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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> National Museums and Galleries On Merseyside (Trustees of) v AEW Architects and Designers Ltd  EWHC 3025 (TCC) (11 October 2013)
Cite as:  EWHC 3025 (TCC),  1 Costs LO 39
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL
B e f o r e :
| THE BOARD OF TRUSTEES OF NATIONAL MUSEUMS AND GALLERIES ON MERSEYSIDE
|- and -
|AEW ARCHITECTS AND DESIGNERS LIMITED
|- and -
|PIHL UK LIMITED and GALLIFORD TRY CONSTRUCTION LIMITED (trading together in partnership as a Joint venture "PIHL GALLIFORD TRY JV)
Paul Reed QC and Brenna Conroy (instructed by Plexus Law) for the Defendant
Jonathan Lee (instructed by Pinsent Mason LLP) for the Third Party
Hearing dates: 22-25, 29-30 April, 1-2, 7-9 May and 10 June 2013
Crown Copyright ©
Mr Justice Akenhead:
"1 (1) It is an implied term in a contract to which this Act applies that any qualifying debt created by the contract carries simple interest subject to and in accordance with this Part.
(2) Interest carried under that implied term (in this Act referred to as "statutory interest") shall be treated, for the purposes of any rule of law or enactment (other than this Act) relating to interest on debts, in the same way as interest carried under an express contract term.
2. (1) This Act applies to a contract for the supply of goods or services where the purchaser and the supplier are each acting in the course of a business…
(2) In this Act "contract for the supply of goods or services" means…
(b) a contract (other than a contract of sale of goods) by which a person does any, or any combination, of the things mentioned in subsection (3) for a consideration that is (or includes) a money consideration.
(3)Those things are…
(c) agreeing to carry out a service.
3 (1) A debt created by virtue of an obligation under a contract to which this Act applies to pay the whole or any part of the contract price is a "qualifying debt" for the purposes of this Act, unless (when created) the whole of the debt is prevented from carrying statutory interest by this section.
(2) A debt does not carry statutory interest if or to the extent that it consists of a sum to which a right to interest or to charge interest applies by virtue of any enactment (other than section 1 of this Act).
This subsection does not prevent a sum from carrying statutory interest by reason of the fact that a court, arbitrator or arbiter would, apart from this Act, have power to award interest on it…
4 (1) Statutory interest runs in relation to a qualifying debt in accordance with this section (unless section 5 applies).
(2) Statutory interest starts to run on the day after the relevant day for the debt, at the rate prevailing under section 6 at the end of the relevant day.
(3) Where the supplier and the purchaser agree a date for payment of the debt (that is, the day on which the debt is to be created by the contract), that is the relevant day unless the debt relates to an obligation to make an advance payment…
5A (1) Once statutory interest begins to run in relation to a qualifying debt, the supplier shall be entitled to a fixed sum (in addition to the statutory interest on the debt)…
8 (1) Any contract terms are void to the extent that they purport to exclude the right to statutory interest in relation to the debt, unless there is a substantial contractual remedy for late payment of the debt…
16 (1) In this Act…
"qualifying debt" means a debt falling within section 3(1)…"
"Subject to rules of court, in proceedings (whenever instituted) before the High Court for the recovery of a debt or damages there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for all or any part of the period between the date when the cause of action arose and
(a) in the case of any sum paid before judgment, the date of the payment; and
(b) in the case of the sum for which judgment is given, the date of the judgment."
This provides an interesting pointer because it refers to both "debt" and "damages" which comprise a large bulk of the Courts' business in terms of monetary awards by way of judgment. There was at least in that statute a perceived difference between the two types of entitlement.
Indemnity or Standard and 100%
"2 The authorities are now well established and I do not intend to repeat them. There is largely, if not entirely, an overlap between what both counsel are putting forward as the appropriate basis: cases such as Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm)  EWCA Civ 879, per Waller LJ, in which he said:
"Is there something in the conduct of the action or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs?"
