BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
Sitting as a Deputy High Court Judge
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(1) MR CHRIS HART () MRS KERRY HART |
Claimants |
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- and |
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(1) MR RICHARD LARGE (2) (2) MICHELMORES LLP (3) HARRISON SUTTON PARTNERSHIP |
Defendants |
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Simon Wilton (instructed by Kennedys LLP) for the Defendants
Hearing dates: 7 May 2020
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Crown Copyright ©
Covid-19 Protocol: This judgment will handed down by the judge remotely by circulation to the parties' representatives by email and release to BAILII. The date and time for hand-down is deemed to be 10.30am on Friday 22nd May 2020.
Mr Roger ter Haar QC :
(1) Anonymity;
(2) Interest;
(3) Costs of the action;
(4) Costs budgeting;
(5) Costs of the hearing on 7 May 2020;
(6) Interim payment as to costs;
(7) Permission to appeal;
(8) Stay pending appeal.
Anonymity
"(4) The court must order that the identity of any party or witness shall not be disclosed if, and only if, it considers non-disclosure necessary to secure the proper administration of justice and in order to protect the interests of that party or witness."
Interest
(1) What is the sum upon which interest is payable?
(2) What rate should be taken?
(3) What period should be taken?
"in proceedings (whenever instituted) before the . [Court] for the recovery of a debt or damages there may be included in any sum for which judgment is given simple interest at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for all or any part of the period between the date when the cause of action arose and
"(a) in the case of any sum paid before judgment, the date of payment; and
"(b) in the case of the sum for which judgment is given, the date of judgment."
"In the result in my view the plaintiffs have the difficulty that on any view they could not contend that the proceedings in the instant case had been commenced prior to what they would contend constituted a part payment. In addition however, as it seems to me, on the proper construction of the subsection their difficulties do not stop there. Even if they could argue that the subsection did apply to proceedings for damages where payments had been made prior to commencement of the proceedings, there would still remain certain questions. (1) The first question would be whether following a recovery from Fitzgerald, it could legitimately be argued that the proceedings thereafter commenced were proceedings for the recovery of those sums recovered from Fitzgerald. (2) Furthermore the question would arise in any event whether the recovery from Fitzgerald constituted a "payment" for the purposes of the subsection.
"As to question (1), it seems to me that the fact that on this construction there might be a distinction between those cases where it was undisputed that a payment or recovery had reduced the damages (leading to the view that the proceedings could not fairly be said to be for the recovery of those damages); and those cases where the question of the recovery might still be in issue, simply serves to demonstrate that the construction of section 35A(1) already indicated (i.e. that the subsection only applies to payments during proceedings) is to be preferred.
"As to question (2), it seems to me that recovery from a third party by way of mitigation, is not what the subsection contemplated. What is contemplated is payment by a defendant. Thus in my view, even in the extreme case of recovery only being obtained from a third party some days prior to a hearing date, then if that recovery reduces the sum for which judgment can be obtained, I do not think that the court would have any power to award interest up to the date of recovery. I should emphasise that there may well be cases where two tortfeasors are sued and a plaintiff by recovering against one will not be forced to accept anything but full judgment from the other with an obligation not to execute for the full amount. But where recovery does reduce the sum for which a plaintiff can obtain judgment, then in my view the court would not have power to award interest up to the date of that recovery."
"The facts of this appeal, and the fact that in the extreme case just referred to the court does not have the power to award interest, points to section 35A causing an injustice in some cases."
"The plaintiffs' claim in the action was for damages for breach of contract and/or negligence. Such a claim has two characteristics. First, the only damages claimed can be the damages which the plaintiff has in fact suffered. In so far as he has been able to avoid some of his losses, as where he has been able to mitigate his loss, he can only sue for and obtain judgment for his unavoided loss. Mitigation or failure to mitigate gives the defendant a defence to the claim. The writ and the statement of claim cannot properly include any claim in respect of an avoided loss."
"The outcome was that the only claim which they made and which they were entitled to make in the action was for their unrecovered loss. The judge gave them judgment for that sum. The question then arose of the award of interest under section 35A of the Supreme Court Act 1981, as inserted. It is to be observed that this case does not involve any question arising from a payment made at any stage by the defendants to the plaintiffs. It might well be thought that it is that type of payment to which the drafting of section 35A was directed. But it is not necessary to express any view whether the references to payment in that section are to be confined to payments made by the relevant opposite party against whom judgment has been obtained .."
