England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand London WC2A 2LL
		17 July 2008

MR JUSTICE AKENHEAD:

1. So far as the costs of this action are concerned, the general approach is that the party or parties who have won should have its or their costs paid for by the losing party. By the Civil Procedural Rules, and the cases which follow the introduction, the court has a wide discretion. I have particular regard to CPR 44.3(2) to (5) in making this decision. Obviously, it is necessary to review (apart from the general rule) all the circumstances and the conduct of the parties referred to in 44.3(4) and (5), and I do so. The easiest part of this exercise relates to the third party, Rowen, brought in as Part 20 defendants by MM. There can be no dispute that since it has won and MM has lost on those Part 20 proceedings, Rowen should be paid its costs on a standard basis. I will return to the route by which they should be paid later.
2. In the main action, MM has won and MCL has lost. In the ordinary case, MCL would pay MM's costs on a standard basis. There are two complications, however. First, on 27 November 2007, a without prejudice offer (save as to costs) was made pursuant to CPR Part 36 by MM's solicitors to MCL. That offer, open for 21 days until 18 December, was to settle the case for £500,000 plus costs. That was not accepted. Given the rejection, it would have been likely, all things being equal, that indemnity costs would have been ordered against MCL as from 18 December 2007.
3. Secondly, there are two aspects to the case on which MM lost, namely contributory negligence and the issue as to whether it was reasonable of MCL to go down the remedial route which it did. An issue arises as to whether it was reasonable or not unreasonable for MM to plead contributory negligence. I have formed the view that it was reasonable to plead contributory negligence in all the circumstances. It is a not uncommon plea in cases such as this, and in circumstances where MCL was an experienced design and build contractor, with personnel who were experienced both in design and build and in structural engineering.
4. So far as the remedial route issue is concerned, I formed the view it was not unreasonable for the argument to be pursued, but I cannot say that it was reasonable as such, given the findings that I have made in my substantive judgment. Doing the best that I can on the point about the aspects of the case on which MM lost, I consider that but for the Part 36 offer, I would have reduced MM's cost recovery to 85 per cent to 90 per cent. That was based on the following: about two and a half days were spent at trial (on my assessment) on the remedial work issue, some 15 per cent of the hearing time. However, the bulk of the costs on this issue were incurred after the service of the Part 36 offer.
5. An amendment dealing with the remedial work issue was raised, first of all in draft in October, further information was provided in mid-November and the full draft Amended Defence containing the issue relating to the remedial route was filed on 21 December 2007. It is difficult for me to attribute a precise percentage, but overall, I formed the view that it would be unlikely to exceed 5 per cent of the total of MCL's costs and probably somewhat less.
6. So far as the contributory negligence issue is concerned, this raised very few issues on its own, which would not have had to have been addressed in any event; thus Mr Saunders and other MCL witnesses would in any event have had to deal with the whole history. Mr Blois-Brooke did not address contributory negligence until a very late stage, in March or April 2008, and again, I would attribute little more than about 3 per cent of total legal and expert teams' time and effort to this issue. Thus it could be said that up to about 10 per cent could be attributable to the two issues, allowing for the fact also that MM spent some time on these matters as well. However, against that fact is the fact that MCL, as it turned out, unjustifiably, given my judgment rejected the part 36 offer (I say unjustifiably; I do not use that expression in any pejorative sense) took the risk by not accepting it that they would recover significantly more.
7. Traditionally, the difference between indemnity and standard assessment is some 20 per cent to 30 per cent, and as I said, in the ordinary course of events, it is likely that indemnity costs would have been payable after 18 December. Weighing the loss on the two issues against the failure to accept the Part 36 offer, it seems to me that an appropriate order to make in all the circumstances is that MCL should pay MM's costs in their entirety, but only on the standard basis. That balances, in my view, fairly the two factors which I have considered.
8. The next matter is to address Rowen's costs. Given that this judgment is an ex tempore one, I will not go into all the authorities which have been quoted by the parties in their written and oral submissions to me today, but it clearly is material to consider the reasonableness of the defendant in bringing in a third party. Now, faced with a very substantial claim, it cannot be said in all the circumstances (and indeed, it is not said otherwise) that the defendant acted unreasonably in bringing Rowen into these proceedings, but given my findings in the judgment, I formed the view, as it turned out, that the case against them was not a strong one. I predicate at paragraph 340 of my substantive judgment that it would be difficult to determine what my findings against Rowen would have been if I had found MM liable to MCL. It is always difficult, because it depends upon precisely what the duty of care would have been, what reliance there would have been and the relationship of any reliance to the heads of loss that were being claimed. Therefore, it is difficult for me to be certain as to what the outcome would have been. However, it seems to me that the case against the third party was on the cusp only of being reasonable, whilst certainly not unreasonable as such.
9. Now, again, the issue relating to Rowen is complicated as between MCL and MM by the Part 36 offer made by the defendant. It seems to me that, at the time that that offer was made, Rowen's position in these proceedings had become entrenched. They were there, they were going to take part in the trial and everyone knew that, and again, it seems to me that MCL, in rejecting the Part 36 offer, were taking the risk that if they failed to beat that offer, they would have to pay the costs, and the risk relating to the third party costs, the Part 20 defendant's costs, is one that no doubt it had (or certainly should have had) in mind.
10. In all the circumstances, I have formed the view that the whole of Rowen's costs should be paid for by the defendant, but, taking into the account the relative strengths and weaknesses of the case against Rowen, that only 50 per cent of Rowen's costs should be paid by MCL. It will follow from that that the appropriate route for the payment of those costs is via the defendant, so that 50 per cent of them shall not be paid direct to Rowen by MCL. That reflects the overall justice of the matter, that in the circumstances following the rejection of the offer, the claimant took the real risk that Rowen would continue to be involved. I will come back to timing later.
11. So far as interest is concerned, Rowen say that they should have their costs and that interest should attach to their costs at 8 per cent from 1 March. I do not understand that to be seriously opposed, and therefore I would propose to order that Rowen should have interest on its costs at 8 per cent from 1 March 2008.
12. So far as the interest on the costs of MM are concerned, in all the circumstances what I am going to do is to order that interest should be payable as from and including 19 December 2007 on the costs as assessed, to the extent that they were expended. So put another way, to the extent that the costs as assessed were not paid until after 19 December 2007, the 8 per cent will not attach to them until they were paid. So the starting date is 19 December, but that will only attach from 19 December to those costs that have been paid, to the extent that standard assessment permits them to be recovered. I hope that is reasonably clear.
13. So far as interim payments on costs are concerned, Rowen have put forward a cost summary in the sum of £1.205 million. That is not seriously challenged, although I doubt Mr Sutherland's confidence that on a standard assessment, 90 per cent would be recovered. It may be the case that that turns out to be the position, but in all the circumstances, it seems to me that an interim payment of 60 per cent of those should be made, to be paid within 28 days; that is 60 per cent of the £1,205,915.
14. So far as the costs of MM are concerned, the total costs are in a summary with which I have been provided, attached to a witness statement of Mr Sheldon, in the total sum of £2,722,237. Now, I am somewhat concerned about some of those costs because, for instance, profit costs are claimed for the solicitors starting in December 2000, some five years before these proceedings were instituted. It is unlikely, although perhaps not theoretically impossible, for recovery on a standard assessment to go back to December 2000; so I am somewhat concerned about the bill that has been presented, at least in that context. It also appears that over the years, a number of different leading counsel have been involved, not that that is, I hasten to say, any criticism, but it may be that the involvement of so many leading counsel throughout the case has added to the cost. It may be ultimately, I know not, that on a standard assessment, elements of that will be reduced on duplication grounds.
15. I have the discretion whether to award an interim payment, and it is certainly an appropriate case for an interim payment order to be made. The difference between the parties is between, I think, some 70 per cent and 50 per cent. I prefer in this instance the assessment which has been put forward by MCL, a 50 per cent allowance of £2,722,237 should be paid within 28 days. That is the figure one can be reasonably confident is the reasonable minimum likely to be recovered. I obviously cannot begin to assess how much, if anything, above that figure will be recovered, but the court can be confident on those figures that at least 50 per cent will be recovered.
16. As to the question of permission to appeal, I have formed the view that this is an inappropriate case for permission to appeal to be granted. My reasons are as follows: the authorities make it clear that to consider whether a duty of care arises at all, one must have regard to the facts, context and circumstances. The question of reliance is overwhelming one of fact. Thus as Mr Furst makes clear, the underlying challenge which his client wishes to make relates to the facts. Seven out of eight of his proposed (I will call them grounds for appeal) areas of appeal, at Paragraph 61 of his written submissions for today's hearing dated 15 July 2008, are either factual or mixed fact and law. Cases such as Skanska Construction UK Limited v Egger (Barony) Limited [2004] EWHC 1748 (TCC) and Yorkshire Water Services Limited v Taylor Woodrow Construction Northern Limited [2002] EWHC 2140 (TCC) make it clear that leave to appeal should be granted only sparingly in fact-sensitive cases, particularly from the TCC. In the latter case, May LJ said, and I quote:

