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England and Wales High Court (Technology and Construction Court) Decisions
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Cite as:  EWHC 2387 (TCC)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Fetter Lane, London EC4A 1NL
B e f o r e :
| ESSEX COUNTY COUNCIL
- and –
|UBB WASTE (ESSEX) LIMITED
Judgment No. 3
Roger Stewart QC and George McDonald (instructed by Norton Rose Fulbright LLP) for the Defendant
Hearing dates: 13-14 July 2020
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
THE HONOURABLE MR JUSTICE PEPPERALL:
2.1 UBB had failed, in breach of contract, to achieve Service Commencement by the Acceptance Longstop Date under the contract;
2.2 UBB was not entitled to operate the modifications made to the facility for the production of so-called QSRF; and
2.3 the Authority was entitled to terminate the contract as at 13 June 2019 by giving notice pursuant to clause 67.
3.1 awarded damages to the Authority in the sum of £9,038,428 to the end of February 2019 with continuing losses thereafter at £99,563 per month;
3.2 dismissed UBB's claim for declaratory relief and its counterclaim for damages, pleaded at some £77 million; but
3.3 found that UBB was entitled to compensation of £745,234 pursuant to clause 39 of the contract.
4.1 At what rate should the court award interest upon damages?
4.2 Did the offer made by the Authority in March 2019 comply with the requirements of Part 36?
4.3 If not, should the court nevertheless treat the offer as a valid Part 36 offer either on the basis that any non-compliance was de minimis or because UBB is estopped from challenging the validity of the offer?
4.4 Has the Authority achieved a judgment that is at least as advantageous as its offer?
4.5 If the offer was compliant with Part 36, or is to be treated as having been a valid Part 36 offer, and the judgment is at least as advantageous as the offer, what orders should be made pursuant to r.36.17 of the Civil Procedure Rules 1998?
4.6 Irrespective of the position under Part 36, should the Authority be awarded its costs on the indemnity basis?
4.7 Should the court recognise UBB's partial success in this litigation and, if so, how?
4.8 On what terms should the court defer the running of interest under the Judgments Act 1838 on costs?
4.9 Should the court extend time to pay the judgment sum?
6.1 There is ample authority for the proposition that in exercising the court's discretion as to the rate of interest to be awarded under s.35A of the Senior Courts Act 1981 the court is seeking to estimate the claimant's further loss in being kept out of the money that, but for the breach of contract or other wrong, it should have had.
6.2 In exercising that discretion, the court should not embark on an enquiry as to the actual further loss, but should rather seek to award a commercial rate of interest at which somebody in the position of the claimant would have had to borrow the money. Such assessment should be fairly broad brush and there is no need for evidence that the particular claimant did in fact have to borrow funds.
6.3 In the current era of historically low interest rates, the conventional rate of 1% over base adopted by Langley J in Kuwait Airways might well not fairly reflect the true cost of borrowing. Indeed, the Commercial Court Guide provides the following guidance at paragraph J14.1:
"Historically the Commercial Court has generally awarded interest at base rate plus one percent unless that was shown to be unfair to one party or the other or to be otherwise inappropriate. In the light of recent interest rate developments there is no presumption that base rate plus one percent is the appropriate measure of a commercial rate of interest."
[See generally Tate & Lyle Food & Distribution Ltd v. Greater London Council  1 W.L.R. 149, Banque Keyser Ullman SA v. Skandia (UK) Insurance Co. Ltd (unreported, 11 December 1987), Kuwait Airways, Lindsay v. O'Loughnane  EWHC 529 (QB) and Kitcatt v. MMS UK Holdings Ltd  EWHC 786 (Comm).]
2. WAS THE OFFER A COMPLIANT PART 36 OFFER?
"If the Defendant accepts the offer within 21 days of the date of this letter (the 'Relevant Period'), the Defendant will be liable for the Claimant's costs of the Proceedings (including pre-action costs) up to the date on which written notice of acceptance of this Offer is received by the Claimant, in accordance with CPR 36.13."