3. There are also the well known cases of Kiam v MGN Ltd (No 2)  2 All ER 242, in particular the judgment of Simon Brown LJ (as he then was), Gloster J (as she then was) in Euroption Strategic Fund Ltd v Skaninaviska Enskilda Banken AB  EWHC 749 (Comm), and this Court in Walter Lilly & Co Ltd v Mackay & Anr  EWHC 1972 (TCC), although this was on obviously on different facts and considerations, when the Court referred to yet more authority, in particular Andrew Smith J in Fiona Trust & Holding Corporation v Yuri Privalov  EWCR 664 (Comm) and The Mayor & Burgesses of the London Borough of Southwark v IBM UK Limited  EWHC 653 (TCC). I do not intend to repeat the summary of principles and considerations to be taken into account. Obviously, the fact simply that one parties loses the case, and maybe loses it on the basis of a firm judgment, does not mean, as such, that the losing party should pay costs on an indemnity basis. There must be some conduct which takes the case out of the normal run of the mill."
The conduct of the party against which indemnity costs are sought does not have to be lacking "in moral probity or deserving of moral condemnation" but the conduct should generally be unreasonable to a high degree.
"(i) In commercial litigation where each party has claims and asserts that a balance is owing in its own favour, the party which ends up receiving payment should generally be characterised as the overall winner of the entire action.
(ii) In considering how to exercise its discretion the court should take as its starting point the general rule that the successful party is entitled to an order for costs.
(iii) The judge must then consider what departures are required from that starting point, having regard to all the circumstances of the case.
(iv) Where the circumstances of the case require an issue-based costs order, that is what the judge should make. However, the judge should hesitate before doing so, because of the practical difficulties which this causes and because of the steer given by rule 44.3(7).
(v) In many cases the judge can and should reflect the relative success of the parties on different issues by making a proportionate costs order.
(vi) In considering the circumstances of the case the judge will have regard not only to any part 36 offers made but also to each party's approach to negotiations (insofar as admissible) and general conduct of the litigation.
(vii) If (a) one party makes an order offer under part 36 or an admissible offer within rule 44.3(4)(c) which is nearly but not quite sufficient, and (b) the other party rejects that offer outright without any attempt to negotiate, then it might be appropriate to penalise the second party in costs.
(viii) In assessing a proportionate costs order the judge should consider what costs are referable to each issue and what costs are common to several issues. It will often be reasonable for the overall winner to recover not only the costs specific to the issues which he has won but also the common costs."
(a) The belated failure by AEW to make the admissions which it did only several working days before the trial commenced.
(b) The failure by AEW to admit liability overall either well prior to the trial or at the latest after the unimpressive expert evidence deployed by AEW coupled with the admission that the AEW liability experts were not asked to address liability issues in their exchanged report. To this is added the unexplained non-deployment of AEW's factual witnesses.
(c) The unwillingness to engage effectively in the run up to the trial and during the trial on quantum matters.
(d) The failure at any time, and even after evidence and closing submissions, to make any realistic offer.
"8… (a) the conduct of NML in relation to supplement the claim;
(b) the provision of a Remedial Scheme thirteen months after the proceedings were issued;
(c) the late appointment of a Quantum Expert seventeen months after proceedings were issued and two months before the trial;
(d) the late provision of quantum information, with 400 pages being served on the parties three days before trial and information being drip fed throughout [the] trial;
(e) late amendments to the sums being claimed;
(f) the fact that NML failed on significant elements of the quantum case…
10…(a) NML amended their case on a number of occasions in circumstances where the case could have been pleaded correctly at the outset;
(b) NML's quantum documentation did not [materially] substantiate their claim, with a large part of the documentation on quantum served shortly before trial commenced without any or any valid excuse; and
(c) NML was unwilling to mediate for an inordinate an unjustifiable period of time."
