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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Bim Kemi AB v Blackburn Chemicals Ltd. [2003] EWCA Civ 889 (24 June 2003)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2003/889.html
Cite as: [2003] EWCA Civ 889, [2004] 2 Costs LR 201, [2004] Costs LR 201

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Neutral Citation Number: [2003] EWCA Civ 889
Case No: A3/2002/0904

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Mr Justice Chambers QC

Royal Courts of Justice
Strand,
London, WC2A 2LL
24th June 2003

B e f o r e :

LORD JUSTICE KENNEDY
LORD JUSTICE WALLER

____________________

Between:
Bim Kemi AB
Appellant
- and -

Blackburn Chemicals Limited
Respondent

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
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____________________

Alastair Wilson QC; Mr Jonathan DC Turner (instructed by Taylors Solicitors) for the Appellant
Andrew Onslow QC (instructed by Messrs Jeffrey Green Russell) for the Respondent

____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
CROWN COPYRIGHT ©
____________________

Crown Copyright ©

    Lord Justice Waller :

    Introduction

  1. On 13 February 2003 we handed down our judgment on the main appeal. We held (1) against the contention of Blackburn in favour of the argument of Bim and, in agreement with the judge, that there was a binding contract made in 1994; (2) in favour of the contention of Blackburn and against the argument of Bim and again, in agreement with the judge, that Bim were in breach of that contract; (3) in favour of the contention of Blackburn and against the argument of Bim and reversing the judge that Bim's breaches were repudiatory; and (4) in favour of Blackburn and against the contention of Bim and reversing the judge that Blackburn were not in breach of the 1994 contract. Issues relating to costs were adjourned. The parties consented to those issues being determined by Kennedy LJ and myself. This is our judgment on those issues.
  2. CPR 44.3(1), (2), (4), (5), and (6) are all relevant. It is unnecessary to set them out but they dictate the proper approach that we should take to the issue of costs.
  3. Submissions

  4. We received a relatively concise written skeleton from Mr Wilson QC and Mr Turner for Blackburn dated 25 February 2003. Its thrust was to seek (1) an order for the costs of the trial and the appeal on the basis that Blackburn were as a consequence of our judgment the successful party; (2) an order that the costs be paid on an indemnity basis; and (3) a submission that no special order should be made relating to the "existence of contract" point on which Blackburn (to their benefit) had failed at the trial and in the court of appeal; this submission was supported on various grounds (a) – (f) including a reference to Blackburn's offer to settle the action by a letter dated 29 May 2001 on a "drop hands" basis. The skeleton thereafter identified various specific points on costs the most significant of which claimed interests on costs under CPR 44.3(6)(g), and claimed the costs already incurred in assessing damages prior to that aspect no longer forming an issue at the trial.
  5. A written response from Mr Andrew Onslow QC covering 12 pages was received on 24th June 2003. Its thrust was to submit that there were substantial grounds for saying Bim deserved to win at the trial, and that the present state of play could be regarded as a stalemate. He submitted that (1) Bim should only be ordered to pay a percentage of Blackburn's costs on the appeal: 50% was his suggested figure; (2) that there should be no order for costs of the trial; (3) the costs incurred in preparing the damages claims should be decided at the end of the action: the reason for this submission was that Bim wished to argue that Blackburn had suffered no loss, and indeed might wish in so submitting to rely on the EC illegality point for which Blackburn had obtained leave shortly before the trial: and (4) all costs should be assessed on a standard basis.
  6. In response to that document was delivered a skeleton covering a further twenty pages from Mr Wilson and Mr Turner. We do not believe that despite its length, the thrust of this document was any different from the original skeleton. One point taken was however that this court should make an order that the matter should not go back to Langley J but be remitted to the Technology and Construction Court.
  7. The matter was then relisted for oral argument which we heard on 23 May 2003. Mr Onslow no longer sought to suggest other than that Blackburn should be considered overall the successful party. His submissions were concentrated on the following points (1) The court should adopt an issue based approached although ultimately it should reflect that in a broad based percentage assessment. (2) Blackburn lost on an important issue "the contract point" and a great amount of time was taken up on that point at the trial and in the Court of Appeal. (3) This court should not interfere with Langley J's assessment of Blackburn's conduct of the litigation including Langley J's condemnation in his judgment on costs where he said at page 2:
  8. "…it is apparent from the way the defence was conducted and from the evidence of Mr George Lamb that it was intended to fight and was fought on every ground imaginable."

    and at page 4:

    I do think, for whatever reason, Blackburn has chosen to conduct the litigation as something approaching a war of attrition and apparently intends to continue to do so."

