Environment Agency v Lewin Fryer & Partners [2006] EWHC 1597 (TCC)

[2006] EWHC 1597 (TCC)

Case No HT-04-322

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 6/07/06

Before

HIS HONOUR JUDGE PETER COULSON. Q.C.,

Between

ENVIRONMENT AGENCYClaimant

LEWIN FRYER & PARTNERSDefendant

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Ms Sarah Hannaford (instructed by Clarkslegal, Reading) for Claimant

Ms Joanna Smith (instructed by Squire & Co., WC2) for Defendant

Hearing Hearing date: 23/06/2006

JUDGMENT

HIS HONOUR JUDGE PETER COULSON Q.C.:

[1]In this action the Environment Agency (“EA”) claim damages for negligence and breach of contract against Lewin Fryer & Partners (“LFP”) arising out of the design and construction of the Jubilee River Project (“the Project”). This was a flood alleviation scheme covering Maidenhead, Windsor and Eton. The Project was completed in about November 2001. The EA allege that, after this date, there were floods and extensive damage due to deficiencies in the design work carried out by LFP. The damages claim is currently estimated in the region of £4 million.

[2]By an application dated the 13th March 2006, LFP sought extensive pre-action disclosure against three contractors involved in the Project pursuant to CPR 31.16 and CPR 31.17. Those contractors were:(a) Jacobs UK Ltd., formerly Babtie Group Limited (“Babtie”), who were engaged by the EA to act as General Supervisor and Quality Management Supplier in respect of the Project;

(b) Balfour Beatty Civil Engineering Ltd (“BB”), who were engaged as contractors by the EA in respect of the northern section of the Project including Taplow Sluice and Glen Island Bund north;

(c) Edmond Nuttall Ltd (“Nuttall”), who were engaged as contractors by the EA in respect of the southern section of the Project, including Manor Farm, Slough Road, Myrke Embankment, and various other low embankments.

[3]In circumstances which are explored in greater below, those applications were due to be heard by this court on Thursday the 27th April 2006, but were abandoned just before or at the outset of that hearing. LFP were, therefore, obliged to pay the costs of the three contractors against whom the applications had been made.

[4]By an application dated the 9th June 2006, LFP now seek to recover against the EA their own costs of that pre-action disclosure application, together with the costs that they have been ordered to pay the three successful contractors. LFP say that these costs would never have been incurred but for the failures on the part of the EA to carry out their own disclosure obligations properly and their conduct during the relevant period of February to April this year.

[5]I propose to deal with this application by identifying first whether the court has the power to make the order sought and, if so, any limitations on such power (Section B below). I then summarise what I consider to be the relevant facts (Section C below). Thereafter, in Sections D and E below I analyse, by reference to the principles and the facts:(a) Whether the EA were in breach of their relevant obligations;

(b) If they were, whether these breaches gave rise to LFP’s ultimately abortive applications against the three contractors;

(c) Whether, in all the circumstances, the EA should be ordered to pay the costs claimed. B. The Power to Make the Order Sought

B.1 The Issue

[6]On behalf of the EA, it was Ms Hannaford’s submission that the court did not have the power to make the order sought by LFP. This argument centred almost exclusively on the fact that LFP’s application for pre-action disclosure against the three contractors had been made under CPR 31.16 and/or 31.17; that the EA were deliberately not made a party to that application; and that the costs order now sought by LFP was very far removed from the usual costs order envisaged by CPR 48.1 as arising out of such pre-action disclosure applications. In answer to a question from me, I understood Miss Hannaford to accept that, if I concluded that the EA was in breach of their disclosure obligations to LFP, and that such breach was found to have caused the application to be made against the three contractors, then the court did have the power to make the costs order sought against the EA pursuant to CPR 44.3.

[7]In the light of this threshold argument it is necessary to identify what obligations in respect of disclosure the EA owed to LFP, and what power the court has to make adverse costs orders against the EA if it concluded that they were in breach of those obligations. In addition, it is necessary to consider whether, absent any breaches on the part of the EA, there is any power to make the order now sought.

B.2 General Disclosure Obligations

[8]What are the primary disclosure obligations of a party to civil litigation? By reference to CPR 31 they can, I think, be summarised as follows:(a) To disclose by way of a list all documents on which that party relies and/or which adversely affect his own case or that of another party and/or which support the case of any other party; (see the provisions as to standard disclosure in CPR 31.6).

(b) When giving standard disclosure, to make a reasonable search for such documents pursuant to CPR 31.7. Reasonableness depends on a variety of factors including the number of documents, the complexity of the proceedings and the difficulties or otherwise of retrieval. If a party does not search for a category or class of documents because that party considers that it would be unreasonable to do so, it must say so in its disclosure statement.

