![HT-2020-000165 - [2024] EWHC 1686 (TCC)](https://backend.juristeca.com/files/emisores/logo_yJUntHA.png){kind=logo}
Section 1
I turn now to the matter of costs. The claimants sought an order that the two remaining defendants, Marbank and SCd, pay the entirety of their costs of the action and seek an interim payment in respect of costs. That position changed slightly in respect of SCd in the course of the hearing last week on 15th May 2024.
The starting point for the claimants’ position on costs is that they are the net winners as against both of these defendants. The normal rule, as set out in the Civil Procedure Rules Part 44.2(2), is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. Part 42.2(4) provides that, in deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including (a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and (c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply. Sub-paragraph (5) provides that the conduct of the parties includes their conduct at all stages of the proceedings, and in particular sub-paragraph (b) provides that conduct includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim. Sub-paragraph (6)(a) provides that the orders which the court may make under this Rule include an order that a party must pay a proportion of another party’s costs and at (f) costs relating only to a distinct part of the proceedings. Sub-paragraph (7) then provides that before the court considers making an order under paragraph 6(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.
The claimants submit in this case that there is no reason for the court to make a different order from the general order that the unsuccessful party will be ordered to pay the costs of the successful party.
Amongst other things, Mr Crowley makes the following points:
As pleaded in the Particulars of Claim, the claimants’ claim was for a total of £889,000 against all three defendants, that is including M&M, the second defendant. They have recovered approximately £435,000 before the addition of interest. That does not immediately suggest a case in which the claim was exaggerated and the recovery is so disproportionate to the amount claimed that the court ought to regard the claim as an exaggerated one and hesitate to award the claimants their costs.
In fact, if the recovery on the counterclaim of £81,000 odd is taken into account, the figure is in the region of the sum of £350,000 for which the claimants, by letter dated 1st August 2022, offered to settle against all three defendants. That is not suggested to have been a Part 36 offer and/or one which the claimants have bettered, but Mr Crowley relies on it as relevant both to the proportionality of recovery and the claimants’ conduct.
The claimants are individuals who have privately funded the claim and ultimately succeeded. There has been, Mr Crowley submits, nothing unreasonable in their conduct which should be penalised in costs. They have been unsuccessful on some issues but not to an extent where it can be said that they have unreasonably pursued a claim, issue or allegation. There is no reason for the court to make an issue based costs order or to order payment of a portion only of the claimants’ costs.
The defendants’ principal means of protecting their position on costs was to make effective Part 36 offers. No such offers were made.
Those are, in summary, the points made by Mr Crowley. He further referred to the notes to the White Book at Note 44.2.10 and the cases referred to therein. The relevant passages are as follows:
“The fact that the judge has such a wide discretion under Rule 44.2 means that predicting the outcome of an issue-based approach is extremely difficult. Different judges may take strongly diverging approaches in similar cases without falling into error and their decisions being amenable to appeal. Criticism has been made of ‘a growing and unwelcome tendency’ by first instance courts and by the Court of Appeal to depart from the ‘starting point’ of the general rule ‘too far and too often’.”
The citation given for that is Fox v Foundation Piling Ltd [2011] EWCA Civ 790 at paragraph 62 as per Jackson LJ. Continuing the quote:
“That criticism applies principally to departures from the general rule by the adoption of an issue-based approach.
Propositions that may be derived from the authorities and which may be stated with a degree of confidence are as follows:
The rules themselves impose no requirement to the effect that an issue-based costs order should be made only ‘in a suitably exceptional case’, and none is to be implied, although ‘there needs to be a reason based on justice’ for departing from the general rule, and that the question of the extent to which costs of a particular issue are to be disallowed should be left to the evaluation and discretion of the judge, ‘by reference to the justice and circumstances of the particular case’ (F&C Alternative Investments (Holdings) Ltd v Barthelemy No 3 [2012] EWCA Civ 843, [2013] 1 WLR 548 CA at [47] and [49] per Davis LJ ) (a case where a proportionate costs order, made in relation to two issues on which the parties who had succeeded overall had not succeeded, was upheld.))
The reasonableness of taking failed points can be taken into account and the extra costs associated with them should be considered”. [Two references are given for that proposition which I do not intend to recite.]