"2. The relevant principles are not contentious. The rate of interest is at the discretion of the court. Secondly the purpose of an award of interest is fairly to compensate the recipient for being deprived of money that he should have received. Thirdly a 'broad brush' approach is taken to determine what rate of interest is just and appropriate. As Andrew Smith J put it in Fiona Trust and Holding Corporation and Others v Yuri Privalov and Others [2011] EWHC 664 (Com) at para. 16:
" it would neither be practical nor proportionate (even in a case involving as large sums as these) to attempt a minute assessment of what will precisely compensate the recipient. In particular, the courts do not have regard to the rate at which a particular recipient of compensation might have borrowed funds. This policy is adopted in order to control the extent of the enquiry to ascertain an appropriate rate: see Banque Keyser the court will, however, consider the general characteristics of the recipient in order to decide whether to assess interest at a rate that is higher or lower than is conventional. So, for example, in Jaura v Ahmed [2002] EWCA Civ 2010 , Rix LJ awarded interest at the base rate plus 3% to reflect that "small businessmen" had been kept out of their money and in recognition of the "real cost of borrowing incurred by such a class of businessmen". Thus, the court will examine what has been called "a question of categorisation of the plaintiff in an objective sense" (see the Banque case Allman case) recognise relevant characteristics of the party who was awarded interest and reflect them when determining the fair and appropriate rate. "
"a. interest is awarded to compensate claimants for being kept [out] of money which ought to have been paid to them, rather than as compensation for damage done or to deprive defendants of profit they might have made from the use of the money;
"b. this is a question to be approached broadly and the court will consider the position of persons with the claimants' general attributes, but not the claimants' particular attributes or any special position in which they may have been;
"c. for commercial claimants the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimants could have borrowed, which is likely to be a percentage over base rate;
"d. for personal injury claimants the general presumption will be that the appropriate rate will be the investment rate;
"e. many claimants will not fall into a category of those who would have borrowed or those who would have put money on deposit and a fair rate for them may often fall somewhere between the two rates."
(1) Where a claimant has delayed unreasonably in commencing or prosecuting proceedings, the court may exercise its discretion either to disallow interest or reduce the rate of interest;
(2) The Court must take a realistic view of delay as litigation is an unwelcome distraction and delay is unreasonable only when, after allowance for the circumstances, the claimant neglected to pursue the claim for a significant period;
(3) If a disallowance or reduction is made, the court should bear in mind that the defendant has had the use of the money during the delay.
"It is submitted that the court should deduct 3 years' worth of interest to reflect the claimants' unreasonable delay in bringing forward their claim, the fact no opportunity was taken to set out the case in the pre-action period as required by the Professional Negligence (Pre-Action) Protocol (which should have been done via a Letter of Claim sent within 3 months of 16 April 2014), the further passage of time before proceedings were issued in late 2017, and the yet further delay before the claimants' liability case was finally properly particularised. It is submitted that that would reflect a reasonable balance between the competing considerations (1) that the purpose of an award of interest is to compensate a claimant for being kept out of his damages; and, (2) that a claimant should get on with bringing his claim, and cannot expect a defendant to compensate him for the use value of compensation ultimately awarded when he has unreasonably delayed in doing so."
Costs of the Action
(1) Should part of the costs be assessed on an indemnity basis?
(2) Should the Claimants receive 100% of their costs, on whichever basis the costs are to be assessed.
"39. The Harts' contend that they should be entitled to an order that the First Defendant pay their costs of the proceedings on the standard basis, save that costs should be on the indemnity basis from the date of the parties' mediation that took place on 27 November 2019, a date by which the Harts case had been made palpably clear and settlement should have been possible. It is submitted that D1 has made no adequate attempts to settle (see discussion of the offers made below), whereas the Harts made a very sensible Part 36 Offer, albeit one which was withdrawn just before trial, on 14 January 2020, in the sum of £324,000. If it had not been withdrawn, it would have been beaten (thus entitling the Harts to all the fruits of CPR r35.17).
