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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Decoma UK Ltd v Haden Drysys International Ltd. [2005] EWHC 2429 (TCC) (04 November 2005) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2005/2429.html Cite as: [2005] EWHC 2429 (TCC) |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
133-137 Fetter Lane London, EC4A 1HD |
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B e f o r e :
____________________
DECOMA UK LTD (Formerly known as Conex UK Ltd) | Claimant |
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HADEN DRYSYS INTERNATIONAL LTD | Defendant |
____________________
VERSION
OF JUDGMENT
Crown Copyright ©
His Honour Judge Peter Coulson QC
A. INTRODUCTION
B. SUMMARY OF FACTS
(a) The Preliminary Issues
Decoma.
The total
value
of those nine claims was about £18 million.
Decoma's
Heads of Claim 4, 5, 6, 8 and 9, totalling about £10.5 million, were dismissed altogether. In addition, the remaining claims, namely Heads 1, 2, 3 and 7, said to be worth in total about £7.5 million, together with a claim for liquidated damages, were found to be
valid,
but subject to the contractual cap of £436,939.
valued
at between £5.5 and £6 million. Some of my findings in respect of that Head of Claim are the only matters on which
Decoma
now seek permission to appeal from the Court of Appeal.
(b) Payment Into Court
Haden
made a payment into court of £350,000. This was expressly stated to relate to part of
Decoma's
claims only. The part was defined as:
"The whole of the claim made by the ClaimantDecoma
![]()
UK
![]()
Ltd
under claim No: HT-04-267 excluding those claims contained within the Particulars of Claim at paragraphs 33.3 and 34 that relate to remedial works still to be carried out as set out in Annexure 2 Part 3 of the Particulars of Claim … The Part 36 payment into court takes into account the entire counterclaim of the Defendant
Haden
![]()
Drysys
![]()
International
![]()
Ltd."
Decoma's
claims, and
Haden's
entire counterclaim, except for
Decoma's
Head of Claim 3, to the extent that that Head of Claim was pursued by
Decoma
under Article 11.3 of the Contract.
Decoma
did not seek clarification of the payment in within the seven days prescribed by the CPR 36.9. However, on 8 July 2005, which fell between the two days of the Preliminary Issues hearing, they requested confirmation that their Head of Claim 3, to the extent that it was pursued as a claim for damages for breach of contract and/or warranty, was also excluded from the payment in.
Haden
wrote back saying that the payment into court related to the whole of the claim excluding that in paragraphs 33.3 and 34 of the Particulars of Claim and that therefore:
"We do not understand the basis of your presumption that your client's claim in relation to Part 3 for damages for breach of contract and/or warranty is likewise excluded. It is not excluded."
Decoma's
solicitors which set out in detail their concerns about the terms of the payment into court and which concluded that
Decoma
was "unable fairly to consider whether or not to accept the payment in."
Haden's
solicitors wrote again on 21 July 2005 making the point that:
"The way our client's offer is framed is a direct result of how your client has decided to plead its claim."
This letter reiterated the point that the claim for future remedial costs pursuant to Article 11.3 was excluded from the payment in.
Decoma's
solicitors wrote again. They contended that
Haden's
solicitors had not properly answered their letter of 19 July 2005. The letter concluded:
"In the meantime,Decoma
remains unable fairly to consider whether or not to accept the payment in; and if necessary will refer to this letter as well as our letter of 19 July 2005 when asking the court to disapply the usual rule pursuant to Rule 36.20(2)."
Decoma's
solicitors wrote to
Haden's
solicitors to indicate that
Decoma
now wished to accept the payment into court. The letter gave no explanation as to how or why
Decoma's
position had changed from 22 July (when they said they could not fairly consider the payment in) to 26 July (when they indicated that they urgently wished to accept it). Likewise, no explanation for this change of position was provided in the evidence available to the court for the hearing on costs.
Decoma
issued a formal application to accept the payment into court out of time. There had not been sufficient notice of that application for it to be considered when Judgment was handed down on 27 July. On 5 August 2005
Haden's
solicitors wrote to
Decoma's
solicitors to say:
"We have now had an opportunity to seek our client's instructions. Our client agrees to let your client accept the Part 36 payment into court made by our client. However, our client does not agree with the costs consequences proposed by your client in your letter dated 26 July 2005."