(c) A party’s duty to give disclosure is limited to documents which are or have been in his control: see the provisions of CPR 31.8. This covers not only documents that the party has or has had in its possession, but also documents of which that party has or has had a right to possession or inspection.

(d) The duty to disclose is a continuing one until the end of the proceedings: see CPR 31.10. Documents covered by the rules relating to standard disclosure which come into a party’s possession during the proceedings must be disclosed.

[9]In addition to these primary obligations, it seems to me that, in respect of disclosure, as with any other interlocutory step in civil litigation, the parties have a general obligation to co-operate with one another as much as possible to ensure that the real disputes between the parties are progressed to trial in an efficient and cost-effective fashion. In the disclosure context this duty to co-operate would, in my judgment, extend to keeping the other side generally informed about inquiries for copy documents being made of third parties.

B. 3 Adverse costs orders

[10]CPR 44.3 provides the Court with a wide discretion as to costs. The relevant provisions are as follows: “(1) The Court has discretion as to –(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid. (2) If the Court decides to make an order about costs – (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order... (4) In deciding what order (if any) to make about costs, the Court must have regard to all the circumstances, including – (a) the conduct of all the parties; (b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and (c) any payment into Court or admissible offer to settle... (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 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 his case or a particular allegation or issue... (a) whether costs are payable by one party to another; (b) the amount of those costs; and (c) when they are to be paid. (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order... (a) the conduct of all the parties; (b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and (c) any payment into Court or admissible offer to settle... (a) conduct before, as well as during, the proceedings, and in particular the extent to which the parties followed 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 his case or a particular allegation or issue...

[11]Accordingly, it seems to me to follow from this rule that, if party A fails to carry out its disclosure obligations properly and thereby causes party B reasonably to incur costs (and/or a liability to pay costs to others) which would not have been incurred but for party A’s failure, then party B can seek to recover those costs from party A pursuant to the provisions of CPR 44.3. As noted above, I did not understand this point ultimately to be in issue.

B.4 The Usual Order on Applications for Pre-Action Disclosure

[12]The usual costs order made as a result of an application for pre-action disclosure is identified in CPR 48.1. The relevant provisions read as follows:

“(2) The general rule is that the Court will award the person against whom the order is sought his costs – (a) of the application; and (b) of complying with any order made on the application. (3) The Court may, however, make a different order having regard to all the circumstances, including – (a) the extent to which it was reasonable for the person against whom the order was sought to oppose the application; and (b) whether the parties to the application have complied with any relevant pre-action protocols.”

[13]Ms Hannaford was, therefore, right to observe that the order now sought by LFP against the EA is unusual, in that it seeks to make a third party, the EA, liable for the costs of the pre-action disclosure applications against the three contractors. The usual order, as set out above, is that the applicant (in this case LFP) pays the costs of those who are required to comply with any order obtained. The order sought is even more unusual here, given that the EA were deliberately not made a party to LFP’s applications against the three contractors under CPR 31.16 and/or 31.17.

B.5 Summary as to Principle

[14]For all these reasons I have concluded that I have the power, under CPR 44.3, to make the costs order sought by LFP. However, I have also concluded that I can only make such an order if I decide that:(a) The EA were in breach of their disclosure obligations;

(b) Those breaches reasonably caused LFP to issue their pre-action disclosure applications of the 9th March against the three contractors;

(c) In the overall exercise of my discretion it is reasonable and appropriate to make the EA pay the costs of those pre-action disclosure applications.

[15]If, on the other hand, there were no breaches of their disclosure obligations by the EA, it is very difficult to see how such an order could be justified. I certainly accept Ms Hannaford’s submission that such an order would be far removed from that envisaged by CPR 48.2.

[16]I therefore turn to set out the relevant facts. In so doing I have borne in mind that the criticisms by LFP of EA’s performance of their disclosure obligations fall into two distinct categories:(a) The EA’s complete failure to disclose in their list of documents the documents in the possession of Babtie, BB and Nuttall which, on LFP’s case, were throughout within the control of the EA.

(b) The EA’s failure to keep LFP informed of their attempts to obtain, by voluntary means, the documents in the possession of Babtie, BB and Nuttall and, in particular, their failure to tell LFP about the voluntary disclosure exercise agreed with Babtie until shortly before the hearing on the 27th April. C. The Relevant Facts

[17]The original Particulars of Claim in this case make allegations of poor design and poor construction. LFP’s Defence, served on the 31st October 2005, makes further specific allegations of poor construction work. Therefore, I consider that the nature and quality of the works carried out by BB and Nuttall, and supervised by Babtie, was and remains a potentially important issue in this case. For this reason, all documents relating to those construction works were prima facie caught by both parties’ obligations to give standard disclosure, because the existence or otherwise of defects in the construction undermined the claim against LFP (which was based on defective design) and/or supported LFP’s case that the problems were not of their making, but were the responsibility of the three contractors.