9.1 Rule 36.7(2) provides that Part 36 offers are made when they are served.
9.2 The Authority's offer was sent by email at 4.54pm on 7 March 2019. Given that the email was sent after 4.30pm, it was deemed by r.6.26 to have been served on the following day.
12.1 both parties' solicitors would know such legal context; and
12.2 it was common ground that the offer was intended to be made and understood as a Part 36 offer.
"The court is reluctant to hold that parts of a contract are inconsistent with each other, and will give effect to any reasonable construction which harmonises such clauses."
"It is artificial to start with an acontextual preconception about the meaning of words used and then see whether that meaning is somehow displaced."
"The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter for dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax …"
"Any ambiguity in an offer purporting to be a Part 36 offer should be construed so far as reasonably possible as complying with Part 36. Once it is accepted that a time-limited offer does not comply with Part 36, one must approach the interpretation of the offer in this case on the basis that the party making the offer, and the party receiving it, appreciated that fact."
18.1 In Thewlis v. Groupama Insurance Co. Ltd  EWHC 3 (TCC),  5 Costs LO 560, the offer did not comply with the then mandatory requirement in r.36.2(2)(b) that it "state on its face that it is intended to have the consequences of Section I of Part 36." His Honour Judge Behrens held that it would not in any event have been a valid Part 36 offer because the offer letter stated that it could only be accepted after 21 days if the parties agreed the liability for costs or the court gave permission. Distinguishing the case from C v. D, Judge Behrens held that such wording was inconsistent with Part 36 and could not be ignored as mere surplusage.
18.2 The same issues arose in Shaw v. Merthyr Tydfil County Borough  EWCA Civ 1678,  P.I.Q.R. P8. The Court of Appeal endorsed Judge Behrens' reasoning on both points. Maurice Kay LJ did not doubt the authority of C v. D but observed, at :
"Here the offer was not a Part 36 offer because it failed to comply with the mandatory and highly prescriptive requirements of the current 'self-contained code.' In these circumstances it is not necessary to engage in the construction exercise invited by Mr Rivers. No process of construction, however liberal, can bring satisfaction of procedural requirements which were not fulfilled."
18.3 Pitchford LJ added, at :
"In the present case we are not concerned with a Part 36 offer presented as such and 'otherwise complying with its form' … We are concerned with an offer that purports to be made under Part 36, but whose terms are completely inconsistent with Part 36 and that fails otherwise to comply with its form."
19.1 the letter was intended to be a Part 36 offer;
19.2 r.36.5(1)(c) requires Part 36 offers to specify a "relevant period" of not less than 21 days (being the period during which the defendant will be liable for the claimant's costs upon acceptance under r.36.13);
19.3 the statement in the letter set out at paragraph 8 above was intended to be the statement of a relevant period in compliance with r.36.5(1)(c);
19.4 r.36.7(2) provides that Part 36 offers are made when they are served; and
19.5 since this offer was sent by email at 4.54pm on 7 March 2019, it was not "made" for the purposes of Part 36 until 8 March 2019.
20.1 First, it could mean that the 21 days ran from the date stated on the face of the letter, i.e. 7 March. If so, a mistake was made and the offer did not comply with r.36.5(1)(c).
20.2 Alternatively, it could mean that the 21 days ran from the date when the offer was made, i.e. 8 March. It is not, in my judgment, a forced construction to describe the date of the making of an offer contained in a letter as the date of the letter.
3. THE POSITION IF THE OFFER WAS NOT COMPLIANT WITH PART 36
DE MINIMIS ERRORS
"Nothing in this Section prevents a party making an offer to settle in whatever way that party chooses, but if the offer is not made in accordance with rule 36.5, it will not have the consequences specified in this Section."