"The burden on a prospective appellant in these areas is nevertheless hard to discharge."

The criteria for permission to appeal are that there should be a real prospect of success or some other compelling reason. Realistic means realistic as opposed to fanciful, see Lord Woolf in Swain v Hillman [2001] 1 All ER 91.

17. I do not consider that the claimant's grounds satisfy either criterion. The judgment relies largely upon established law, mostly of the highest authority, which would be largely unexceptionable. The outcome of the case would very largely depend on fact. It appears from the judgment, which runs to 152 pages, one of the grounds (and I only pick this by way of example) regarding an issue of law relates to my finding (on the House of Lords and Court of Appeal cases which I reviewed) that:

"It is then necessary to establish that the statement giver is fully aware of the nature of the particular transaction which the recipient has in contemplation ..."

18. Mr Furst and Miss Dias argue that there is no authority to support this proposition, at least as stated in those terms. I took those exact words from Lord Bridge's judgment in the Caparo Industries plc v Dickman [1990] 2 AC 605 case. Another ground is that it is said that I proceeded on the basis that a duty of care only arose in exceptional circumstances. It was a fair point to argue, but I have amended my judgment to identify that necessary circumstances as opposed to exceptional circumstances may well be of the order of the day, so far as that is concerned.
19. I am certainly not satisfied that there are any or any substantial issues of law which satisfy the criteria for permission to appeal, and therefore I reject it.
20. An application to extend time for the lodging of application to the Court of Appeal for permission to appeal to the end of September 2008 is made by MCL: this takes into account, it is said, of the long vacation. I am satisfied that that would be somewhat too long. The draft judgment, albeit that it has been amended by me (at the parties' suggestions) has been with the parties for, I think, three to four weeks already and it should be possible, and in the interests of expedition, to do much better than 30 September. What I will do is extend time until 12 September, and that takes into account the very real problem that the parties' legal advisors will be going away on holiday, and it is quite clear that any application for permission to appeal needs to be honed with the skeleton. I speak only from personal experience, of being on the opposite side of counsel who produced an 80 or 90-page single-space small type skeleton in an application for permission to appeal before the Court of Appeal, and the Lords Justice were seriously dismayed when they received that. So it seems to me that some care should be taken (not that I am encouraging the application) in honing the skeleton, in particular.