Van Oord Uk Ltd (First Claimant) v Sicim Roadbridge Ltd (Second Claimant) Allseas Uk Ltd

JurisdictionEngland & Wales
JudgeThe Honourable Mr Justice Coulson
Judgment Date30 November 2015
Neutral Citation[2015] EWHC 3385 (TCC)
CourtQueen's Bench Division (Technology and Construction Court)
Docket NumberCase No: HT-2014-000032
Date30 November 2015

[2015] EWHC 3385 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Before:

Mr Justice Coulson

Case No: HT-2014-000032

Between:
Van Oord Uk Limited
First Claimant
and
Sicim Roadbridge Limited
Second Claimant

and

Allseas Uk Limited
Defendant

Ms Finola O'Farrell QC and Ms Jennie Wild (instructed by K&L Gates) for the Claimants

Mr Simon Lofthouse QC and Mr Robert Clay (instructed by Curtis Davis Garrard LLP) for the Defendant

Hearing date: 12 November 2015

The Honourable Mr Justice Coulson
1
1

At a hearing on 12 November 2015, I handed down the substantive Judgment in this case ( [2015] EWHC 3074 (TCC)). The net effect of that Judgment was that the claimant (OSR) was liable to repay to the defendant (AUK) the sum of £2,768,405.17. The outcome of the litigation therefore represented a significant loss for OSR.

2

Thereafter, I was asked to decide a variety of issues concerned with interest and costs. At the hearing, I gave brief reasons for the following rulings:

(a) That AUK's offer of 13 January 2014 was a valid Part 36 offer, but it was a defendant's offer (which had the consequences set out in CPR r.36.17(3)), and was not a claimant's offer (which would have had the consequences set out in r.36.17(4));

(b) That the appropriate rate for interest, in relation to both the judgment sum and costs, was 2.5% (in other words, 2% over base, a common, but not inevitable rate awarded in cases like this: see Fitzroy Robinson Ltd v Mentmore Towers Ltd [2009] EWHC 3365);

(c) That OSR was liable to pay AUK's costs;

(d) That AUK was entitled to have those costs assessed on an indemnity basis, save for the £1.3 million paid by AUK to Knowles Ltd, in respect of which I concluded that OSR should be permitted to argue recoverability, proportionality and reasonableness at the detailed assessment;

(e) That OSR must make an interim payment on account of costs to AUK in the sum of £1.3 million.

3

It was agreed that, due to time constraints, I would provide detailed reasons in writing for my conclusions under sub-paragraphs (a), (d), and (e) above. This short Judgment sets out those reasons.

2

THE PART 36 OFFER

4

Rules 36.2, 36.5 and 36.6 of the CPR make plain that offers can be made by both a claimant and a defendant, whether or not the defendant is making a counterclaim. Rule 36.2(3) states that offers can be made in respect of claims and counterclaims and provides a 'signpost' to Rules 20.2 and 20.3 (which provide that "counterclaims and other additional claims are treated as claims and that references to a claimant and a defendant include a party bringing or defending an additional claim".) Rule 36.5(1) sets out the form and content required of a Part 36 offer. One stipulation is that the offer must state whether it takes into account any counterclaim (r. 36.5(1)(e)).

5

If a Part 36 offer is 'beaten', in the sense that the party making the offer does better in the litigation than it would have done if the terms of the offer had been accepted by the other side, then different consequences follow, depending on whether or not the offer was a claimant's offer or a defendant's offer. A successful claimant is entitled to a raft of enhancements set out at r. 36.17(4) as follows:

Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a) interest on the whole or part of any 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 (including any recoverable pre-action 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) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court

Prescribed percentage

Up to £500,000

10% of the amount awarded

Above £500,000

10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

6

On the other hand, a defendant who has beaten its Part 36 offer has a more limited entitlement, set out in r.36.17(3) as follows:

"(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—

(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired;

(b) and interest on those costs."

7

The position can be more complicated if the defendant has a counterclaim, particularly if the Part 36 offer takes into account a counterclaim not yet formulated. In such circumstances, if a Part 36 offer is made by a defendant, it will be a question of construction as to whether it is to be treated as a claimant's offer or a defendant's offer under Part 36.

8

This approach can be found in the Court of Appeal decision in AF v BG [2010] 2 Costs LR 164. In that case, there was an argument as to whether the offer letter made by the respondent was a Part 36 offer at all and, even if it was, whether it was to be construed as a claimant's offer under Part 36. The offer letter in that case, set out at paragraph 6 of the judgment of Lloyd LJ, referred to the existence of the respondent's counterclaim which had not yet been pleaded, but which was asserted in a specific sum in the offer letter. The offer expressly took into account both the claim and the counterclaim, and resulted in the respondent offering to accept a smaller sum than the amount of its counterclaim in settlement of the case. The letter went on to say:

"This letter is intended to have the consequences of a claimant's offer to settle in accordance with Part 36 of the Civil Procedure Rules

We should point out that you will face potentially adverse costs consequences in the event that you choose not to accept the proposal set out in this letter and any judgment subsequently awarded is at least as advantageous to our client as the offer set out in this letter. In these circumstances our client will seek:

(1) his costs on the indemnity basis with interest at 10% above base rate on those costs; and

(2) interest on his damages at 10% above base rate,

from the date on which the Relevant Period expired."

