HT-2020-000165 - [2024] EWHC 1686 (TCC)

So far as SCd is concerned, the position is somewhat different. Firstly, the counterclaim never concerned SCd. In the course of argument Mr Crowley accepted that any order in respect of the counterclaim could be the subject of a separate order against Marbank only. It would seem to me that the effect would be that an order against SCd would, at most, be that SCd should pay the costs of the claim which, for the avoidance of doubt, would not include the costs of the counterclaim, even though those were set off against the claim as a whole.

But it is also the case that much of the claim never concerned SCd at all, only the brickwork and glass claims, item 10 (Accoya), item 11 the (Bauder Green roof), item 12 (the stairwell rooflight) and item 44 (the defective kitchen floor) were pleaded against SCd. The other numerous and often smaller claims did not feature in the case against SCd. If I have overlooked a small claim that was made against SCd or which featured SCd it is not material.

Mr Crowley submits that this is simply the product of a defects claim against more than one defendant and that the appropriate order should still be that SCd pays the claimants’ costs of the claim, with any issues as to whether the costs associated with individual claims should be recoverable from SCd being addressed as part of the process of assessment.

For SCd Mr Fowler advances a number of arguments as to how the court could and should address the issue of costs recoverable, if any, from SCd. As I indicated above in relation to Marbank, I leave aside for the moment the issues relating to M&M. Mr Fowler relies on the helpful summary of the authorities in Pigot v The Environment Agency [2020] EWHC 1444 Ch, a decision of Mr Stephen Jourdan QC sitting as a Judge of the High Court.

At paragraph 5 the Deputy High Court Judge said this:

The summary differs slightly from the White Book note which I have quoted. In my view, paragraph 3 is slightly overstated, but it may be that it is moderated by sub-paragraph (6) and the exhortation to stand back and consider the justice of the case. I say that it is slightly overstated because there may be many cases where a party is deprived of its costs on an issue on which it was unsuccessful and which can be regarded as a discrete issue, but it is a matter of discretion, and to say that a party may be deprived of its costs, rather than is likely to be deprived of its costs, is a principle of more general application. As I have said in dealing with Marbank, a case which comprises a list of discrete defects and discrete claims under a final account is more likely to be looked at as a whole rather than as a series of distinct claims and counterclaims. Also, as Mr Crowley submitted, the defendant’s primary means of providing costs protection is to make an appropriate Part 36 offer on the whole of the claim or making discrete offers on parts of the claim. Those latter two points are ones which should clearly be borne in mind in considering all the circumstances of the case and the just result.

Against the background of the principles summarised in Pigot, Mr Fowler’s starting point is to identify, on his case, that the claimants have recovered less than 10% of the claim against SCd. In making that submission, he relies on the schedule of loss at Appendix 3 to the Particulars of Claim which put the claimants’ claim at £767,913 before the addition of VAT and interest and which claimed the entirety of that sum from SCd, even though not all defects formed part of the case against SCd. As against SCd the claimants have recovered £93,644.50. Mr Fowler submits that if the sum of £35,000 from the M&M settlement is credited against this amount the claimants have recovered less than 10%, in fact 7.5% of the total claimed, and 12% of the total if no credit is given. His high level submission is that it would be surprising if the claimants then recovered more than 10% of their costs against SCd. This is not simply a pleading point on the schedule of loss but, on Mr Fowler’s submission, reflects the fact that the costs of the claim in its entirety are sought against SCd rather than the costs of the claims in fact made against SCd.

In reality, the sums claimed against SCd by the time of the closing submissions were in the region of £250,000 in respect of remedial works and around £200,000 for alternative accommodation and general damages. The amounts set out in the Scott Schedule for remedial works were greater, but, in any case, the claimants’ recovery against SCd compared with the claims made was more in the region of 20 - 25%.

I also observe that, although the claims for alternative accommodation and general damages made up a significant part of the total claim, they were not costs heavy issues. There was a modest amount of factual evidence, obviously no expert evidence, and the issues were mostly dealt with as part of legal argument.