26.1 In Huntley v. Simmonds  EWHC 406 (QB), Underhill J (as he then was) found that a purported Part 36 offer did not comply with the formal requirements of Part 36. The judge observed that the errors were "purely technical failures." While not a Part 36 offer, Underhill J held that in such circumstances the court could give effect to a non-compliant offer by the exercise of its discretion pursuant to Part 44.
26.2 In Fitzroy Robinson Ltd v. Mentmore Towers Ltd  EWHC 98 (TCC), Coulson J (as he then was) found that in considering the appropriate costs order the court could take into account that if two offers had been made in accordance with Part 36 then indemnity costs would have been payable as a matter of course under what is now r.36.17.
"Those consequences are not sought in the present case, even though PHI's offer was a claimant's offer. The point therefore does not arise for decision, but for my part I do not see how the court could award the additional interest unless the offer was a Part 36 offer properly so-called. Even a minor formal or technical defect would be fatal to that entitlement. So far as indemnity costs are concerned, they can of course be awarded under the general provisions as to costs, but absent a true Part 36 offer a claimant's claim for indemnity costs would have to be justified on the relevant general principles, not just by arguing that the offer only just failed to comply with Part 36."
"Given the facts there can be no quarrel at all with the overall result in the Fitzroy Robinson case; nor can there be any quarrel with the judge having regard to the without prejudice save as to costs offers as part of the relevant material in deciding overall whether to order indemnity costs. But in my respectful view, it goes altogether too far to take into account as a factor that, had only those offers been made as Part 36 offers, then indemnity costs would have been payable as a matter of course. That is a course neither mandated nor permitted either under Part 36 or under r.44.3. Similarly, while the result in the Huntley case may be capable of being justified on the special facts, in my view it is not permissible wholly to discount a number of failures to comply with the requirements of Part 36 as the merest technicality. Perhaps there can be de minimis errors or obvious slips which mislead no one: but the general rule, in my opinion, is that for an offer to be a Part 36 offer it must strictly comply with the requirements."
30.1 Rule 36.2(2) is clear and there is no possibility of such an offer being treated as a Part 36 offer.
30.2 Like any other settlement offer, the non-compliant offer must be taken into account when exercising the general discretion as to costs under Part 44: see r.44.2(4)(c).
30.3 In exercising the court's discretion under Part 44, the court cannot, however, treat an offer that is a "near miss" as if it were a compliant Part 36 offer.
"Should the Defendant require any clarification as to the terms of this Offer, or should the Defendant consider this Offer to be in any way defective or non-compliant with Part 36 of the CPR, please notify us by return and in any event within seven days of the date of this letter. Any failure to do so will be relied on by the Claimant to preclude the Defendant from attempting to avoid the adverse costs consequences of Part 36."
"… in any event the letter of 14 May 2010 made it clear that if the offer was in any way defective or non-compliant with Part 36, Mr and Mrs Ho's solicitors were asked to let them know as soon as possible. It seems to us clear that, not only did the solicitors treat the offer as a Part 36 offer in the light of the hearing of the appeal, but they also accepted it as a Part 36 offer in their letter of 21 September 2010."
"Although Thomas LJ did not express himself in this way, it appears to me that his reasoning was that Mr and Mrs Ho were estopped from challenging the validity of the Part 36 offer made by Mr and Mrs Seeff. In my judgment, this reasoning is equally applicable to the present case."
37.1 First, one must keep in mind that Part 36 is a self-contained procedural code. It has become something of a tradition in Part 36 cases to attribute that observation to Moore-Bick LJ in the important case of Gibbon v. Manchester City Council  EWCA Civ 726,  1 WLR 2081, but since 2015 it has been hardwired into Part 36 by the new r.36.1(1). Introducing the rules of estoppel would breach this core principle.
