England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		15/06/2012

Mr. Justice Teare:

1. On 30 May 2012 I gave judgment in this action. The Claimant succeeded in her contractual claim for the payment of death benefits in respect of her late husband in the sum of US$230,256 but failed in her claim in tort under the Fatal Accidents Act 1976 for damages in the sum of US$1,325,945.
2. On 30 May 2012 I also ordered that the Defendant, BP, pay interest on the sum of US$230,256 at the rate of 5.25% from 1 September 2009 until 28 February 2012.
3. The Claimant submitted that she should be awarded 80% of the costs of the action. The 20% deduction was intended to reflect the fact that the Claimant had failed in her claim in tort. BP submitted that the proper order for costs should be as follows:

(i) The Defendants to pay the Claimant's costs of the claim in contract until 25 March 2011.

(ii) The Claimant to pay the costs of the claim in tort before 25 March 2011 and the Defendants' costs of both claims from 25 March 2011.

4. I was shown an estimate of the Claimant's costs which have been incurred on the basis of a Conditional Fee Agreement (CFA). Including a success fee of 100% they amounted to £2,639,399. That estimate was provided by the Claimant to BP on 20 February 2012. Another estimate was provided to the Court as part of the Pre-Trial Checklist which was in the sum of £1,370,000 excluding the success fee, which would suggest a total bill in the region of £2,700,000. The Claimant's costs are, to put it mildly, striking. That is because the base figure (excluding the success fee) is greater than the failed claim in tort and several times the claim in contract which succeeded. By comparison BP's costs were estimated in the Pre-Trial Checklist in the sum of £420,000, a little less than one third of the Claimant's base costs.
5. The apparent quantum of the Claimant's costs is so substantial that my decision on costs may well be of greater financial significance than my decision on the merits of the case. It was for that reason, and because it was necessary for me to consider the detailed terms of the several offers made by BP to settle the case (which I saw for the first time during oral submissions) that I thought it prudent to reserve my decision on costs.
6. BP made no less than 6 offers to settle this litigation between 28 February 2011 and 6 March 2012. The first of these, an offer made on 28 February 2011 to pay a sum of $100,000 plus £5,000 in respect of costs, may be ignored because it fell well below the amount of BP's liability on the contractual claim. However, it is necessary to note the others. Mr. Aldous accepts that none was an effective Part 36 offer but submits, correctly, that pursuant to CPR 44.3 (4) I must take them into account.
7. On 25 March 2011 BP made an offer, without prejudice save as to costs, to pay $230,256 in settlement of the claim in contract and any claim in tort (none had yet been formally brought but such a claim had been intimated by letter dated 28 February 2011) plus the Claimant's reasonable costs with a success fee of no more than 25%. There was to be a confidentiality clause which would prevent publicising the fact of settlement and no admission of liability. It remained open for acceptance for 21 days and was expressed to be a Part 36 offer and so could still be accepted once 21 days had expired in accordance with Part 36.10(5).
8. It is to be noted that this was an offer to pay the full sum claimed in contract plus costs. The success fee was limited to 25% but I was told by Mr. Aldous that this was the standard success fee approved by the Civil Justice Council for up to 21 days before trial in an employer's liability claim. However, the offer made no mention of interest.
9. On the same day, 25 March 2011, the Claimant's solicitors replied as follows:

"It really is quite pointless to offer our client less than she will clearly recover in the contract compensation clam, so the offer is rejected out of hand. The offer equates to some 14% of the overall claims for both aspects of the case which is of no interest whatsoever.

Equally, the confidentiality clause is completely unacceptable – at the very least our client requires an acknowledgment in writing that there was no suicide. If this cannot be given our instructions are to pursue the case so there is a judgment in open Court declaring there was no suicide, that your clients were in breach of contract and grossly negligent in their ship operations."

