Hochtief (UK) Construction Ltd v Atkins Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 11 November 2019 |
| Neutral Citation | [2019] EWHC 3028 (TCC) |
| Date | 11 November 2019 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000148 |
[2019] EWHC 3028 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
The Rolls Building,
Fetter Lane, London, EC4A 1NL
Mrs Justice O'Farrell
Case No: HT-2017-000148
Suzanne Chalmers (instructed by Clyde & Co LLP) for the Claimants
Luke Wygas (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Defendants
Hearing date: 22 October 2019
CONSEQUENTIALS JUDGMENT
On 31 July 2019 the Court handed down judgment for the claimants (“the JV”) against the defendant (“Atkins”), published at [2019] EWHC 2109 (TCC). The Court found that the JV had established its claim in respect of the Bridge, entitling it to damages and interest in the sum of £802,475.35, but dismissed its claim in respect of the Underpass.
This hearing was fixed to determine all consequential matters, including interest, costs and Atkins' application for permission to appeal.
Shortly before the hearing, the parties agreed the figure for interest due on the damages awarded, at a rate of 2% above base, up to 9 June 2017, in the sum of £77,372.41.
At the oral hearing on 22 October 2019, the Court heard and refused Atkins' application for permission to appeal.
There was insufficient time available at the hearing to deal with the other issues. The Court adjourned the hearing and allowed time for the parties to file further submissions. The parties agreed that the outstanding consequential issues could be determined on paper.
The issues for determination are:
i) consequences of the JV's Part 36 offer;
ii) basis on which costs should be ordered; and iii) the JV's application for a payment on account of costs.
Consequences of the JV's Part 36 offer
On 19 May 2017 the JV made a Claimant's Part 36 offer to settle the claim, including interest, in the sum of £875,000.
The last date for acceptance of the offer was 9 June 2017.
The JV has succeeded in obtaining judgment on its claim for £879,847.76, including interest, beating its Part 36 offer by £4,847.
The JV seeks an order for:
a) interest on the damages awarded at an enhanced rate of 6% above base rate from 10 June 2017 to 31 July 2019;
b) costs on the indemnity basis from 10 June 2017;
c) interest on those costs at an enhanced rate of 6% above base rate from 10 June 2017; and
d) an additional sum of £65,123.77.
It is not disputed that the JV has achieved a judgment sum that is at least as advantageous to the JV as its Part 36 offer (albeit by a small margin). Therefore, in principle, the provisions of CPR 36.17 are engaged.
CPR 36.17(4) provides that in such circumstances, the court must, unless it considers it unjust to do so, order that the JV is entitled to:
a) enhanced interest on the damages awarded at a rate not exceeding 10% above base rate;
b) costs on the indemnity basis from the date on which the relevant period expired;
c) enhanced interest on those costs at a rate not exceeding 10% above base rate; and
d) an additional sum not exceeding £75,000, calculated by applying the prescribed percentage to the sum awarded as damages by the court (10% of the first £500,000 awarded and 5% of the amount above that figure).
In considering whether it would be unjust to make the orders referred to above, CPR 36.17(5) provides that the court must 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;
c) the information available to the parties at the time when the Part 36 offer was made;
d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and
e) whether the offer was a genuine attempt to settle the proceedings.
In McPhelmy v The Times Newspapers Ltd (No.2) [2001] EWCA Civ 933, the underlying purpose of the provisions was explained by Chadwick LJ:
“[19] It is plain, as Lord Woolf, Master of the Rolls, pointed out in the Petrotrade case, that [the provisions of CPR 36.17] are intended to provide an incentive to a claimant to make a Part 36 offer. The incentive is that a claimant who has made a Part 36 offer (which is not accepted) and who succeeds at trial in beating his own offer stands to receive more than he would have received if he had not made the offer. Conversely, a defendant who refuses a Part 36 offer made by a claimant and who fails to beat that offer at trial is at risk of being ordered to pay more than he would have been ordered to pay if the offer had not been made … subject to the limitation that the powers are intended to be used in order to achieve a fairer result for the claimant and not to punish the defendant, it is plain that they are to be used in order to redress elements, otherwise inherent in the legal process, which can properly be regarded as unfair.
