Transocean Drilling U.K. Ltd v Providence Resources Plc
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 20 October 2016 |
| Neutral Citation | [2016] EWHC 2611 (Comm) |
| Docket Number | Case No: CL-2012-00887 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 October 2016 |
2016 EWHC 2611 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
The Hon. Mr Justice Popplewell
Case No: CL-2012-00887
Colin West (instructed by Ince & Co) for the Claimant
John McCaughran QC & Laurence Emmett (instructed by Herbert Smith Freehills) for the Defendant
Hearing dates: 14 October 2016
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
The background to this costs application is set out in my judgment of 19 December 2014 at the conclusion of the trial ( [2014] EWHC 4260 (Comm)), my judgment on consequential matters, including costs, given on 20 February 2015 ( [2015] EWHC 1136 (Comm)), hereafter referred to as my Costs Judgment, and the judgment of the Court of Appeal of 13 April 2016 ( [2016] EWCA Civ 372). The effect of the decision of the Court of Appeal is to increase the amount recovered by the Claimant ("Transocean") such that it now contends that it has beaten a Part 36 offer it made on 8 August 2014 which expired on 29 August 2014.
By this application Transocean seeks an order that the Part 36 consequences should apply from 30 August 2014, namely that its costs be assessed on an indemnity basis, that interest accrue at 10% on the principal sum awarded and on costs, and that there be a surcharge of £75,000. Transocean does not contend that my existing costs order should be varied in relation to the period prior to 30 August 2014.
At trial I held that Transocean's claim succeeded to the extent of approximately US$7.6 million, inclusive of interest. In my Costs Judgment I concluded that although Transocean was the successful party, there should be no order for costs. My reasons are set out fully in that judgment. I analysed the costs which had been expended on each group of issues and on common costs, and which party had succeeded on those issues. At paragraph 32 I concluded:
"The upshot is that looking at the action as a whole, and using this very broad brush, Providence has succeeded on issues on which there has been spent something of the order of 70–75% of the costs of the action."
I considered a number of criticisms of Transocean's conduct and concluded that two of them were relevant to the exercise of my discretion. I identified them in the following terms at paragraphs 34 and 35:
"34. Amongst the many points, I detected essentially six criticisms which were in the forefront of this aspect of Providence's argument. The first is that Transocean's management cannot truly have believed the case which was advanced to the effect that there had been compliance with the relevant maintenance procedures in relation to the pods, as I noted at para. 106 of my judgment. Transocean chose not to call Mr. McLean, who was the individual who was responsible for the pre-deployment check, but instead relied upon evidence from Mr. Scott, whose evidence was, as I found, contradicted by the documentary record to which it referred. There is, to my mind, force in this criticism.
35. The second matter is that it is said that Transocean sought to deceive Providence by sending it a report which purported to set out findings of its internal investigation but which had been deliberately doctored so as to remove conclusions which were adverse to Transocean, and I so found (see para.66 of my judgment). The vice in this, so Providence submits, is not merely the attempt to mislead prior to the conduct of the litigation but that having done so, both Mr. Scott and Mr. Clyne in their evidence actively compounded this dishonest behaviour by providing explanations for the changes to the report which they must have known to be incorrect. Both men signed witness statements which contained incorrect statements. Mr. Scott maintained his position in cross-examination, although Mr. Clyne eventually gave evidence as to the true position. Again, it seems to me that there is considerable force in this criticism."
I rejected a submission made on behalf of Providence that Transocean's whole case in relation to the technical issues was one in which Transocean's senior management had no honest belief. I said at paragraph 44:
"I am not prepared to decide the costs application on the basis that the technical case as a whole was put forward dishonestly by Transocean's senior management. It was supported by the expert evidence of Mr. Lewis and it was legitimate to run the case on that basis, albeit that it ultimately failed."
I summarised the position at paragraph 51 in the following terms:
"Drawing the threads together, in summary the position is this. Transocean is the successful party and therefore the starting point is that Transocean should recover its costs. It is appropriate to depart from that starting point to reflect the fact that something of the order of 70 per cent of the costs of the action have been incurred on issues on which Providence has won. It would not, however, be appropriate simply to apportion costs by reference to that assessment of who has won on the issues, in other words, it would not be appropriate simply to make an issue based order that Transocean should pay 70 per cent of Providence's costs and Providence should pay 30 per cent of Transocean's costs, or if one were netting off, that Transocean should be the paying party of 40 per cent of Providence's costs. That would not be appropriate for a number of reasons. One has to take into account and give some weight to the fact that Transocean is the successful party. It has had to come to court. One has to take into account that there have been no relevant offers made by Providence, notwithstanding that it is the paying party, to the tune of $7 million. One has to take into account the general principle that the winning party cannot be expected to win on every issue and if the successful party has failed on some issues by the wayside, that is not necessarily a reason for depriving it of costs. There then has also to be put into the balance the respects in which I have found that Transocean's conduct of the litigation has been unreasonable."
One aspect of my decision at trial was that Providence's spread costs counterclaim was not excluded by the terms of clause 20 of part II of the rig contract. On that issue alone Transocean appealed and the appeal was successful. An application to the Supreme Court for permission to appeal against the Court of Appeal's decision is pending. The effect of the Court of Appeal's decision is that the judgment in Transocean's favour is increased to a principal sum of US$13,858,093.51.
Had I awarded such a sum at the conclusion of the trial, based on a determination of the issues in the way I decided them but with the correct application of clause 20 as determined by the Court of Appeal, I would still have made no order as to costs in the exercise of my discretion, if I were leaving out of account any consideration of any Part 36 offer. The issue of construction on which Transocean lost before me and won in the Court of Appeal occupied a very small proportion of the costs. The costs of all construction issues amounted to about 5% of the costs of the action. The clause 20 point was only one of a considerable number of construction points, including points concerning day rates, breach, and maintenance obligations, on which Transocean otherwise failed. The adjustment would make no difference to the exercise of my discretion which as I said at paragraph 51 of my Costs Judgment reflected a broad brush assessment that something of the order of 70% of the costs of the action were incurred on issues on which Providence had won. That remains the position in the light of the Court of Appeal decision.
The Part 36 Offer
The Part 36 offer was made by letter of 8 August 2014. It is accepted that it complied in form with Part 36. It explained that Transocean's claim was currently valued at US$22.5 million. It offered to accept US$13 million inclusive of interest in settlement of the entire proceedings including claims and counterclaims. It stated that that sum did not include costs, and drew attention to the fact that if it were accepted, Providence would be liable to pay Transocean's costs on the standard basis by reason of the terms of Part 36. It replaced and withdrew a previous Part 36 offer dated 6 February 2014 which is not material to the current dispute.
The relevant provisions of the Civil Procedure Rules are those in force at the time of the offer. The relevant parts of CPR 36.14 were as follows:
"36.14 –
(1) … this rule applies whereupon judgment being entered –
(a)…
(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer
(1A) for the purposes of paragraph (1), in relation to any money claim or money element of a claim, "more advantageous" means better in money terms by any amount, however small, and "at least as advantageous" shall be construed accordingly."
(2)…
(3) …where rule 36.14 (1)(b) applies, the court will, unless it considers it unjust to do so, order that the claimant is entitled to –
(a) interest on the whole or any part of the sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate; and
(d) an additional amount which...
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Costs not to be considered when assessing whether Part 36 offer has been beaten
...Drilling UK Ltd v Providence Resources Plc [2016] EWHC 2611 (Comm), 20 October 2016 An assessment of whether a Part 36 offer has been beaten at trial does not involve any consideration of the extent of the parties' costs. The assessment was to be made only on the basis of the judgment obtai......