Balmoral Group Ltd (Claimant) (1) Borealis (UK) Ltd (Defendants) (2) Borealis as and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 17 October 2006 |
| Neutral Citation | [2006] EWHC 2531 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2005 FOLIO 130 |
| Date | 17 October 2006 |
[2006] EWHC 2531 (Comm)
Mr Justice Christopher Clarke
Case No: 2005 FOLIO 130
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Richard Mawrey QC & Mr Ross Fentem (instructed by Moon Beever) for the Claimant
Mr David Allen & Mr Charles Holroyd (instructed by Kennedys) for the Defendants
Hearing dates: 6 th October 2006
Approved Judgment
Balmoral lost the action. They will have to pay the costs. The question I have to decide is whether they should pay the costs, or some of them, on the standard or the indemnity basis. The basic rule is that a successful party is entitled to his costs on the standard basis. The factors to be taken into account in deciding whether to order costs on the latter basis have been helpfully summarised by Tomlinson, J., in Three Rivers District Council v The Governor and Company of the Bank of England [2006] EWGC 816 (Comm). The discretion is a wide one to be determined in the light of all the circumstances of the case. To award costs against an unsuccessful party on an indemnity scale is a departure from the norm. There must, therefore, be something – whether it be the conduct of the claimant or the circumstances of the case – which takes the case outside the norm. It is not necessary that the claimant should be guilty of dishonesty or moral blame. Unreasonableness in the conduct of the proceedings and the raising of particular allegations, or in the manner of raising them may suffice. So may the pursuit of a speculative claim involving a high risk of failure or the making of allegations of dishonesty that turn out to be misconceived, or the conduct of an extensive publicity campaign designed to drive the other party to settlement. The making of a grossly exaggerated claim may also be a ground for indemnity costs.
In this case Balmoral lost badly. On most of the issues I found against it. That does not necessarily mean that it must pay costs on an indemnity scale. But Borealis contends that there are a series of circumstances, which, looked at as a whole, amount to a pattern of unreasonable behaviour which make it just to order costs on that basis. Such an order is not a punishment. But it will mean that Borealis recovers a higher percentage of what it has had to pay in costs than would be the case on the standard basis. This is because the incidence of the burden of proof is different and because, in the case of costs on the indemnity scale, proportionality does not feature as an expressed criterion. It is only just, Borealis submits, that costs should be awarded on this basis in the light of Balmoral's behaviour and the costs to which Borealis has thereby been exposed.
In essence Borealis says that Balmoral adopted an unreasonably obdurate approach to the litigation from the start and unreasonably disregarded the interests of the Borealis defendants. This approach was manifested by Balmoral's pre-action publicity, by the presentation of a grossly exaggerated claim, by an unreasonable failure to make efforts to settle, and by the character of the technical evidence adduced.
As to pre action publicity, in 2003 Balmoral recalled a large number of its borecene made fuel tanks. In the course of so doing it stated that the materials used during the period when the tanks were manufactured created the problems, or that the raw material of the tanks was suspect, or similar expressions. No complaint is made of the product recall or the giving of publicity about tank failures. What is complained of is a public prejudgment of the issue which was to be determined in the action as to whether the tank failures were caused by the material or something else.
I do not regard the fact that Balmoral spoke publicly of their problems being due to suspect raw material (which the industry would know meant borecene) as unreasonable in the circumstances. Tanks were cracking in increasing numbers; members of the public were concerned; as was, increasingly, the Environment Agency. Balmoral believed that borecene was the cause of the problem. It had not had anything like this trouble with previous materials; other manufacturers were having similar problems using it; and RAPRA's advice was that it was the material that was to blame. In those circumstances it was not unreasonable for Balmoral to say what it did. Indeed it seems to me somewhat unrealistic to expect Balmoral to recall large numbers of tanks without explanation as to why they were suspect.
On 13 th January 2005, after proceedings had been begun in May 2004, Balmoral wrote to the chief executive of Borealis A/S in Denmark, with copies to Borealis' shareholders, referring to its claim in these proceedings. The gist of the letter was to point out that the tanks were a continuing threat to the environment because of the risk of leakage and that something had to be done in a shorter time frame than that of the litigation. The letter proposed a mediation in the penultimate week of January and said that if a mediation could not take place in the week beginning 24 th January 2005:
"…the Directors of Balmoral will have no option but to go public with information on the defective Borealis raw material to the industry, its Regulators, and customers. This will include information on Borealis raw material problems incurred by other tank manufacturers ….including but not limited to [4 named manufacturers]. Given that Balmoral has sold oil tanks in other European countries Balmoral will have no option but to include those countries within the media campaign."
This was a clear threat to contact Borealis' customers and the industry regulators and to mount a campaign in the media, the intended purpose of which must have been to put pressure on Borealis to settle. Borealis contends that this was an unjustified prejudgment of the issue —put forward in disregard of its legitimate rights not to have pre-trial by media.