Where the circumstances of the case require an issue-based order in the form of an order expressed by reference to the costs of the issue, that is what the judge should make; however, generally because of the practical difficulties which this causes, the judge should hesitate before doing so and, where practicable, the order should be expressed as a percentage or with reference to a distinct period of time. (Rule 44.2(7)) (Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC), Jackson J at [72(iv)].
There is no automatic rule requiring an issue-based costs order in the form of a reduction of a successful party’s costs if he loses on one or more issues. HLB Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm), Gloster J at [10]. “The mere fact that the successful party was not successful on every last issue cannot of itself justify an issue-based costs order (J Murphy & Sons Ltd v Johnston Precast Ltd (No 2) [2008] EWHC 3104 (TCC), Coulson J at [10].).
The courts recognise that in any litigation, especially complex commercial litigation but including personal injury litigation, any winning party is likely to fail on one or more issues in the case (possibly issues on which the losing party could have taken steps to protect himself, at least to an extent, to costs liability). That point is frequently made….” [A number of authorities are cited in support of that proposition, which again I do not intend to recite].
The claimants therefore submit, firstly, that the principal way in which the defendants ought to have protected themselves from a costs order would have been to make well-judged Part 36 offers. Such offers can be in respect of the whole of the claim or part of the claim. The defendants did not do so. That cannot, in my view, be a complete answer to the defendants’ submissions, which I shall come to in a moment, as that would be inconsistent with the court’s discretion to make an issue-based costs order. It is a factor to be borne in mind and particularly in a case such as this where there is an overarching case that there are defects in the property but, in a sense, each individual defect gives rise to a distinct claim, and, so far as Marbank at least is concerned, there is a similar position in relation to the Final Account claim.
It seems to me important, and this is the second point which the claimants particularly urge upon the court, that the court does not lose sight of the answer to the question who is the overall winner and of the protection offered to a defendant by making effective offers.
Marbank
So far as Marbank is concerned, almost the entirety of the claim, as itemised in the Scott Schedule, was made against them. Only item 11 (the Bauder green roof) was advanced against SCd only and the stairwell rooflight was primarily a design claim against SCd. Marbank advanced a counterclaim. The claimants were clearly the net winners.
Summarising, and I hope I do no injustice to Mr Clay’s submissions, it is submitted on behalf of Marbank that some account needs to be taken of the extent to which the claimants were successful on individual claims and issues.
So far as claims are concerned Mr Clay relies firstly on the fact that the claimants’ claim failed on item 10 (Accoya) item 11 (the Bauder green roof), item 12 (the stairwell rooflight) and item 28 (Brise Soleil), and that, as opened, the claimants’ claims in respect of these items totalled approximately £160,000. In respect of these claims he submitted that they featured prominently in the evidence for trial and occupied considerable time at trial.
The claim for alternative accommodation included two years’ of alternative accommodation for Mrs Vainker. I found that period to be unreasonable for the carrying out of remedial works to the glass balustrades. There was a claim for £110,000 for lost rental income because the rental property was used as accommodation for Mrs Vainker’s son and his family. I found this claim to be too remote. Mr Clay also pointed to the claim for lost liquidated damages which was made and could only be made against M&M.
As to these two latter points, the alternative accommodation and lost liquidated damages, they did not occupy any or any significant time at trial and I take the submission to be that they are relevant to the extent to which the claimant succeeded against Marbank.
Mrs Vainker’s contract with Marbank was under seal and there were no limitation issues so far as Marbank was concerned. The position was entirely different so far as SCd was concerned and, as I said in giving judgment, that was why the claimants’ focus in respect of some of the larger claims was on the Defective Premises Act 1972. Mr Clay submitted that the only reason for the DPA claim was the fact that the claimants wished to pursue SCd and could only realistically do so under the Defective Premises Act because of the limitation defences available to SCd in contract and tort. He argued that that had a significant impact on the brickwork claims in particular, because the evidence was expanded to advance the case that the property at completion was unfit for habitation. The claim for breach of the DPA failed because I found the discolouration or staining of the brickwork to be an aesthetic defect only.
Before I turn to the relevance of the counterclaim, I address these points, and I do so in reverse order.