|January 2010||The first appreciation by NML that there was a problem with the amphitheatres|
|December 2010||NML's solicitors ask AEW to admit liability in relation to the amphitheatre problems|
|May 2011||The SAS ceiling collapse|
|July 2011||The initial opening of the Museum|
|20 Sept 2011||NML issues its proceedings against AEW|
|November 2011||NML serves its Particulars of Claim|
|January 2012||Armstrong ceiling tiles are dislodged|
|Jan 2012||AEW served its Defence and very detailed Request for Further Information|
|24 Feb 2012||First CMC - 22 April 2013 trial date fixed; expert report due for exchange by 30 November 2012|
|March 2012||AEW serves its third party claim against the Contractor|
|31 July 2012||Disclosure originally due|
|21 Sept 2012||Witness statements originally due|
|3 Oct 2012||NML serves details of amphitheatre remedial scheme|
|25 Oct 2012||NML serves Amended Particulars of Claim|
|Nov 2012||Procedural agreement about further directions with new disclosure arrangements between 26 November 2012 and 14 Jan 2013, witness statements to be exchanged by 15 Feb 2013, Joint experts' statements by 15 March 2013 with reports by 29 March 2013|
|Mid-Jan 2013||AEW suggests mediation in mid-Feb 2013|
|25 Jan 2013||AEW asks NML for identity of its quantum expert|
|28 Feb 2013||NML appoints Mr Fitch as its quantum experts|
|4 March 2013||Court orders exchange of witness statements by 8 March 2013 (effectively against AEW which was in default) – final and unless orders. Joint experts' report to be filed by 21 March 2013|
|22 March 2013||Pre-Trial Review. Quantum experts joint statement to be filed by 26 March 2013 with quantum reports to be served by 2 April. Order relating to late disclosure from AEW.|
|2 April 2013||Mediation between all parties - unsuccessful|
|17 April 2013||NML serve two further witness statements including Ms Granville's 3rd and some 400 pages of attached documentation|
|22 April 2013||Day 1 of trial|
|9 May 2013||Day 11 of trial and end of evidence|
|10 June 2013||Final speeches|
|31 July 2013||1st judgment awarding £1,127,870. 40 in favour of NML|
|20 Aug 2013||2nd judgment awarding £1,236,419.24 in favour of NML|
|23 Dec 2010||Letter from NML to AEW:
"If in fact you accept liability then we respectfully request and require written conformation of this admission by return"
|4 Mar. 2013||Part 36 offer from AEW: Offer to pay £950,000 plus costs in respect of all liability.|
|23 Apr. 2013||NML make a WP Save as to costs offer to take £2.94 million plus indemnities, all as set out in a detailed Scott Schedule listing each element of the claim and the figure attributed to that element. AEW do not respond.|
|26 Apr 2013||No response having been received NML make a further WP Save as to costs offer to take £2.99 million plus indemnities. Again, NML set out that offer in a detailed Scott Schedule listing each element of the claim and the figure attributed to that element. Again, AEW do not respond.|
|27 Apr 2013||No response having been received to those two offers NML make its offer of 26th April 2013 openly, indicating that it wishes to receive counteroffers on its detailed Scott Schedule. AEW do not respond: it simply ignores the open offer.|
|1 May 2013||AEW write offering to pay £1.4 million plus costs to, apparently, include the effects of all indemnities. That offer was not broken down by reference to the Scott Schedule.
NML immediately respond asking for clarification of how the offer "worked" re the indemnities and whether it was correct that the intention of the offer was to include all sums payable under the indemnities within the £1.4 million.
Again AEW do not respond, and simply ignore that request for clarification.
|15th May 2013||Its email of 1st May 2013 having been ignored by AEW, NML writes repeating its request for clarification.|
|17 May 2013||AEW finally respond, providing some clarification on the indemnities point.
NML reply on 21st May 2013 seeking to pin down precisely what the indemnity is that is being offered.
Again AEW do not respond, and simply ignore that request for clarification
|24 June 2013||AEW write making a composite offer to pay £1.175m in respect of the amphitheatres and £600,000 in respect of the ceilings on the basis that:
NML give up all claims forever more in relation to those areas – ie.. not just the claims in these proceedings and
NML accept that offer as a composite: "should NML not accept any of the offers, the offers shall have no effect"
(a) No explanation has been given by AEW as to why either it decided to call no factual evidence (although witness statements had been exchanged) or why it admitted some aspects of liability only several working days before the start of the trial. Mr Reed QC suggests that I have no evidence as to why and therefore the Court should not take it into account. The remainder of the actual evidence both documentary and witness evidence (to which the court did have access) however suggests that the defence on liability was, at its best very thin, and at worst unsustainable. Notwithstanding this, AEW maintained its defence on all aspects of liability until almost the 12th hour. I do not suggest however that it was unreasonable on the part of AEW to deny liability in the pleadings but following disclosure and the retention by it of liability experts, the admissions of liability could and should have been made some weeks earlier than they were. I bear in mind that the pleaded case on liability on the SAS and Armstrong ceiling claims and the steps and stairs claim did not materially alter. I also take into account that it must have been known to AEW and its professional team at the very least some weeks before the exchange of witness statements of key members of AEW's original architect team (such as Mr Hiscock who had apparently left the firm) were not going to be called as witnesses to deal with important aspects of liability.