37.2 Secondly, Moore-Bick LJ added in Gibbon that Part 36 is a "carefully structured and highly prescriptive set of rules." He explained that parties were not bound to follow those rules but that, if they wanted the substantial benefits which flow from Part 36, they had to follow them in every respect. As Coulson LJ observed in King v. City of London Corporation  EWCA Civ 2266,  1 WLR 1517 at , that warning is as relevant today as when it was made by Moore-Bick LJ in respect of an earlier incarnation of Part 36. Indeed, this simple point is made by r.36.2(2), which reads:
"Nothing in this Section precludes a party making an offer to settle in whatever way the party chooses, but if the offer is not made in accordance with rule 36.5, it will not have the consequences specified in this Section.
(Rule 44.2 requires the court to consider an offer to settle that does not have the costs consequences set out in this Section in deciding what order to make about costs.)"
In my judgment, r.36.2(2) is a complete answer to the estoppel argument.
37.3 Thirdly, Moore-Bick LJ also explained, at :
"Basic concepts of offer and acceptance clearly underpin Part 36, but that is inevitable given that it contains a voluntary procedure under which either party may take the initiative to bring about a consensual resolution of the dispute. Such concepts are part of the landscape in which everyone conducts their daily life. It does not follow, however, that Part 36 should be understood as incorporating all the rules of law governing the formation of contracts, some of which are quite technical in nature. Indeed, it is not desirable that it should do so. Certainty is as much to be commended in procedural as in substantive law, especially, perhaps in a procedural code which must be understood and followed by ordinary citizens who wish to conduct their own litigation. In my view, Part 36 was drafted with these considerations in mind and is to be read and understood according to its terms without importing other rules derived from the general law, save where that was clearly intended."
For much the same reasons, I consider that Part 36 should not be construed so as to incorporate the rules of estoppel which would only be apt to introduce yet further uncertainty and complexity into the operation of the Part 36 regime.
37.4 Fourthly, I respectfully agree with the observation of Coulson LJ in Hertel v. Saunders  EWCA Civ 1831,  1 WLR 5852, at , that the parties cannot agree that an offer is in accordance with Part 36 if, on analysis, it is not. If they cannot agree that a non-compliant offer is a Part 36 offer then, in my judgment, still less can one party be estopped from taking the point about the defect.
37.5 Fifthly, I consider that, as a matter of policy, the responsibility for ensuring that an offer is compliant with Part 36 should lie squarely upon the offeror and his lawyers. There are two very simple answers to the unrelenting stream of cases which, as Coulson LJ observed in King, litter the law reports in which parties seek to obtain the benefits of Part 36 despite making non-compliant offers:
a) As has been repeatedly stressed by the Court of Appeal and as the rules clearly explain, there is no problem with a party making an offer outside Part 36. Such offers will be taken into consideration under Part 44 but will not gain the special advantages of Part 36.
b) As the commentary in Civil Procedure (the White Book) makes clear at paragraph 36.5.2, much of the difficulty would be avoided if parties would only use form N242A to make their offers.
4. WAS THE JUDGMENT AT LEAST AS ADVANTAGEOUS AS THE OFFER?
"(i) The Defendant has failed, in breach of contract, to achieve Service Commencement by the Acceptance Longstop Date under the Contract.
(ii) The Defendant's design for the Facility once executed was at all material times incapable of passing the contractual Acceptance Tests, and has not passed the contractual Acceptance Tests as at the date of the Defendant's acceptance of this Offer.
(iii) The Defendant is not entitled to operate the modifications made to the Facility for the production of QSRF.
(iv) The Authority is entitled to terminate the Contract under clause 67.
(v) The composition tests carried out by UBB between Q1 2016 and Q3 2018 were not valid Composition Tests as defined by the Contract, and the results of such tests are of no contractual effect and did not engage Clause 21.9A.2 of the Contract.
(vi) The Composition Test results are to be determined during the Commissioning Period on a rolling annual average basis using the average results from the four most recent Composition Tests (or, where there are less than four Composition Tests, the average of the available Composition Tests).
(vii) The requirements for an Impact and Remedy Report (Clause 21.9A.2 of the Contract) is only engaged if the results of the four most recent Composition Tests (or where there are less than four Composition Tests, the average of the available Composition Tests) confirm, on a rolling annual average basis, that the composition of the input Contract Waste does not fall within Composition Band A."
