The Mayor and Burgesses of the London Borough of Southwark v IBM UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 21 March 2011 |
| Neutral Citation | [2011] EWHC 653 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-09325 |
| Date | 21 March 2011 |
[2011] EWHC 653 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Akenhead
Case No: HT-09325
Nicholas Stewart QC (instructed by the Legal Services Department of the London Borough of Southwark) for the Claimant
Jeremy Nicholson QC and Terence Bergin (instructed by Blake Lapthorn) for the Defendant
Hearing date: 17 March 2011
Introduction
On 17 March 2011, I handed down judgement in this case. I will not repeat the facts save to record that Southwark's claim was dismissed and there was judgement for IBM, the Defendant. Essentially, Southwark had retained IBM under three Contracts to provide software and services. The primary complaint was that software manufactured and installed by Orchard (but contractually supplied by IBM (via the Arcindex Contract)) was not suitable for purpose in that it was unable to achieve de-duplication of Southwark's data in as efficient a way as it was claimed it should have done.
This judgement is concerned with the costs in that, although Southwark accepts that it must pay IBM's costs, IBM claims that it should have all of its costs on an indemnity basis.
The Principles
The principles to be applied are derived from CPR Part 44.4 which provides that the Court will assess costs on a standard or indemnity basis and Part 44.3 which provides that the Court, in deciding what order to make about the costs, should have regard to the conduct of the parties (both before and during the proceedings), success, any admissible offer to settle, whether it was reasonable for a party to raise or pursue particular claims and the manner in which the party has pursued its case or particular allegations or issues.
The following are unexceptionable propositions.
(a) An award of costs on an indemnity basis is not intended to be penal and regard must be had to what in the circumstances is fair and reasonable: Reid Minty v Taylor [2002] 1 WLR 2800, Paragraph 20.
(b) Indemnity costs are not limited to cases in which the court wishes to express disapproval of the way in which litigation has been conducted. An order for indemnity costs can be made even when the conduct could not properly be regarded as lacking in moral probity or deserving of moral condemnation: Reid Minty, Paragraph 28.
(c) The court's discretion is wide and generous but there must be some conduct or some circumstance which takes the case out of the norm: Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (A Firm) [2002] C.P. Rep. 67, Paragraphs 12, 19 & 32
(d) The conduct must be unreasonable to a high degree. 'Unreasonable' in this context does not mean merely wrong or misguided in hindsight: Kiam v MGN Ltd (No2) [2002] 1 WLR 2810, Paragraph 12.
(e) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, 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: "[T]o maintain a claim that you know, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify an order for indemnity costs": Wates Construction Ltd v HGP Greentree Allchurch Evans Ltd [2006] BLR 45, Paragraph 27 and Noorani v Calver [2009] EWHC 592 (QB), Paragraph 9.
(f) There is no injustice to a claimant in denying it the benefit of an assessment on a proportionate basis when the claimant showed no interest in proportionality in casting its claim disproportionately widely and requiring the defendant to meet such a claim: Digicel (St Lucia) Ltd v Cable & Wireless plc [2010] 5 Costs L.R. 709, Paragraph 68.
(g) If one party has made a real effort to find a reasonable solution to the proceedings and the other party has resisted that sensible approach, then the latter puts himself at risk that the order for costs may be on an indemnity basis: Reid Minty, Paragraph 37.
(h) Rejection of a reasonable offer to settle will not of itself automatically result in an order for indemnity costs but where the successful party has behaved reasonably and the losing party has behaved unreasonably the rejection of an offer may result in such an order: Noorani, Paragraph 12.
(i) Rejection of 2 reasonable offers can of itself justify an order for indemnity costs: Franks v Sinclair (Costs) [2006] EWHC 3656
Material Considerations in this Case
As is clear from the earlier judgement, Southwark had by the end of the trial abandoned its claims in relation to over half, numerically, of the defects or manifestations of unsuitability upon which it had relied throughout the proceedings and, either then or earlier during the trial, its claims based on an overarching contract, misrepresentation, negligence and collateral warranty and for breach of the two Contracts previously relied upon. Essentially, its claim came down to assertions that in two respects the Arcindex software was not fit for purpose in that, so it was asserted, it did not achieve the requirements notified to IBM prior to the Arcindex Contract in February 2007.
In summary, Southwark primarily failed in the litigation because it did not establish that its requirements as communicated pre-contract were for anything other than those which the Arcindex software could and would provide. Surprisingly, it did not call as a witness any one of six possible people who were involved in the pre-contract period for or on behalf of Southwark. Southwark therefore had no oral evidence to support its claim that there was an oral over-arching contract, or that, if there was a material misrepresentation anyone of relevance within Southwark had relied upon it or to support any real substratum of fact to demonstrate that there might have been a collateral warranty. The other difficulty facing Southwark was that it could only rely on contemporaneous documentation pre-contract to seek to prove what its requirements for the software which it was proposing to acquire from IBM were. There was, as explained in the judgement, the SAP Brief which certainly identified what its requirements for another supplier would have been and there was no factual issue that this Brief was made available to IBM. The overall difficulty however was the emerging factual evidence from IBM's witnesses by way of statements to the effect that Southwark's staff were shown by way of demonstrations and written material what Arcindex could do and what it could not do. The clear inference at that stage therefore was that Southwark's key staff knew exactly what they were likely to get from Arcindex and were...
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