(b) AEW was unjustifiably late (in mid-March 2013) in disclosing particularly Mr Hiscock's notebooks which, importantly, contained serious admissions and corroborated Ms Granville's recollection of what was said between them in January 2010.
(c) I said at Paragraph 37 of the first judgment:
"I was surprised (to say the least) to be told by Mr Wasilewski that he and Mr Pepper (who both work for the same firm) had not been asked to consider what could reasonably be expected of architects in AEW's position. This extraordinary state of affairs (in a case all about alleged professional negligence on the part of architects) may explain why such little coherent thought had been given by Mr Pepper to this aspect of the case. Mr Pepper was wholly unconvincing about all aspects of liability."
To this point, Mr Reed QC, on instructions, referred to instructions which went to Mr Pepper from his solicitors on 17 November 2011 which asked that expert to "provide a preliminary view" on the issues of negligence (amongst others). Whatever preliminary views he may have provided on a privileged basis on the professional responsibility aspects of this case (if any), the joint report prepared by him and Mr Wasilewski is noteworthy at least for its omission to address clearly, obviously or at all issues of responsibility of either AEW in particular or in relation to what a competent architect exercising reasonable care should or should not have done. That omission is so glaring that it must have been known to AEW, its insurers and its professional team. I have no reason to doubt the evidence put forward (as set out above). The reality is that if, as is the case, the two experts were not asked to consider and address in their report the key issues of professional responsibility which were challenged in the pleadings, it is unsurprising and almost inevitable that it would have emerged that there was, on any proper analysis, no real defence on liability either in fact or otherwise on the merits. That is borne out by the evidence. It is borne out by the extensive admissions made by Mr Pepper on liability. Matters should never have got as far as a trial on liability.
(d) The above point is compounded by the non-acceptance of liability in all its respects following the extensive concessions made by Mr Pepper and in particular following his extraordinary concession that he was seeking to defend the indefensible in the interest of his client. I specifically asked Mr Reed QC after Mr Pepper had given evidence whether the denial of liability was being maintained and Mr Reed, properly, said that he would take instructions; no further concessions were made. It must have been obvious that, following Mr Pepper's evidence, AEW was facing very real difficulties on liability. Indeed, Mr Reed's written and oral closing hardly touched on liability in any material sense.
(e) Turning to quantum, I expressed surprise during the trial at various stages but with a growing concern that greater efforts were not being made by the quantum experts and the parties to agree substantial areas of quantum or at the very least identify the extent of disagreement. This emerged at best slowly. The production by NML during the trial (on or about Day 5) to the Court and to AEW and PGT of an open offer which listed each and every head of quantum and identified what figures (below those claimed) which NML would accept either overall or by reference to any individual figure was an imaginative and sensible move. There was however no (at least no open) equivalent response from AEW and, even in the final oral and written closing submissions on behalf of AEW, there were few concessions. An example is that there was nothing accepted as due in respect of NML staff costs notwithstanding the compelling evidence of Ms Granville (whose integrity and reliability were not seriously challenged in cross-examination).
Interim Payment on Account of Costs
"In a case where a costs management order has been made, at least seven days before any subsequent costs management hearing, case management conference or pre-trial review, and before trial, a party whose cost budget is no longer accurate must file and serve a budget revision showing what, if any, departures have occurred from that party's last approved budget, and the reasons for any increased budget. The court may approve or disapprove such departures from the previous budget."
Finally, Paragraph 8 stated:
"When assessing costs on the standard basis, the court –
(1) will have regard to the receiving party's last approved budget; and
(2) will not depart from such approved budget unless satisfied that there is good reason to do so."
"3. On 10 May 2011, the claimant took out ATE Insurance against the risk of having to pay the defendant's costs. The cover was up to £250,000. These proceedings were commenced on 25 July 2011, and the following day, the claimant notified the defendant of both the funding and the limit of the cover.
4. At the CMC on 29 March 2012, Edwards-Stuart J ordered that the defendant file and serve its costs budget in accordance with CPR PD 51G, the Costs Management in Mercantile Courts and Technology and Construction Courts - Pilot Scheme. On 31 May 2012, having considered the costs budgets submitted by both parties, Edwards-Stuart J made Costs Management Orders approving the claimant's costs budget of £317,333.25 (being £212,533.25 in respect of costs and £104,800 for the ATE Insurance premiums), and the defendant's costs budget of £264,708.
