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 Rolls Building London, EC4A 1NL
		28/10/2015

JUDGMENT (NO.2) COSTS
 


Mr Justice Fraser:

Introduction

1. In this action, the claimant, GBM Minerals Engineering Consultants Ltd claims a sum slightly in excess of £594,000, and the defendant, a Canadian company called GB Minerals Holdings Ltd, brings a substantial counterclaim. The background to the action is dealt with both in a judgment by Coulson J of 14 May 2015 in GB Mineral Holdings Ltd v Michael Short [2015] EWHC 1387 (TCC), and also a judgment by me of 21 October 2015 in GBM Minerals Engineering Consultants Ltd v GB Minerals Holdings Ltd [2015] EWHC 2954 (TCC). That latter judgment dealt with the applications brought by each of the claimant and the defendant to amend their respective pleadings. Those applications were heard by me on 9 October 2015 at what was supposed to have been the Pre-Trial Review, and they were both opposed.
2. For reasons explained in that judgment, in what I consider to be exceptional circumstances, I allowed both applications to amend. This meant that the trial date had to be vacated. I directed that the parties should attempt to agree the relevant costs consequences, but if they were unable to do so each should lodge short written submissions and the court would consider the matter of costs as a paper application, and would deal with costs in writing. Section 4.4 of the Technology and Construction Court Guide encourages this approach, which saves the parties the costs of further attendance, and neither party in this instance sought to dissuade me from dealing with costs in this way. I directed that the submissions on costs be limited to two pages. Each party complied with that regarding the length of submissions, but I have also been provided with no fewer than 13 e mails between the solicitors as well, dealing with this subject. These e mails do not make edifying reading. They rather reinforce the point to which I referred in paragraph [32] of my earlier judgment at GBM Minerals Engineering Consultants Ltd v GB Minerals Holdings Ltd [2015] EWHC 2954 (TCC). These parties appear determined to fight bitterly over every possible inch of ground.
3. Sadly, but unsurprisingly in those circumstances, the parties have been unable to agree who should bear the costs of preparation and attendance at the hearing on 9 October 2015. Schedules were lodged prior to the hearing so that summary assessment could be performed by the court for both applications. These show that the claimant's costs of its own application were £8,224, and the defendant's costs of opposing that application were £6,386 (all figures stated exclude Value Added Tax). So far as the defendant's application is concerned, the defendant's costs were £50,693.50, and the claimant's costs in opposing that application were £32,153.

The Claimant's position

4. The claimant's written submissions on costs were settled by junior counsel and are dated 19 October 2015. The claimant submits that its own amendments, predominantly deletions to remove reliance on the 17 Variation Orders (that were accepted to have been created long after the date upon which they purported to be signed) should have been agreed. The claimant submits that the defendant unreasonably opposed these amendments. The claimant submits that the defendant's application to amend its own pleading was very late, and it was these amendments that prejudiced the trial date. The claimant explains its opposition to these amendments by stating that the application was made so close to trial that it would always have required a hearing. The claimant maintains that its opposition to these amendments was reasonable. The claimant also submits that the defendant's costs of its application are disproportionate and unreasonable. It says the value of the amendments by the defendant does not justify the high level of costs claimed for the application. In particular the claimant also attacks the amount of time spent, over 62 hours, in drafting the single witness statement of Ms Allass dated 25 September 2015 which was the evidence in support.
5. As part of the attempts to agree costs, the claimant has proposed the following order on costs. The defendant should pay 50% of the claimant's costs; the claimant is content to pay 25% of the defendant's costs; and 25% of each party's costs should be costs in the case. This, it is said, would result in a net payment to the claimant from the defendant of £10,000. That figure, which is set down in communications between solicitors^[1], is more of an approximation which "reflects the principles set out" by the claimant, rather than a precise mathematical calculation arising from those percentages. It is challenged, in the e mails between the parties, and the defendant stated that "it is therefore impossible to understand the principles on which your offer is made". I disagree; the principles are explained by the claimant and, in my view, it is a sensible approach to deal with figures in that way, given that this is a summary assessment. The figure of £10,000 is a broad brush analysis of the result of the various percentages.