    (4) The Court of Appeal's adverse view of Bim's conduct in its late disclosure and change of position reflected in its judgment in particular at paragraph 108, should be viewed in the context of the judge having seen both parties and their witnesses over a period of three and half weeks of trial with many issues being fought out. The Court of Appeal had only three discrete issues before it, those issues not bringing to the court's attention various aspects of Blackburn's evidence which had caused the judge to take such an adverse view.

  9. Mr Wilson in his commendably concise response submitted that the court should be less inclined to adopt an issue based response where a defendant was seeking to defend itself. He suggested that it was quite reasonable in the light of Bim's failure to disclose until shortly before the trial, for Blackburn to keep open the "no contract point"; indeed he emphasised that Blackburn would have succeeded on the "no contract point" but for a last minute amendment pleading completion of the contract at the October meeting. He submitted the late disclosure permeated the whole of Blackburn's ability to conduct the action. He thus submitted that Blackburn should get all their costs. He further submitted that the late disclosure and the fact that Blackburn had been prepared to settle on the terms offered by the 29 May 2001 letter took this case out of the norm, and thus made it fair that proportionality should not be a factor in the assessment of costs and that thus indemnity costs should be ordered.
  10. Discussion

  11. The first question is whether there is a successful or unsuccessful party. There cannot be much doubt, subject to one point, that at this stage Blackburn, following the appeal, are the successful party. The one point relates to Blackburn's amendment to allege that the 1994 contract was illegal and void for breach of EC competition legislation. That issue was not decided at the trial. It is at present a little unclear what will happen in relation to it. Blackburn will obviously not wish to pursue it further. Bim have not finally made up their mind whether they will try to do so for their own benefit. If it were ever decided that the 1994 contract was void and illegal, that would now benefit Bim, but it is not a point which up until now Bim has advocated. If it was ever decided that the 1994 contract was void and illegal the whole proceedings so far would have been a waste of time. But since both parties have fought out the other issues, and, since the alleged illegality point if it were right was always potentially a point to benefit the winner, the right course, as it seems to us, is to treat the points so far tried as the relevant litigation so far as costs are concerned. On that basis thus Blackburn are clearly the successful party.
  12. It is also right to take into account the conduct of the parties. Criticisms were made of Blackburn's conduct of the trial by the judge. In our judgment we took an adverse view of the conduct of Bim in relation to the disclosure of documents by reference to which ultimately Blackburn were successful in their claim for damages. We would accept that there is a danger where the Court of Appeal has only examined a limited number of issues that it has not got a full flavour of the trial. Equally however, where as we have held following a fuller presentation of the case, the judge has not grasped the full implications of the conduct of one party, some restoration of the balance must take place. In this context it is also right to take into account, that when in his cost judgment the judge was highly critical of Blackburn's conduct of the case in the passages already quoted, he did so, as we learned, without being aware of Blackburn's offer by their letter 29 May 2001. It is of the highest relevance as it seems to us that Blackburn offered to settle this action prior to trial on the basis that each party would discontinue its claims against the other and bear their own costs. It was made clear in the letter that although the offer was not in conformity with Part 36, it was an offer which Blackburn would seek to refer to on any argument relating to costs. Even in the context of the judge's findings, that offer would as it seems to us demonstrate that Blackburn in fact took a reasonable attitude to this litigation. We are indeed a little puzzled why the judge did not have his attention drawn to that letter. But in the light of our findings Blackburn deserves even greater credit for the making of that offer.
  13. Conclusion on costs of action and appeal