5. At the Pre-Trial Review on 18 January 2013, Ramsey J enlarged the cost management orders to cover the costs of daily transcripts at the forthcoming trial. This had the agreed effect of increasing the defendant's approved costs budget to £268,488. Apart from that, at no time before or at the trial (which started before me on 4 March 2013) did either side apply to increase or revise the costs budgets which were the subject of the costs management orders.
6. This was despite the fact that, on 7 February 2013, just a month before trial, the defendant sent the claimant and the court a revised costs budget, which doubled the previous estimate to £531,946.18. On 22 February, the claimant's solicitors objected to the revised budget, but at the same time notified the defendant's solicitors of a much smaller increase in their own budget figure to £372,179.53.
7. Although these exchanges were sent to the court, they were not included in the trial bundles, which were the only papers in this case that I ever saw: accordingly, I was wholly unaware that the defendant's estimated costs were now twice the amount approved in the costs management order. I was, however, aware (because I was told this expressly at paragraph 9.1 of Mr Susman's written opening) that:
"The defendant has not yet made any application for further enlargement of the Costs Management Order made on 31 May 2012, but any such application if made will be strongly resisted by the claimant."
No such application was made and the matter proceeded to trial and judgment."
The Defendant "won" the case and issues involving indemnity costs, interim payments on account of costs and the impact of the costs management orders made came into play.
"28. Prima facie, whether under PD 51G paragraph 8, or CPR 3.18, the costs management order (with its approval of the costs budget) is expressed to be relevant only to an assessment of costs on a standard basis. However, as a matter of logical analysis, it seems to me that the costs management order should also be the starting point of an assessment of costs on an indemnity basis, even if the 'good reasons' to depart from it are likely to be more numerous and extensive if the indemnity basis is applied.
29. The first reason for this is that, as set out in paragraphs 2 and 3.2 of PD 51G (paragraph 10 above), the costs budgets represent the parties' estimate of all the costs that they think that they will incur. It is not an estimate based on any particular form of costs assessment; it is just an estimate of likely costs. If it is an accurate estimate of all the costs that will be incurred, then it seems to me that it should be the relevant starting point for an assessment of costs on an indemnity basis as well as for an assessment on the standard basis…
33. It seems to me that, whether regard is had to the TCC Pilot, or the new rules in the CPR, or the guidance in Henry, the result is the same: unless the defendant can amend/revise upwards the costs management order or approved costs budget pursuant to paragraph 6 of the Practice Direction (and now r.3.15(3)), or persuade the court that there are good reasons to depart from it in accordance with paragraph 8 of the Practice Direction (and now r.3.18(b)), then the defendant's costs are going to be assessed by reference to the costs management order.
36…if the defendant wanted the court to approve the significant changes to its costs budget, then it had formally to seek such approval. It was not enough simply to file the material at court. As I have said, coming late to this case, I was entirely reliant on the parties to provide me with the information that I needed properly to manage the trial. I was wholly unaware of the fact that the defendant's estimate of costs had almost doubled in the weeks before trial. Had I known, I would have put the defendant to its election at the outset of the trial.
37. When should an application to revise/amend a costs management order be made? In my judgment, it ought to be made immediately it becomes apparent that the original budget costs have been exceeded by a more than minimal amount. On the facts of this case, that appears to be late January/early February 2013…
38. I am in no doubt that the application pursuant to paragraph 6 of PD 51G ought to have been made before the trial. That is because paragraph 6 identifies expressly the stages when such an application could be made, which are said to be "any subsequent costs management hearing, case management conference or pre-trial review, and before trial". There is nothing in paragraph 6 which envisages an application after the trial; indeed, I consider the paragraph expressly requires any application to be made before the trial.
39. Furthermore, in my judgment, an application to amend an approved costs budget after judgment is a contradiction in terms. First, it would mean that the exercise would no longer be a budgeting exercise, and would instead be based on the actual costs that have been incurred. Secondly, it would encourage parties to 'wait and see'; only applying to increase the budget costs if it was in their interests. Thirdly, it would make a nonsense of the costs management regime if, at the end of the trial, a party could apply to double the amount of its costs budget. The certainty provided by the new rules would be lost entirely if the parties thought that, after the trial, the successful party could seek retrospective approval for costs incurred far beyond the level approved in the costs management order."
(a) PGT had not then been brought into the proceedings; it was brought in some weeks after the first CMC.
(b) There were substantial amendments to the Claimant's case in the autumn of 2012, particularly in relation to quantum.