The Defendant's position

6. The defendant's submissions state the following in paragraph 5: "The Defendant interprets 'costs of the hearing' to include preparation for, attendance at and consequentials (sic) of the hearing, but to exclude the costs of the applications." The defendant made an open offer to the claimant that the costs be resolved in the following way: the claimant should pay to the defendant 70% of the defendant's costs of the hearing of the defendant's application to amend, all other costs being costs in the case. This would result, it is said, in a net payment to the defendant of £14,479.50. The grounds relied upon by the defendant are that the defendant's application was successful; that although the claimant succeeded on its application, Further Information was ordered and this had been sought by the defendant on 30 July 2015. It is also said that had that information been provided, there would have been no need for the claimant's application; and the need for the claimant's amendments only arose because the relevant statements in its original pleadings were false.
7. Supporting the defendant's submissions, the e mails that were provided to the court showing offer and counter-offer between the parties make it clear that the defendant is taking the position that "[the defendant] succeeded on the substantive issues in both applications"^[2].
8. The figure from which the 70% is calculated is not immediately apparent, as it has not been taken from any particular item or group of items from the defendant's schedule or schedules. However, it is very close to 70% of the total fees for the defendant's two counsel. That may, or may not, be how the figure of £14,479.50 is arrived at. However, and should the matter go any further, I should say that the use of two counsel by each party for these applications was justified, given the subject matter of the defendant's application in particular. Regardless of how the 70% figure is calculated, it is evident that the defendant's interpretation set out in paragraph 5 of its submissions (and reproduced in paragraph [6] of this judgment above) means that some of the costs on its schedule are not being included.

Analysis

9. Each set of amendments was opposed, and each was granted. In a sense therefore, each applicant has succeeded and in ordinary circumstances would be entitled to its costs of its own application (subject to any points on disproportionate costs, or excessive recovery). However, this is not an ordinary case. The claimant's amendments did not threaten the trial date, but these were only required because certain aspects of the claimant's case that relied upon the 17 Variation Orders had to be abandoned. They had to be abandoned because those documents were falsely created, with a "strong prima facie case of dishonesty"^[3] against Mr Short, the controlling individual of the claimant. Had the case been pleaded without relying upon the 17 Variation Orders originally – which it should have been -- the pleadings would have been in much the same form as they are after the amendments.
10. The amendments by the claimant were, in the circumstances, undoubtedly required, but this was because originally the claim relied upon false documents. It is difficult to see why the defendant should pay for that. However, the Further Information which I ordered – and which was required – should have been provided voluntarily by the claimant a reasonable time after it was sought on 30 July 2015. Had the information been provided some time in August, for example, then the necessity for the application could have been avoided. My attention has not been drawn to any letter or document where the defendant expressly stated in advance of the hearing that if the Further Information were to be provided, the amendments would not be opposed. That would have been the reasonable course of action for the defendant to have adopted. So in my view both sides were at fault to a certain degree.
11. The defendant, in its costs submissions and also in its e mails, describes itself as having succeeded on the substantive issue on the claimant's application. That is, in my view, rather an optimistic description of the outcome. The defendant opposed any permission being given to the claimant for the amendments, and I granted the claimant permission. That does not immediately strike me as success on the defendant's part.
12. Turning to the defendant's application, there have been no findings yet, at this stage of the proceedings, on the allegations themselves. There is no explanation from either the claimant or Mr Short, nor could one be expected at this stage. They remain at this stage simply allegations, albeit ones based on documents shown to the court on the application. These documents have been found by the defendant in the claimant's disclosure. The nature of the allegations concerning payments to the bank account in Cyprus controlled by Mr Laing is serious, although as yet unproven. It is also relevant to note that these allegations are made against the background of the 17 Variation Orders, signed by both Mr Short and Mr Laing, which were the subject of the detailed judgment of Coulson J to which I have already referred.
13. The claimant in its submissions states "it cannot be said that [the claimant] unreasonably objected to [the defendant's] application". However, it is not the case that costs will only be awarded against a losing party on an application if that party has opposed the application unreasonably. Unreasonable opposition is a potential ground for a successful applicant seeking costs on the indemnity basis, and it is also one of the relevant circumstances, which under CPR Part 44.2(4) the court will take into account. However, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; CPR Part 44.2(2)(a). Primarily, therefore, on the defendant's application, the claimant is the unsuccessful party.
14. The claimant has submitted that a hearing would always have been required because the application to amend was made so close to the trial date, and also because granting permission for the amendments would inevitably (as I found in my first judgment) lead to the trial date being lost. There is something in both of those submissions, but two points require noting. Firstly, such a hearing (had the amendments been consented to) would not have been of the complexity and length that this hearing was. A hearing dealing with matters of case management, consequential upon permission for unopposed amendments, would have been a far more straightforward, shorter and less expensive affair than the defendant's application turned out to be. Secondly, had the application been issued far earlier, the court could have heard the parties on a contested basis earlier, and it might not have been inevitable that the trial date was lost. The application was issued on 25 September 2015. My comment in my earlier judgment that allowing the amendments made losing the trial date "inevitable" was made in relation to the stage at which permission was in fact sought from the court, not a blanket comment that would have applied regardless of when the amendments were applied for.
15. It could be said that I have already fully dealt with delay by the defendant (and potentially excused it) by having granted permission for the amendments. However, CPR Part 44.2(4)(a) expressly requires me to consider the conduct of the parties, and paragraph [24] of my earlier judgment makes it clear that impermissible matters were affecting the defendant's decision concerning whether, and when, to amend its defence and counterclaim to include the allegedly secret payments made by the claimant to Mr Laing.