  14. Our view is that, in so far as the conduct of the parties are concerned, the position is that there is no reason to penalise Blackburn as the successful party, and indeed the offer of settlement makes it clear that they should be treated as the successful party both in relation to the costs of the trial and the costs in the Court of Appeal.
  15. But even as a successful party and even though a settlement offer was made, if there is a major issue on which they lost, then that might have to be reflected in any order. Simply because a settlement offer has been made that does not entitle a party to have a totally free rein in what issues it raises. It is not however, right to go into the minutiae of the different ways in which various points have been argued from time to time in order to carve out relatively minor issues. There is one issue in this case which is an obvious candidate for consideration. We refer to the "no contract" issue on which much time was spent at the trial and much time spent in the Court of Appeal. The odd feature of this issue is that in losing it, Blackburn have actually ultimately benefited. Why one might ask did they ever fight it then?
  16. We think the answer provided by Mr Wilson has considerable force. Blackburn were defending themselves. They did not know whether they would be able to establish the breaches of contract which they thought Bim had committed. The delay in disclosure inhibited them in that task. In fact, before the judge, they had not marshalled the case in a way which convinced the judge, so the view that they needed a further defence was shown not to be unreasonable. Furthermore their case of "no contract" was in fact a strong one. Up until the time when Bim pleaded the October meeting, Blackburn's case (as the judge found) would have succeeded. Even once the October meeting became the basis for supporting a contract, we in our main judgment saw considerable force in Blackburn's argument.
  17. But despite the force of Mr Wilson's arguments, we think it would be wrong not to reflect in the order for costs the loss of this issue by Blackburn. That is not to say that it was improper to run it or anything of that nature. But having run it, lost it and benefited from losing it, it would be unjust to make Bim pay the whole cost of that process.
  18. The rules require us to make an order using paragraph 6(a) or (c) rather than 6(f) "if practicable". In other words the rules suggest that where practicable the court should not put the Costs Judge in the position of having to assess costs of a "distinct part" of the proceedings. One should if possible make an order that a party pay only a proportion of another party's costs, or make an order for costs by reference to a certain date. We believe it is practicable to utilise paragraph 6(a) and make an order that Bim only pay a proportion of Blackburn's costs.
  19. We also think that it is just to use the percentage basis because this is not a case where we would simply try and assess what costs Bim should not pay and calculate what costs Bim should recover in order to reach the appropriate percentage. This is a case in which the loss of an issue is not the only factor affecting our assessment. As we have said, there is force in Mr Wilson's submission as to why the point was run in this case; furthermore if the offer of settlement made by the letter of 29 May 2001 had been accepted the costs of the trial and the appeal would not have been incurred at all.
  20. We think that the appropriate order with the above considerations in mind is that Blackburn should recover only 75% of their costs and that order should apply both in the Court of Appeal and at the trial.
  21. Indemnity or standard

  22. Should the costs be paid on an indemnity basis? Mr Wilson relied on the late discovery and the offer of settlement to support that contention. We have taken these factors into account in reaching the conclusion that we have and we do not think it right to order costs on an indemnity basis.
  23. Specific points

