COSTS, PARTIES & PROPORTIONALITY: CONSTRUCTING AN ARGUMENT AS TO WHO SHOULD PAY WHAT
There are now an increasing number of cases reported where the judge sets out expressly their views in relation to costs. These are important reading. A good example is the decision of Mr Justice Edwards-Stuart in Laing O’Rourke Construction Ltd -v- Healthcare Support (Newcastle) Ltd [2014[ EWHC 3847 TCC. The short judgment contains a number of observations on costs liability between the parties and the proportionality of the costs generally.
The judge had decided a case under Part 8 of the CPR relating to the construction of a Project Agreement. The claimant sought a number of declarations but obtained only one. That judgment is available here.
THE DECISION ON COSTS
- The parties’ arguments on costs in this case are almost as far apart as they could be.
- The Claimant’s position is that it was the effective winner and that it should it have its costs paid by the Trust.
- The Trust, by contrast, submits that the Claimant sought seven declarations and only succeeded on one, and then only in a form that was modified – in the Trust’s favour – by the court.
- HSN submits that it was the party that came closest to adopting the position at which the court arrived and that accordingly its costs should be paid by the Trust, alternatively by the Claimant.
Considerations and discussion
- There is no doubt in my mind that the Trust’s construction of the contract, as summarised in paragraphs 33-34 of the judgment, was fundamentally different from the construction arrived at by the court. The description of the Trust’s submissions as “bold” was no understatement.
- I am quite satisfied that, as between the Claimant and the Trust, the outcome was far closer to the position contended for by the Claimant than that contended for by the Trust.
- However, the Claimant’s declarations 6 and 7 were essentially fact-based and introduced an inquiry into matters of fact that was potentially inappropriate on a Part 8 claim. This, in my view, provoked the Trust into serving fairly extensive evidence on matters of fact, although that evidence was, I felt, somewhat tainted because in two or three places it was more partisan than it should have been.
- I consider that there is some force in the Trust’s submission that the Claimant did not really retreat from its position on declarations 6 and 7 until fairly early on during the course of its submissions at the hearing and that, as a result, much time was spent during the preparation for the hearing that should have been avoided.
- My attention was drawn to the decision of Jackson J in Multiplex Construction v Cleveland and Bridge UK Ltd  EWHC 2280, at paragraph 72, and to my own judgment in M T Højgaard A/S v E.ON Climate and Renewables UK (5 June 2014), in which I considered that and other authorities. At paragraphs 9-11 of the latter I illustrated, by reference to the parties’ estimates of their costs in that case, the consequences of an issue-based costs order when it is simplified and translated into an order making one party pay a proportion of the other side’s costs. I bear those authorities in mind and propose to apply the principles set out in them to this case.
- In my view, this is not a case in which a pure issue-based costs order would be appropriate: the costs of this claim are already high enough and no useful purpose would be served by directing the parties to embark on a laborious analysis of their own and the other parties’ costs. The pragmatic and proportionate solution is to make an order that reflects, in general terms at least, each party’s success on the issues.
- In particular, I consider that the appropriate order should reflect the fact that the Claimant did not succeed on declarations 6 and 7 and that the inclusion of those two declarations did make a fairly significant increase in the costs of preparing for the hearing. But, as I have said, as between the Claimant and the Trust, I am in no doubt that the Claimant was the substantial winner. In these circumstances I consider that the fair order is that the Trust should pay 70% of the Claimant’s costs up to and including the hearing. This proportion takes into account the fact that the Trust’s costs were increased by the unsuccessful pursuit of declarations 6 and 7. However, the Trust has effectively lost the battle on costs and so thereafter it should pay 100% of the Claimant’s costs of preparing its submissions on costs. Unless otherwise stated, all references to “costs” are to “costs on the standard basis, to be assessed if not agreed”.
- As between the Claimant, HSN and the Trust, I have already concluded that HSN was the party whose position most closely reflected the outcome. However, it was the Claimant who joined HSN in the action – although HSN thereafter took up a position that was broadly aligned with that taken by the Claimant.
- In my view HSN is in principle entitled to substantially all of its costs. I would not say that it took an entirely consistent position throughout, but any variation of its position did not in my view add materially to the costs incurred by either of the other two parties. I consider that there should be a small reduction in the costs it recovers to reflect the fact that, whilst close to being the successful party, its success was not quite total. In these circumstances, I consider that HSN should recover, one way or the other, 90% of its costs and should not be required to make any contribution to the costs of either of the other two parties.
- Since HSN was adopting a position broadly in line with that of the Claimant and opposed to the position taken by the Trust, I consider that the Claimant should pay 90% of HSN’s costs but that it should recover 75% (being 75% part of 90%, not 75% of 90%) of those costs from the Trust.
The amount of the costs
- The amounts of the parties’ costs of preparing for this hearing were somewhat startling. The Claimant incurred costs of about £300,000, the Trust incurred costs of about £175,000 and HSN incurred costs in excess of £150,000.
- In my view, these sums are far too high, in terms of proportionality, for a one-or two-day Part 8 claim. No party suggests that there should be a summary assessment of these costs (and, even if it had done so, I would not have acceded to it), and so what I say hereafter is by way of observation only.
- Since I have heard submissions on the amount of the various parties’ costs I consider that it would be appropriate for me to say something about them and, in particular, what I consider would be a proportionate amount of costs in a claim of this sort. The issues were undoubtedly of high importance to the parties and I can understand that on the Claimant’s side some 350-400 hours of solicitors’ time might reasonably and proportionately have been required, together with 150 hours of counsel’s time.
- For the Claimant, therefore, I consider that a figure much in excess of £200,000 would be hard to justify, at least in terms of proportionality and therefore what the losing party might fairly be expected to pay. I am not talking about solicitor and own client costs. By the same reckoning, I consider that a proportionate figure in respect of the Trust’s costs would be of the order of £150,000. I would expect HSN’s costs to be something significantly less than that.
- But, as I have already said, these are only observations made with a view to assisting the costs judge or to enable the parties to agree the appropriate figures in respect of costs. If those figures cannot be agreed, then of course there will have to be a detailed assessment on the standard basis.
- In the light of my observations as to what would be proportionate amounts in respect of each party’s costs, I direct that interim payments on account of costs are to be made as follows:
i) By the Trust to the Claimant £140,000ii) By the Trust to HSN £97,500
iii) By the Claimant to HSN £19,500
ALSO ON THESE ISSUES – SUMMARY ASSESSMENT AND ISSUE BASED COSTS ORDERS