) Pursuant to CPR 44.3(4)(a), the court must have regard to all the circumstances, including the conduct of all the parties. In the course of submissions before us, both Miss Jefford, who has appeared as counsel for the appellant but not below, and Mr Neville Clarke, because it became apparent at an early stage of this appeal that we were considering exercising our own discretion, on the basis that the learned judge erred in the exercise of his discretion, and/or that we should in any event reconsider the matter in the light of the course matters have taken, have put before us matters to be considered on both sides.

42. We are inevitably appreciative of the fact that we are much less able to fully understand the nature of such facts than was the learned judge who tried the matter for 13 days. Subject to that, this is what we have considered.
43. Conduct by the appellant.
44. This falls under two heads. I deal, first, with conduct which was taken into account by the judge according to his judgment on costs. There are four such matters. The judge specifically mentions the first two of these in his conclusions; the third and fourth were simply mentioned by him in the course of his judgment.
45. The first matter was the willingness of the respondent to agree to remeasure in July 1998, which was agreed to, but then reneged upon, by the appellant, who sought subsequently to impose unacceptable conditions to his prior agreement. The appellant agrees that this occurred, but points out that it made a subsequent similar offer to the respondent in March 1999, which the respondent refused.
46. Secondly, the respondent won on repudiation. Under CPR 44.3(4)(b), success on part of the case is also a relevant factor to consider, it being the appellant who left the job. The appellant accepts he did leave the job and was found to have repudiated, but submits that that issue did not take up anywhere near a substantial proportion of time or costs and, so far as the trial is concerned, brought with it only a small recovery in damages.
47. Thirdly, the judge considered that the appellant failed adequately to instruct its expert, Mr Robinson, at an early stage. This is denied by the appellant.
48. Fourthly, the appellant did not give a full "plus and minus" statement until the failed mediation in March 2000.
49. This is not accepted by the appellant. The plus and minus statement it supplied in August 1998 was, on the submissions of Miss Jefford, quite sufficient. She points to the evidence of the appellant's expert, Mr Robinson, at trial (paragraph 5.2.4 in the respondent's bundle). The appellant submits that the allegedly late delivery of such plus and minus statement is of no relevance to the outcome of the proceedings. In relation to such statement, it had been in substantial bulk delivered in August, and those parts in respect of which it is said to have been deficient and only made good in March 2000 did not, in the event, form part of the items tried by the learned judge.
50. I then turn to conduct which was not taken into account by the judge on the 15 December in his judgment, but is now urged by the respondent. First, the original excessive demand by Mr Gray, an employee of the appellant. Mr Neville Clarke submits that this was reprehensible, and was never justified by Mr Gray. The learned judge did not characterise that conduct as reprehensible in his judgment. Indeed, he makes some complimentary comments about the appellant and the respondent at the outset of his judgment, which would, perhaps, be inconsistent with any such conclusions. However, Mr Neville Clarke submits that the learned judge may not have made such comments because of a desire not to exacerbate the position, knowing there would be a second trial. However, this is not a matter that the learned judge mentioned in the course of his judgment as being part of his reasoning for the costs order he made.
51. Secondly, Mr Neville Clarke relies upon the appellant's failure to deal with the financial appraisal produced by the respondent's expert, Mr Lawrence, and supplied to the respondent in July 1999, or with the respondent's Scott Schedule. The appellant, through Miss Jefford, answers that neither the appraisal nor the Scott Schedule were adequate or capable of being dealt with. Indeed, the inadequacy of not one but four Scott Schedules which were successively produced by the respondent is a matter of which the appellant makes complaint.
52. Conduct by the Respondent
53. I then turn to the conduct by the respondent to which Miss Jefford has referred. None of these matters relied on before us by the appellant were referred to or taken into account by the judge in his judgment. The appellant submits that it would certainly have heavily have relied upon them, and other points, had it been appreciated that it was facing a cross application for costs by the respondent.
54. The first matter is the respondent's refusal of the offer of March 2000, to which one might add his failure to respond or, if appropriate, counter-offer within a reasonable time. Irrespective of whether it would amount specifically to a Part 36 offer, and irrespective of whether the final outcome does or does not in fact exceed £15,000, the reasonableness of the offer and the unreasonableness of the refusal ought to have been taken into account. The respondent asserts that in March 2000 he was not in a position to respond to or accept such offer. The appellant does not accept this. It was the respondent who brought the claim and must have been able to appreciate the claim it brought, and, in any event, the offer post-dated the mediation. There was no response by the respondent at that stage asking either for further time to consider the offer or for further information with which to do so.
55. The second matter refers to the respondent's refusal of the appellant's offer to abide by an independent remeasurement in March 1999. I have already referred to the reverse refusal by the appellant of the respondent's offer the previous year, on which the learned judge placed reliance. The respondent says he did so on legal advice and was feeling pressurised. Nevertheless, he made no response to that offer.
56. Thirdly, the respondent's commencement of proceedings in November 1999 at a time when the experts had already arranged to have a meeting on 8 December.
57. Fourthly, the respondent's wholly inadequate Scott Schedule which contributed substantially to the cost and complexities. His Honour Judge Toulmin QC came to this conclusion at a case management conference in April 2000 in relation to an earlier version of the Scott Schedule, such that it was ordered to be reserved, and so did the learned judge himself, as is apparent from his judgment when, at various stages, he is very critical of the Scott Schedule. In paragraph 29 he refers to its "even more unfortunately" being a document of "great complexity", and "very difficult to understand". At paragraph 69, he said that he shared the "bemusement" of Mr Robinson, the appellant's expert, in seeking to understand the Scott Schedule and the confusing assessment prepared by and on behalf of the claimant, each reaching different totals. In paragraph 70 he described it as an "extremely confusing document" and at paragraph 131 he referred to the fact that "counsel for the claimant needed an adjournment during his closing speech to take instructions to enable him to answer my question about it", so difficult was it to derive a figure from it: he emphasised that counsel was not responsible for the drafting of that Scott Schedule.

