Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fraser |
| Judgment Date | 26 July 2017 |
| Neutral Citation | [2017] EWHC 2299 (TCC) |
| Docket Number | No. HT-2015-000381 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 26 July 2017 |
[2017] EWHC 2299 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT
Rolls Building
Mr Justice Fraser
No. HT-2015-000381
Mr M Bowdery QC (instructed by Clyde & Co) appeared on behalf of the Claimant.
Mr J Mort QC (instructed by Mills & Co) appeared on behalf of the Defendant.
I will just give a short ruling. I handed down judgment on liability in this case on 12 th July. The trial took a reasonable number of days in May and the judgment is fairly lengthy, resolving what has been a long-running dispute between MMT and ICI, effectively about three main areas or categories arising out of the project in which MMT were involved. What I am doing by explaining these three categories is that I am grouping the arguments between the parties into three broad categories, although they were far more wide-ranging than this. For the full list of the issues that arose between these two parties, recourse should be had to my judgment on liability which is at [2017] EWHC 1763 (TCC).
The first category was which party repudiated the contract, and separately but included within that category there was an issue about the quality of the defendant's welding, and also a separate free-standing legal argument about whether in the circumstances there should be a final accounting/restitution exercise undertaken on the total that the claimant had paid to MMT. This was to the effect that if there had been an overpayment, whether ICI were or would be entitled to recover it in principle. That amount is pleaded in the sum of approximately £10 million. In the judgment MMT were successful on almost all the issues, save for that separate one, the final accounting/restitutionary argument, which means that there will be a second round of this litigation to deal with quantum.
Mr Mort for MMT seeks an order for costs against ICI today for the liability trial. He accepts that MMT were not successful on everything because of the legal issue identified about repayment. He also accepts that no money will change hands because he candidly accepts that in the circumstances it would not be correct to make an order for paymentprior round 2 taking place. However, he does submit that the correct time in this litigation to make an order for costs is now. In respect of that, he prays in aid a short passage of Nugee J very recently in the case of Merck KGaA v Merck Sharp & Dohme, who said at [6]:
"It is in general a salutary principle that those who lose discrete aspects of complex litigation should pay for the discrete applications or hearings which they lose, and should do so when they lose them rather than leaving the costs to be swept up at trial."
I should say that Nugee J's case relates to success on a preliminary issue whereas this case is rather different in that it was a split trial of liability and quantum. However, that is what Mr Mort relies on. He also seeks indemnity costs against ICI.
Mr Bowdery for ICI says that this is effectively an academic debate. Given no money will change hands in any event at this stage, and the matters which were resolved by me in the judgment were fairly intractable and needed resolving in one way or another in any event, costs should be reserved. He submits that the points raised by ICI were properly arguable. He also submits that none of the provisions for indemnity costs are engaged and that any suggestion that ICI is running this litigation cynically, or deploying its economic muscle (that is not his phrase or Mr Mort's phrase but that is my phrase) to snuff out MMT, which is a fairly small company by comparison and is in any event now in voluntary liquidation, is in fact misplaced.
I have decided, taking into account all the circumstances, that the correct approach is to make an order for costs now. It is correct that no money will be changing hands at this stage; however, the parties are about to embark on the second round of this litigation and it is further to be hoped that round will not in fact go all the way up to and require a trial. Actions such as this sometimes settle at appropriate stages, but I have to proceed on the basis that round 2 will happen. Round 2 will be very much less of a factual enquiry because it has more limited issues, but depending on the application to amend that is being made immediately after I have finished this short ruling, round 2 will in fact involve more than purely dealing with numbers, or it may involve more than purely dealing with numbers, because there are some principles to be decided too.
Also it is the case that even if MMT do not receive any money now, they would in fact have an order in their favour, and certainty in respect of what could potentially be sizable costs on the liability trial. Merely postponing this off to the ultimate resolution of the entire action is, in my judgment, wholly unsatisfactory. Both parties need to know where they stand when that is possible and the cost of the liability trial, which went on for about two and a half weeks, are sizable and should be dealt with now if they can be. In my judgment they can be, and the correct approach is to make an order for costs today.
That then leads me to consider what is the correct order for costs? There is no doubt that Mr Bowdery for ICI was successful on his legal arguments in terms of the final accounting/restitutionary issue about the amount of money paid to MMT, and whether ICI could in principle recover any overpayment. However, that was a self-contained and purely legal point. In my judgment, the correct way to deal with that is in fact to make a modest discount to the recovery of costs to which MMT would otherwise be entitled. That discount is going to be five per cent.
I then turn to the correct way in which the remaining95 per cent should be considered ondetailed assessment; in other words, on the standard basis or on the indemnity basis? The principles upon which indemnity costs should be awarded are very well known and have been dealt with in a great number of cases, most recently in the TCC by Coulson J in a case called Elvanite but these principles were re-stated by Akenhead J in Courtwell Properties v Greencore [2014] EWHC 184 (TCC) and at [22] and [23] of that judgment Akenhead J explained the approach to indemnity costs. I am going to briefly identify the points which as far as I am concerned are applicable in this case.
The first is that indemnity costs are appropriate only where the conduct of the paying party is unreasonable to a high degree. Unreasonable in this context does not mean merely wrong and misguided in hindsight. That is taken from Kiam v MGN Ltd. Secondly, the court must decide whether there is something in the conduct of the action or the circumstances of the case in general which take it out of the norm, in a way which justifies an order for indemnity costs. That statement is taken from Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer. Pausing there, the phrase that is most often deployed in a short application for indemnity costs is that the circumstances in that particular case takes it out of the norm.
Thirdly, the pursuit of a of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. But the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may well lead to such an order. That is taken from Wates Construction Ltd v HGP Greentree Alchurch Evans Ltd. The fourth point is that if a claimant casts its claim disproportionately widely, requiring the defendant to meet such a claim, there is no injustice in denying the claimant the benefit of an assessment on a proportionate basis given that the claimant has forfeited its rights to the benefitof the doubt on reasonableness. That is taken from Digicel (St Lucia) Ltd v Cable and Wireless.
Akenhead J then added the following points of his own and the first is a quotation from Three Rivers v Governor of the Bank of England which is that the discretion to award indemnity costs is a wide one. It must be exercised taking into account all the circumstances and...
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Litigation
...MK) Ltd [2016] EWHC 2764 (TCC) at [20]–[23], per Coulson J. See also Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2017] EWHC 2299 (TCC) at [24]–[25], per Fraser J; Nua Interiors Ltd v Brady [2018] EWHC 2586 (TCC); Walter Lilly & Co Ltd v Clin [2019] EWHC 587 (TCC) at [3]......
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Table of cases
...II.9.111, III.16.09, III.24.119, III.26.85, III.26.114, III.26.125 Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2017] EWhC 2299 (TCC) III.26.75, III.26.221, III.26.272 Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2018] EWhC 1577 (TCC) I.5.84, I.5.161,......