Afldheader LG Ltd v Cumbria County Council
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Stephen Davies |
| Judgment Date | 18 November 2016 |
| Neutral Citation | [2016] EWHC 2946 (TCC) |
| Date | 18 November 2016 |
| Docket Number | Case No: 3MA50110 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2016] EWHC 2946 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MANCHESTER DISTRICT REGISTRY
TECHNOLOGY AND CONSTRUCTION COURT
Manchester Civil Justice Centre,
1 Bridge Street West, Manchester M60 9DJ
His Honour Judge Stephen Davies
SITTING AS A JUDGE OF THE HIGH COURT
Case No: 3MA50110
David Streatfeild-James QC & Andrew Singer (instructed by Pinsent Masons LLP, Solicitors, Leeds) for the Claimant
Martin Bowdery QC & Frances Pigott (instructed by REN Legal, Solicitors, London EC2) for the Defendant
Hearing date: 10 November 2016
JUDGMENT ON COSTS
A. Introduction
I handed down my judgment on the substantive issues, [2016] EWHC 2856 (TCC), on 11 November 2016 and, having heard argument on the consequential costs issues now proceed to provide my judgment on those issues.
The following issues arise:
2.1 The appropriate order as to costs.
2.2 The amount of the payment on account of costs.
2.3 The rate of interest on costs.
As I said in my substantive judgment, this is a claim and counterclaim arising out of a 7 year contract for the provision of highways maintenance and other services by the claimant, Amey, to the defendant, Cumbria. By the time the contract expired a number of claims and counterclaims had already been intimated, and Cumbria had made substantial deductions from Amey's 3 final monthly payment applications. Neither the final account process nor the subsequent pre-action protocol process resulted in an overall settlement of the claims and counterclaims, with the result that Amey commenced proceedings in the Manchester Technology and Construction Court in December 2013. Amey's claim as originally pleaded amounted to over £30 million together with interest. The counterclaim as originally pleaded, even after taking into account Cumbria's valuation of Amey's claims, was around £20 million. The parties endeavoured to settle their disputes throughout the course of the proceedings, including undertaking a week-long mediation in May 2014, and achieved some success in settling some of the claims, but the majority of the claims remained in dispute. The case went to trial at the beginning of February 2016 and ran until the end of May 2016.
The result of the trial, in summary, was as follows 1:
4.1 After taking into account all claims and counterclaims Amey was the victor, achieving a judgment of around £5.365 million, comprising around £3.698 million principal plus contractual interest of around £1.697 million.
4.2 Amey was successful as to around £4.616 million in relation to its part 1 claim, claimed at around £7.915 million, being its valuation of its annual account claims for work done in the 3 final years of the contract, where it said that Cumbria had wrongfully undervalued its claims and wrongfully made deductions from them.
4.3 Amey was only successful as to around £296,000 in relation to its part 2 claim, claimed at around £19.774 million, being its valuation of what were pleaded as being 16 separate final account claims for additional sums claimed under the contract and/or as damages.
4.4 Cumbria was successful as to around £1.214 million in relation to its counterclaims, claimed at around £15.646 million.
4.5 Adding together Amey's part 1 and part 2 claims, and deducting Cumbria's counterclaims, pleaded as a defence and set off as well as an independent counterclaim, produced the net balance of £3.698 million principal. The interest of around £1.697 million represents contractual interest on that sum at 8% over base from June 2012.
In relation to its part 1 claim, in broad terms Amey succeeded in showing that the substantial deduction of around £4.197 million made by Cumbria from the final 3 monthly claims on the stated basis that it had substantial counterclaims had been very largely unjustified. However Amey failed to show that it had been very substantially underpaid for the Better Highways work undertaken by Amey from 2008 onwards. That was because whilst Amey was able to satisfy me that it had undertaken this work to the extent that it had claimed it failed to satisfy me that it was so different from the work previously undertaken that it was entitled to payment on a re-rated and therefore substantially increased basis.