  24. That brings us to the specific points on costs raised in paragraph 6 of Mr Wilson's skeleton. We will deal with them under the headings used by him.
  25. a) Blackburn's costs of the assessment of costs
    Blackburn were ordered to pay the costs of the trial and the assessment of those costs was proceeded with. Blackburn incurred costs of £3,761 in relation to the assessment and Mr Wilson seeks an order that those costs be summarily assessed and paid by Bim forthwith. Mr Onslow accepts that if we were not going to be ordering costs in favour of Bim then Mr Wilson is right on this contention. Accordingly, we summarily assess these costs at £3,761 and order their payment. There should also be interest on these costs and we think that the appropriate rate of interest is 1% over base rate. Mr Wilson's argument for a higher rate set out in paragraph 6(b) is an argument to which we will turn in the context of that paragraph.
    b) Interest on costs already paid by Blackburn to Bim
    On 13 February 2003 we ordered that the costs already paid by Blackburn to Bim pursuant to the order of the judge should be repaid with interest at the judgment rate from 13 February 2003. Mr Onslow accepts that interest should be paid on those costs from the date of payment by Blackburn up to 13 February 2003. As already indicated, Mr Wilson seeks to suggest that interest should be awarded at the rate of 6% per annum on the basis that Blackburn would have had to pay compound interest at 2% over base rate if it had borrowed the money from its bank. He referred us to an illuminating judgment of Rix LJ in Jaura v Ahmed [2002] EWCA Civ 210. In that judgment Rix LJ was concerned to deal with the appropriate rate of interest on damages. He refers to a passage in Chitty on Contract 28th edition 1999 volume 1 at paragraph 146 which states:
    "In business contexts, the rate of interest should reflect the current commercial rate. The approach of the commercial court is to award interest at a rate which broadly represents the rate at which the successful party would have had to borrow the amount recovered over the period in question."
    He further refers to the fact that:
    "Thus a rate of 1% above base rate prevailing from time to time has become the practice of the commercial court, albeit this is only a presumption and can be varied up or even down to meet the fairness of the parties' particular situation."
    He then refers to various cases in which a higher rate than 1% over base rate has been awarded. In that particular case the award of interest to Mr Jaura a small businessman was 3% over base rate. Rix LJ said at paragraph 26:
    "It is right that the defendants who have kept small businessmen out of money to which a court ultimately judges them to be entitled should pay a rate which properly reflects the cost of borrowing by such a class of businessmen. The law should be prepared to recognise, as I suspect the evidence might well reveal, that the borrowing costs generally incurred by them are well removed from the conventional rate of 1% above base, (and sometimes even less) available to first class borrowers. "
    Rix LJ was dealing with interest on damages but if persons have had to borrow money in order to pay for litigation there is no reason why a similar approach should not be taken to interest on costs.
    The question is whether the evidence in this case demonstrates that a rate greater than 1% above base rate should be applied. Evidence of what a bank might have charged if money had been borrowed is not we think sufficient. It is not clear to us what takes Blackburn outside the norm to which the 1% above base rate presumption applies. In our view the appropriate course in relation to these costs is to make an award of interest at 1% over base rate the interest to run from the date when the costs were paid. We do not think that the evidence from Blackburn is such as to entitle them to a higher rate, but we do not think that such an order will be unfair to Bim.
    c) Interest on costs awarded in Blackburn's favour
    Mr Onslow in his written submission suggested that there should be no order for payment of interest on costs. He suggested this would be a most unusual order and further suggested that such an order is never made. It is clear from CPR 44.3 (6) (g) that the rules intended that the court should have power to award interest on costs and Mr Onslow did not press these submissions orally. In any event in principle there seems no reason why the court should not do so where a party has had to put up money paying its solicitors and been out of the use of that money in the meanwhile. It furthermore seems to us that Mr Wilson is right that there is no reason why Blackburn should not have interest at the judgment rate as from 30 January 2002, that being the date of the order of the trial judge. That must be so in our view because if the judge had made the order which we now hold he should have made in Blackburn's favour, interest would have been payable at the judgment rate from the date of that order down to the date of payment – see Hunt v R M Douglas (Roofing) [1990] 1AC 398. That leaves the question of interest on costs incurred prior to that date. It seems to us that once again, 1% over base rate is the appropriate rate of interest, that interest to run from the date of each invoice.
    Costs incurred by Blackburn preparing for the issue of damages
    Mr Onslow seeks to suggest that costs incurred in relation to the issue of Bim's losses should not be paid at this stage. He suggests that those costs should be dealt with by the judge dealing with "causation and loss" issues. It seems to us that there can be no question but that these costs must be included as part of the costs of the action at this juncture.
    The more difficult issue relates to the costs that Blackburn has incurred in relation to the assessment of its own losses. Should they be costs in the action at this stage or should they await the assessment of damages? Mr Wilson argues that Blackburn sought to have damages hived off before any costs on the assessment had been incurred. If damages had been hived off then no costs accordingly would have been expended in relation to their assessment prior to the trial at all. So he argues Blackburn should be entitled to have those costs paid now. Mr Onslow submits that these costs relate to the damages issue and that Blackburn should only recover them if they ultimately recover damages. He submits that Bim have arguments that no losses were suffered even without regard to the illegality point, but in addition Bim may take the illegality point.
    We are not much impressed with Mr Onslow's suggestion that Bim will establish that Blackburn suffered no losses without regard to the illegality point. But we are persuaded on balance that these costs should await decision on the assessment of damages.
  26. It remains to deal with Mr Wilson's suggestion that this case should be remitted to the Technology and Construction Court. His concern on behalf of his clients relates to the adverse view that Langley J took of the Blackburn witnesses during the main trial.
  27. It seems to us quite inappropriate that this case should be remitted to the Technology and Construction Court. It may well be that when the matter is returned to the Commercial Court there will be aspects which that court feels can better be dealt with by a Master. However it is that court which should rule on that question and not the Court of Appeal. It would probably be better if this case was not remitted to Langley J, but we do not make any order in that regard.
  28. In the light of this judgment we hope parties will be able to agree the form of order.
  29. Order: As per draft order.
    (Order does not form part of the approved judgment)


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