41.1 Paragraphs (i) and (iii) of the offer were in the same terms as the declarations granted at paragraph 391 of my principal judgment.
41.2 The declaration obtained, at paragraph 423 of my judgment, that the Authority was entitled to terminate the contract as at 13 June 2019 by giving notice pursuant to clause 67 equates to the proposal at paragraph (iv) of the offer. The possibility that such right of termination might thereafter be lost is not in point since it applies equally to the proposed offer and the declaration actually obtained.
42.1 As to (ii), see paragraphs 169-211 and 392 of my judgment.
42.2 As to (vi), see paragraphs 328-334.
42.3 As to (vii), see paragraph 334.3.
5. THE ORDER UNDER PART 36
45.1 r.36.17(4)(a): interest on the judgment sum at a rate not exceeding 10% above the Bank of England base rate from 29 March 2019;
45.2 r.36.17(4)(b): costs on the indemnity basis from such date;
45.3 r.36.17(4)(c): interest on the costs awarded under r.36.17(4)(b) at a rate not exceeding 10% over base; and
45.4 r.36.17(4)(d): the additional amount of £75,000.
INTEREST ON THE JUDGMENT SUM
47.1 The rate of 10% over base is not the starting point but rather the maximum possible enhancement.
47.2 The award of additional interest is not purely compensatory, but rather the objective of the rule is in large measure to encourage good practice.
47.3 The enhanced award of interest must be proportionate to the circumstances of the case. The Chancellor added that those circumstances may include (a) the length of time between the offer and judgment; (b) whether the defendant took entirely bad points or whether it behaved reasonably, despite the offer, in pursuing its defence; and (c) the general level of disruption caused by the defendant's refusal to negotiate or accept the offer. He stressed, however, that all cases will be different and the judge's duty is to have regard to all the circumstances of the individual case.
47.4 The purpose of the award of enhanced interest is to achieve a result that is fairer for the claimant. In some cases, a proportionate rate will have to be greater than a purely compensatory rate in order to provide the appropriate incentive to defendants to engage in reasonable settlement discussions and to mark the court's disapproval of any unreasonable or improper conduct pour encourager les autres.
47.5 Parties are no longer entitled to litigate forever simply because they can afford to do so. The rights of other court users must be taken into account and parties are obliged to make reasonable efforts to settle and respond properly to Part 36 offers made by the other side.
47.6 The Part 36 regime of sanctions and rewards was introduced to incentivise parties to behave reasonably and, if they do not, they can expect the court to exercise such powers to their disadvantage.
INTEREST ON COSTS
"That does not, however, indicate that some of the factors I have already mentioned may not be relevant. Moreover, once again I do not regard the award as purely compensatory. As I have also said, different factors may in practice apply to the enhanced interest under [rules 36.17(4)(a)/(c)]. That is because account may need to be taken of how the costs, on which an enhanced rate of interest is claimed, were incurred. It could have been, for example, that despite the fact that it was unreasonable to refuse the Part 36 offer, the conduct of the litigation was itself reasonable, so that the costs on which enhanced interest was sought were not incurred in contesting bad points or dishonesty by the defendants."
6. THE BASIS OF ASSESSMENT
"(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including–
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
(c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.
(5) The conduct of the parties includes–
(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim."
"(a) Indemnity costs are appropriate only where the conduct of a paying party is unreasonable 'to a high degree.' 'Unreasonable in this context does not mean merely wrong or misguided in hindsight': see Simon Brown LJ (as he then was) in Kiam v. MGN Ltd (No. 2)  1 WLR 2810.
(b) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs: see Waller LJ in Excelsior Commercial & Industrial Holdings Ltd v. Salisbury Hammer Aspden & Johnson  EWCA Civ 879.
(c) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. But the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may well lead to such an order: see, for example, Wates Construction Ltd v. HGP Greentree Allchurch Evans Ltd  BLR 45.
