Mouchel Ltd v Van Oord (UK) Ltd (Number 2)
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr. Justice Ramsey |
| Judgment Date | 15 June 2011 |
| Neutral Citation | [2011] EWHC 1516 (TCC) |
| Docket Number | Case No: HT-07-229 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 15 June 2011 |
[2011] EWHC 1516 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr. Justice Ramsey
Case No: HT-07-229
Steven Walker (instructed by Beale and Company LLP) for the Claimant
Jonathan Selby (instructed by Fladgate LLP) for the Defendant
Hearing date: 1 st April 2011
In the first judgment in these proceedings, [2011] EWHC 72 (TCC), I determined claims by Mouchel for a contribution under the Civil Liability (Contribution) Act 1978 ("the 1978 Act"). Those claims were made against Van Oord in respect of Mouchel's liability to the main contractor, Kier, in respect to two claims by Kier relating to offshore works for a cooling water system at South Humber power station. Van Oord was a sub-contractor to Kier in relation to those offshore works and Mouchel gave advice and carried out design for Kier in relation to those works.
The two claims concerned, first, the unsuitability of Grimsby Middle Sand ("GMS") supplied by Van Oord and placed above the immersed tube which provided the cooling water intake and outlet for the power station. The second claim related to liability for scour protection rock placed by Van Oord around the cooling water intake structures.
In the first judgment I held that, in respect of the payment of £100,000 made in a settlement between Mouchel and Kier, Mouchel would have been liable to Kier for £112,968 in respect of GMS and £36,380 in respect of scour protection, making a total of £149,348. I held that Van Oord had no liability to contribute in respect of the GMS but did have a liability to contribute in respect of the scour protection. I held that the contributions of Mouchel and Van Oord should be 65% and 35% respectively. Given that the overall liability of £149,348 had been settled for £100,000 I found that the settlement represented £75,540 for the GMS and £24,360 for the scour protection. On that basis I held that, in respect of Van Oord's 35% contribution they were liable to contribute £8,546 (35% of £24,360).
The full and final settlement with Kier was in an overall sum of £517,500. In a witness statement dated 10 May 2009 from Mr David Binns, a commercial Director of Mouchel, he said that this sum was broken down with £100,000 being in respect of Kier's damages together with £18,000 being for interest on that sum (3 years at 6%) and that the sum of £399,500 was negotiated in respect of Kier's costs, disbursements and percentage uplift, based on roughly half of Kier's costs with a 30% uplift and payment of the full sum of Kier's disbursements to the date of the settlement.
There are now three further issues which arise:
(1) The amount of Van Oord's contribution in respect of interest.
(2) The amount, if any, of Van Oord's contribution in respect of Kier's costs.
(3) What proportion, if any, of Mouchel's costs of the main action should be paid by Van Oord. The amount of such costs is a matter to be determined at a later hearing or by detailed assessment.
I now deal with each of those issues in turn.
Interest
In paragraph 182 of the first judgment, where I dealt with the obligation of Van Oord to contribute £8,546, I stated that that same pro-rata calculation should also apply to the sum paid by way of interest. The parties have therefore agreed a calculation that the relevant contribution in respect of interest should be based on 8.546%. This percentage was based on the fact that Van Oord's overall contribution towards the settlement sum of £100,000 was £8,546. Applying that percentage to the £18,000 agreed settlement for interest, the sum has been agreed by the parties at £1,534.68.
Liability for costs
There are two elements of contribution for costs. First there is the contribution for Kier's costs paid by Mouchel and, secondly, there is the claim for contribution for Mouchel's own costs. I shall consider the two elements separately. However, it is convenient to review decisions in which, at least in relation to the first element, the court has considered the principles by which a party may be required to make a contribution for costs.
There are a number of decisions which have considered whether or not a party may recover a contribution to its costs under the 1978 Act. In J Sainsbury plc v Broadway Malyan (a firm) (1998) 61 Con LR 31 His Honour Judge Humphrey LLoyd QC had to consider a claim for contribution by architects against consulting engineers in relation to negligent design and supervision of a fire compartment wall in a supermarket. The claim was made on the basis that the architect had been negligent and the negligence had meant that the damage to the supermarket was more extensive than it should have been when a fire started in the store.
