Fitzpatrick Contactors Ltd v Tyco Fire & Integrated Solutions (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Coulson |
| Judgment Date | 20 February 2009 |
| Neutral Citation | [2009] EWHC 274 (TCC) |
| Date | 20 February 2009 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-07225 |
[2009] EWHC 274 (TCC)
IN THE HIGH COURT OF JUSTICE
TECHNOLOGY AND CONSTRUCTION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Coulson
Case No: HT-07225
Mr Bernard Livesey QC and Mr Marc Rowlands (instructed by Maxwell Winward LLP) for the Claimant
Mr David Thomas QC and Mr Jonathan Lee (instructed by Cobbetts LLP) for the Defendant
Hearing date: 13th February 2009
Mr Justice Coulson :
A. INTRODUCTION
On 24 th January 2008, the claimant (“Fitzpatrick”) made an offer to the defendant (“Tyco”) in accordance with CPR Part 36. In that letter, Fitzpatrick offered to settle this litigation for payment of the sum of £10,250,000. The relevant period for acceptance (21 days) expired on 14 th February 2008. There was a trial of contractual preliminary issues in March 2008 on which Fitzpatrick were substantially successful. At the end of July 2008, I acceded to Fitzpatrick's application, which was opposed by Tyco, to adjourn the trial from November 2008 to April 2009.
On 14 th January 2009, Tyco's solicitors wrote to Fitzpatrick's solicitors accepting the Part 36 offer. A whole series of issues then arose between the parties. A number of those issues have subsequently been resolved. The parties have agreed the amount of interest due on the £10.25million. In addition Fitzpatrick have concluded that, to the extent that they wish to pursue claims which were the subject of proposed re-amendments in December 2008, that will be done by way of separate proceedings.
That leaves three issues outstanding between the parties in these proceedings which were debated at the hearing on 13 th February 2009. Those issues were:
a) Fitzpatrick's claim that their costs of the action from 14 th February 2008 (i.e. 21 days after the Part 36 offer had been made) should be paid by Tyco and assessed on the indemnity basis. Tyco accept that they are liable to pay those costs but argue that they should be assessed on the standard basis if they cannot be agreed.
b) Fitzpatrick's claim for interest on those costs in accordance with CPR Part 44.3(6)(g).
c) Fitzpatrick's claim for an interim payment on account of costs in accordance with CPR Part 44.3(8). Tyco do not object in principle to the making of an interim payment but there is a dispute between the parties as to the appropriate amount.
It will be seen at once that the argument as to the proper basis for the assessment of costs is the most significant of these issues. Accordingly I set out in Section B below the applicable parts of the CPR and some of the authorities that were cited to me on that issue. At Sections C and D below I deal with the points of principle on which Mr Livesey relied in support of his contention that indemnity costs were payable in these circumstances. At Section E below I deal with the wider questions of conduct and justice that arise in the present case.
Thereafter, at Section F below I analysis the issue as to interest on costs. At Sections G, H and I below I deal with the calculation of the interim payment, a process made more complicated in this case by Tyco's submission that at least one of Fitzpatrick's earlier cost estimates was wildly inaccurate, and therefore gives rise to concerns about the reasonableness of Fitzpatrick's claimed costs. There is a short summary of my conclusions at Section J below. I should say that I was greatly assisted by all counsel on these issues, particularly in respect of the interesting, and not unimportant, debate about indemnity costs. It is to that issue that I now turn.
B. GENERAL PRINCIPLES
B1. The CPR
The parties are agreed that there has been a valid acceptance of a valid Part 36 offer. Accordingly, under the CPR, the starting point is Part 36.10 which provides as follows:
“1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to his costs of the proceedings up to the date on which notice of acceptance was served on the offeror.
2) Where-
a) A defendant's Part 36 offer relates to part only of the claim; and
b) At the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,
the claimant will be entitled to his costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise.
3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if the amount of costs is not agreed.
…..
4) Where-
a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or
b) a Part 36 offer is accepted after expiry of the relevant period,
if the parties do not agree the liability for costs, the court will make an order as to costs.
5) Where paragraph (4)(b) applies, unless the court orders otherwise-
a) the claimant will be entitled to his costs of the proceedings up to the date on which the relevant period expired; and
b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance.”
The parties are agreed that rules (4) and (5) apply to the present case and they are also agreed that Tyco, as the offeree, will be liable for Fitzpatrick's costs of the action, including those costs from 14 th February 2008 until 14 th January 2009. What they are not agreed about is the basis on which these latter costs will be assessed if they cannot be agreed.
Fitzpatrick's principal submission is that an assessment of the costs from 14 th February 08 to 14 th January 09 on an indemnity basis is appropriate by analogy with CPR Part 36.14. That provides as follows:
“1) This rule applies where upon judgment being entered-
…
b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.
…..
3) Subject to paragraph (6), where rule 36.14(1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to-
a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the periods starting with the date on which the relevant period expired;
b) his costs on the indemnity basis from the date on which the relevant period expired; and
c) interest on those costs at a rate not exceeding 10% above base rate.
4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including-
a) the terms of any Part 36 offer;
b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
c) the information available to the parties at the time when the Part 36 offer was made; and
d) the conduct of the parties with regard to the giving or the refusing to give information for the purposes of enabling the offer to be made or evaluated.”
The parties are also agreed that the general rules about the exercise of the court's discretion as to costs, set out in CPR Part 44.3, are also applicable to the present situation. This part of the CPR requires the court, when making orders as to costs, to have regard to all the circumstances including, at r44.3(4)(a), “the conduct of all the parties”, which conduct will expressly include the matters set out at r44.3(5), such as the conduct before, as well as during, the proceedings, the manner in which claims have been pursued and whether or not the claim has been exaggerated either in whole or in part.
B2. Authorities
Since CPR 36.10(4) and (5) are silent as to the basis on which costs are to be assessed, both sides referred me to a variety of cases in which, in similar circumstances, the courts approached a dispute about the effect of one part of the CPR by making (or rejecting) analogies with other parts of the CPR. A number of these focused on the earlier incarnation of CPR 36.14 which, as r36.21, was in a subtly different form. Some, at least, of the cases referred to below appear to have led to the replacement of the old r.36.21 with the existing CPR 36.14.
In Excelsior Commercial and Industrial Holdings Limited v Salisbury Hammer Aspden and Johnson (a firm) [2002] EWCA Civ 879, the Court of Appeal were dealing with a case where the defendants had made a joint payment into court of £100,000 and where the claimant recovered nominal damages of £2 at trial. The defendants obtained indemnity costs and the claimant appealed.
The Court of Appeal dismissed the appeal on the basis that indemnity costs had been awarded, not only because the Part 36 offer had been bettered, but because of the other findings, effectively of conduct, made by the trial judge. In the course of his judgment, Lord Woolf, then the Lord Chief Justice, compared the old r36.20 (which dealt with the situation where a claimant failed to meet a defendant's Part 36 offer) with r36.21 (which dealt with the situation where the claimant made a Part 36 offer and then did better than that offer). Lord Woolf said:
“18… The significance of 36.21 is that, unlike 36.20, it refers specifically to the court being entitled to order costs on the indemnity basis from the latest date from when the defendant could have accepted the offer which had been made. Equally, it refers to interest on a higher rate than normal in the case of situations where it applies. Where Part 36.20 is compared with 36.21, light is thrown on the appropriate approach to the application of Part 36.20
19. The clear inference from the absence of any reference to an indemnity basis in 36.20 is that, in...
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