"40. It is accepted that the Harts cannot avail themselves of CPR r 35.17. However, the court, in its broad discretion, is entitled to take into account the Harts' own offer, as well as the D1's inadequate offers, when deciding what orders to make in respect of costs."
"27 December 2019 D1 participated in an "All Ds" Part 36 Offer in the sum of £439,200, inclusive of VAT and interest . This was essentially an update to the offer that had been made by D2/3 on 24 December 2019, in the sum of £376,000. Therefore, the element particularly referable to D1 was £63,200; "
30 December 2019 D1 participated in an "All Ds" Calderbank Offer in the sum of £649,200, inclusive of damages, interest, costs, disbursement and VAT;
13 January 2020 D1 made a Calderbank Offer in the sum of £175,000, inclusive of damages, interest, costs, disbursement and VAT;
13 January 2020 D1 made a Part 36 Offer in the sum of £79,200 inclusive of VAT and interest;
17 January 2020 D1 made a Calderbank Offer in the sum of £250,000, inclusive of damages, interest, costs, disbursements and VAT having stated in open correspondence, for the first time, that this was the limit of D1's insured liability, in any event ."
"24. The delay in bringing the proceedings, the failure to follow the Protocol and the delay within the proceedings in producing a proper Scott Schedule are detailed above. As to issues upon which the claimants lost, the court rejected their case that Mr Large should have recommended a building survey, Mr Easton having made an unheralded and apparently inexplicable concession that Mr Large could properly have opted for the HomeBuyer survey. The court also rejected the case that Mr Large was in breach of duty in failing to identify, or draw attention to the need for investigation of, or protection against, most of the very long list of itemised defects in the Scott Schedule. Paragraphs 187-199 of the draft judgment indicate findings of negligence in respect of: failing to identify or report sufficiently on the binding front door, the lack of falls in the window cills, the slight tile overhang, the inappropriate detailing to the lead overlaps to the bay roof, and the poor workmanship to the terrace (plus possibly the flues and ventilation, the plasterboard and insufficient step in the garage - all of which were, however, described as "relatively trivial" in paragraph 187 so it looks as if the court did not regard them as sufficiently serious to require reporting upon). The court certainly rejected any reporting failure in relation to the fire protection to steel columns, the approach steps, surface rust, structural steelwork, and the lack of a party wall agreement. Furthermore, at the start of day 4, mid-way through the cross-examination of Mr Easton, and without any explanation, the claimants abandoned their case that the defendant negligently failed to report: the steel beams crossing the cavity, incorrect plywood in the upstairs bathroom, sanitaryware and plumbing connections being concealed, corrosion of balustrade post base fixing plates, wrong steel in the balustrade posts and fixings, corroding steelwork to garden door handles, roof slates fixed with galvanised not copper nails, dormer slate roof defectively constructed, and a defective electrical installation.
"26. In the result, and contrary to what one might have supposed on reading the particulars of claim and Scott Schedule, this was not in substance a case about a failure to recommend a building survey or a case about failing to identify defects which were there to be seen or suspected, and instead the route to the substantial liability the court imposed lay via the court's findings that (1) Mr Large should have drawn attention to the fact that he could not see evidence of damp-proofing measures and should have said that further investigations were advisable for that reason and because the construction was new and there had not yet been a chance for any serious defects to show themselves, and (2) Mr Large did not give a sufficiently emphatic warning about the need for an architect's certificate.
"27. A substantial amount of time and money was therefore spent addressing the issues of whether a building survey was necessary and whether individual defects were observable by Mr Large when that case was either abandoned, or failed at trial. That involved both lawyer time (when preparing the pleadings including the detailed response to the Scott Schedule, and statements, liaising with experts, and in preparation for trial) and expert time. Indeed, this case would have been simpler, less costly, and easier to manage all round, if the claimants had founded their case just on those relatively few defects where there was good reason to allege they were observable at the time (most obviously by reason of the contemporaneous photos), on the allegation as to the kind of warning which should have been given about not being able to verify the presence of damp-proofing measures, and as to the need for a more emphatic warning about the need for an architect's certificate."
Cost Budgeting
Costs of the hearing before me on the 7th May 2020.
Interim payment as to costs
Permission to appeal
Stay