(d) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there was no injustice in denying the claimant the benefit of an assessment on a proportionate basis given that, in such circumstances, the claimant had forfeited its rights to the benefit of the doubt on reasonableness: see Digicel (St Lucia) Ltd v. Cable & Wireless plc  EWHC 888 (Ch)."
"(i) The discretion to award indemnity costs is a wide one and must be exercised taking into account all the circumstances and considering the matters complained of in the context of the overall litigation (see Three Rivers DC v. The Governor of the Bank of England  EWHC 816 (Comm) and Digicel.
(ii) Dishonesty or moral blame does not have to be established to justify indemnity costs (see Reid Minty v. Taylor  1 WLR 2800).
(iii) The conduct of experts can justify an order for indemnity costs in respect of costs generated by them (see Williams v. Jervis  EWHC 1837 (QB).
(iv) A failure to comply with Pre-Action Protocol requirements could result in indemnity costs being awarded.
(v) A refusal to mediate or engage in mediation or some other alternative dispute resolution procedure could justify an award of indemnity costs."
57.1 First, UBB advanced a case that was not just speculative, weak, opportunistic and thin, but which it knew or ought to have known was speculative, weak, opportunistic and thin.
57.2 Secondly, UBB made serious allegations of a lack of good faith against both the Authority and the Department for the Environment, Food and Rural Affairs without any proper foundation.
57.3 Thirdly, UBB cynically sought to embarrass the Authority and bully it into settling or abandoning its claims.
57.4 Fourthly, UBB adopted a strategy designed to frustrate the Authority's ability to obtain disclosure of obviously relevant and damaging documents.
57.5 Fifthly, he relies upon UBB's conduct in instructing Dr Weatherby despite an obvious conflict of interest and its delay in disclosing such conflict.
58.1 While largely unsuccessful in its Defence and Counterclaim, he asserts that UBB acted reasonably in putting forward its case. He points to the fact that much turned on a question of contractual construction on which UBB had the comfort of having succeeded in an earlier adjudication.
58.2 While I dismissed many of the good faith allegations, Mr Stewart points out that other such allegations did not need to be considered in view of the court's findings. Further, he argues that the allegations added by re-amendment in March 2019 did not substantially add to the costs of this litigation.
58.3 He denied any attempt to embarrass or bully the Authority.
58.4 He defended UBB's approach to disclosure, pointing out that its initial resistance to standard disclosure was a perfectly proper attempt to control the costs of what turned out to be a very expensive disclosure process costing, between both parties, some £10 million. Further, disclosure was complicated by the fact that many of the relevant documents were held by the EPC company and not by UBB itself and by difficult questions of privilege given the extent of the parties' commercial negotiations.
58.5 He argues that it would be rare and exceptional to order indemnity costs on the basis that an expert witness was conflicted. Further, he contends that Dr Weatherby's evidence did not form the foundation for UBB's case, that he was cooperative with his fellow expert witnesses, that the expert costs were exacerbated by the Authority's conduct in adducing immaterial expert evidence as to design issues and, in any event, UBB denied expert shopping or pursuing a technical case that it knew to be flawed.
The good faith allegations
Speculative, weak, opportunistic or thin claims
"Where a claim is speculative, weak, opportunistic or thin, a claimant who pursues it is taking a high risk and can expect to pay indemnity costs if it fails."
67.1 The fundamental problem with this project was that the design density for the waste on arrival at the biohalls was 0.55 t/m3 whereas the true density was 0.3 t/m3, meaning that the volume of waste was as much as 83% higher than the design volume and the biohalls were seriously undersized: see paragraphs 156-163 of my principal judgment.
67.2 UBB had identified the design problem by January 2015: see paragraphs 165-168.
67.3 Furthermore, UBB bid an unattainable level of BMW reduction without any proper understanding of:
a) the contractual BMc test;
b) the guaranteed but unproven performance measured by the AT4 test of a Spanish plant that was then still in construction;
c) any differences in composition between the waste assumed in the Spanish plant and that likely to be processed in Essex;
d) any differences in the processing methods in the two plants; and
e) the correlation, if any, between test results reported as AT4 and BMc.
