Phi Group Ltd (Defendant Appellant) v Robert West Consulting Ltd (Third Party Respondent)

JurisdictionEngland & Wales
JudgeLord Justice Lloyd,Lord Justice Stanley Burnton,Lord Justice Rix
Judgment Date10 May 2012
Neutral Citation[2012] EWCA Civ 588
CourtCourt of Appeal (Civil Division)
Date10 May 2012
Docket NumberCase No: A1/2011/1857

[2012] EWCA Civ 588




[2011] EWHC 1581 (TCC)

Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Rix

Lord Justice Lloyd


Lord Justice Stanley Burnton

Case No: A1/2011/1857

Phi Group Limited
Defendant Appellant
Robert West Consulting Limited
Third Party Respondent

Nigel Jones Q.C. (instructed by Wright Hassall) for the Appellant

Martin Bowdery Q.C. and Rónán Hanna (instructed by Mills & Reeve LLP) for the Respondent

Approved Judgment

Hearing date: 26 April 2012

Lord Justice Lloyd



This appeal, from an order of Akenhead J made on 23 June 2011, requires the court to visit again Part 36 of the Civil Procedure Rules, and to consider the application of that rule, and the general rules as to costs, in relation to contribution proceedings between two parties both liable to a claimant for the same damage.


The claimant was Carillion JM Ltd. It was the main contractor engaged to carry out the design and construction of a train servicing depot to the west of the Wembley Football Stadium between 2004 and 2006. The appellant, PHI, was the specialist design and build contractor for what was called the "soil nailing work". The respondent, RWC, was the consulting engineer and lead consultant for the overall works.


The judge's order which is under appeal was as to the costs as between PHI and RWC, and was made at the conclusion of a trial both of Carillion's claim against RWC, as to liability and quantum, and of contribution claims each way as between PHI and RWC. The issues need to be understood in the context of the course of the proceedings. I will therefore set this out now. I will need to go into more detail as to certain aspects of it later.


Carillion first sued PHI for damages for negligence by a claim with the number HT-09–152, commenced in April 2009, after substantial pre-action procedures. Later in 2009 PHI notified RWC of a contribution claim, seeking (in substance) an indemnity or a partial contribution to any sums for which PHI might be held liable to Carillion. In February 2010 PHI made an offer to RWC to settle the contribution claim, which was not accepted. Carillion's claim against PHI was due to come to trial in May 2010. By then Part 20 proceedings had been commenced by PHI against RWC in the 2009 claim, but they were to be tried separately. Shortly before the trial date, Carillion settled with PHI, receiving £3.8 million. By then Carillion's claim was put at some £7.2 million.


In March 2010 Carillion had started separate proceedings, claim number HT-10–111, against RWC. RWC, having served a defence to PHI's contribution claim, amended this in August 2010 to claim an indemnity or contribution itself from PHI against sums for which it might be held liable to Carillion. In November 2010 a mediation took place between Carillion and RWC, which PHI was unable to attend. In anticipation of this PHI made an offer to RWC, which would take effect only if the mediation were successful. It was not. Later in November 2010 PHI made a further offer to RWC. This was not accepted. By the end of 2010 Carillion put its quantum claim at just over £8 million.


In March 2011 the trial came on before the judge, lasting for 11 days. All three parties were represented. Carillion having recovered £3.8 million from PHI sought judgment for the balance of its claim against RWC. RWC resisted liability and challenged quantum against Carillion, and sought to establish in any event that PHI was responsible to a greater extent than itself for any loss of Carillion, and therefore should contribute most to any sum for which RWC was held liable at the end of the day. In turn PHI joined in challenging Carillion's claim as regards quantum, but also sought to show that RWC was responsible to a greater extent, so as to recover part of the sum which it had already paid out to Carillion, and to resist liability for any further contribution to RWC.


