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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd [2009] EWHC 274 (TCC) (20 February 2009) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2009/274.html Cite as: [2010] 2 Costs LR 115, 123 Con LR 69, [2009] CILL 2700, [2009] EWHC 274 (TCC), [2009] BLR 144 |
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TECHNOLOGY AND CONSTRUCTION
Strand, London, WC2A 2LL |
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B e f o r e :
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FITZPATRICK CONTRACTORS LIMITED |
Claimant |
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- and - |
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TYCO FIRE AND INTEGRATED SOLUTIONS (UK) LIMITED (FORMERLY WORMALD ANSUL (UK) LIMITED) |
Defendant |
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(No.3) |
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Mr David Thomas QC and Mr Jonathan Lee (instructed by Cobbetts LLP) for the Defendant
Hearing date: 13th February 2009
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Crown Copyright ©
Mr Justice Coulson :
A. INTRODUCTION
a) Fitzpatrick's claim that their costs of the action from 14th February 2008 (i.e. 21 days after the Part 36 offer had been made) should be paid by Tyco and assessed on the indemnity basis. Tyco accept that they are liable to pay those costs but argue that they should be assessed on the standard basis if they cannot be agreed.
b) Fitzpatrick's claim for interest on those costs in accordance with CPR Part 44.3(6)(g).
c) Fitzpatrick's claim for an interim payment on account of costs in accordance with CPR Part 44.3(8). Tyco do not object in principle to the making of an interim payment but there is a dispute between the parties as to the appropriate amount.
B. GENERAL PRINCIPLES
B1. The CPR
"1) Subject to paragraph (2) and paragraph (4)(a), where a Part 36 offer is accepted within the relevant period the claimant will be entitled to his costs of the proceedings up to the date on which notice of acceptance was served on the offeror.
2) Where-
a) A defendant's Part 36 offer relates to part only of the claim; and
b) At the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,
the claimant will be entitled to his costs of the proceedings up to the date of serving notice of acceptance unless the court orders otherwise.
3) Costs under paragraphs (1) and (2) of this rule will be assessed on the standard basis if the amount of costs is not agreed.
…..
4) Where-
a) a Part 36 offer that was made less than 21 days before the start of trial is accepted; or
b) a Part 36 offer is accepted after expiry of the relevant period,
if the parties do not agree the liability for costs, the court will make an order as to costs.
5) Where paragraph (4)(b) applies, unless the court orders otherwise-
a) the claimant will be entitled to his costs of the proceedings up to the date on which the relevant period expired; and
b) the offeree will be liable for the offeror's costs for the period from the date of expiry of the relevant period to the date of acceptance."
"1) This rule applies where upon judgment being entered-
…
b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant's Part 36 offer.
…..
3) Subject to paragraph (6), 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 part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the periods starting with the date on which the relevant period expired;
b) his costs on the indemnity basis from the date on which the relevant period expired; and
c) interest on those costs at a rate not exceeding 10% above base rate.
4) In considering whether it would be unjust to make the orders referred to in paragraphs (2) and (3) above, the court will take into account all the circumstances of the case including-
a) the terms of any Part 36 offer;
b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;
c) the information available to the parties at the time when the Part 36 offer was made; and
d) the conduct of the parties with regard to the giving or the refusing to give information for the purposes of enabling the offer to be made or evaluated."
B2. Authorities
"18… The significance of 36.21 is that, unlike 36.20, it refers specifically to the court being entitled to order costs on the indemnity basis from the latest date from when the defendant could have accepted the offer which had been made. Equally, it refers to interest on a higher rate than normal in the case of situations where it applies. Where Part 36.20 is compared with 36.21, light is thrown on the appropriate approach to the application of Part 36.20
19. The clear inference from the absence of any reference to an indemnity basis in 36.20 is that, in normal circumstances, an order for costs which the court is required to make under that Part to make, unless it considers it unjust to do so, is an order for costs on the standard basis. That means that if the court is going to make an order for indemnity costs, as it can in the case where Part 36.20 applies, it should do so on the assumption that there must be some circumstances which justifies such an order being made. If I may here adopt the way it was put in argument by Waller LJ, there must be some conduct or (I add) some circumstances which takes the case out of the norm."
Mr Thomas QC relied on that passage as being directly applicable to the present case, arguing that the absence of any reference to the indemnity basis in CPR 36.10(4) and (5) meant that the court should make an order for costs on the standard basis, unless it considers it unjust to do so.
C. DOES CPR 36.14 APPLY BY ANALOGY?
D. FITZPATRICK'S SECONDARY CASE
E. CONDUCT/JUSTICE
E.1. Introduction
F. INTEREST ON COSTS
F1. The CPR
F2. Authorities
"For my part, I think it may well be appropriate, at least in substantial proceedings involving commercial interests of significant importance both in balance sheet and reputational terms, that the court should award interest on costs under the rule where substantial sums have inevitably been expended perhaps a year or more before an award of costs is made and interest begins to run on it under the general rule."