[See paragraphs 172-185.]
67.4 UBB realised that a mistake had been made as early as September 2010 and, by February 2016, accepted that its BMW reduction bid was unattainable: see paragraphs 185-191.
67.5 As a result of these errors, UBB knew that the facility as designed was not capable of passing either the Throughput or the BMW reduction Tests: see paragraphs 169 and 172-199.
67.6 Despite attempting to buy down the Acceptance Tests in 2015, UBB's position changed significantly as soon as the composition data started to show a reduction in the putrescible content of the waste: see paragraphs 280-295 and 324-327. It was quickly seized on as the answer to UBB's problems. Indeed, I observed at paragraph 326 of my judgment:
"Plainly, Mr Faraldo was contemplating that UBB might be able to seize upon the latest composition data to blame the waste for all ills and propose the acceptance of the QSRF Line and other modifications as part of the necessary solution, all at the Authority's cost. It was an audacious plan given that the true causes of the facility's inability to pass the tests were the serious density design error and the unrealistic BMW reduction bid."
The expert evidence
7. SHOULD THE COURT RECOGNISE UBB'S PARTIAL SUCCESS?
82.1 These proceedings were principally about the failure of the facility to pass the Acceptance Tests and whether such failure entitled the Authority to terminate this long-term and valuable contract, or whether the true problem was the composition of the waste and the Authority was itself in breach of contract in failing properly to engage in the Options Review process with a view to remedying the composition issue.
82.2 Although its monetary claim was of secondary importance, the Authority also sought damages of around £9 million in respect of UBB's unauthorised operation of the QSRF Line.
82.3 Against that, UBB pursued a counterclaim pleaded at £77 million but in fact worth over £100 million by trial.
82.4 The Authority was successful both in its claims for declaratory relief and its monetary claim. While UBB's principal counterclaim was dismissed, its success on the asbestos issue meant that it recovered around 0.8% of the sums originally sought.
82.5 I accept Mr Stewart's analysis that the factual evidence occupied a little over one court day at trial. This is helpful in making a broad assessment of the overall importance of the issue, although irrelevant in the sense that, as I explain at paragraph 83 below, I am here dealing only with pre-trial costs.
82.6 Some disclosure was relevant only to the asbestos issue, but it concerned a short period of time in early 2017 and the documents were relatively modest compared to the vast size of the disclosure given upon the main issues.
82.7 While the parties chose to instruct major city law firms, five leading silks and three experienced juniors to litigate the very important issues concerning the future of this £800 million contract, the reasonable and proportionate costs of pursuing a discrete £800,000 counterclaim would have called for a very different approach.
82.8 I am awarding the Authority's costs on the indemnity basis whereas in fixing the percentage reduction in its recovery I am seeking to identify the appropriate set-off for the costs that would have been recovered on the standard basis had the court instead made an issue-based order. Accordingly, Mr Taverner's observation that the proposed 10% reduction would, in rough terms, equate to a costs order in UBB's favour of £1.5 million in respect of its success in recovering compensation of about half that amount is pertinent.
82.9 Further, my order should not just reflect UBB's reasonable and proportionate costs of litigating the asbestos issue but also the disallowance of the Authority's own costs on the issue: Monsanto.
83.1 UBB will pay 95% of the Authority's costs incurred to 29 March 2019, such costs to be assessed on the indemnity basis.
83.2 Thereafter, the Authority will recover its costs on the indemnity basis pursuant to r.36.17 without any proportionate deduction. (The Part 36 offer sought to settle both the claim and counterclaim. Since the Authority achieved a judgment that was at least as advantageous as its offer, it should recover costs without deduction from the end of the relevant period.)
8. INTEREST ON COSTS
9. DATE FOR PAYMENT