Capita (Banstead 2011) Ltd and Another v RFIB Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Flaux,Lord Justice Henderson,Lord Justice Longmore |
| Judgment Date | 20 July 2017 |
| Neutral Citation | [2017] EWCA Civ 1032 |
| Docket Number | Appeal No: 2014/3543 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 July 2017 |
[2017] EWCA Civ 1032
Lord Justice Longmore
Lord Justice Henderson
and
Lord Justice Flaux
Appeal No: 2014/3543
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HON. MR JUSTICE POPPLEWELL
[2014] EWHC 3727 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Adam Tolley QC (instructed by Plexus Law) for the Appellants
Neil Kitchener QC and Laurence Emmett (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Respondent
Hearing date: 22 June 2017
Approved Judgment
Introduction
The appellants appeal the costs order made by Popplewell J after trial of this action in which he awarded the appellants 50% of the amount claimed (subsequently increased to 58% after a partially successful appeal). In his judgment on costs dated 17 October 2014, he ordered that there should be no order as to costs in relation to the period up to the expiry of a Calderbank offer on 28 November 2013 and that from that date to the end of trial, the appellants should pay 80% of the respondent's costs. The subsequent increase in the indemnity awarded after the appeal did not alter that costs order and has no impact on this appeal.
The appellants appeal with permission from Briggs LJ against two aspects of that costs order: (i) they contend that it was wrong in principle to make no order for costs up to 28 November 2013, when they were the successful party at trial; and (ii) they contend that the judge wrongly treated the Calderbank letter as having the same effect as an offer made pursuant to CPR Part 36, so that the date after which the appellants should pay 80% of the respondent's costs should be 4 January 2014 (the day after expiry of the Part 36 offer made by the respondent on 12 December 2013, which the appellants failed to beat at trial). Aside from that issue as to whether the relevant date should be 28 November 2013 or 4 January 2014, there is no appeal against the order that the appellants should pay 80% of the respondent's costs after the relevant date.
It is necessary to set out a summary of the underlying dispute and of the procedural history of the proceedings in order to put the costs judgment in context.
The underlying dispute and the procedural history of the proceedings
The underlying claim related to an indemnity given in a Share Purchase Agreement ("SPA") dated 28 April 2004 whereby the respondent sold the entire issued share capital of the second appellant to the first appellant. The indemnity was contained at clause 5.8.5 of the SPA in these terms:
"5.8 The Seller undertakes to indemnify and keep indemnified the Buyer on behalf of itself and the Company … from any liabilities costs claims demands or expenses which any of them may suffer or incur arising directly or indirectly from …
5.8.5 any services or products supplied by the Company … or any advice provided by the Company (or any of its employees or agents) prior to the Transfer Date [30 April 2004]."
In 2010, proceedings were commenced against the second appellant by a former client, the Queen Elizabeth's Foundation for Disabled People ("QEF"). Between 2000 and 2008, the second appellant had been retained by QEF and the trustees of its occupational pension scheme to provide advice and other services in relation to the scheme. QEF alleged negligent and deliberate breach of duty, including deceit. Its claim related to five amendments to the scheme announced to members between 6 April 2000 and 1 April 2004. They were not validly made because the deed which established the scheme required amendment and was not amended. The relevant individual at the second appellant, Mr Le Cras, was advised in May 2004 that the amendments had not been validly made and could not be made retrospectively. He failed to draw QEF's attention to the problem or ensure the amendments were validly made prospectively in order to prevent further losses. Rather he falsely represented to QEF that the changes had been validly effected.
The QEF proceedings eventuated in a Settlement Agreement dated 11 October 2011, following mediation, pursuant to which the second appellant agreed to pay QEF £3.85 million. It was accepted by the respondent that this was a reasonable settlement.
