CLAIM No. 6BM40021
BAILII Citation Number: [2010] EWHC B16 (Mercantile)
IN THE HIGH COURT OF JUSTICE 
QUEEN’S BENCH DIVISION
Birmingham DISTRICT REGISTRY
MERCANTILE COURT
Date: 16th July 2010
before:
HH JUDGE BROWN QC

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B E T W E E N:

(1)	MIDLAND PACKAGING LIMITED
(2)	MAURICE MENIR
(3)	ROSE MENIR
Claimants
-AND-

 hw, CHARTERED accountants  (a firm)
defendants
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JUDGMENT
 JUDGMENT ON COSTS
Introduction
1.	This has been a keenly contested action where the costs are also now a significant issue between the parties.
2.	The Claim was issued on 15th March 2006 for £300,000. 
3.	By the Particulars of Claim dated 19th February 2007: 
a.	The 1st Claimant sought £41,544.47 in respect of wasted expenditure on the Defendant’s fees and £83,728 regarding additional exposure to Corporation Tax;
b.	the Second Claimant sought damages as a significant beneficiary and executor in his mother’s estate for increased Inheritance Tax exposure due to delay in implementing a tax avoidance scheme;
c.	the Third Claimant sought £8,960 for fees expended on new advisers; £1,435,305 for loss of investment income; an unspecified sum for increased Income Tax liability and £200,000 for Capital Gains Tax exposure.  
4.	Following a Case Management Conference on 10th October 2007, an Amended Particulars of Claim again drafted by Leading Counsel was served on 21st November 2007. This pleading considerably revised the Claims:
a.	The 1st Claimant still sought £41,544.47 in respect of wasted expenditure on the Defendant’s fees and  £83,728 regarding additional exposure to Corporation Tax;
b.	the Second Claimant however now sought the specified sum of £2.5m damages as a significant beneficiary and executor in his mother’s estate for increased Inheritance Tax exposure due to delay in implementing a tax avoidance scheme; £900,000 costs of obtaining life insurance on his mother’s life; and £2,793,295 lost income in investment in monies from his mother’s estate if it had been timeously been transferred to him as a non-domicile in the UK;
c.	the Third Claimant still sought £8,960 for fees expended on new advisers but now sought £2,896,479 for loss of investment income; and and £200,000 for Capital Gains Tax exposure.  
5.	A draft Re-Amended Particulars of Claim (drafted this time by new Counsel who subsequently appeared to represent the Claimants at the trial) was served on 1st August 2008 following a Pre Trial review on 11th July 2008 prior to the then trial listed on 5th September 2008. This substantially recast the way the Claimants’ case was put on liability but the pleas for damages remained as before, save for deleting a curious plea for general damages.  The Costs of and occasioned by this amendment were ordered to be paid by the Claimants.  The draft claims was as follows: 
a.	The 1st Claimant sought £41,544.47 in respect of wasted expenditure on the Defendant’s fees and £83,728 regarding additional exposure to Corporation Tax;
b.	The Second claimant sought damages as a significant beneficiary and executor in his mother’s estate for increased Inheritance Tax exposure of £2.5m due to delay in implementing a tax avoidance scheme; loss of investment income of £2,793,295 (as an alternative to the Third Claimant’s such claim of £2,896,479) ; and the cost of obtaining life insurance of £900,000;
c.	The Third Claimant sought £8,960 in obtaining advice in an attempt to mitigate loss; £ 2,896,479 for loss of investment income; an unspecified sum for increased income Tax liability; and £200,000 for Capital Gains Tax exposure. 

6.	In the Particulars of Claim actually served in substitution on 9th September 2008, pursuant to permission granted on 11th August 2008, the pleaded claim at trial was eventually as follows: 
a.	The 1st Claimant sought £41,544.47 in respect of wasted expenditure on the Defendant’s fees and £40,496 regarding additional exposure to Corporation Tax;
b.	The Third Claimant sought £2,348,480, alternatively £1,124,297, in respect of lost return on investment, against which the Third Claimant gave credit to the Defendant in the sum of £551,795 in respect of interest accrued by the First Claimant, net of tax. She also sought £133,892 in respect of capital gains tax, and an indemnity in respect of her exposure to Inheritance Tax, then amounting to £2,391,174.
c.	The Second Claimant sought damages for loss of return on investment, in the alternative to the Third Claimant’s claim.