(c) It is clear that the case by the autumn of 2012 was becoming much more complex, particularly in relation to quantum, than had been earlier envisaged by the parties.
(d) From the autumn of 2012, in particular, the tone, content and quantity of solicitors exchanges increased beyond what could reasonably have been envisaged at the earlier stage, which was to lead to heated disputes about disclosure.
(e) From the autumn of 2012, and largely by agreement, the parties' legal representatives agreed a much more concertinaed programme up to trial which will inevitably have increased costs beyond what was envisaged at the time of the first CMC when an ordered programme was laid down.
These points can at least in part be gleaned from a comparison of the NML earlier and later budgets with pleadings costs rising by some £80,000, disclosure costs being some £180,000 higher, witness statements about £50,000 higher and expert reports £190,000 higher. The trial and trial preparation costs went up from about £150,000 to £345,000, which, at least to a large extent, reflects the greater complexity.
"If there is a successful outcome you will pay our ordinary costs, our disbursements and the success fee. You are entitled to seek recovery from your opponent of part or all of our ordinary costs, our disbursements and the success fee.
If there is an unsuccessful outcome, you will pay our discounted costs and our disbursements. You may also be liable for your opponent's costs, subject to your own insurance arrangements…"
"Disbursements" are explained. Under the heading "The success fee", this appears:
"The success fee is set at 50% of basic charges as set out in Schedule 1…The success fee cannot be more than 100% of basic charges.
Where the success fee becomes payable, then if we or you are required by the Court…to disclose to it or to any other party the reasons for setting the success fee at the level assessed by us, we may do so."
Under a "Miscellaneous" heading, it was said that if "any part of this agreement is found to be unenforceable, the remainder of it shall continue in full force and effect".
|Level||Schedule 1||Schedule 2|
|Trainee Solicitor/Legal Adviser||£110||£60|
"1) A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.
(2) For the purposes of this section and section 58A—
(a) a conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances; and
(b) a conditional fee agreement provides for a success fee if it provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not payable only in specified circumstances.
(3) The following conditions are applicable to every conditional fee agreement -
(a) it must be in writing…
(c) it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.
(4)The following further conditions are applicable to a conditional fee agreement which provides for a success fee -
(a) it must relate to proceedings of a description specified by order made by the Lord Chancellor;
(b) it must state the percentage by which the amount of the fees which would be payable if it were not a conditional fee agreement is to be increased; and
(c) that percentage must not exceed the percentage specified in relation to the description of proceedings to which the agreement relates by order made by the Lord Chancellor…"
(a) On any count, the rates charged by DWF, which is a substantial firm, in connection with the adjudication and related matters in late 2010 and early 2011 appear, even on Mr Reed's assertions, seem to have been less than even the Guideline rates.
(b) I do not consider that there is anything necessarily unlawful or unenforceable in the CFA agreement identifying "discounted" rates which would be chargeable if NML had lost the case. A significant number of CFAs have identified that, if the client loses the case, the solicitors will charge nothing. The discounting of rates in the event of failure is simply a commercial arrangement as between the client and the solicitor, which is not inherently unlawful or wrong.
(c) If the basic (or as here the "ordinary") rates are above what is fair, reasonable or realistic for solicitors in a particular area doing the particular work encompassed by the particular litigation, it is open to the costs judge simply to mark down those rates so that in the end the losing party, the Defendant, pays no more on a standard assessment than by reference to reasonable and appropriate rates. Subject to that and to the risk which it took in contesting the proceedings after becoming aware of the CFA, AEW would then be liable for costs assessed on such reasonable and appropriate rates plus any mark-up (up to 50% thereon) which the costs judge endorses or accepts.
(d) I doubt that the mark-up can be applied to fees charged for work done prior to the date of the CFA.
THE POSITION IN RELATION TO PGT
(a) On 8 April 2013, its solicitors wrote a "without prejudice save as the costs" letter to AEW's solicitors (accepted not to be a Part 36 offer as such). It was written in the context of the most recent offer made by AEW to NML on 4 March 2013 in which £950,000 plus costs had been offered to NML of which £350,000 related to the steps and stairs. Having explained various difficulties and their reasoning, they said:
"Our client's offer is therefore as follows:
(1) PGT offers to join AEW in making a joint offer to NML which enhances AEW's previous offers.
