ON APPEAL FROM QUEEN'S BENCH DIVISION MANCHESTER DISTRICT REGISTRY
HIS HONOUR JUDGE STEPHEN DAVIES
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE TOMLINSON
SIR MARK WALLER
| EPSOM COLLEGE
(A PRIVATE COMPANY LIMITED BY GUARANTEE)
|Claimant / Respondent
|- and -
|PIERSE CONTRACTING SOUTHERN LIMITED
(IN LIQUIDATION, FORMERLY BISELEY CONSTRUCTION LIMITED)
|Defendant / Appellant
Dr Mark Friston and Mr Kevin Latham (instructed by Berrymans Lace Mawer LLP) for the Respondent
Hearing dates : Wednesday 9th November 2011
Crown Copyright ©
Lord Justice Rix :
The flooding incident
Dr Leek's report
The first Part 36 offer, 13 March 2009
"This offer will remain open for acceptance 21 days from the date of receipt of this letter by you. We calculate date of receipt as Friday 13 March 2009 [the offer was made by fax] and as such diarise expiry as 4.00 p.m. on Friday 3 April 2009.
If you do not accept within 21 days and we meet or beat this offer we shall refer the Court to this offer in relation to the issue of costs. This offer is intended to have Part 36 consequences."
Mr Watts' report
The second Part 36 offer, 16 April 2010
The third offer, 26 July 2010
"We maintain that the evidence supports the claimant's claim and there are far more risks for your client in defending this claim than there are for the claimant in pursuing it. We therefore remain of the view that our client's Part 36 offer which expired on 7th May 2010 is protective and therefore your clients have been at significant risk on costs since its expiry. Nevertheless in the absence of any counter proposals of settlement from you and in light of our recent telephone discussion on settlement in which you indicated that the claimant's success fee may be the sticking point, our clients are prepared to accept the sum of £62,000 in full and final settlement of the whole of the claim inclusive of damages, interest, profit costs, VAT, disbursements and success fee (additional liabilities)."
In effect, therefore, the school's insurers were prepared to cap costs at approximately £50,000.
The discovery of the pipe
"We confirm for the avoidance of doubt that during our without prejudice discussion when we indicated that our clients may be prepared to accept £45,000 inclusive of costs as a bottom line figure, to the extent that this represented a formal offer this offer is now withdrawn."
"Whilst I do not think it could be denied that the most probable cause of the leak was a nail or screw being introduced into the pipe, I do not consider it is possible to determine when that occurred. On Dr Leek's theory that the nail formed a seal with the copper pipe when it was introduced then that nail could have been introduced many years earlier. On a balance of probabilities, the nail was introduced the last time the duct covers at that location was lifted and there is no evidence to suggest that that occurred in 2003, in my opinion. However the fact that there appears to be no aroma, mould or wet rot suggests that the leak occurred only relatively recently before it was discovered. This may well suggest that it is more likely that the nail was introduced only a relatively short period of time before the leak was discovered. However, this would mean that the nail was either driven through the carpet on the floor or part of the carpet was peeled back at that location. Ultimately, these are of course all now a matter of evidence upon which I am unlikely to assist further. It is of course for the Claimant to prove its case."
The December non-intrusive site visit
"It is also an application made on short notice, for which the defendants are to be condemned and the claimants are to be congratulated for being able to deal with the application substantively on short notice."
"But when the cost and inconvenience of that process [the October direction for an intrusive site inspection] had been explained by the claimant's solicitor, Miss Hindle, to the school it appears that this prompted some further search and the original section of copper pipe, which it had been said was lost, was mysteriously discovered. I do not intend to draw any adverse inference from this at this stage, but it does appear quite remarkable that it was only at this late stage in the proceedings and in those circumstances that the pipe was subsequently produced. On any view that is a poor state of affairs so far as the claimant is concerned."
The judge's main judgment
The judge's costs judgment
"So constant attempts, never a counter offer, never, apart from on 16 December 2010 when the defendant's solicitor suggested there should be a 'drop hands' and walk away. My Lord, in my submission completely unreasonable failure to engage with the commercial realities of a miniscule claim where the risks for both sides turning on oral evidence were obvious."
"6. In my judgment Mr Mitchell is right when he says that the court should not be influenced by the fact that the case turns on oral evidence. That is one of those inevitable risks and vicissitudes of litigation. Indeed it is unhappily often the case that evidence which is anticipated turns out differently, and new points come up in the trial, and one simply cannot regard that as being a relevant factor. As I described in my principal judgment, it was purely coincidence that it was only appreciated in late December 2010 that Mr Blann was a material witness, and there is no suggestion that the claimant deliberately or negligently failed to serve his witness statement before then. But it does seem to me that there is some force in saying that the claimant's conduct, and by this I mean the insured claimant itself, was unsatisfactory, first in that it did not retain either the original nail which did the damage or the duct cover so that they were not photographed or inspected; and, secondly, that carelessly it internally lost the damaged section of pipe and the replacement nail with the effect that until it was by chance discovered in October of this year there was, not unsurprisingly, a significant debate between the experts as to whether in fact the cause of nail puncture damage had been made out. It is perhaps again not altogether surprising that in those circumstances the defendant took the view that this was a case where the claimant had a serious problem in proving its case on the balance of probabilities.
7. I accept that this would not in most cases be decisive, but it does seem to me that taking that into account then overall it would be unjust to penalise the defendant for not accepting the offer of March 2009 in those circumstances where the offer gave very little discount of the risk of failure. By contrast, it does seem to me that the position is different when I consider the April 2010 offer, where a perfectly sensible offer on a sensible and commercial 50/50 allocation of risk was made but again not responded to and no constructive engagement, so that in the end what I am satisfied is that there should be an order for indemnity costs from the expiry date of that subsequent offer which is 7 May 2010 and that the appropriate enhancement to interest should reflect an enhanced interest rate from that date."
"I on the last occasion made it clear that it seemed to me that in the absence of something really very unusual I would be making an order that the defendant pay the costs of that application. And the reason for that is that, although the defendant was successful, I made it clear that it was really an indulgence to the defendant who was asking for and being given a last opportunity to put in further evidence well after the date for doing so, and indeed well after the date for original inspection. And I am satisfied that it should in effect fall within the costs in the case order which I have already made. In other words the claimant should have its costs of the whole proceedings…"
"Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36. Once it is accepted that a time-limited offer does not comply with Part 36, one must approach the interpretation of the offer in this case on the basis that the party making the offer, and the party receiving it, appreciated that fact."
The costs of the application for a December site inspection
Part 44 indemnity costs
"The other important distinction between a standard order and an indemnity order is the fact that, whereas in the case of a standard order the court will only allow costs which are proportionate to the matters in issue, this requirement of proportionality does not exist in relation to an order which is made on the indemnity basis. This is a matter of real significance."
It seems to me that it is of all the greater significance in cases where a successful claimant who has made a conditional fee agreement with his solicitors may be claiming huge costs which the solicitors may have considered it to be worth while for them (rather than for the claimant) to risk, to which is added their success fee uplift. This is a matter which it may be that the courts will have to take into account.
Lord Justice Tomlinson :
Sir Mark Waller :