10. On 1 April 2011 directions were given for trial. The trial was subsequently fixed for 14 November 2011 for three days. On 8 July 2011 the offer of 25 March 2011 was withdrawn by BP. Miss Bucknall submitted that the offer could thus have no effect on costs. I am unable to accept that submission; see Samco Europe [2011] EWHC 1656 at paragraphs 24-26.
11. By September 2011 BP had given very substantial disclosure not only in respect of the claim in contract but also in respect of the claim in tort. Mr. Aldous told me that this was at the request of the Claimant. On 23 September 2011 BP made a further offer, without prejudice save as to costs. BP offered to pay US$230,256 in settlement of all claims plus agreed interest. Each party was to bear its own costs. Again, there was to be a confidentiality clause and no admission of liability. It remained open for 14 days after which it could only be accepted if the Claimant paid the BP's costs from the date of the offer.
12. On 24 October 2011 the Claimant applied for permission to amend the claim form by adding the claim in tort. That permission was granted. The trial date fixed for November 2011 was vacated on terms which included the payment of BP's costs of the adjournment. It seems likely that had the tort claim not been brought the claim in contract would have been determined at the three day trial in November 2011. At that trial there would have been no expert evidence and only limited factual evidence. Thereafter, no further costs would have been incurred.
13. The trial of the contract and tort claims was fixed for 30 April 2012 for 8 days.
14. On 17 February 2012 BP made what was described as a Part 36 offer. BP offered to pay the sum of $232,000 in full and final settlement of the Claimant's claims including her costs. There was no requirement for a confidentiality clause.
15. On 20 February 2012 the Claimant's solicitors provided BP with schedules of the Claimant's costs incurred up to 12 February 2012, some £1,173,869, and of the Claimant's estimated future costs from 12 February 2012, some £1,465,529. These schedules, which included the success fee, had been prepared by an independent costs consultant.
16. On 6 March 2012 BP made two offers. The first was described as a Part 36 offer. BP offered to pay US$232,000 in full and final settlement of the claim in contract plus the Claimant's reasonable costs of that claim. The tort claim was to be discontinued and the Claimant was to pay BP's reasonable costs of that claim. The second offer was without prejudice as to costs and was expressed to be an alternative to the first, the Claimant being free to accept either. In this second offer BP offered to pay $232,000 plus interest in full and final settlement of both claims plus £340,000 in full and final settlement of the Claimant's costs.
17. On 9 March 2012 the Claimant made a Part 36 offer in which she offered to accept $750,000 in respect of both claims, including interest on the claim in contract). BP was to pay the Claimant's costs, to be subject to a detailed assessment of not agreed.
18. The trial took place between 30 April and 14 May 2012. On 30 May 2012 judgment was given to the Claimant on her contract claim in the sum of $230,265 plus interest. The claim in tort was dismissed. When account is taken of the interest which has been awarded the Claimant has recovered more than she had been offered at any stage by BP.
19. The following observations may be made on the foregoing course of events:

i) The addition of the claim in tort which was dismissed increased the costs of the action. Instead of a three day trial there was an eight day trial.

ii) Although an offer was never made which equalled the amount awarded in respect of the claim in contract including interest BP had demonstrated a willingness to negotiate a settlement on the basis of the full amount of the principal sum claimed in contract.

iii) The Claimant did not demonstrate a willingness to negotiate on the basis of the full amount of the claim in contract.

20. The general rule is that the unsuccessful party pays the costs of the successful party. However, the court may make other orders and in deciding what order to make the court must take into account the conduct of the parties, whether a party has succeeded on part of his case even if he has not been wholly successful and any offer to settle which has been made, whether pursuant to Part 36 or not; see CPR Part 44.3(2) and(4).

Conduct

21. Criticisms were made by both parties of the conduct of the other. Miss Bucknall criticised the conduct of BP. She said BP had misled the Claimant by errors in the BP Investigation Report and in the pre-action protocol and in other documents. Whilst there may have been errors or omissions in these documents I do not consider they can properly be regarded as unreasonable conduct in the context of CPR 44.3. There was no intention to mislead and I have no doubt that the underlying transcripts of evidence and other documents would have been studied in detail by the Claimant's legal advisers in any event. Miss Bucknall also criticised the disclosure by BP during the trial of the weather data which had been obtained by the master from the ship shortly before he gave evidence. Notwithstanding the tight table leading up to trial the failure to produce this weather data before trial was, in my judgment, unreasonable. Enquiries of the master ought to have produced it before trial. Nevertheless, in the context of the costs of the whole action it does not appear to me to be of much significance, for there was unreasonable conduct on the part of the Claimant also. She was willing to put a false document regarding her qualifications before the court. In addition the Claimant's expert pursued arguments concerning the weather which could not be sustained and abandoned arguments concerning the relevance of regulations to the opening of the engine room hatch in the course of his evidence.

Issues

22. BP succeeded in resisting the claim in tort. The claim in tort faced, to put it no higher, considerable difficulties. The Claimant had to prove that there had been an accident, that there had been a breach of duty by BP and that such breach of duty was an effective cause of the accident. On all of these issues the Claimant failed; see paragraphs 60-66 of my judgment. The addition of the claim in tort must have added significantly to the costs of the action.

Offers

23. I have already summarised BP's offers. They were all (save the first) based upon the position subsequently found by the court, namely, that the claim in contract succeeded but the claim in tort failed.