7.	As before, a Defence in substitution, denying liability and a Counterclaim of £7,931.25 for unpaid fees was served on 19th September 2008.  A Reply and Defence to Counterclaim ensued on 21st October 2008.
8.	The Defendants continued with a full denial of liability until 12th January 2009 when a draft Amended Defence and Counterclaim was served on the Claimants. This only partially admitted some liability: 
“13(3)… the Defendant … admits that by about 1 June 2001 it had assumed responsibility to the Claimants either (i) to devise, and take reasonable steps to implement, a reasonable scheme to address the issue of Inheritance Tax … (“a Scheme”) alternatively (ii) to advise the Claimants expressly that it required further instructions before it could do so …
… The foregoing admission is made by the Defendant upon the basis that (a) by about 1 June 2001, it was reasonably necessary to begin work to devise and implement such a Scheme … (b) the papers available to the Defendant suggest that with effect from about 1 June 2001, Mr Owen began work in relation to devising a Scheme (albeit that the Scheme he proposed, if implemented, would have been flawed …)…
44A The Defendant admits:
(2)	That it was negligent in that it failed timeously to devise and propose to the Claimants a reasonable Scheme.
(3)	That, had it acted with reasonable competence, a Scheme would have been proposed which (if accepted by the Claimants) would have led to a share buyback transaction in respect of Rose’s shares being completed by the Company on 31 December 2002 and investment of the proceeds and/or any relevant potentially exempt transfer(s) … would have occurred by 1 July 2003.
45(1)… It is admitted that the possibility of emigrating to overcome the problem of deemed domicile ought to have been (but was not) raised with the Claimants…
(4) … It is admitted that the Defendant’s earlier advice, based on the premise that Rose and Maurice would not be deemed … domiciled, was wrong and negligent.
(5) … It is admitted that it was negligent not to identify [the possibility of emigration] and communicate it to the Claimants
9.	The Defendants position on loss also changed somewhat, putting the Claimants to proof:
“44A The Defendant admits … 
(2) that, had it acted with reasonable competence, a Scheme would have been proposed which (if accepted by the Claimants) …
50 … (2) the Defendant does not admit, and requires the Claimant to prove, that they would have accepted alternative advice had it been given, and when they would have given instructions for such alternative advice to be implemented …
51 (1) … if the Claimants prove that they would have implemented an alternative Scheme at any earlier stage than they did the Claimants have suffered some loss and damage” [emphases added]
10.	The amendments went on to make very limited (but contingent) concessions as to loss, based upon the proposition that the Claimants should have implemented the scheme by 31 December 2004 – a proposition held by the Court in paragraphs 55 of the Judgment to be “harsh and unfair criticism” where such argument was also deployed, without success, in relation to the Defendant’s substantial submissions on mitigation of loss. In particular the Defendant’s open, but contingent, admission of loss in respect of investment return was put at £106,437 for the 6 month period from 1st July 2003 to 31st December 2004 only. 
11.	Notwithstanding this, the Defendants chose to keep in issue throughout the trial all questions of any liability on the issue of “causation” of loss: effectively challenging the Claimants upon liability and putting them to proof.  Mr Howarth for the Defendant, in his opening  submissions, wrote:
“42. D accepts that if it had acted properly, a Scheme would have been in place such that, had the Scheme been accepted …
44. D accepts that, provided Cs prove that properly advised they would have extracted the cash from the company, Cs are entitled to damages for the loss of investment return during the period of delay …
45. Likewise, D accepts that, provided Cs prove that properly advised they would have extracted the cash from the company, excessive CT has been paid by the company …” [emphasis as in his original text].
12.	He maintained this position in his written submissions on damages dated 24th June 2009 delivered to the Court after closing speeches:
“24… Assuming that the Claimants prove that they would have given instructions to implement a share buy back and PET of the proceeds (this being in issue: Amended Def and CC para 45A(3) …” 
13.	The Claimants, having secured a judgment in their favour on 21st January 2010, now seek an order for costs of this action on a standard basis, subject to a detailed assessment. The Defendants ask for an order that, they contend, more fairly reflects their own overall relative ‘success’ in the litigation and the manner in which the case has been ‘conducted’ by the Claimants.  