Judge LLoyd found that there was no obligation to contribute. He went on to say that if there had been an obligation to contribute then, even on a wide interpretation of the 1978 Act, the costs paid by the architect to the store owner as part of a settlement could not form part of the loss or damage in respect of which a party was entitled to contribution. He said this at paragraph 8.3:
" The point raised by the arguments on this topic is a short one but apparently requires the resolution of a conflict between the principle that reasonable settlements are to be encouraged (which inevitably means that costs are taken into account in arriving at the figure) and the wording of the 1978 Act. On that approach the Act must of course prevail as it is the source of BM's right to a contribution. It is therefore in my view irrelevant that if contribution were awarded on the basis of settlement then costs would only be considered as part of deciding objectively whether the settlement was reasonable overall (even though that may involve grappling with points of the kind made by Mr Moxon-Browne). If inBirse Construction Ltd v Haiste Ltddefects in works caused by a contractor's breach of contract were not for the purposes of the Act the same damage as the contractor's costs of putting them right then the costs of having to bring an action to enforce a duty by claiming damages in lieu of performance cannot be regarded as the same damage as that caused by failure to comply with that duty. Even if there had not been such guidance from theBirse Constructioncase (and leaving aside the situation where the party from whom contribution is sought could be said to be responsible for the costs that had to be paid under a settlement) costs in a case such as this arise from the defendant's decision not to accept liability and not from the original cause of action. The amount may well increase either because the defendant adheres to that decision or because either the claimant or the defendant is intractable (or both are) in not contemplating a settlement or in negotiating its terms, as Mr Moxon-Browne's submissions well illustrated. Even on a wide interpretation of either section 1 or section 2 of the 1978 Act costs could not therefore as a matter of fact form part of the loss or damage with respect to which a party is entitled to contribution and in any event could not be loss or damage for which a party such as EGP could be regarded as responsible. I also accept Mr Moxon-Browne's argument that costs may be incurred for reasons unconnected with the underlying damage and for which a third party is not to be held to be responsible. A detailed investigation of how costs came to be incurred is not consistent with the simplicity envisaged by the 1978 Act. On a liberal interpretation of the Act it would not in my judgment be material that an award of costs is determined by the exercise of the discretionary power given under section 51 of the Supreme Court Act since any compromise necessarily anticipates that a court will or may exercise its powers in favour of the party receiving payment, and as a result of the decision of the court there will be a liability whereas the liability referred to in section 6 of the 1978 Act is the primary liability (see the Friends' Provident Life Office case).
He then continued at paragraph 8.4 by saying that if there were a settlement, its terms and the circumstances leading up to it would or might be examined. He said that if costs were not isolated but were included in the settlement then they would obviously not be capable of being excluded. On the basis of the settlement in that case and various estimates which had been produced he was able to conclude that the settlement included a particular sum for costs which he deducted and based the claim for contribution on the settlement figure less that sum for costs.
That decision was considered by the Court of Appeal in BICC Limited v Parkman Consulting Engineers [2002] BLR 64 in which consulting engineers had paid £1,950,000 in settlement of claims arising from the reclamation work to an industrial waste tip to provide a site for development for light industrial purposes. They then sought a contribution against two parties: against the contractors who had constructed a bund and installed a membrane as part of the works to reclaim the tip and against a company who had been engaged to review the planned works before construction began. At first instance His Honour Judge Thornton QC dealt with Parkman's claim for a contribution in respect of £600,000 for BICC's costs which was included in the settlement sum of £1,950,000. That claim was made under section 51(3) of the Senior Courts Act 1981 ("the 1981 Act") or alternatively as part of a contribution extending to the full sum of £1,950,000 under the 1978 Act. Judge Thornton held that he had no jurisdiction to make an order under section 51(3) of the 1981 Act but, distinguishing the Broadway...
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