[20] Two of those elements, which many would regard as obviously unfair, were identified by Lord Woolf, Master of the Rolls, in the Petrotrade case. First, an award of costs on the standard basis will, almost invariably, lead to the successful claimant recovering less than the costs which he has to pay to his solicitor. So, although he has been successful, he is out of pocket. Costs on an indemnity basis should avoid that element of unfairness. Second, neither costs on an indemnity basis nor interest awarded under section 35A of the Supreme Court Act 1981 will compensate the successful claimant for the inconvenience, anxiety and distress of proceedings or (where the claimant is a corporation) the disruption caused by the diversion of senior management from their normal duties. Interest at an enhanced rate – that is to say at a rate which is higher than the rate which would otherwise be ordered, under section 35A of the 1981 Act – may redress that element of unfairness…
[23] The purpose for which the power to order interest on costs under that paragraph is conferred is, I think, plain. It is to redress, in a case to which [CPR 36.17] applies, the element of perceived unfairness which arises from the general rule that interest is not allowed on costs paid before judgment …”
In that case the Court of Appeal explained that the provisions were not limited to cases where there was unreasonable conduct on the part of the defendant – see Chadwick LJ at [9]:
“It is, to my mind, clear from the structure and language of [CPR 36.17] … that an order for the payment of costs on an indemnity basis (from the latest date when the defendant could have accepted the offer without needing the permission of the court) is the order which the court can be expected to make in a case where a claimant who has made a Part 36 offer is, nevertheless, obliged to proceed to trial — because the defendant does not accept the offer — and then beats his own offer at trial. In those circumstances, it is only where the court considers that such an order would be unjust that it is permitted to refuse an order for the payment of costs on an indemnity basis. To make the order carries no implied disapproval of the defendant's conduct; nor any stigma. Properly understood, the making of such an order in a case to which [CPR 36.17] applies indicates only that the court, when addressing the task which it is set by that rule, has not considered it unjust to make the order for indemnity costs for which the rule provides.”
And Simon Brown LJ at [28]:
“It is not designed to punish unreasonable conduct but rather as an incentive to encourage claimants to make, and defendants to accept, appropriate offers of settlement. That incentive plainly cannot work unless the non-acceptance of what ultimately proves to have been a sufficient offer ordinarily advantages the claimant in the respects set out in the rule.”
In OMV Petrom SA v Glencore International AG [2017] EWCA Civ 195, Sir Geoffrey Vos, Chancellor, identified the factors that could be considered when determining the appropriate rate of enhanced interest, if any, to award:
“[38] The court undoubtedly has a discretion to include a noncompensatory element to the award as I have already explained, but the level of interest awarded must be proportionate to the circumstances of the case. I accept that those circumstances may include, for example, (a) the length of time that elapsed between the deadline for accepting the offer and judgment, (b) whether the defendant took entirely bad points or whether it had behaved reasonably in continuing the litigation, despite the offer, to pursue its defence, and (c) what general level of disruption can be seen, without a detailed inquiry, to have been caused to the claimant as a result of the refusal to negotiate or to accept the Part 36 offer. But there will be many factors that may be relevant. All cases will be different. Just as the court is required to have regard to “all the circumstances of the case” in deciding whether it would be unjust to make all or any of the four possible orders in the first place, it must have regard to all the circumstances of the case in deciding what rate of interest to award under Part 36.14(3)(a). As Lord Woolf said in the Petrotrade case, and Chadwick LJ repeated in the McPhilemy case, this power is one intended to achieve a fairer result for the claimant. That does not, however, imply that the rate of interest can only be compensatory. In some cases, a proportionate rate will have to...
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...Ltd v Essex Services Group Plc [2014] EWHC 1099 (TCC) at [16]–[42], per Coulson J; Hochtief (UK) Construction Ltd v Atkins Ltd [2019] EWHC 3028 (TCC). LITIGATION the period starting with the date on which the “relevant period” 1214 expired; 1215 (ii) costs on the indemnity basis from the da......
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Table of cases
...(UK) Construction Ltd v Atkins Ltd [2019] EWHC 2109 (TCC) I.1.78 ccxl TaBLE OF CaSES hochtief (UK) Construction Ltd v atkins Ltd [2019] EWhC 3028 (TCC) III.26.291 hock Chuan ann Construction pte Ltd v Kimta Electric pte Ltd [1999] 2 SLr(r) 237 I.2.12, I.2.46, I.4.155 hodgkinson v Doepel & a......