14.	The Order upon the Judgment was that:
a.	the First Claimant should recover £14,859.56 in respect of wasted expenditure on the Defendant’s fees and  £40,496 regarding additional exposure to Corporation Tax;
b.	the Second Claimant should recover £582,425 lost investment return;
c.	the Third Claimant or her estate should have an indemnity for Inheritance Tax on a gift of £5, 460,709 made on 27th June 2007, save it shall not extend to such tax (if any) as would have been payable by the Estate of the 3rd Claimant had a gift of £5,016,157.20 been made on 1st July 2003.  
15.	On 11th April 2010, the court held a full day’s hearing on costs having been also provided with detailed written submissions by Counsel, 5 lever arch files of documents (very few of which have been referred to) and estimated costs schedules of the Claimants of £795,589 and £346,312 of the Defendants, i.e. a total of just over £1.14m spent on legal fees.  
16.	During this hearing, it was revealed to the Court that CPR 36 Offers had been exchanged by the parties shortly before trial at around the time the Defendants were amending their case on liability and quantum.  The Defendants made two offers on 8th January and 24th February 2009; the Claimants made an offer to compromise on 16th March 2009 in the terms summarised in the table on the following page regarding the 5 heads of loss claimed: 

Judgment & Part 36 Offers

	Judgment	Judgment with interest at base + 1.5% on damages	Defendant’s 8.1.09 all-in offer of £1,186,000	Defendant’s 24.2.09 offer	Claimants’ Revised Offer 16.3.09	
Wasted expenditure	£14,860 (for C)	£20,719	£10,000	£10,000	£30,000	
Excess Corporation tax	£40,496	£49,964	£46,000	£46,000	£46,000	
CGT	£0	£0	£0	£0	£100,000	
Investment return	£582,425	£673,227	£630,000 (£526,039 + % rounded up)	£630,000 
 £526,039 + % rounded up)	£1,204,072	
Indemnity for IHT	Indemnity for an exposure based on gift of c.£5.46M in June 2007	Indemnity for an exposure based on gift of c.£5.46M in June 2007	(£500,000 cash in lieu of indemnity based on gift of £5.55M at Dec 2005)	Indemnity based on gift of £5.55M at Dec 2005 22005	Indemnity based on gift of £6.25M until 2013/14 with Claimants being responsible until end of 2009 for IHT in any event of £550,000	

The Law
17.	The ‘General Rules about Costs’ are to be found in CPR 44. 
18.	CPR 44.3 provides that the Court has ‘discretion’ as to “whether costs are payable by one party to another”, “the amount to be paid” and “when they are to be paid.
19.	CPR 44.3 (2) preserves the general rule that “the unsuccessful party will be ordered to pay the costs of the successful party; but the court may make a different order”.
20.	CPR 44.3 (4) requires the court “in deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including (a)  the conduct of all the parties; (b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and (c) any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences apply”. 
21.	CPR 44.3 (5) defines ‘Conduct’ as including (a) “conduct before as well as during the proceedings … “; (b) “whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue”; (c) “the manner in which a party has pursued or defended his case or a particular allegation or issue”; and (d) “whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim”.
22.	CPR 44.3 (6) lists an array of orders which the court might consider as including that a party must pay (a) “a proportion  of another party’s costs; (b) a stated amount in respect of another party’s costs; (c) costs from or until a certain date only; (d) costs incurred before proceedings have begun; (e) costs relating to particular steps; (f) costs relating to a distinct part of the proceedings; and (g) interest on costs from or until a certain date, including a date before judgment”.  However a sensible note of caution is added under CPR 44.3 (7) that an order must be practicable i.e. the court should, if practicable, make an order under (a) or (c) rather than one under (f).
23.	CPR 36.14 is a rule which applies upon judgment being entered and “(a) a claimant fails to obtain a judgment more advantageous than a defendant’s part 36 offer”. Where this applies then under CPR 44.14 (2) “the court will, unless it considers it unjust to do so, order that the defendant is entitled to a) his costs from the date on which the relevant period expired; and (b) interest on those costs”.