The outcome of the trial was that the judge held RWC to have been negligent, assessed Carillion's overall loss at some £6.7 million and ordered RWC to pay Carillion £3.25 million. He held that PHI and RWC were responsible as to 60% and 40% respectively as between them. He treated the payment by PHI to Carillion as being £3.45 million plus costs. On that basis he ordered PHI to pay RWC £570,000 odd, so as to bear 60% of the overall liability. His judgment on liability was given on 15 June 2011 and has the reference [2011] EWHC 1379 (TCC). He then heard argument on consequential matters, including, above all, costs. His judgment on costs was given on 23 June 2011 and has the reference [2011] EWHC 1581 (TCC). An order for costs had been agreed as between Carillion and RWC. He ordered PHI to pay 20% of Carillion's costs which RWC had been ordered to pay. That part of the order is not appealed. What is challenged is that he then ordered PHI to pay 30% of RWC's contribution proceedings against it and he made no order as to the costs of PHI's contribution proceedings. He refused permission to appeal, but permission was granted by Tomlinson LJ.


By the appeal PHI seeks an order that RWC should pay PHI's costs of both sets of contribution proceedings and that RWC should bear its own costs of both those proceedings.


PHI's case is put in a number of different ways. Its first and most far-reaching point is that it contends that its solicitors' letter in February 2010 was a Part 36 offer. If so, it would have the consequences laid down by the rules. The judge held that it was not. Secondly, in the alternative, PHI argues that, even if for technical reasons it was not a Part 36 offer, then even so it was a better offer for RWC than the result they achieved, and it should have all or most of the consequences that it would have had as regards costs if it had been a Part 36 offer. The judge rejected this argument, for at least two reasons: he held that it had been withdrawn, implicitly, at the time of the November 2010 offers, and he also held that it only related to liability in the 2009 claim by Carillion against PHI, not that arising under the 2010 claim against RWC. The latter of those points is challenged, and PHI seeks to challenge also the former point, as to withdrawal.


If the February 2010 offer was not a Part 36 offer, it is nevertheless relevant to the exercise of the judge's discretion under the general rules as to costs. To an extent the judge did take it into account. If he did not misdirect himself in any material respect as to the discretion, then it is not open to this court to interfere with his decision made in exercise of the discretion.


Thus, the issues on the appeal are, first, whether the first offer was a Part 36 offer, secondly, if not, whether it should be given much the same effect as if it had been, thirdly whether it was withdrawn by the making of the later offers, and fourthly, whether it related only to sums due or paid by PHI to Carillion as a result of the first claim and not to sums for which RWC was liable to Carillion under the second claim. The third and fourth points are those on which it is argued that the judge erred in the exercise of his discretion. The third point was argued before the judge but was not raised in the grounds of appeal. There is therefore a preliminary point as to whether it can now be taken.


Before the judge PHI was represented by Simon Hughes Q.C., instructed by Fishburns. They acted on the appeal to start with, Mr Hughes having settled the grounds of appeal and the skeleton argument. Shortly before the appeal came on for hearing PHI changed its representation, instructing Wright Hassall and through them Mr Nigel Jones Q.C. Mr Jones submitted a supplemental skeleton argument three days before the appeal hearing, in which he intimated a criticism of the judge's conclusion that the November offers involved the withdrawal of the February offer. He did not then seek to add to or amend the grounds of appeal. At the hearing, however, he did seek permission to do so, and to argue that the judge had been wrong in that conclusion. For RWC, Mr Martin Bowdery Q.C., leading Mr Rónán Hanna as he had below, on the instructions of Mills & Reeve LLP, objected to this course, while also arguing that there was no merit in the point.


In addition, there was some debate during the hearing as to whether the judge might have misdirected himself by giving weight to the fact that PHI had not achieved a better outcome for itself than that which would have resulted from the November offers. It is common ground that there is no particular significance to that factor. No ground of appeal was formulated in any clear terms as regards that point, and I do not think it appropriate to treat any such ground as before us. In contrast, the point about withdrawal was argued before the judge, and is simple and straightforward to state. It is that the judge was wrong to hold that the effect of the November offers (either or both of them) was that the February offer was implicitly withdrawn. Despite the forensic force of Mr Bowdery's point that, if there were any merit in the point, it is surprising that it was not taken by Mr Hughes at the outset of the appeal, or at any stage, I would grant permission to PHI to add this point to their grounds of appeal.

The offer letters


Much depends on the relevant terms of the three letters by which the successive offers were made. I will therefore describe them and set out the material passages next.


The first offer was made by a letter from Fishburns to Mills & Reeve dated 5 February 2010, headed "Part 36 Offer" and "without prejudice save as to costs". It referred to Carillion's then claim in the 2009 proceedings, and to PHI's letter of claim against RWC which...

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