The appropriate order

24. BP had offered on 25 March 2011 to pay the principal sum claimed in contract together with the Claimant's reasonable costs of that claim with a limit of 25% on the CFA success fee. Mr. Aldous did not suggest in terms that the offer was a "successful" offer. Rather, he said that it indicated a willingness to settle the case on the basis of what proved to be the judgment of the court. I agree that it did.
25. The offer was not "successful" because it made no mention of interest. For this reason it did not match what the Claimant ultimately recovered. It was suggested that by Mr. Aldous that the offer was more generous to the Claimant than the judgment because she would have recovered all of her costs whereas she accepts that she can do no better than recover 80% of her costs. However, I am not persuaded that it follows that the offer should be regarded as a successful offer on that account. At the time of the offer she was entitled to her claim in contract plus interest and costs.
26. It was suggested that there was a second difficulty with the offer, namely, the requirement for confidentiality. However, the Claimant failed to obtain a finding that her husband had not committed suicide (which it was stated she wanted failing an acknowledgment in writing by BP that there was no suicide) and so she cannot say that this feature of the offer made the offer "unsuccessful".
27. Since the offer of 25 March 2011 was "unsuccessful" I do not consider it appropriate to order that the Claimant pay all of BP's costs from that date. The question arises whether it is appropriate to order that the Claimant pay all of BP's costs from the date on which it is likely that agreement would have been reached had the Claimant been willing to negotiate on the basis of the full amount of the contractual claim. That would be an unusual approach and is in any event somewhat speculative. BP was not willing to pay interest on 25 March 2011. BP was willing to pay interest on 23 September 2011 but by then, after further costs had been incurred, was unwilling to pay the Claimant's costs of the claim in contract. Notwithstanding that BP resisted an award of interest after judgment (because the award of interest determined whether BP had made a successful offer) I consider that the parties would have been likely to settle the case had interest been the only issue in dispute. But I do not consider it appropriate to speculate as to when that notional agreement might have been reached in circumstances when BP could so easily have made a "successful" offer inclusive of interest and costs had they chosen to do so.
28. The fact remains that the Claimant lost on the tort claim which must have greatly increased the costs of the action. This is not a case where a claimant has established a cause of action but has lost on some of the points made in support of that cause of action. Here, the Claimant introduced a further cause of action, the claim in tort, seeking considerably more in damages then she was entitled to pursuant to the claim in contract and failed to establish that cause of action.
29. Making one order in respect of the claim in contract and another order in respect of the claim in tort seems to me undesirable. Whilst some costs can easily be allocated to the claim in tort, for example the expert evidence, other costs were arguably relevant to both claims and it would be difficult and therefore causative of yet further costs to make an issue based order.
30. I have also considered whether the appropriate order is to award the Claimant her costs up until the end of a (notional) trial on the contract claim alone in November 2011 and to award BP its costs thereafter. However, assessing the costs of a notional trial has its difficulties and such an order would require two detailed assessments which would add to the costs.
31. I consider that the appropriate order is one which reflects the Claimant's failed claim in tort by deducting a proportion of her costs. Mr. Aldous suggested that at least three-eighths of the trial should be allocated to the contract claim (because the contract claim had been fixed for 3 days and the trial of both claims took 8 days) and five-eighths to the tort claim. He went further and submitted that there should be an 80/20 spilt in favour of the tort claim. Miss Bucknall suggested an 80/20 split in favour of the contract claim.
32. Had the tort claim not been introduced there would have been a much more limited investigation into the work planning meeting on 10 May 2009 and no need to examine the requirements of BP's Control of Work programme. There would have been no need to call more than one officer and no need to call expert evidence. But the actions of Mr. Braganza and his interest in the weather on the eve of his disappearance would have still required to be closely examined and many, if not all, of the extensive transcripts of evidence collected by the BP investigation would still have been required to be studied. I consider that 40% of the costs should be attributed to the tort claim. That suggests an order that the Claimant recovers 60% of her costs.
33. But in addition account should be taken of BP's legitimate claim to its costs of the tort claim which failed, in circumstances where BP was willing to pay the principal sum claimed in contract and the Claimant was unwilling to negotiate on the basis of that offer. It is difficult to judge what further deduction should be made to reflect this consideration in circumstances where the Claimant's costs are so strikingly high and apparently disproportionate. Doing the best I can I consider that a just order, balancing the interests of both parties, is one which requires BP to pay 45% of the Claimant's costs.

Payment on account

34. The Claimant also sought a payment on account of her costs. It is normally appropriate to order a payment on account in order to ensure that the successful party receives as soon as possible the minimum sum to which he or she is likely to be entitled on a detailed assessment of his or her costs. However, I have not been provided with an up to date schedule of her costs signed by her solicitor. That is usually done when an application is made for an interim payment of costs. Instead I have an unsigned estimate of costs in the sum of £2.6m. which I have been told had been prepared by a costs consultant. The base figure (excluding the success fee) is estimated at about £1.3m. In view of the apparent lack of proportionality with the sums claimed in the action, and in particular with the sum recovered by the Claimant, and in view also of the absence of proper evidence as to the amount of the Claimant's costs I consider that any payment on account can only be based upon an assumption that the Claimant's reasonable costs were somewhat more (on account of being the Claimant) than BP's estimated costs of £420,000. That suggests costs of about £500,000. For the purposes of an interim payment I do not consider that account should be taken of the success fee as to which there may or may not be a dispute. 45% of £500,000 is £225,000. It seems to me that if I make an order for an interim payment of £175,000 I can be confident that the Claimant will recover at least that sum on a detailed assessment of her costs. I note that BP offered to pay £340,000 in respect of the Claimant's costs on 6 March 2012.

Conclusion

35. BP shall pay 45% of the Claimant's costs to be assessed on the standard basis if not agreed and shall make an interim payment of £175,000 in respect of the Claimant's costs.