The appellants commenced the present proceedings under CPR Part 8 on 22 August 2012. In the Part 8 Claim Form, they claimed an indemnity from the respondent for the full amount that had been paid to QEF and all the costs of defending the QEF claim. The appellants' case was set out in the witness statement of Mr Beckwith, a partner in Plexus Law, the appellants' solicitors and proceeded on the basis that, even though the QEF claim referred to certain acts and omissions after the transfer date of 30 April 2004, those all arose directly or indirectly from services supplied or advice provided prior to that date. Accordingly, the appellants contended that upon the true construction of the indemnity, the respondent was obliged to indemnify the appellants in full. At that stage, no alternative claim for any lesser sum was pleaded or referred to in the witness statement.
The respondent considered that, since there were issues of fact, including as to whether acts or omissions after the transfer date arose directly or indirectly from services or advice provided prior to the transfer date, which could not be resolved by use of the Part 8 procedure, the proceedings should have been issued under Part 7. There was thus a contested case management conference before Popplewell J on 21 December 2012. As the judge noted in [7] of his costs judgment, it was only during oral submissions in answer to questions from the judge that counsel then acting, Mr Patrick Lawrence QC, accepted on behalf of the appellants that, if they were wrong in their contention that the entirety of the liability to QEF fell within the indemnity, they would advance an alternative case to the effect that some of the liability fell within the indemnity and that this would be likely to require a trial under Part 7. The judge ordered the proceedings to continue under Part 7 and set a timetable for exchange of pleadings and disclosure. The costs of the hearing, which were about £80,000 on each side, were ordered to be costs in the case.
Notwithstanding that indication at the case management conference, as the judge also noted in [7] of the costs judgment, the Particulars of Claim served on 11 January 2013 still advanced the case on an all or nothing basis. It was not until service of the Reply on 21 February 2013, (after the respondent had served a Defence denying any liability to indemnify, alternatively contending that the indemnity did not cover losses as a result of wrongdoing after the transfer date of 30 April 2004), that an alternative case for partial recovery was pleaded, which even then was not quantified.
There was an unsuccessful mediation in May 2013, following which the respondent made a Part 36 offer in June 2013 of £1,309,016 including interest, which was too low compared with the amount awarded in the judgment. The claim proceeded at a leisurely pace in 2013, with disclosure by the appellants in October 2013, after which on 23 October 2013 the respondent made a further offer to settle for £2 million, inclusive of interest and costs. On 7 November 2013, the respondent made a Calderbank offer without prejudice save as to costs which was expressed to be open for 21 days from the date of the letter, i.e. to 28 November 2013. This offer was on the basis of apportionment of the QEF settlement sum between the period before and after the transfer date, which the appellants' own solicitors had calculated in a without prejudice save as to costs letter dated 30 October 2013 as £2,153,690 plus £191,441.17 contractual interest, a total of £2,345,131.17. The Calderbank offer referred to that letter and calculation and offered to settle for that total sum.
Shortly after that offer expired, on 11 December 2013, the respondent made a second Part 36 offer in the sum of £2,508,640 inclusive of interest. This proved to be in excess of both the amount awarded by the original judgment and in the revised judgment dated 29 July 2016 after appeal when Popplewell J held that 58% of the QEF settlement sum was recoverable under the indemnity.
Neither of these offers was accepted and the case proceeded to trial in June 2014. The judge handed down judgment on 4 July 2014 ( [2014] EWHC 2197 (Comm)). He found against the appellants on the transfer date issue, concluding that the respondent was only liable to indemnify the appellants in respect of settlement sums which were in reasonable settlement of QEF losses occurring prior to the transfer date, and was not liable in so far as the settlement sums represented settlement of losses occurring after the transfer date. In those circumstances, on the basis of the expert evidence on apportionment, the judge concluded that 50% of the settlement sums claimed represented the settlement of losses prior to the transfer date.
Consequential matters were determined at a hearing on 14 October 2014 at which the judge gave the costs judgment now under appeal.
The substantive appeal against the judgment was heard by this Court in October 2015. The judgment dated 21 December 2015 [2015] EWCA Civ 1310 is now reported at [2016] QB 835. In summary, the appellants failed on their principal ground concerning the interpretation of the indemnity and succeeded (by a majority) on a subsidiary point as to whether the second appellant had been under a continuing duty to QEF, as a consequence of which the majority held that only losses post 31 December 2004 (as...
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