Decoma
to take the payment into court pursuant to CPR 36.11(2)(b)(ii). However, whilst both parties are happy for the court to give such permission, they have
very
different
views
as to the cost consequences that should follow.
C. RELEVANT PRINCIPLES
"The orders which the court may make under this rule include an order that a party must pay –
(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date, including a date before judgment."
Decoma's
Heads of Claim. Such an approach has become much more common in recent years. In Phonographic Performance
Ltd
v
AIE Rediffusion Music
Ltd
[1999] 1 WLR 1507, Lord Woolf said about the CPR:
"From 26 April 1999 the 'follow the event principle' will still play a significant role, but it will be a starting point from which a court can readily depart. This is also the position prior to the new rules coming into force. The most significant change of emphasis of the new rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new rules are reflecting a change of practice which has already started."
Ltd
v
Secretary of State for the Environment [2001] EWCA Civ 6535, Chadwick LJ said:
"… The Judge may make different orders for costs in relation to discrete issues – and, in particular, should consider doing so where a party has been successful on one issue but unsuccessful on another issue and, in that event, may make an order for costs against the party who has been generally successful in the litigation …"
Ltd
v
Pitmans (A Firm) [2001] EWCA Civ 2020 in which the Court of Appeal upheld the decision of Park J who had approached costs on an issue basis. Chadwick LJ said:
"In myview,
it has not been shown on this appeal that the Judge erred in principle. An issue based approach requires a Judge to consider, issue by issue in relation to those issues to which that approach is to be applied, where the costs on each distinct or discrete issue should fall. If, in relation to any issue in the case before it the court considers that it should adopt an issue based approach to costs, the court must ask itself which party has been successful on that issue. Then, if the costs are to follow the event on that issue, the party who has been unsuccessful on that issue must expect to pay the costs of that issue to the party who has succeeded on that issue. That is the effect of applying the general principle on an issue by issue based approach to costs."
D. COSTS LIABILITIES: THOSE AGREED AND THOSE DISPUTED
(a) Elements of Costs Agreed
Decoma
should pay
Haden's
costs of Head of Claim 3. As I understand it, this is because Head of Claim 3 was essentially unaffected by the payment into court (Head of Claim 3, by reference to Article 11.3, being excluded from the payment: see paragraph 8 above) and because the Judgment on the Preliminary Issues found that the £5.5 million odd claimed under Head of Claim 3 could not be recovered by
Decoma
and that this Head, along with three other Heads of Claim in this group, was subject to the contractual cap of £436,939.
Haden
should pay
Decoma's
costs of the counterclaim. That is because the payment into court, which has been accepted by
Decoma
with
Haden's
consent, made due allowance for the counterclaim.
Haden
should pay at least an element of
Decoma's
costs in respect of Heads of Claim 1, 2 and 7. That is because it is agreed that Heads of Claim 1, 2 and 7 were, and remain, covered by the payment into court.
Haden,
contends that his client's liability to pay
Decoma's
costs in respect of those three Heads of Claim should somehow be limited to the costs incurred in pursuing those claims up to the contractual cap, but not beyond, because the Judgment on the Preliminary Issues found that
Decoma
had no entitlement under those Heads beyond the contractual cap. Whilst I understand this argument as a matter of theory, I consider that it is wholly unworkable in practice. I put this to Mr Taverner QC during the course of argument and he was unable to explain how his preferred course could actually work. I have concluded that it could not. It seems to me that, in those circumstances, given both the Judgment on the Preliminary Issues and, more importantly, the inclusion of Heads of Claim 1, 2 and 7 within the payment into court, it would be fair to order that
Haden
pay all of
Decoma's
costs of Heads of Claim 1, 2 and 7, to be assessed on the standard basis if not agreed. There can be no qualification or reduction in those costs to reflect the fact that these three Heads of Claim were limited to the cap, because such a qualification or reduction would simply not be workable.
Haden
accepted that, up to the contractual cap, these Heads of Claim were
valid.
Therefore, I find that
Decoma's
entitlement to their costs of Heads of Claim 1, 2 and 7 must exclude any costs associated with the Preliminary Issues, which is a separate subject, dealt with below.