24.	The application of these rules in business cases was helpfully reviewed  by Lord Justice Waller in Straker v Tudor Rose [2007] EWCA Civ 368 (paragraphs 11 to 13):
“11 How then would the rules suggest one should approach a case such as this? The court must first decide whether it is case [sic] where it should make an order as to costs, and have at the forefront of its mind that the general rule is that the unsuccessful party will pay the costs of the successful party. In deciding what order to make it must take into account all the circumstances including (a) the parties' conduct, (b) whether a party has succeeded on part even if not the whole, and (c) any payment into court.
12 Having regard to the general rule, the first task must be to decide who is the successful party. The court should then apply the general rule unless there are circumstances which lead to a different result. The circumstances which may lead to a different result include (a) a failure to follow a pre-action protocol; (b) whether a party has unreasonably pursued or contested an allegation or an issue; (c) the manner in which someone has pursued an allegation or an issue; and (d) whether a successful party has exaggerated his claim in whole or in part.
13 Where, particularly in a commercial context, the claim is for money, in deciding who is the successful party, I agree with Longmore L.J. when he said in Barnes v Time Talk (UK) Ltd. [2003] EWCA Civ 402 para.[28] that “the most important thing is to identify the party who is to pay money to the other”. In considering whether factors militate against the general rule applying, clear findings are necessary of factors which led to a disapplication of the general rule, e.g. if it is to be said that a successful party “unreasonably” pursued an allegation so as to deprive that party of what would normally be his order for costs, there must be a clear finding of which allegation was unreasonably pursued.”
25.	The process set out in Straker is  summarised in Cook on Costs, the leading text book on the increasingly complex area of costs as:
a.	First, is it appropriate to make an order for costs?
b.	Second, if so, the general rule is that the unsuccessful party will pay the costs of the successful party
c.	Next, identify the successful party.
d.	Then, consider whether there are reasons for departing from the general rule in whole or in part. If so the judge should make clear findings of the factors justifying costs not following the event.
26.	In Multiplex Constructions (UK) Limited v. Cleveland Bridge UK Limited [2008] EWHC 2280 (TCC) Jackson J. (as he then was) comprehensively reviewed CPR 44 & 36 and cases concerning those two rules in a business case context. He helpfully ended by distilling them to 8 principles [paragraph 72]:
“(i) In commercial litigation where each party has claims and asserts that a balance is owing in its favour, the party which ends up receiving payment should generally be characterised as the overall winner of the entire action.
(ii) in considering how to exercise its discretion the court should take as its starting point the general rule that the successful party is entitled to an order for costs.
(iii) the judge must then consider what departures are required from that starting point, having regard to all the circumstances of the case.
(iv) where the circumstances of the case require an issue based costs order, that is what the judge should make. However, the judge should hesitate before doing so, because of the practical difficulties which this causes and because of the steer given by rule 44 (7).
(v) in many cases the judge can and should reflect the relative success of the parties by making a proportionate costs order.
(vi) in considering the circumstances of the case the judge will have regard not only to any part 36 offers made but also to each party’s approach to negotiations (insofar as admissible) and general conduct of the litigation.
(vii) if (a) one party makes an offer under part 36 or an admissible offer within rule 44.3 (4) (c) which is nearly but not quite sufficient, and  (b) the other party rejects that offer outright without any attempt to negotiate, then it might be appropriate to penalise the second party in costs.
(viii) In assessing a proportionate costs order the judge shod consider what costs are referable to each issue and what costs are common to several issues. It will often be reasonable for the overall winner to recover not only the costs specific to the issues which he has won but also the common costs.”
27.	In the specific context of “exaggeration”, but marginal bettering of part 36 offers, the Court of Appeal observed in Painting v. Oxford University [2005] EWCA Civ 161 in paragraph 22 per Maurice Kay LJ  remarked:
“The first is the strong likelihood that, but for exaggeration, the claim would have been settled at an early stage and with modest costs. The second is that at no stage did Mrs Painting manifest any willingness to negotiate or to put forward a counter-proposal to the Part 36 payment. No one can compel a claimant to take such steps. However to contest and lose an issue of exaggeration without having ever made a counter-proposal is a matter of some significance in this kind of litigation. It must not be assumed that beating a Part 36 payment is conclusive. It is a factor and will often be conclusive, but one has to have regard to all the circumstances of the case.” 
