Zagora Management Ltd & Others v Zurich Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Stephen Davies |
| Judgment Date | 15 February 2019 |
| Neutral Citation | [2019] EWHC 257 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: B50MA033 |
| Date | 15 February 2019 |
[2019] EWHC 257 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
TECHNOLOGY AND CONSTRUCTION COURT (QB)
Manchester Civil Justice Centre,
1 Bridge Street West, Manchester M60 9DJ
HIS HONOUR JUDGE Stephen Davies
SITTING AS A JUDGE OF THE HIGH COURT
Case No: B50MA033
Case No: D50MA041
Jonathan Selby QC & Charlie Thompson (instructed by Walker Morris, Leeds) for the Claimants
Nicholas Baatz QC & Nicholas Maciolek (instructed by Kennedys, Birmingham) for the First & Third Defendant
Tom Asquith (instructed by DAC Beachcroft, London) for the Second Defendant
Hearing date: 7 February 2019
APPROVED JUDGMENT NO. 3 CONCERNING COSTS
I direct that pursuant to CPR PD 39A paragraph 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.
In this judgment I determine the appropriate costs orders to be made following the handing down of my principal judgment on 30 January 2019 [2019] EWHC 140 (TCC) and of my supplemental judgment in relation to interest on 7 February 2019 [2019] EWHC 205 (TCC).
In very brief summary of those decisions, all of the claimants (“ the ZBC claimants”) who sued the Second Defendant (“ ZBC”) lost their claims against it. As against the First Defendant and Third Defendant (collectively “ ZIP”) the first claimant freeholder (“ Zagora”) lost its claim whereas the remaining individual leaseholder claimants (“ the leaseholder claimants”) succeeded in securing a substantial judgment amounting in total to £3,634,074.65 together with interest of £699,559.30, grand total £4,333,633.95.
The starting point, therefore, in terms of success is that ZBC was the successful party against all of the ZBC claimants, whereas the leaseholder claimants were the successful parties as against ZIP and ZIP was the successful party as against Zagora.
As CPR part 44.2 provides: (i) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order; (ii) the court will have regard to all the circumstances, including conduct, success or failure on part or parts of the case and admissible settlement offers. I have received detailed, wide-ranging and skilfully presented submissions from all of the parties in relation to conduct, relative success and offers in order to justify or rebut arguments as to why I should not simply award each of the successful parties all of their costs. I have taken all of those arguments into account in producing this judgment but have not mentioned each and every specific matter adverted to so as not to over-lengthen and hence delay the production of this judgment, given that I shall still need to deal on 13 February 2019 with outstanding issues in relation to interest on costs, interim payments on account of costs and stay of enforcement pending appeals.
I shall address the arguments relating to ZBC first before turning to those relating to ZIP.
A. Costs in relation to the claims against ZBC
Mr Asquith submits that costs should follow the event. Mr Selby QC and Mr Thompson for the ZBC claimants submit that to award ZBC all of its costs would be to ignore the fact that the ZBC claimants succeeded in proving that ZBC had been guilty of deceit in issuing the Building Regulations final certificates the subject of the claim. (Whilst they also succeeded in proving certain other elements of their claim those issues are in my view of far less significance, both in themselves and as drivers of costs.) The reasons why the ZBC claimants failed despite this finding in their favour are that: (a) Zagora as subsequent freeholder failed to establish that ZBC intended that Zagora should rely on the final certificates; (b) all of the leaseholder ZBC claimants failed to establish that they relied on the final certificates.
I am satisfied that in general terms the costs of the deceit and the reliance issues were roughly equal to each other and also far more significant than were the costs of the remaining issues. The costs in relation to limitation and quantum were however not insignificant and I should also record that ZBC failed to make much progress on either issue, since (save in relation to one of the leaseholder claimants) they failed to defeat the claims on limitation grounds and they failed to make much inroad into the quantum of the claims.