(b) Elements of Costs Disputed
Decoma's
Heads of Claim 4, 5, 6, 8 and 9 "the dismissed Heads of Claim". Mr Taverner QC contends that, because the result of the Judgment on the Preliminary Issues was to dismiss these five Heads of Claim in their entirety,
Haden
should be entitled to their costs of the dismissed Heads of Claim. Mr Sears QC, on behalf of
Decoma,
submits that they should have their costs of those claims, at least up until 13 July 2005, because they were included in the payment into court and
Decoma
could have accepted that payment into court up until 13 July 2005 and thereby recovered their costs of the dismissed Heads of Claim.
Haden
was successful on the Preliminary Issues, they should be entitled to their costs of the Preliminary Issues. On the other hand Mr Sears QC submits that, again, if
Decoma
had accepted the payment into court on 13 July 2005, then all of the costs of the Preliminary Issues would have been incurred by that date and, save in respect of Head of Claim 3,
Decoma
would have been automatically entitled to those costs on their acceptance of the payment into court.
E. WHO WAS THE SUCCESSFUL PARTY?
Haden.
Decoma
to be worth £10.5 million. They were maintained in full by
Decoma
both before and during the Preliminary Issues hearing. Following the arguments on the Preliminary Issues, they were dismissed in their entirety. No appeal is sought to be raised in respect of the dismissed Heads of Claim, a point helpfully confirmed by Mr Sears QC during the costs hearing. In such circumstances, it is hard to imagine a more comprehensive success for
Haden
than the complete dismissal of these five Heads of Claim as a result of the Judgment on the Preliminary Issues.
Decoma
lost on that point as well. Thus, not only was the first group of claims dismissed completely, but the second group (including Head of Claim 3) said to be worth £7.5 million, was found to be capped at £436,939. Accordingly, there can again be no question but that
Haden
were the successful party in respect of the Preliminary Issues.
Decoma
should pay
Haden's
costs of the dismissed Heads of Claim, namely Heads of Claim 4, 5, 6, 8 and 9, and that
Decoma
should also pay
Haden's
costs of the Preliminary Issues, with both those elements of costs to be assessed on the standard basis if not agreed. The remaining question then becomes whether or not the payment into court, and its acceptance by
Decoma,
makes any difference to that analysis.
F. THE EFFECT OF THE PAYMENT INTO COURT AND ITS ACCEPTANCE
(a) The Relevant Parts of Part 36
Decoma,
relied on CPR 36.11 which provides that a claimant may accept a payment into court without the court's permission if he gives the defendant written notice of acceptance not later than 21 days after the offer or payment in. Of course, that did not happen here. The part of CPR 36.11 relevant to the present situation provides:
"(2) If –
(a) …
(b) The claimant does not accept it within [21 days] –
…
(ii) if the parties do not agree the liability for costs the claimant may only accept the offer or payment with the permission of the court;
(3) Where the permission of the court is needed under paragraph (2) the court will, if it gives permission, make an order as to costs."
"Where –
(a) a Part 36 offer or a Part 36 payment relates to part only of the claim; and
(b) at the time of serving notice of acceptance 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."
Decoma
have not abandoned 'the balance of the claim'. On the contrary, the remaining 'balance of the claim', being Head of Claim 3 pursued under Article 11.3 for an amount in excess of the contractual cap, is the subject of
Decoma's
application for permission to appeal.
"(1) If a Part 36 offer or Part 36 payment relates to the whole claim and is accepted, the claim will be stayed.
…
(3) If a Part 36 offer or a Part 36 payment which relates to part only of the claim is accepted –
(a) the claim will be stayed as to that part; and
(b) unless the parties have agreed costs, the liability for costs shall be decided by the court."
(b)Decoma's
Contentions
Decoma
could have accepted the payment into court within 21 days (namely up to 13 July 2005) and that, had they done so,
Haden
would have been bound to pay their costs, which would have included the costs of the dismissed Heads of Claim (because those claims were included within the payment into court) and the costs of the Preliminary Issues (because those costs had all been incurred during the relevant period prior to 13th July). He argued, by reference to the decision of the Court of Appeal in Factortame
Ltd
& Ors
v
Secretary of State for the Environment [2002] EWCA Civ 22, that it was well established that a claimant who failed to beat the payment in was to be regarded as the unsuccessful party from the last date on which he could have accepted that payment in and that, by analogy, up until that date, such a claimant was to be regarded as the successful party.
Decoma
in circumstances where they had not only accepted £350,000 against all their claims except Head of Claim 3, but had also accepted that sum to take into account
Haden's
counterclaim, which had been pleaded in the sum of £1.2 million.