The submission that the DPA claim had any significant impact on scope of the evidence and conduct of the trial is one I reject. The claimants’ position was that the discolouration evidenced not only an aesthetic defect but had a consequential impact on the structural stability of the brickwork, which it was alleged was at risk of early failure. It is inconceivable that the claimants would have advanced their case differently if there had been no limitation issue so far as SCd was concerned and no reason or no need to rely on the Defective Premises Act. Further, although the claimants lost on the risk of early failure point, almost all of the evidence given would have been given in any event. The issue formed an element of the brickwork claim but not one which should drive any discrete costs order.
So far as the general points as to the extent of success are concerned, although the claimants’ recovery against Marbank was far less than 100% of the claim, it was not so disproportionately small, when compared with the sums claimed against Marbank, that it merits a reduction in the claimants’ recovery of costs.
So far as the particular claims on which the claimants failed are concerned, it is not, in my view, the case that any of these claims can be said to have been unreasonably advanced at trial. I do not intend to repeat my lengthy judgment, but in respect of each of these claims there was a complex factual background and there were significant issues of expert evidence. The resolution of these issues may have been in the defendant’s favour but it did not make the pursuit of the claims unreasonable and, as I have said already, overall the claimants were the winners.
As Mr Crowley submitted, this was in essence a defects claim which comprised some major alleged defects (to which the bulk of the financial claim attached), and a much larger number of claims to which the sums attached varied from less than £200 to over £35,000. It is the sort of claim which should properly be looked at as a whole and, when looked at as a whole, the claimants have won. I accept that submission made by Mr Crowley, as indeed I have already indicated, and I do not consider that there is anything in the claimants’ conduct in relation to individual claims on which they did not succeed that merits a percentage reduction in the costs recoverable against Marbank.
So far as the counterclaim is concerned, Mr Clay submits that there should be a reduction to reflect the claimants’ conduct in relation to the counterclaim.
In this context I refer to paragraphs 675 to 677 of my judgment. As at December 2014, Mr Bowler appears to have valued Marbank’s works at just over £1.3 million. M&M appears to have certified a sum of £1,250,470 as due to Marbank. On any view there was, therefore, a certified sum outstanding. However, it was not in dispute that there was a Pay Less Notice for £50,000 for liquidated damages and, at all times, the claimants had a claim for damages which they could set off against the outstanding amount. Marbank took no steps to recover any amount until the provision, in October 2017, of what I have referred to as the Final Account, which formed the basis of the counterclaim and was in the sum of £1.365 million.
Mr Clay makes the following points:
Firstly, the Particulars of Claim gave no credit for any sum outstanding. When the Counterclaim was pleaded the claimants’ response was to deny any liability.
Secondly, the claimants’ quantum expert, Mr Finn, was not instructed to and did not address the Counterclaim at all in his report, although Marbank’s expert did. I note in that context that Mr Crowley drew attention to the fact that in their first joint statement the quantum experts agreed at paragraph 1.8 that: “The experts have not been provided with information on this counterclaim to make an assessment in this QS 1st JS”.
Thirdly, Mr Finn only addressed the counterclaim at the last minute. One reason given was that he had not had relevant substantiating documents, such documents did not exist and this was not the product of a failure in disclosure. As a result, he gave figures as figures for some items (not all items) and expressed a view on reasonableness. He could have done so earlier. The other reason given for the timing of his second report was a lack of funds.
I cannot see how any of these matters would lead to the conclusion that there should be any reduction in the claimants’ recovery of costs to reflect conduct. They did, of course, in one sense lose on the Counterclaim, but that was always subject to the set-off of the claim for damages. The total value of the Final Account was almost in accordance with Mr Bowler’s valuation in December 2014, which could have been agreed by Marbank, and after deduction of liquidated damages the total was less than certified in December 2014.
In terms of conduct, the Final Account claim was not submitted until over three years after practical completion. Even when pleaded as part of this action, there was no detail of the basis on which variations, not the subject of written instructions, were claimed. Marbank’s factual evidence on the Counterclaim was perfunctory. Mr McGee’s report was superficial. Most of the detail on which my judgment was based was provided in closing submissions. Criticism of the claimants and Mr Finn for failing to grapple with the counterclaim is therefore in my view misplaced.
Overall, therefore, my view is that the proper order is that Marbank should pay the claimants’ costs of the action, and I will so order. I will say something more about the costs related to the second defendant, M&M, in due course.