Mr Fowler’s more particular submission is that some of the claims made against SCd, and on which the claimants failed, were made unreasonably. That submission is not made in respect of the brickwork claim; it is made in respect of Accoya, the Bauder green roof and the staircase rooflight. I have already indicated that I do not consider any of these claims to have been made unreasonably and I repeat what I have already said about the complexity of the factual and expert evidence.

Without repeating the whole of the relevant parts of the judgment again, so far as the Accoya was concerned, there was, for example, undoubtedly black mould on some of the wood, expert evidence that the design was defective/incomplete, albeit I did not accept that evidence, and an arguable case that SCd had acted negligently in not sufficiently taking account of Mrs Vainker’s maintenance requirements. The claim for 50 years of maintenance costs was unsustainable, but that did not make the claim as a whole unreasonable. There was an obvious limitation defence, but the claimants relied on the condition of the Accoya as part of their case that the property was unfit for habitation because of the maintenance required.

So far as the green roof was concerned, no limitation defence was taken. There was a measure of agreement amongst the experts that better provision should have been made for the water supply. The fact that I concluded that the provision was adequate for professional maintenance does not make the claim one that was unreasonably brought.

Similar points can be made about the claim in respect of the stairwell rooflight which was not at optimum pitch for self-cleaning glass.

Mr Fowler submits that on these “unreasonable” claims, not only should SCd not pay the claimants’ costs but the claimants should, in effect, pay SCd’s costs. I say “in effect” because he submits that the court should take a percentage of the claimants’ costs, and he suggests that should be 25%, and then disallow 50% of the claimants’ costs to reflect the claimants paying the defendant’s costs. He makes similar submissions about the claims under the DPA generally, albeit on the basis that the claimants should not recover their costs, rather than pay the defendant’s costs. He says that those are claims on which the claimants failed and they should be deprived of their costs and he seeks to make a deduction for the recovery from M&M. Suffice to say that that results in SCd, on his submission, making no payment to the claimants in respect of costs.

I do not accept that submission, not least because I do not find that the claims on which the claimants were unsuccessful were brought unreasonably, and so I would never get to zero recovery.

I do, however, consider that this is a case where the claimants should recover against SCd only the costs of the claims or issues on which they succeeded and that they should be deprived of the costs of the claims on which they failed. SCd’s position is very different from that of Marbank. Only a limited number of claims, albeit two of the largest, were made against SCd. With one exception there was a potential limitation defence and, although I would not characterise the claimants’ conduct as unreasonable, there was little engagement with the provisions of section 14A. This was why the claims were framed as claims for breach of section 1 of the DPA, even though, even on a cumulative basis, it was difficult to see how these alleged defects could render the property unfit for habitation. The DPA claims added little or nothing to the claims against Marbank in contract but were the principal basis for the claims against SCd.

It would be open to me to order SCd to pay the costs of items 8 and 9 and the associated claims for damages only, but the clear preference is for an order that awards a percentage of costs. There are no figures before me which would enable me to make an assessment of costs of these matters as a percentage. I have regard to the submissions as to the percentage level of recovery.

I note that Mr Fowler also submitted that the glass claims did not involve significant costs because the issues were largely agreed by the experts. I cannot accept that submission, and a brief consideration of my judgment would show the scope of the evidence on design and the breadth of the issues explored before and during the trial.

Having said that, I have come to the view that the figure of 15% of the total of the claimants’ costs is an appropriate reflection of the level of success on the whole of the claim against SCd and, therefore, an appropriate percentage of the whole which SCd should be ordered to pay, subject to the further argument in respect of the without prejudice save as to costs offer made by SCd. In coming to that percentage I have taken account of the percentage success on the whole of the claim but I have uplifted the percentage to reflect that the weighting of the costs was on the claim for the costs of remedial works.