(2) The joint offer to NML must, if accepted by NML, settle all liabilities in relation to the amphitheatres: that AEW has to NML in the main action; that PGT has to AEW in the third party action; and all liabilities (save for latent defects discovered after the date of acceptance) that PGT has to NML.
(3) The joint offer, which will stand as an alternative to AEW's previous offer of £350,000 in respect of the amphitheatre geometry and fees claim, must be in the minimum sum of £875,000 [there being a footnote that "AEW are free to increase this sum"]. If accepted, PGT will pay £350,000 and AEW will pay the balance, with neither party having recourse to the other beyond those sums.
(4) AEW will pay NML's costs.
(5) Both AEW and PGT will bear their own costs of the litigation (i.e. both main and third-party actions)."
(b) This offer was effectively repeated on 18 April 2013 albeit that the minimum sum figure of £875,000 referred to in sub-paragraph (3) above was reduced to £700,000. This offer was withdrawn by e-mail dated 19 April 2013 because there was some reluctance on the part of AEW to offer as much a £700,000 in relation to the steps and stairs claim.
(c) The trial being well underway, on 29 April 2013 PGT's solicitors made a further "without prejudice save as the costs" offer:
"Our client's offer to compromise your clients' remaining contribution claims is therefore as follows:
(1) PGT offers to join AEW in making a joint offer to NML which enhances AEW's previous offers in respect of the amphitheatres.
(2) The joint offer to NML must be approved by PGT before it is made; and must contain the following provisions:
(a) NML must:
(i) undertake to include in the final accounts (without abatement, set-off or contra-charge) the full value of the work in relation to the amphitheatres; including the value of CVI340 and the later removal of the plinth; and any loss and/or expense that from CVI340 and the removal and the plinth - both of which NML must agree are Relevant Events and Relevant Matters;
(ii) undertake not to rely now or in the future (against PGT) on the efficacy of the amphitheatre design.
(b) Unless a sum is agreed between NML and AEW, that AEW indemnify NML in respect of:
(i) the value of CVI340 and the removal of the plinth; and
(ii) the value of such additional sum as is payable to PGT by way of loss and/or expense arising out of or in connection with the amphitheatre geometry, CVI340 and the removal of the plinth.
(c) It must, if accepted by NML, settle all liabilities in relation to the amphitheatres: that AEW has to NML in the main action; that PGT has to AEW in the third party action; and all liabilities (save for latent defects discovered after the date of acceptance) that PGT has to NML.
(d) It must be open to AEW and/or PGT to withdraw the joint offer unless and until it is accepted by NML.
(3) The joint offer will replace that part of AEW's offer dated 4 March 2013 which relates to the steps and terraces. The joint offer must be in the minimum sum of £800,000 [with the footnote as before]. It must maintain the sub-division between amphitheatre and ceiling issues. The joint offer will not be 'wrapped up' into a global offer but also extends to the ceiling issues in which PGT has no interest. There must be attached to the joint offer no conditions additional to or different from those set out in his letter, save by agreement between AEW and PGT. If the joint offer is accepted, PGT will pay £450,000 and AEW will pay the balance with neither party having reports to the other beyond those sums
(4) AEW will pay NML's costs.
(5) Both AEW and PGT will bear their own costs of the litigation (i.e. both main and third-party actions)."
(d) This had been preceded by a telephone discussion between AEW's and PGT's solicitors in which the latter had explained that the "likely settlement zone' on amphitheatres is £1.2m" noting that the former were "of more or less the same view" and that there was "likely to have to be a settlement fund of £1m if there is to be a deal". Whilst the Court can not know whether NML would have settled the amphitheatres claim at between £1m and £1.2m, that range of figures was not unrealistic (certainly in the light of the judgment sum of £1,127,870.40).
(e) In the result, AEW made a further "without prejudice save as to costs" offer to NML on 1 May 2013 in the sum of £1.4 million (of which £800,000 related to the amphitheatre) plus costs. It broadly incorporated the conditions suggested by PGT several days before.
"In the usual course of things the court will consider the incidence of costs in the main proceedings quite separately from the incidence of costs in the Part 20 proceedings, but nobody submitted that this was an inviolable rule. Even under the former regime, and long before the House of Lords illuminated the wide scope of section 51 of the Supreme Court Act 1981 in Aiden Shipping Co Ltd v Interbulk Ltd  AC 965, this court had held that both the High Court and the county court had "full and ample power to make such orders as to costs as between plaintiffs, defendants and third and subsequent parties as the justice of the case may require."