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

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

		The Rolls Building 7 Rolls Buildings London EC4A 1NL
		24th June 2013

Mr Justice Akenhead :

1. I will now formally hand down judgment in this matter, and I do so. I have heard argument from the parties as to the nature of the costs order. It is accepted by the Claimants that overall, having lost in these proceedings, they must pay the Defendant's costs at least on a standard basis. The Defendant, however, argues that it should be entitled to indemnity costs.
2. The authorities are now well established and I do not intend to repeat them. There is largely, if not entirely, an overlap between what both counsel are putting forward as the appropriate basis: cases such as Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm) [2002] EWCA Civ 879, per Waller LJ, in which he said:

"Is there something in the conduct of the action or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs?"

3. There are also the well known cases of Kiam v MGN Ltd (No 2) [2002] 2 All ER 242, in particular the judgment of Simon Brown LJ (as he then was), Gloster J (as she then was) in Euroption Strategic Fund Ltd v Skaninaviska Enskilda Banken AB [2012] EWHC 749 (Comm), and this Court in Walter Lilly & Co Ltd v Mackay & Anr [2012] EWHC 1972 (TCC), although this was on obviously on different facts and considerations, when the Court referred to yet more authority, in particular Andrew Smith J in Fiona Trust & Holding Corporation v Yuri Privalov [2011] EWCR 664 (Comm) and The Mayor & Burgesses of the London Borough of Southwark v IBM UK Limited [2011] EWHC 653 (TCC). I do not intend to repeat the summary of principles and considerations to be taken into account. Obviously, the fact simply that one parties loses the case, and maybe loses it on the basis of a firm judgment, does not mean, as such, that the losing party should pay costs on an indemnity basis. There must be some conduct which takes the case out of the normal run of the mill.
4. This is a case in which the Claimants broadly had an arguable case. It is not a case that raises any great points of law. It raises, in terms of liability, relatively simple issues as to whether or not the Defendant had failed to exercise reasonable care and skill. Much of the case came down to an even simpler consideration, which was whether the Defendant during the course of its surveying and reporting should have carried out a stress calculation to see what that would throw up and as to whether it would throw light on what the actual, or at least realistically possible, cause of the cracking in this case was.
5. It does seem to me that, at least up until September/October and possibly even going into November 2012, whilst there had been some attempts to settle the case (there were two mediations and at least one offer had been made some time before by the Defendant on a costs-inclusive basis), matters were proceeding in the usual way to trial. If there had been an appropriate Part 36 offer accepted, there would have been no room for any costs basis other than a standard basis. But it may be thought and it is certainly argued that, come October 2012, the position may well have changed.
6. Expert reports were exchanged in the summer of 2012.
7. On 29th August, the Defendant made an all-inclusive offer of £600,000 (all-inclusive in the sense of including the costs). It is fair to say that an offer at that level, which was later explained as being £300,000 for the damages and £300,000 for costs, was more than a nuisance offer. It compared with what the money claim, inclusive of interest, was or could well have been, which was substantially over £1m. This provoked a response. The parties seem to have gone down the route on most occasions of exchanging correspondence, although, there were some telephone conversations explaining, amplifying or indeed making offers.
8. On 28th September 2012, the Claimants made an offer to accept £1.3 million in settlement of the claim, including costs and interest. Although the figures were far apart, in relative terms nonetheless, because it was a costs-inclusive offer, it compared at least with the offer that had been made about a month before.
9. On 1st October 2012, we begin to get Part 36-type offers coming in. The Defendant made an offer of £400,000 under Part 36. That was inclusive of interest and it bore the cost consequences of Part 36, so that, if the Claimants had accepted it, they would have had their costs paid up to the date of the acceptance if that acceptance was within the 21 day period following the offer.
10. On 3rd October 2012, the Claimants themselves made a Part 36 offer to accept £850,000 with costs to be assessed; alternatively £1.3m inclusive of costs and interest. That compared with the offer that they had made five days before.
11. On 9th October, the Defendant, in effect, put in a further Part 36 offer. The sum of £600,000 inclusive of interest was offered.
12. The parties were moving a bit closer because, on 22nd October 2012, the Claimants edged down from £1.3m inclusive of interest and costs to £1.175m.
13. Two days later, on 24th October, the Defendant rejected that offer and offered to settle for £800,000, but this was inclusive of costs, inferentially at least, for some £200,000 of costs.
14. What then happened was very odd, in my view. On Friday, 26th October 2012, the Claimants made an offer, which it seems to have been accepted was without prejudice save as to costs, to accept a total sum of £729,500, plus costs to be assessed if not agreed. This was made at a time when the trial in Chester before His Honour Judge Halbert was due to take place about two weeks or so later. This offer was said to be open until 4pm on the following Monday, so the weekend intervened. It was clear by this stage that substantial trial costs were being incurred. Brief fees (or their instalments) were due to accrue and the inference was that it would make sense for the Defendant to accept that offer. It will be appreciated that the Claimants had clearly come down from their most recent Part 36 offer, which was £850,000 plus costs to be taxed, so it had dropped by just over £120,000.
15. The Defendant did not, at that stage, indicate that they were prepared to accept that offer.
16. However, on 30th October, the following Tuesday, the £729,500 having not been accepted within the proffered time, the Defendant through its solicitors offered to settle at £664,750 plus costs to be assessed if not agreed. That offer, however, was only open until 8.30 the following morning, this conversation having taken place some time shortly after 5pm. The parties were edging yet closer to each other. But, 10 minutes later, the response from the Claimants' solicitor was to reject that offer of £664,750.
17. Three days later, on Friday 2nd November, the Defendant's solicitor, without prejudice save as to costs, offered by telephone and repeated by email at 12.49 on the same day to settle the claim for £729,500 inclusive of interest, "plus your clients' reasonable costs to be agreed or assessed". This offer was said to be open for acceptance until 5pm that day, so there was, to be precise, four hours and 11 minutes of the working day on that Friday for it to be accepted.
18. That offer was not responded to until 6th November 2012, when the Claimants' solicitor said that the offer was rejected, but they held the door open at least for further discussions.
19. The next and almost last offer was made on 14th November 2012. Eversheds, the Claimants' solicitors, had gone back from the brink of settling at £729,500, which was their own clients' figure at the end of October, to saying on behalf of their clients that they wanted £850,000 plus costs to be agreed if not assessed. That offer was concluded by saying:

"This is our clients' final attempt to settle this matter. In the event that this offer is not accepted by the deadline set out above, our clients will simply proceed to trial. We also wish to make it clear that our clients would not be amenable to splitting the difference between this offer and your client's previous offer and any such counter-offer by your clients on that basis would be rejected."

20. Given that, it is perhaps not surprising that there was no further discussion. Effectively the offer was made on the "take it or leave it" basis. It was made clear that all previous settlement offers of any sort were otherwise withdrawn. This offer of 14th November 2012, made on a Wednesday, was said to be open for acceptance only until 4pm on Friday 16th November.
21. At about this time, the matter was due to start its trial before His Honour Judge Halbert, who unfortunately felt unable to hear the case. He had been concerned about the length of time allowed for the case and was not sufficiently assured by what was said to permit the case to go ahead. Unfortunately, and of course I do not attach any criticism at all to the learned Judge, he felt it necessary to adjourn the case and pass it over to His Honour Judge Raynor QC in Manchester, who in turn, in about February or March of this year and after liaison with me, transferred the matter to the Technology and Construction Court in London.
22. However, on that first day of the trial, His Honour Judge Halbert made a number of comments to Counsel. It is clear from that exchange, which is recorded in a letter from the Defendant's solicitor to the Claimants' solicitor (and I do not think these comments as recorded have been broadly challenged as having been said) that he expressed some concerns about what Mr Lovell, the Claimants' expert, had been saying. At this stage, there was only the engineers' first joint statement, which had been signed and put together some time before. It is clear that the Judge took the view that there were statements agreed to by Mr Lovell in that first joint statement which gave rise, clearly, to certain difficulties. This relates to a number of the matters which, in the judgment I have just handed down, I attached a certain amount of weight to, although I have to say I did not have a copy of this letter in mind or available when I reached my views about the experts and the expert evidence. The learned Judge is recorded as saying that, in light of the concessions that had been made by Mr Lovell, he had concerns about how the Claimants' claim could succeed. It is not, I hasten to say, necessarily that the Claimant was left without argument, but it seems that the learned Judge, based on what he had read about the case, was unconvinced by what the Claimant had to say. The Judge is also recorded as having noted that, whatever the calculations said, there remained the point that the building had stood for 170 years. Although I was unaware that the Judge had made these comments, these were all factors which I did very much take into account in the result.
23. Unfortunately, and I referred to this in my judgment, although I was not specifically aware as to what the motivation had been on the part of Mr Lovell, we then had the second joint statement, which I am told was produced some time after the appearance before His Honour Judge Halbert. From this, I formed the view that Mr Lovell was (and I used this expression in my judgment) "rowing back from" a number of the concessions that he had apparently properly and legitimately made. I do not begin to suggest that any pressure was put on him to explain, justify or qualify anything that he had said in his first joint statement, but nonetheless at the very least he felt that it was necessary. It does seem to me that the learned Judge's informed comments at the date of what would have been the first trial day before His Honour Judge Halbert should have started a red light flashing in the Claimants' minds.
24. I would also express some concern about certain difficulties in the Claimants' case. It is undoubtedly the position from my judgment that the Claimants have failed on almost every issue in this case. They have obviously failed on every aspect of liability. They have failed on such issues as were relevant on contributory negligence. There were serious gaps, in my judgment, in their causation case and there were serious problems with their quantum case. I expressed the view that, certainly in the case of Mr Frood, their quantity surveyor, there was a clear lack of transparency in his written evidence and indeed in his oral evidence until what I think I called "the relative twelfth hour" in paragraph 73 of the judgment. This related to Option 0, which was the remedial scheme which it was said was the primary case being put forward, this being based on appropriate remedial work being necessary to resolve any compression failure problem that there was or might well be and valued as at May or June 2003. Mr Frood in his report, apart from providing two or three headline figures for Option 0, provided no explanation as to how he had got them. He simply produced overall figures, which came to some £850,000. It was clear from open exchanges between the experts that Mr Renaudon was concerned about Option 0 and felt unable to quantify it. That was a perfectly legitimate concern for him to raise and Mr Frood was clearly very reluctant to provide any explanation for his figures.