THE JUDGE'S JUDGMENT

58. On the face of it a question of costs, particularly in relation to a judge who had a hearing of 13 days, is entirely a matter of discretion. On the other hand, I have come to the conclusion that this is a case in which the judge made what Mr Neville Clarke was driven to describe as a rather extraordinary order, which was not within his discretion, and that he erred in the exercise of his discretion in arriving at his decision. In particular, the following appear to me to be the case.

1. The judge did not deal with the important issue of the offer of 2 March 2000 at all. Not only was he obliged to do so pursuant to CPR 44.4 but it was plainly a material matter with which he was required to deal.

2. The learned judge did not give an opportunity for the appellant to deal with an application for costs in favour of the respondent which was in fact not made. Miss Jefford does not submit that the learned judge did not have jurisdiction to make an order when none was sought before him, but I am entirely clear that if it was within the judge's mind to make it, then he should have given the appellant the opportunity to deal with the existence of such application. Had he done so, Miss Hannaford, for the appellant, would have been in position to put before the judge the arguments relating to the respondent's conduct, already referred to, and to seek to satisfy the judge in relation to the matters alleged against it, which it appeared may have weighed with the judge.

3. The judge was asked at that stage to take account of an uncertain outcome. But he could not, and did not, take into account that eventual outcome. Both parties accept before us that we are entitled to look at that eventual outcome, which I have sought to summarise, and in so far as it is relevant, we can now consider it.

59. I reach the following conclusions.

(1) Leaving aside the issue of VAT and interest, on the totality of claim and counterclaim as now resolved, the appellant has succeeded, but, subject to those matters, only by a relatively small amount in the overall context of this case.

(2) Even now, it is not possible to know for certain whether, taking into account VAT and interest, the £15,000 (the subject matter of the interim offer) will be exceeded. But the making of that offer and the failure to respond to it by the respondent, is a matter which must be taken into account as a factor.

(3) It is clear to me that the points made by the appellant about the conduct of the respondent in relation to the proceedings carry considerable weight and do not seem to have been considered by the judge. As he had been the trial judge over 13 days, great respect must be paid to the views he seems to have formed about the conduct of the case by the appellant, albeit he was in his judgment respectful of both sides. As can be seen, however, there is something to be said on both sides.

(4) The one matter that does appear to have weighed heavily with the judge is the success of the respondent on the issue of repudiation. That in itself may be helpful guidance to us, indicating that this is not an appropriate case for an overall costs order, particularly in the light of the fact that it is still unclear what the eventual outcome is going to be. In accordance with CPR 44.3(4)(b) attention must be paid to the success of the respondent on that issue. Nevertheless, it plainly formed a relatively minor part of the trial and certainly would have led to considerably lesser expenditure on costs. The respondent's claim for damages was only limitedly successful, and the appellant's success on the issues of the final account which were tried at trial 1, was manifestly greater. I can see no basis upon which the judge's conclusions as to the repudiation issue, even as to the conduct of the appellant in relation to the repudiation issue, can possibly have justified the order he made, quite apart from the overlooked importance of the letter of 2 March 2000.

60. In my judgment, the right course would have been, but certainly is now in the exercise of my discretion, that the respondent should have two-thirds of his costs of the repudiation issue and claims arising thereout, but the appellant should have its costs of the balance of the action, the former being offset against what I anticipate will be the considerably greater amount of the matter.
61. LORD JUSTICE LATHAM: I agree.
Order: Appeal allowed. Cross-appeal dismissed. Appellants to have costs of appeal and of the cross-appeal to be subject to detailed assessment. No order as to costs of interlocutory hearing in the Court of Appeal when costs were reserved. No interim order for costs. (Order does not form part of approved judgment)