I am not however persuaded that Balmoral so overstepped the mark that I should award indemnity costs on that ground. Firstly the fact that a claimant puts his case to, and in, the media is not of itself a ground for indemnity costs. Much depends on how he does so. A litigant must not put improper pressure on another litigant to abandon a defence; and, even if what he does falls short of contempt, he may find that his conduct leads, or contributes, to the making of an order for indemnity costs. But much depends on the circumstances. Secondly, I bear in mind that Balmoral was facing acute financial difficulties at this stage and was desperate to get some movement on what it viewed as a well founded claim for severe financial loss. Thirdly, I have no evidence that the threat – and it was only a threat —contained in the letter matured into an improper campaign. Borealis replied 6 days later rejecting what it described as Balmoral's presumption about responsibility for the tank failures, stating that the threat to go public would not persuade it to follow any course that it did not consider appropriate, and declining mediation until an appropriate time. Thereafter, so far as the evidence shows there was no campaign.
As to exaggeration of the claim, Balmoral's claim as finally put forward was valued at over £60 million, a figure which grew from an initial £10 million. That figure included two matters – environmental claims (unquantified) and overseas claims (about £11 million) – that were not dealt with at the trial. Shortly before the trial Borealis valued Balmoral's claim on the matters the subject of my judgment as being worth about £12 –13 million. Borealis told Balmoral that it had done so when it made a payment in, and said that that the sum paid into court was therefore generous to Balmoral in terms of risk assessment. Borealis' accountant has subsequently estimated that, on the findings as to quantum set out in my judgment (which assumed that all of Borealis' defences failed), the claim was about £16.6 million or about 1/3 rd of the figure claimed for the items with which I dealt. So Borealis' estimate was not that far off. However you look at it, and even allowing for the fact that the £60 million includes overseas claims, the claim was grossly exaggerated. This, Borealis submits, was as a result of the unbending determination of Balmoral in the person of Mr Joyce, Balmoral's Managing Director, and Dr Milne, its Chairman, to stick to the line that figures of this kind were realistic. This included the ridiculous contention that a 30% year on year continuing increase in turnover would, but for the tank failures, have been achieved.
Against that Mr Richard Mawrey, Q.C., for Balmoral points out that, on the footing that I am wrong on liability, I have made an award under each of the headings of loss in respect of which Balmoral claimed. The amount that would have been awarded, had all of Borealis' defences failed, would have comfortably exceeded both the payment in and Borealis' calculation as to the claim's worth. Further a major part of the reason for the shortfall between the amount claimed and the amount awarded is that I have not accepted that Balmoral would, but for the tank failures, have achieved a year-on-year cumulative straight line increase in turnover 1 of 10 %, 20% or 30%, with consequent loss of profit. These claims, he submits, were in no way absurd, and, as important, they were relatively easy to deal with. They relied on a projection from an existing profit figure as the base line. A 10% increase could, on no view, be regarded as a fanciful estimate. A 20% figure, for which in the end Miss Hassell, his expert accountant, plumped, and a 30% figure, which she thought possible, were simply further...
To continue reading
Request your trial
-
R Hussain v Secretary of State for the Home Department
...... on the Application of Hussain Claimant and Secretary of State for the Home ... of cases, in particular the case of Balmoral v Borealis (UK) Ltd [2006] EWHC 2531 and in that ......
-
Andrew Lawrence Hosking v Apax Partners LLP & others
...examples of circumstances which may take a case out of the norm—such as his own judgment in Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm), my judgment in Three Rivers District Council v Governor and Company of the Bank of England [2006] 5 Costs LR 714 and the judgment of Gl......
-
Goodlife Foods Ltd v Hall Fire Protection Ltd
...out appropriate remedial works when notified of defects. 69 The other case was Balmoral Group Limited v Borealis UK Limited & Others [2006] EWHC 2531 (Comm) where Balmoral, who manufactured storage tanks, contracted with Borealis to supply polyethylene for the process. Borealis supplied a ......
-
R Newsquest Media Group Ltd v The Legally Qualified Chair of the Police Misconduct Tribunal
...the conduct of proceedings and/or the manner in which the particular points are raised may suffice ( Balmoral Group v. Borialis AS [2006] EWHC 2531 (Comm.) at [1]), per Christopher Clarke J (as he then was). Where proceedings are commenced as a result of culpable breaches of the duty of ca......
-
Table of cases
...Ltd v Conart Pty Ltd [2014] QSC 124 II.6.128, III.20.81, III.20.95, III.24.261, III.24.267 Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm) III.26.272 Balog v Crestani (1975) 132 CLR 296 II.9.39, II.11.24 Baltic Shipping Co v Dillon (1993) 176 CLR 344 II.6.342, II.6.361, II.6.......
-
Litigation
...Ltd v Styrene Packaging & Insulation Ltd [2006] BLR 50 at 51 [2], per HHJ Coulson QC. 1138 Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm) at [1], per Christopher Clarke J. See also Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd (2008) 119 Con LR 15......