9

Lloyd LJ ruled that the offer was a valid Part 36 offer. The next question was whether it was a valid claimant's Part 36 offer, a finding which would bring with it the possibility of the r.36.17(4) enhancements referred to in paragraph 5 above, or whether it was a defendant's offer, which brought the more limited r.36.17(3) benefits referred to in paragraph 6 above. The Court of Appeal concluded that the offer letter was a claimant's Part 36 offer letter. This allowed the respondent to argue for the enhancements although, as Lloyd LJ said at paragraph 23 of his judgment, the question of whether the court would think it just to allow indemnity costs and enhanced interest under the relevant rule "is quite another matter."

10

In the present case, the parties are agreed that an offer made by AUK to OSR dated 13 January 2014 was a Part 36 offer. The issue of substance, therefore, was whether it was similar to the offer made in AF v BG or whether it was a defendant's Part 36 offer. I deal first with the background, and then set out the letter and my conclusions as to its proper construction.

11

OSR had made what was called the Consolidated Claim in December 2012. AUK had responded to it some months later. Later in 2013, OSR sent a detailed letter of claim in accordance with the TCC pre-action protocol. AUK had responded to that too. In their response, AUK denied the claims and noted that, because large sums had already been paid to OSR on an interim basis, in respect of these very claims, OSR had in fact been overpaid. It does not appear that a separate, stand-alone counterclaim was asserted by AUK at any stage prior to the commencement of proceedings in April 2014.

12

At the end of 2013, AUK reached a global settlement with TEP in respect of all of the onshore works, which therefore included the works which AUK had subcontracted to OSR. The settlement involved a payment by TEP to AUK. It therefore appears more likely than not that the AUK offer letter of 13 January 2014 was written following that settlement, in order to try and resolve the remaining claim in respect of the onshore works. The letter was written some three months before these proceedings commenced.

13

It is appropriate to set out the letter in full:

" Without prejudice save as to costs

THE MEMBERS OF A JOINT VENTURE BETWEEN VAN OORD UK LTD. AND SICIM ROADBRIDGE LTD. (OSR) V ALLSEAS UK LTD. (AUK) Offer to settle under part 36

We refer to Contract no. 400970/AUK/LFL/001 for the Laggan Tormore Development and the Claims relating to WP10 Onshore Works East made under the LETTER OF CLAIM reference OSR/LPU/248 dated 29 th August 2013.

Although OSR's claim has serious deficiencies, AUK is mindful that under the Civil Procedure Rules (CPR(s)) litigants are expected to try to resolve their disputes whenever possible. AUK therefore makes the following offer to settle under Part 36...

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4 cases
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    ...For today's purposes, it is sufficient to refer to the statement of principle by Coulson J in the case of Van Oord v. All Seas Ltd. [2015] EWHC 3385 (TCC) at [27] ff, and his citation from his own decision in Elvanite Full Circle Ltd v. AMEC Earth & Environmental (UK) Ltd. [2013] 4 Costs LR......
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    ...where there is both a claim and a counterclaim and will be a question of construction: Van Oord UK Ltd & Anr v Allseas UK Ltd [2015] EWHC 3385 (TCC) [2016] 1 Costs 22 Subject to certain caveats which are not relevant here, Part 36 Offers can be accepted at any time unless they have already......
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    ...to 44 the learned judge opined: “42 A useful summary of the principles relating to indemnity costs is set out in Van Oord v All Seas Ltd [2015] EWHC 3385. In his judgment in that case Coulson J referred to his summary of the applicable principles in his earlier decision in Elvanite Full Cir......
2 books & journal articles
  • Table of cases
    • United Kingdom
    • Construction Law. Volume I - Third Edition
    • 13 April 2020
    ...UK Ltd [2015] EWhC 3074 (TCC) I.3.140, II.6.327, II.7.11, II.8.42, II.8.43 II.11.111, III.26.231 Van Oord UK Ltd v allseas UK Ltd [2015] EWhC 3385 (TCC) III.26.254, III.26.282, III.26.287, III.26.291 Varga v Galea [2011] NSWCa 76 III.21.06 Varley v Spatt [1955] VLr 403 II.6.295, III.25.180 ......
  • Litigation
    • United Kingdom
    • Construction Law. Volume III - Third Edition
    • 13 April 2020
    ...WLR 2722 at 2733–2734, per Stanley Burnton J. 1056 But not, it seems, any other type of proceedings: Van Oord UK Ltd v Allseas UK Ltd [2015] EWHC 3385 (TCC) at [33]–[37], per Coulson J. 1057 Octoesse LLP v Trak Special Projects Ltd [2016] EWHC 3180 (TCC). 1058 Senior Courts Act 1981 (UK) se......

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