Decoma
to recover their costs in respect of the dismissed Heads of Claim and the costs of the Preliminary Issues. He says that any difficulties for
Haden
created by the payment into court were the result of the fact that the payment into court was made late, particularly when measured against the forthcoming date of the hearing of the Preliminary Issues.
internal
logic, they fail to address the realities of the situation in which
Decoma
now find themselves. I have already dealt in Section E above with the reasons why
Haden
was the successful party in respect of both the dismissed Heads of Claim and the Preliminary Issues. Mr Sears QC's original submissions did not address those matters at all. In reply to Mr Taverner QC, he was obliged to argue that the Judgment on the Preliminary Issues was of no real relevance to the dispute on costs. I cannot accept such an approach; I regard it as unrealistic and unreasonable to ask the court to dispose of costs by ignoring the clear result of the only substantive hearing between the parties. Since
Haden
was the successful party in respect of both the dismissed Heads of Claim and the Preliminary Issues, I consider that there would have to be some clear principle or rule, either within the CPR or the authorities, which could deprive them of one or both of these elements of the costs. On a consideration of the component parts of Mr Sears QC's submissions, I conclude there is no such principle or rule.
(c) Analysis
Decoma
had an automatic entitlement to accept the payment into court up to and including 13 July 2005 and that, if they had accepted the payment in up until that date,
Haden
would have been bound to pay their costs. Such a submission is incorrect. The payment into court was in respect of part of the claim only. Accordingly, up to 13th July 2005, the relevant part of the CPR would have been r 36.15(3), which provides that, if a Part 36 payment relating to part only of the claim had been accepted, the claim would be stayed as to that part and, in the absence of agreement as to costs, the liability for costs would be decided by the court. The balance of the claim then either had to be abandoned (CPR 36.13(2)(b)) or continued. There was, therefore, no automatic entitlement to costs, even if the payment in had been accepted by
Decoma
before or on 13th July 2005.
Decoma
did not in fact accept the payment in within the 21 days, then, pursuant to 36.11(2)(b)(ii), the permission of the court was required to allow
Decoma
to accept the payment into court in any event. It seems to me that, in granting that permission (which both parties urged me to do) I must have regard to the realities of the final result in the litigation when I consider the related question of costs. Those realities are set out in Section E above, where I have explained why, as a matter of general principle, I consider that
Haden
are entitled to the two disputed elements of costs.
very
different set of facts. In his judgment, Waller LJ, at paragraph 21, was simply reiterating the point that a payment into court usually brings with it an offer to pay costs. The payment into court in that case was in relation to the whole claim, not just part of it. That Waller LJ's judgment was specifically concerned with the facts of that case is also clear from paragraph 23 where he said:
"If a payment in has not been accepted there is a further starting point accepted by the Judge and by both sides in this case, that if the claimant fails to beat the payment in, prima facie the claimant will be considered the unsuccessful party as from the date when the payment in should have been accepted."
Again, I regard that as an expression of the law in relation to payments into court in straightforward cases. It by no means follows from that judgment that, in this case,Decoma
can be regarded as the successful party, even up to the 13th July 2005. Indeed, for the reasons I have set out at some length, they cannot be regarded as the successful party.
Decoma
would be unfair and unjust, and therefore contrary to the over-riding objective in CPR 1.1. After all, at the outset of the Preliminary Issues hearing,
Decoma
were seeking in excess of £18 million from
Haden.
I know from the figures which have been provided to the court that
Decoma
spent £550,000 by way of legal costs in pursuing that claim. All they have recovered for that substantial outlay is £350,000, and the dismissal of a counterclaim, pleaded in the sum of £1.2 million. Such a result cannot realistically be presented in any terms other than those of failure. It would be contrary to common sense to conclude that, overall,
Decoma
had been the successful party and should recover the two disputed elements of costs.
Decoma
had simply applied (on the
very
same day) to take the money out of court out of time.
Haden
had not confirmed that they would consent to such a course and, more importantly, neither side had sought the court's permission for the money to be paid out. Furthermore, since the parties had plainly not agreed their respective liabilities for costs, it would have been clear to everyone that, when costs came to be considered by the court, it was going to be a relevant consideration that five of the Heads of Claim had been dismissed altogether.