"The purpose of an order of costs to compensate the winning party and to relieve him of or to reduce the financial burden of having had to conduct an action which would have been avoided had the losing party given in earlier… the purpose of a costs order is to compensate the winning party for the real cost of having conducted the litigation and the real cost is not measured simply by adding up mathematically the bills that it has paid to or agreed to pay to its lawyers. £1 paid in 1980 may be the same coin that is paid in 2005, but it is not the same in value. What the award of interest on costs allows the court to do is to ensure that the receiving party is compensated properly for the real cost to it of having conducted the litigation successfully".
"… it seems to me that the court has a broad discretion when deciding whether to award interest on costs from a date before judgment. That discretion must be exercised in accordance with the principles set out in CPR 44.3 and the court must take into account all the circumstances of the case, including such matters as the conduct of the parties and the degree to which a party has succeeded. Further, the discretion must be exercised in accordance with the overriding objective of dealing with the case justly. I am unable to accept the submission that costs should only be awarded in a case which is in some way out of the norm. I find no basis for that in the CPR and I believe it would provide an unwarranted fetter on the court's discretion."
F3. Analysis
a) The claimant made a reasonable Part 36 offer in January of last year.
b) It took the defendant almost a year to conclude that that offer should be taken. During that period, of course, the claimant was incurring considerable further costs.
c) Although the factual background is not sufficient to warrant an order for indemnity costs under CPR 44.3, the defendant's delay in taking the Part 36 offer has undoubtedly caused Fitzpatrick to be out of pocket. The claimant has suffered a real cost because it has been deprived of the use of its money pending judgment.
a) It is correct that the Part 36 offer letter did not expressly refer to an entitlement to interest on costs. But it did expressly refer to CPR 36.14 which provides for interest on costs. Accordingly I consider that, on any fair reading of the letter, the claimant was making it clear that it would indeed argue for such interest.
b) The existence of an order that Fitzpatrick pay 60% of Tyco's costs of and occasioned by the adjournment cannot affect whether, as a matter of principle, Fitzpatrick should be entitled to interest on its costs. The precise detail will be a matter either for the parties or the costs judge but, in principle, the earlier order does not mean that Fitzpatrick are not entitled to such interest.
G. PRINCIPLES IN RESPECT OF COSTS ESTIMATES AND INTERIM PAYMENTS ON ACCOUNT OF COSTS
G1. The CPR
"Where a party has won and has got an order for costs the only reason why he does not get the money straight away is because of the need for a detailed assessment. Nobody knows how much it should be. If the detailed assessment were carried out instantly he would get the money instantly. So the successful party is entitled to the money. In principle he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping him out of some of his costs that you need time to work out the total amount. A payment for some lesser amount which you will almost certainly collect is a closer approximation to justice. So I hold that where a party is successful the court should on a rough and ready basis also normally order an amount to be paid on account, the amount being a lesser sum that the likely full amount."
"(1) On an assessment of the costs of a party, the court may have regard to any estimate previously filed by the other party, or by any other party in the same proceedings. Such an estimate may be taken into account as a factor among others, when assessing the reasonableness and proportionality of any costs claimed.
(2) In particular where-
(a) there is a difference of 20% or more between the base costs claimed by receiving party and the costs shown in an estimate of costs filed by that party; and
(b) it appears to the court that-
(i) the receiving party has not provided a satisfactory explanation for that difference; or
(ii) the paying party reasonably relied on the estimate of costs;
the court may regard the difference between the costs claimed and the costs shown in the estimate as evidence that the costs claimed are unreasonable or disproportionate."
G2. Leigh v Michelin Tyre Plc [2003] EWCA Civ 1766
a) The estimates made by solicitors of the overall likely costs of the litigation could usually provide a useful yardstick by which the reasonableness of the costs finally claimed may be measured. If there is a substantial difference between the estimated costs and the costs claimed, that difference calls for an explanation. In the absence of a satisfactory explanation the court may conclude that the difference itself is evidence from which it can conclude that the costs claimed are unreasonable.
b) The court may take the estimated costs into account if the other party shows that it relied on the estimate in a certain way.
c) The court may take the estimate into account where it decides it would probably have given different case management directions if a realistic estimate had been given.
d) Paragraph 6.6 of the Practice Direction gives the court the power to take these matters into account in deciding whether, and if so how far, to reflect them in determining what costs it is reasonable to order the paying party to pay on an assessment.
e) It is wrong in principle to reduce costs claims simply because they exceed the amount of an estimate, and there is no justification for interpreting provisions in the CPR as equating cost estimates with cost budgets or caps.
H. THE MATERIAL FACTS AND FIGURES
I. CALCULATION OF INTERIM PAYMENT
J. CONCLUSIONS