28.	Again more recently  the Court of Appeal in Carver v. BAA Plc [2008] EWCA Civ 412  exhorted [paragraph 31]:
“The Civil Procedure Rules and Part 36, in particular, encourage both sides to make offers to settle. Compromise is seen as an object worthy of promotion, for compromise is better than  contest, both for the litigants concerned, for the court and for the administration of justice as a whole. Litigation is time-consuming and it comes at a cost, emotional as well as financial. Those are therefore appropriate factors to take into account in deciding whether the battle was worth it. Money is not the sole governing criterion”. 
29.	The “uncertainty introduced into part 36 by Carver” is criticised by the Jackson Report on Costs. In paragraph 2.9 of Chapter 41 of the Review of Civil Litigation Costs: Final Report, he concludes:
“I recommend that the effect of Carver should be reversed either judicially (if an early opportunity arises) or by rule change. It should be made clear that in any purely monetary case “more advantageous” in rule 36 .14 (1) (a) means better in financial terms by any amount, however small”. 
Application of the Law
30.	Stage 1: General approach under CPR 44.3(2): This is a professional negligence action concerning tax in the mercantile court – a money claim. There is no dispute between the parties that, prima facie, the Claimants have been “successful” (CPR 44.3 (2)) in establishing liability of the Defendants by their late admission on 12th January 2009 and by being awarded substantial damages following a contested trial.  Following Principle (i) in Multiplex, (supra) this must be correct; this is commercial litigation where the Defendants have ended up paying substantial damages and giving a significant indemnity to the Claimants and the Claimants are the overall winners i.e. the Claimants are “successful”  and the Defendants are “unsuccessful” hence liable to pay costs to the Claimants.  
31.	Notwithstanding this, Mr Howarth submits the Claimants should only be entitled to 50% of their costs until the Part 36 offers because of: (1) the Claimants conduct in pursuing an ‘exaggerated’ claim; (2) the success of the Defendants on parts of the case (6:2 on the 8 issues, he submits); and (3) the reasonable offers to settle the claim by the Defendants, apart from CPR 36, compared with the attitude taken by the Claimants. i.e. each of the elements that the court must take into account when deciding what to do about costs under CPR 44.3(4). 
32.	After the Part 36 offers, he submits that the Defendants should be awarded their costs under CPR 36 on the basis that Carver [supra] applies to CPR 36 and is binding authority, despite the conclusion of the Jackson Report upon it and despite the fact that this is a commercial case all about money.  He referred me to paragraph 71 of the Judgment of Jackson J. in Multiplex [supra] where it was held that Carver was generally applicable and was not restricted to personal injury cases where exaggeration of injuries was a significant issue. In the TCC case before him he then went on to adopt Carver:
“Paragraphs 28 – 32 of the Court of Appeal’s decision in Carver set out how the court ought to approach the matter in circumstances where: (a) one party has made an offer which was nearly but not quite sufficient; and (b) the other party has rejected that offer outright without any attempt to negotiate” 
33.	In my judgment, these factors come into play in Stages 2 and 3 below, not Stage 1 where the Claimants have been “successful” with their claim for damages. 
34.	Stage 2: CPR 36 : It is therefore necessary at this stage to analyse the Part 36 offers that are on the Schedule (supra) compared with the Judgment awards.
35.	(a) Indemnity: There can be little doubt that the Claimants substantially bettered any offer for indemnity for IHT which was the main issue in the case – the Defendants having lost the “mitigation of loss” issue.  Carver simply does not ‘come into play’ on that wide disparity between offer and award. 
36.	(b) Damages: Both offers by the Defendants amounting to £582,039 then (now £686,000 inclusive of interest) fell short of the Judgment sum of £637,781, now £743,912 (inclusive of interest[?to 12 February 2010?]) for ‘strict’ Part 36 purposes.  
37.	Mr Howarth submits that the court ought to apply Carver here where the disparity of offer and award of damages is £91,742 in a claim where the Claim was pleaded at £2,348,480, opened at £1,541,081 and a counter offer was made only a little below that at £1,380,072 plus the indemnity. 
38.	In my judgment, £91,742 is a significant sum worth fighting this litigation for. It is a far cry from, in effect, fighting over £51 as in Carver. It was open to the Defendants to have raised their offers more than they did so that the “certainty” of Part 36 came into effect, rather than hoping for the “uncertainty” of Carver to come to their aid. It is understandable that the Jackson Report has concluded as it has done that it is desirable that costs battles over Carver do not proliferate as here. 