Mr Asquith for ZBC realistically acknowledges that if there was nothing else of relevance to set against its loss on the issue of deceit the court would be likely to depart at least to some extent from the general rule in order to reflect this significant finding on a major element of the case. However, ZBC relies upon two countervailing factors. The first is that on 29 May 2018 it made an admissible offer to settle the claim, inclusive of costs, for £250,000. The second is what it submits was the unreasonable conduct of the ZBC claimants in relation to the reliance issue. I shall address each point separately.
As regards the offer the starting point is that it is apparent that the ZBC claimants, having obtained nothing, failed to better that offer by proceeding to trial. Mr Selby's two principal ripostes were that the offer should be disregarded because: (a) in the context of the case overall, it offered only a trifling amount; (b) it failed either to contain an admission or an apology for ZBC's deceit.
Before addressing these arguments I should record that this offer was made shortly after there at been a tripartite mediation earlier that month and at a time when ZBC had served: (a) a draft detailed case, following disclosure, on reliance which set out what transpired to be successful arguments as to why the ZBC claimants would be unable to establish reliance on the final certificates; (b) a draft application to strike out the claim on reliance (which ultimately, sensibly in my view given the fact sensitive nature of the issue, was not proceeded with). I should also make clear that I accept, as I said in my principal judgment, that in my view the ZBC claimants never really grappled in a convincing way with the difficulties in their case on reliance which were pointed out by ZBC in its detailed case. They failed to appreciate that, with the exception of Zagora, they never personally relied on the final certificates and they also failed to appreciate that, given the particular terms of the sale contracts employed in this case, without evidence from the conveyancing solicitors retained on the flat purchases they had no realistic prospect of establishing that their solicitors had relied on the final certificates issued by ZBC (as opposed to the completion certificates issued by ZIP). Their witness statements were, as I found, a confused and confusing attempt to ride two horses on reliance (i.e. personal reliance and solicitor reliance) which were convincingly demolished in cross-examination by Mr Asquith.
As to whether or not the offer was trifling, I should record that whilst both parties addressed me as to whether or not the £250,000 offered would, if accepted, have produced a net recovery for the ZBC claimants after deduction of their costs as incurred as against ZBC it is simply not possible in my judgment to reach any firm conclusion on that point because: (a) according to the claimants' solicitors the total costs incurred by the claimants overall are significantly in excess of the budgeted costs; (b) the claimants' approved costs budget was not sub-divided as between ZIP and ZBC. What I can say with some confidence is that, if accepted, it would have provided the ZBC claimants with at least a significant proportion of the costs incurred as against ZBC up to that point and insofar as they had any realistic prospect of recovering them against ZBC. I do however accept that it was unlikely to have provided the ZBC claimants with any substantial net recovery for their claim as advanced against ZBC, which was that they should be refunded their purchase prices together with interest. The offer was clearly intended, as I am satisfied the ZBC claimants through their advisers must have appreciated at the time, as an attempt by ZBC to settle the case, on the basis that the claim would ultimately fail on reliance even if deceit was proved, by offering a generous dose of sugar, in the form of a significant contribution towards costs, to sweeten the pill of being compelled to abandon the claim.
As a matter of fact it is true that the offer contained no apology or made no admission as regards what I have found was the fraudulent issuing of the Building Regulations final certificates. Ought it to have done? Mr Selby referred me to and relied upon the decision of the Court of Appeal in Yentob v MGN Limited [2015] EWCA Civ 1292, in which the court upheld the decision of Mann J at first instance in a “telephone hacking” case that the claimant should not suffer the normal consequences of not accepting a Part 36 offer which he had failed to beat at trial because the defendant had made only a limited admission in which it had failed to admit the full extent of its wrongdoing and because the defendant would have failed to make a full joint statement had it been invited to do so. Mr Selby accepted, and in any event I agree with Mr Asquith, that in normal commercial cases a desire on a part of a claimant to have a public judgment exposing wrongdoing cannot be a good reason for justifying a refusal to accept a reasonable offer and proceeding to trial: see the judgment of the Court of Appeal in Ashdown v Griffin [2018] EWCA Civ 1793 at [35]. Mr Selby submitted that there was a...
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