Conclusion

16. In my view, the fact that each party opposed the other's application to amend their pleadings is explained as an attempt by each to seek opportunistic advantage. Although the defendant must have realised that the claimant could no longer rely upon the 17 Variation Orders (which the defendant itself had uncovered as being potentially created falsely after the event), by opposing the amendments it was seeking to trap the claimant in a corner – failure by the claimant to obtain permission would effectively have meant that the claimant had no pleaded case left to advance at trial at all, even though the case was that the increases in contract amount for the work were agreed by the defendant. This would have amounted to the defendant achieving summary judgment on its defence to the claim, but by the back door. There was no good reason to oppose the claimant's amendments, and I consider the lack of particularisation was being used by the defendant as an excuse.
17. Turning to the defendant's amendments, the claimant sought to keep these issues out of the case, even though they are very serious allegations, are supported (arguably at this stage) by contemporaneous documents, and are relevant to the subject matter that will already be before the court when the trial judge comes to consider the committal proceedings, as ordered by Coulson J in his judgment. The material that justified the amendments was not available to the defendant until the disclosure process, and represents prima facie evidence of secret payments. The claimant however attacked the amendments on a number of fronts, including lack of particularisation (of what was by its nature a potentially secret arrangement between a director of the claimant, Mr Short, and one of the claimant's own witnesses, Mr Laing) and a failure to bring the application earlier. The claimant was seeking an opportunistic advantage.
18. In my judgment, both of paragraphs [16] and [17] above represent examples of parties seeking "litigation advantage", a phrase used (in different circumstances, concerning relief from sanction) by the Court of Appeal in paragraph [41]^[4] of Denton v TH White Ltd [2014] EWCA Civ 906. The Court of Appeal in that case made it clear that "the court will be more ready in the future to penalise opportunism"^[5]. Although that statement was made in the context of avoiding satellite litigation, and contested applications for relief from sanction, it makes it clear that seeking opportunistic advantage will not achieve the aim of efficient conduct of litigation.
19. This was in any event a Pre-Trial Review which would have required attendance by trial counsel in any event. I consider that in all the unique circumstances of this case, on these two applications, the correct order for costs on each of the applications is no order for costs. Each party will therefore have to bear its own costs of the hearing of each application.
20. I wish to end on a cautionary note to the parties. The total sum of both parties' costs, taken from both the schedules on the two amendment applications, is approximately £97,456. That is a sizeable amount for developments in the case that effectively amount to no more than the claimant no longer relying upon falsely created Variation Orders, and for the defendant to allege that the claimant had made secret payments to Mr Laing, based on the contents of an e mail and a one-page schedule. That sum is also a sizeable percentage of each of the costs budgets that were approved by Akenhead J on 24 October 2014. Without repeating paragraph [32] of my first judgment, there are now two separate applications listed for 6 November 2015, namely an application for security for costs and also another for specific disclosure, that latter application including a Schedule dated 20 October 2015 seeking no fewer than 20 different categories of documents (with one of those categories having three sub-categories). This could be said to be the very antithesis of cost-effective and efficient litigation. If the parties insist on litigation of attrition, they may find (without in any way pre-judging any particular costs applications in advance) the court approaching the matter by not awarding costs to either party.

Note 1   19 October 2015 at 13:06 from Christopher Wright to William Charrington    [Back]

Note 2   Email at 11:47 on 15 October 2015 from William Charrington to Christopher Wright     [Back]

Note 3   Paragraphs [32] and [41] of the judgment of Coulson J granting the defendant permission to apply to commit Mr Short    [Back]

Note 4   Per Lord Dyson MR and Vos LJ    [Back]

Note 5   Paragraph [43] ibid    [Back]