39.	In my judgment the Claimants are entitled to all their costs to be assessed on a standard basis up to the date of the counter offer where Stage 3 becomes a factor. 
40.	Stage 3:  CPR 44.3.4:  Success, Conduct and Offers to settle.  
41.	(a) Success: The case was managed and tried surgically upon an agreed List of 12 Issues (but at trial 8 live ones) to arrive at the question of liability for 4 heads of loss. As Mr Howarth submits, the Defendants were “successful” on 6 of the 8 but “unsuccessful” on 2 at trial. 
42.	The Defendant ‘succeeded’ on the largest issue, in financial terms: investment return. The Claimant was seeking the sum of £1,541,081 in opening but obtained judgment for only £582,425 i.e. about one third of the sum sought and close to the pre-trial offers of the Defendant.  In other words, the Defendant saved almost £1M judged against the Claimants’ maximum case. 
43.	The Claimant recovered approximately half of the lowest amount (£1,204,072) he was prepared to accept in negotiations (Judgment on investment return was £582,425; interest as at  counter-offer of 16th March 2009 would have been £80,262 i.e. a total of £662,687) .  In other words, the Defendant saved £541,385 by fighting the trial as opposed to compromising the point. Judged against the pleaded claim for £1,796,685, the Claimant recovered, i.e. only a third of the pleaded claim.
44.	The Claimant was again ‘unsuccessful’ on the liveliest evidential issue of emigration.  This issue took up considerable court time, because it was necessary to cross examine Mr Menir on the wealth of contemporaneous documents, and surrounding circumstances, which suggested that, contrary to his very lengthy witness statement composed much later on, he and his mother would not have emigrated.
45.	The Defendant also ‘succeeded’ on the CGT claim, saving £140,000 against the pleaded figure.  The best offer the Claimant was prepared to make was £100,000.  By fighting the issue, the Defendant saved a six figure sum by comparison with having compromised or given in. 
46.	The Defendant ‘succeeded’ on whether bearer shares would have been taken up by the Claimant.  The Claimants’ attempt to suggest that this option would have been followed suffered from the same evidential difficulties as the emigration argument.  It was entirely contrary to the character and previous recorded behaviour of the Claimant, and inconsistent with his having shown no interest in the option when it was put to him. 
47.	The Defendant’s case on retainer was also ‘successful’.  This did not depend upon detailed witness evidence of Mr Menir long after the critical events , nor upon an unexpected concession made during the evidence, nor upon a point of law.  All that was required was a careful examination of the contemporaneous documents recording events.
48.	The Claimant was ‘successful’ on whether it was negligent not to draw a bearer shares scheme to the Claimant’s attention. This was a short contest between experts already instructed on bigger issues.
49.	The Claimant was also wholly ‘successful’ on the mitigation of loss contest that was a main issue in the trial affecting as it did the vital indemnity sought for IHT.  It is accepted that the Defendant failed to obtain any discount from the damages on this basis. 
50.	In my judgment the costs order ought to reflect the substantial but ‘partial success’, in a fully contested trial under CPR 44.3 (4) (b) where it was surgically managed and conducted on an “issues” basis.  
51.	(b) Conduct: Mr Howarth submits that (i) the claim was exaggerated; (ii) the Claimant made an unreasonable counter offer on 16th March 2009, well beyond the eventual judgment findings, based upon this exaggeration and (iii) the Claimants approach to negotiations and the general conduct of the litigation were significant barriers to compromise. Accordingly, the dicta of  Maurice Kay LJ in Painting [supra] are apposite. 
52.	In my judgment, Mr Menir did display a tendency to exaggerate on very significant aspects of his case that took up considerable time and cost at trial and this was a major factor in creating an unbridgeable gap between the parties once the exaggerated counter offer was made.  As emphasised in Carver [supra] “compromise is seen as an object worthy of promotion”
53.	These were:
a.	the actual terms of the retainer where Mr Menir would not accept what was obvious from a study of the contemporaneous documents and he obviously knew that the Defendants had no witness evidence to gainsay him because Mr Owen was not going to not testify;
b.	whether of not he and Mrs Menir were realistically going to emigrate for tax purposes when there was subsequent historical evidence as to what did happen when he and Mrs Menir “tried”; 
c.	Most seriously what investment portfolio he would have chosen. Until very shortly before trial, the case was presented on the basis of a rate of return supported by the APCIMS indices.  This produced a claim of over £1.8M.  Belatedly, when this case became unsupportable, the Claimants relied instead on Mr Morse.  His approach was misconceived because it involved disavowing the portfolio proposed by Mr Humphries of HWFS at the time, proposals which Mr Menir had already said he would have supported, and inflated because of the attempt to “improve on” the HWFS return though introducing property into the portfolio due to its now historic good rate of growth. This was ‘like betting on a race after it had taken place.’  In order to rely on Mr Morse, Mr Menir had to trim his evidence and then contradict himself.  The process began in his second statement (served just 7 days before Trial) and developed further during the trial. 