25. How it could have been thought that any informed judge could make a decision on the basis of the figures put forward for Option 0 without some at least verbal and preferably numerical explanation as to how Mr Frood had got to the figures that he had I simply do not understand. When he gave his evidence, over which the Claimants of course had no real control as to what he said in the witness box, he was, in my judgment, in even greater difficulties because I had asked near the beginning of the trial that the two quantity surveyors should get together with the assistance of the engineering experts as necessary to work out what was involved in Option 0. They produced very belatedly (and I do not criticise them for that, but just before they were due to give evidence) a further joint statement. It emerged that all that Mr Frood had done, I assume of his own initiative, was to take his original figure and pro-rata it through much more detailed explanations for what remedial work was likely to have been involved. It was only really at the very last minute that he explained that he had actually got his figures from two jobs which his firm had been involved in some years ago which gave him the basis for putting forward the figures that he had done.
26. I do not suggest that the Claimants were party to Mr Frood's thought process, but it must have been abundantly clear that there was no explanation about and there was no transparency in these figures and his evidence, perhaps unsurprisingly in the light of his reluctance to explain where he got his Option 0 figures from, seriously undermined any confidence I could have in the evidence which he gave. It was, therefore, unsurprising, that I preferred the evidence of Mr Renaudon.
27. I am very concerned about that. It does seem to me that the Claimants and their professional team must have been aware of the very real risk at least that there were matters being put forward by their quantum expert which were not, at least on the face of the exchange reports, justified and therefore justifiable as a matter of logic or research on the part of Mr Frood. It perhaps then is unsurprising when the judge who has been involved in this case reaches the views that he has done in relation to quantum.
28. It does seem to me that a substantial amount of cost and effort was expended as the result of the putting forward the evidence of an expert whose reasoning for that evidence did not appear anywhere in his exchanged reports. That is extremely unfortunate.
29. I have formed the view that this is an appropriate case in which to make an order for indemnity costs, but not until the date starting on the Monday after the hearing in front of His Honour Judge Halbert. Up to that stage, it seems to me that this was a relatively standard professional negligence claim. It was clearly keenly contested by the parties. The Claimants were putting forward a case which, if their evidence was believed and accepted, would have succeeded. It was an arguable case, although by then it must have been becoming apparent that Mr Lovell, their inexperienced engineering expert, had made concessions in the first joint statement which did undermine their case. Thereafter, of course, what they doubtless encouraged Mr Lovell to do was to reconsider what he had said in his first joint statement with a view to explaining at the very least, if not qualifying, what he had conceded beforehand. It was pointed out to them by the TCC Judge in Chester that there were difficulties along those lines and it does seem to me that, by the time of the hearing in front of His Honour Judge Halbert, at least on the evidence and the joint statement as it stood, there were some very real and obvious difficulties facing the Claimants.
30. I couple that with the negotiations which had taken place. I am not at all critical of the Claimants or the Defendant so far as the negotiations were concerned. They happen. Parties deploy arguments in the course of those negotiations. Often one party or the other will say "Well, if you do not settle now, you are facing very real costs difficulties" or "the brief is going to be delivered tomorrow or in a couple of weeks' time." These are all arguments that can be put in a commercial context and I do not criticise the Claimants or indeed the Defendant for the stance which they generally took.