In relation to its part 2 claims, although Amey succeeded in part on 6 of its part 2 claims it failed on the remaining 10. Its net recovery of around £296,000 needs some clarification, because that includes a deduction of around £280,000 for the overpaid element of the Better Highways work as well as a deduction of around £288,000 for the deduction of a previous on account payment. Thus the total of the individual awards to Amey for the 6 items on which it succeeded was around £864,000 before deductions.
In equally broad terms, Cumbria very substantially failed to achieve success in relation to its three most substantial counterclaims, being the defects counterclaims in Schedules 2, 3 and 7. It achieved a success of only around £802,000 in relation to these multi-million pound claims, where the total claimed was around £12.6 million. Of the £802,000 it achieved a significant success only in relation to one element of the Schedule 2 and 3 claims, which was a claim for repayment of payments made for testing which I concluded had not been undertaken (around £598,000 of the sum claimed of around £2.223 million) and only in relation to around £179,000 of the sum claimed of around £877,000 for Schedule 7. The major reasons for its failure to achieve greater success were (a) its failure to satisfy me that it was proper to extrapolate its findings from inspections of work sites sample inspected to the entirety of the works undertaken by Amey; (b) its failure to satisfy me that it was proper to award damages based on the cost of remedial works which I was satisfied were never in fact going to be carried out; (c) its failure to evidence the majority of its Schedule 7 claims for notified defective works.
Furthermore, whilst it achieved some success in relation to some of the other counterclaims, many of those were mirrors of Amey's claims, rather than freestanding claims in their own right, and it failed on others. As I have said overall its level of success was not sufficient to justify the deductions it had made from Amey's annual account claims.
B. The respective cases
Amey's position is straightforward. It is the successful party and should be awarded its costs of the claim and counterclaim with no reduction.
Cumbria's position as clarified in oral submissions was that:
(1) Whilst it accepted that Amey was the successful party, because of Amey's relative lack of success, its conduct and relevant admissible offers its costs entitlement should be reduced to 50% of its recoverable costs.
(2) There should be separate costs orders in Cumbria's favour in relation to three discrete items, the first being the costs attributable to what I have found were Amey's delays and defaults as regards its failure to produce documents from its SAP IT system, the second being the costs attributable to what are said to have been Amey's unreasonable allegations of fraud and dishonesty made in closing submissions, and the third being the costs of obtaining legal advice as regards Amey's threat of contempt proceedings.
C. Costs incurred
The importance of the debate about costs may be seen from the costs incurred, as to which both parties produced details for the purposes of the costs argument.
Amey's total costs from 1 July 2012 to date, excluding costs not charged to it by its solicitors and excluding costs already dealt with, are said to amount to around £8.848 million. Cumbria's are said to amount to around £10.037 million.
I should also record that this case was not subject to costs management. At the time the case was issued costs management did not apply to claims with a stated value of over £2 million unless the court otherwise ordered. Prior to the first case management conference the court enquired whether the parties intended to file costs budgets and after consideration both parties stated in clear terms that they did not wish the court to make a costs management order. They did however, as they were required to do, indicate on their case management information sheets the estimated amounts already spent on costs and the estimated overall costs. In Amey's case the figure was £1.7 million and £6.5 million respectively and in Cumbria's case the figure was £2.5 million and £6 million respectively. In those circumstances the court did not order that costs management should apply against the wishes of both parties and the case proceeded to trial.
Whilst it is apparent that both parties' incurred costs are significantly in excess of those estimates, the reasons for that have not been the subject of investigation at this stage. It is apparent from my knowledge of the case, having case managed the case throughout and tried the case, and from the costs schedules, that very significant and broadly equivalent amounts have been spent by both parties on electronic disclosure and the electronic trial process, on very significant expert input, particularly on quantum and extrapolation, and on intensive input from the respective legal teams. I have no doubt that the hard fought nature of the case, with very little in the way of agreement on issues or on figures as figures, and the need for intensive activity on all hands and at all stages to ensure that the case was ready for trial and was concluded within the trial timetable, provide explanations for much if not all of the increase on both sides.
C. The relevant principles as regards the award of costs
By the end of the hearing there appeared to be no significant dispute as to...
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