54.	Mr Howarth submits that the ‘roadblocks to settlement’ were initially 2 in number.  On the Claimants’ side was the unrealistic expectation as to the level of damages which would be awarded.  On the Defendant’s side there was the understandable reluctance of insurers and re-insurers to accept a “long tail” potential liability, in an uncertain sum, as conceived by indemnities. The Defendant therefore initially sought to compromise the IHT position by offering a lump sum. This necessarily involved speculation about Mrs Menir’s survival. The lump sum might exceed the sum payable under an indemnity (because Mrs Menir might survive) and had the advantage of being received immediately and hence available for investment.  It was reasonable for the Defendant to make this offer and would have been equally reasonable for the Claimant to accept it, negotiate or reject it. However, the Claimants chose to do none of these things. Therefore, the Defendant alone attempted to move to a position of compromise with a “bid against itself” by making a further offer, this time including a concession as to indemnity.
55.	The Defendant’s indemnity however did not offer cover for a sufficient period: the period of the indemnity actually obtained was more advantageous than the offer. However, the counter offer made by the Claimants before trial was nowhere near a realistic point of trying to bridge the gap between the parties and such was withdrawn whilst the Claimant sought unrealistic damages, as the Court determined.
56.	In my judgment there does not appear to have been any real attempt by the Claimants to settle this litigation, in contrast with the Defendants. , The  clear impression to be gleaned from these negotiations, the conduct of the trial and Mr Menir’s attitude in the witness box is that they had resolved to have the matter fully tried by putting the Defendants and Mr Owen on public trial for their torts against them that Mr Menir patently felt so strongly about. Of course, they were perfectly entitled to do this but it is only “just” that the Court in applying the fundamental Overriding Objective of civil procedure rules [CPR 1.1] should make the Claimants bear a substantial burden of the costs of that exercise. 
57.	Mr Howarth also submits that the court should have regard to the general conduct of the litigation by the Claimants. Apart from the above, the Court is extremely reluctant to descend more generally into this arena not least because it has the very highest regard for all the lawyers – counsel and solicitors- involved in this case.  Apart from the regrettable need to replead the Claimants case, which is already dealt with by a costs order that obliges the Claimants to pay the costs of and occasioned by the amendment, it appeared to the court that the standard of conduct of the litigation was exemplary on both sides and to be applauded with grateful thanks in helping the court at all times.  Whether or not the high level of costs apparently incurred is justifiable or not is a matter for detailed assessment. 
58.	As the judgment found, many of the hypothetical answers Mr Menir gave were at best “imagination” or “wishful thinking”: see Onassis v. Vergottis [1968] 2 Lloyds Rep 403 at 431.  However, on one matter concerning the note of a meeting on 5th August 2002 that he relied upon as an admission by the absent Mr Owen, I expressed “grave doubts about its authenticity” in my judgment in paragraph 54 (a).   
59.	In my judgment, Mr Menir’s “conduct” from the time of his counter offer was the main reason why this case did not reach a settlement at that stage – the judgment was not far off the offers made by the Defendants once they had admitted liability. The Claimants thereafter fought the case through to the bitter end substantially based on his exaggerated claims overplaying his hand. 
60.	The Claimants “succeeded” on 2 of the 8 issues they put before the Court but the Defendants “succeeded” on the other 6 after the counter offer. Accordingly, taking this into account as well as Mr Menir’s conduct of the claim and his attitude to negotiations, in my judgment the fair result is that the Defendants should have their 75% of their costs from the date of the counter offer to be set off against the costs of the Claimants up to that date. 
61.	These costs are to be subject to detailed assessment. 

His Honour Judge Simon Brown QC
16th July 2010