31. However, as is quite common, the parties got closer and closer to each other and, although I would not criticise them for the stances which they took, what I do find absolutely extraordinary is the fact that the Claimants having offered to settle at a particular figure just before one weekend which, albeit only open for acceptance until the following Monday, when exactly the same figure with costs to be assessed if not agreed however was offered back by the Defendant a week later, yet the Claimants drew back from the brink of settling. It does seem to me that that was and represented at the very least an unfortunate watershed in the parties' negotiating relationship. The Claimants, it would seem, as soon as the Defendant got to their latest figure, withdrew from any discussion about a settlement at the very sum they had put forward. They reversed back from the brink of settlement.
32. In my view, having regard to the overriding objective, parties do need to consider seriously the impact of costs and the like. It is not just the Court which is bound by the overriding objective, but parties are bound by the overriding objective as such. Where effectively both would be prepared to settle at exactly the same figure within a few days of each offer being put forward, for the Claimants to have withdrawn does seem to be unjustifiable. Nothing had happened, so far as I can tell, between the time that the Claimants' offer for £729,500 plus costs had expired on the Monday afternoon and the timing of the offer made by the Defendant for settlement at exactly that level a few days later. An enormous amount of time and cost and court resource has been wasted thereafter as a result of the Claimants' unwillingness to accept the figure that they themselves were prepared to settle at. Of course, contractually they were not bound to accept the same figure put forward by the Defendant, but, with a view to saving costs, time and still ending up ahead of the game, it seems to me to have been unjustified not to settle at the very figure which they had first put forward.
33. One couples that, as I have said, with where they were at that stage, plus the judge's informed comments to them on day one of the trial. There was, therefore, no justification for going on with the case at that stage, or at least not indicating that they were, without prejudice save as to costs, prepared to settle at the very level that they were suggesting they were. This has led me to the view that the Monday following the hearing in front of His Honour Judge Halbert would be an appropriate date for indemnity costs to start.
34. I take into account also, although it is in relative terms a minor factor but nonetheless not insignificant, the evidence being proffered from Mr Frood. I am not so critical of Mr Lovell as Miss Day QC has been in her arguments. He was clearly an inexperienced expert and I formed the view that he was over enthusiastic in his clients' cause, but that, I suspect, was brought on by a perceived need on his part down to his lack of experience and I would not want to criticise Mr Lovell any more than I have done in my first judgment.
35. Accordingly, on that basis, the Defendant will have its costs on the standard basis up to the Monday after the hearing before His Honour Judge Halbert and indemnity costs thereafter. The reason I have selected the following Monday is to allow for a notional thinking period for the parties as to what they might sensibly do about the case, particularly following its unfortunate adjournment and, therefore, the building up of the costs by there having been an abortive first trial before His Honour Judge Halbert. That will be my order.
Legal argument
36. Permission to appeal is refused. It seems to me that the Court of Appeal has said time and time again in relation to cases, particularly from the TCC but also from elsewhere, that they are not likely to be interested in appeals on questions of fact. This is because in this country, primarily in civil cases, the first instance judge is the primary arbiter of fact.
37. I do not accept what has been suggested that most of my findings are based on primary facts which were not in issue. It seems to me that in relation, for instance, to the very clear views I have formed about the reliability of the witnesses, in particular Mr Rudd and also the experts, they make this a case in which the Court of Appeal will simply not be interested. It is not suggested, I am glad to say, that there has been a failure in the process in the reaching of the findings of fact. It is just simply submitted that the trial judge got it wrong on the facts and that possibly other judges might have formed a different view.
38. In my view, on the 13 grounds of appeal that are put forward by the Claimants, I would refuse permission on the basis that there is no realistic prospect of success. Of course, it is entirely up to the Claimants what they do. I do not want to discourage them from spending any more money than they have already done so, and they of course have a right to seek permission to appeal, but they may think that their money would be better spent on other things. However, that is not a reason for refusing permission as such.
39. I am otherwise very grateful to counsel for the assistance they have given me during the trial and also to the solicitors for preparing the case for trial in front of me. It has been interesting.
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