That leaves the without prejudice save as to costs offer made on 9 August 2022. SCd offered to pay the claimants £145,000, inclusive of VAT interest and costs, in settlement of the whole of the claim. The offer was open for acceptance for 14 days. The offer was not accepted, but there appears to have been a conversation about it between solicitors for the claimants and SCd. As a result, on 9 September 2022, SCd’s solicitors wrote further:

Mr Fowler relies on the decision of the Court of Appeal in Walker Construction (UK) Ltd v Quayside Homes [2014] EWCA Civ 93. In that case the defendant recovered judgment on its counterclaim of £10,885, with costs estimated at £345,000. The recovery amounted to less than 6% of the original counterclaim. On the facts, the claim was not relevant by the time of judgment. The claimants had made a Calderbank offer on 5 January 2011 to pay the defendants £30,000 plus VAT in full and final settlement inclusive of costs. The claimants argued that the judge should have assessed that offer as representing a reasonable offer on costs, given the ultimate recovery of approximately £11,000. Gloster LJ essentially agreed. From paragraph 85 she said this:

At [92] Gloster LJ concluded:

What is said by SCd in light of that judgment is that, following the approach taken by the Court of Appeal, the court should consider with the benefit of hindsight whether the offer made was bettered by the claimants. The hindsight relates not only to the actual recovery of damages but the costs that follow that recovery.

In the present case the recovery of damages, including VAT, is roughly £93,000 before the addition of interest. It is argued that I might have regard to a lower figure for two reasons.

One is that, prior to this offer being made, the claimants’ solicitors had said in correspondence that the claimants would claim the cost of glass remedial works in the PFG tender and not the slightly higher cost actually incurred. At trial the claim was put on the basis of the cost actually incurred. No objection was taken to this and I awarded the costs actually incurred. There is no reason now to have regard to a different figure.

The second reason is the credit for the M&M settlement. That had not been reached at the time of the offer by SCd but was reached within the time for acceptance. The relevant sum of £35,000 was agreed with M&M in respect of remedial works, alternative accommodation and expenses, and general damages for distress and inconvenience. That sum will be credited against the total claim (including the claims on the items where the claim was against Marbank and M&M and not SCd) and it seems to me both unrealistic and unfair to the claimants, for the purposes of considering the relevance of the without prejudice save as to costs offer, to say, in effect, that they ought to have considered their position as against SCd on the basis that the whole of that sum was credited against the claim against SCd.

The net total awarded against SCd which I take into account is therefore £93,000, to which interest is to be added, and by Mr Crowley’s calculation the total is then £108,000. The costs offer was in effect therefore £37,000; even without interest the figure would be £52,000. A necessary part of SCd’s case therefore is that the costs it would have been, at that date, liable to pay would have been no more than those figures, assuming those costs to be assessed either by reference to discrete issues or on a percentage basis.

The claimants’ approved costs budget for the various stages was in excess of £900,000 before the addition of VAT and I am told that the claimants have in fact expended over £1 million. Mr Crowley submits that it is inconceivable that at the time SCd’s offer was made, some two months before trial, the claimants would have expended so little that the costs offer, in effect made by SCd, would have been more than that expended on the issues on which the claimants succeeded.

I have said that I will order SCd to pay 15% of the claimants’ costs of the claim. If I take the total of the costs budget net of VAT, 15% would be £135,000, for which SCd is now liable. The figure is necessarily overstated as an amount payable on costs at the time the offer was made: at the time the offer was made there had not yet been a trial; in any case, the total budget includes the costs of the counterclaim; and SCd would doubtless also say that it is overstated because it includes costs of the claim against M&M. But however many adjustments one makes, I cannot see that the figure would come down to a point where the £145,000 offer had not been beaten. In any event, it would provide an unsatisfactory basis on which to make a costs order against the claimants as SCd ask. A Part 36 offer could have been made on a part of the claim which would have avoided these difficulties of calculation and it was not. Accordingly, I do not make the order sought by SCd to the effect that the claimants should pay SCd’s costs after the date of the making of the offer and the order that I make will be that SCd should pay 15% of the claimants’ costs of the claim.