(d) Conclusions
Decoma
to take the money out of court, but on the basis that such payment relates only to those claims which, following the Judgment on the Preliminary Issues, are still in existence, namely Heads of Claim 1, 2, and 7 (up to the contractual cap). It seems to me that I cannot and should not give permission for the money to be taken in respect of the five Heads of Claim which I dismissed on 27th July 2005. They are no longer in existence.
Decoma
to take the money in court in respect of the dismissed Heads of Claim, I am still bound to deal with the costs consequences under CPR 36.11(3) or CPR 36.15(3)(b). I am obliged to decide all questions relating to costs pursuant to the principles set out in Section C above. Accordingly, for the reasons which I have given, I do so by ordering that the costs of the five Heads of Claim which I have dismissed, namely Heads of Claim 4, 5, 6, 8 and 9, should be paid by
Decoma
to
Haden.
view,
as set out in paragraph 35 above, that
Decoma
should pay
Haden
their costs of the Preliminary Issues.
Haden
should pay the costs of the Preliminary Issues, because the payment in was somehow late, and made too close to the hearing. This was a payment into court made almost a year before the start of the scheduled trial.
Decoma
had notified their acceptance of the payment into court prior to, rather than after, the handing down of the draft Judgment on the morning of 26th July 2005. On the evidence before me it is not possible to say which came first: the sudden desire on the part of
Decoma
to take the money (despite the repeated statement that they could not even consider it), or the provision of the draft Judgment itself. However, as Mr Sears QC fairly accepted, I certainly cannot infer from the evidence that
Decoma
would have accepted the money in court in any event.
Decoma
permission to take the money out of court, make no difference to my findings in Section E above that
Haden,
as the successful party, should have their costs of both the dismissed Heads of Claim, and the Preliminary Issues.
G. COSTS ATTRIBUTABLE TO HEAD OF CLAIM 3
Decoma
asked me to attribute a percentage of their costs to Head of Claim 3. This was so that I could order that
Haden
pay all of
Decoma's
costs of the action up to 13th July, less whatever percentage I attributed to Head of Claim 3. Since, for the reasons I have set out, I am not going to be making such an order in any event, it may
very
well be that attributing a percentage of the costs to Head of Claim 3 is a redundant exercise.
Decoma's
solicitor, attributes a percentage of just 2.8% (of the £550,000 odd spent by
Decoma)
to Head of Claim 3, but he makes plain that that is simply the percentage that could be directly linked to Head of Claim 3. He appears to accept that there would be other costs incurred in respect of Head of Claim 3 which are not included in the 2.8%. However, he makes no attempt to identify either the additional sums or the final percentage that would result. It seems to me, given that
Decoma's
own solicitor has avoided undertaking the task of identifying an overall figure or percentage attributable to Head of Claim 3, that it would not be sensible for me to attempt that same exercise.
Haden's
solicitor, Mr Lloyd Jones, expresses the
view
that 40% of
Haden's
costs relate to Head of Claim 3. He appears to accept that this is simply a
very
rough and ready guesstimate of the likely percentage, but it demonstrates the potentially significant effect of any ruling from the court on this point, and highlights the need for better information before such a ruling is made.
H. CONCLUSIONS
Decoma
permission to accept the payment in. I do so, on condition that the parties' respective costs liabilities will be as set out below.
a)Decoma
pay
Haden's
costs of Head of Claim 3.
b)Haden
pay
Decoma's
costs of the counterclaim.
c)Haden
pay
Decoma's
costs of Heads of Claim 1, 2 and 7. It is impossible to limit this liability to the costs incurred in pursuing the claims up to the contractual cap.
Haden
must therefore pay
Decoma's
costs of the Heads of Claim 1, 2 and 7 without such qualification. However, such costs will not include any costs incurred in respect of the Preliminary Issues, since my Judgment on those Issues only confirmed
Haden's
position at the outset, to the effect that the three Heads of Claim were
valid,
but only up to the contractual cap.
d)Decoma
pay
Haden's
costs of the dismissed Heads of Claim, namely Heads of Claim 4, 5, 6, 8 and 9.
e)Decoma
pay
Haden's
costs of the Preliminary Issues.
Haden.
I have rejected
Decoma's
principal argument on costs liability by reference to the payment into court. Therefore, it seems to me that
Decoma
should pay
Haden's
costs of the hearing on 28th October 2005. Not for the first time in this case, I express my thanks to Leading Counsel for their considerable assistance in resolving the
various points in issue between the parties.