[18]The EA’s original list of documents was served on the 2nd December 2005. Other documents were listed by the EA subsequently. There is no dispute that neither the list of the 2nd December, nor any of the lists provided by the EA prior to 9 March 2006, took account of any of the documents in the possession of the three contractors. Indeed, on the evidence, it seems clear that the lists of documents prepared on behalf of the EA were prepared on the basis that neither the EA nor their solicitors even asked themselves whether or not such documents were within their control.

[19]On the 24th January 2006, LFP’s solicitors wrote to the court on the subject of the inadequacies in the EA’s disclosure. Amongst other things they said:

“During the inspection process, it became clear to us that (contrary to expectations) the Claimant’s disclosure did not contain much new information in relation to the roles of third parties and, in particular, correspondence between the on site consultant/supervisors (e.g. Babtie) and the contractors, together with site records, were scarce. We, therefore, anticipate inviting various third parties to allow access to their files and to provide disclosure with the aim of ensuring that the parties and the Court have a complete picture of the relevant events. Of course, if the relevant third parties do not consent to disclosure we anticipate that an application for non-party disclosure will need to be made and a further period thereafter to allow for analysis of the third party disclosure and consideration of the possibility of third party proceedings.”

[20]The EA’s response, on the 27th January 2006, made this point:

“We agree with your observations on the extent and volume of the disclosure on both sides and have also not ruled out the possible need to access third party documents. We will be in a better position to review this and any further time needed for compliance with the existing directions once the relevant copy documents requested following inspection have been provided to us.”

[21]On the 31st January LFP notified the three contractors, together with a fourth, Ruthin Precast Concrete (“Ruthin”), of the various categories of documents that they sought and attached copies of their draft pre-action disclosure application to be made against each contractor under CPR 31.16/31.17. On the 3rd February LFP notified the EA in detail about the various categories of documents sought from Babtie, BB, Nuttall and Ruthin. The documents sought were extensive. However, the bulk (if by no means all) of the documents that were the subject of the draft application and the subsequent letter to the EA could, I think, be fairly categorised as documents comprising the “as built” records, namely those documents which identified precisely what was built and how at the different sites that made up the Project.

[22]There was never any response from the EA dealing with the particular categories of documents being sought. There was, however, a general response from the EA’s solicitors dated the 13th February. That said:

“3. The third party documentation to which you refer is relevant, if at all, to the issues that your client has now raised in its Defence in respect of the construction of the scheme. The fact that your client and its advisers has not had access to this documentation before pleading construction issues in its Defence and that you now take the view that it is essential to have sight of this documentation suggests that it is the basis of your client’s Defence to certain aspects of the claim that has not been thoroughly investigated. ... 6. We are ourselves following up the position with Babtie and if their files can be made available we will liase with you on arrangements for this. Insofar as the other parties are concerned, it, of course, will be necessary for us to inspect the files as well and we shall be grateful if you will copy us in on arrangements for this to avoid unnecessary duplication of costs...”

[23]The response to the draft application from the solicitors acting for Babtie and BB was uniformly hostile. They complained about the wide scope of the application, its legal basis and the potentially oppressive nature of the relief sought. References were made, for instance, by Babtie’s solicitors, to the existence of 78 boxes of documents. It appeared that, in contrast, Nuttall might have been prepared to provide some documents on a voluntary basis. Ruthin was certainly prepared to provide documents on a voluntary basis and subsequently did so. Thus, when the application was eventually issued on the 9th March it was not made against Ruthin and only against the other three contractors.

[24]On the 1st March there was a telephone conversation between LFP’s solicitor, Mr Crossingham, and Mr James who, together with Mr Morris, was the solicitor with the day-to-day running of the case on behalf of the EA. Mr James’ attendance note of the relevant part of this conversation reads as follows:

“RC has made requests of Babtie, Balfour Beatty, Nuttalls and RPC. Nuttalls and RPC originally gave their consent. RPC are sending documents to RC this Friday. Nuttalls have withdrawn their previous agreement. Nuttalls have instructed Plexus Law who claim there is no basis on which third party disclosure can be ordered. SMJ and RC agreed this was nonsense. Babtie have instructed Beale & Co., who have objected to the draft application on the grounds that it is too wide-ranging and a fishing expedition. Balfour Beatty have instructed Pinsents who have taken a similar line. RC is reviewing his draft application and after addressing the various complaints will issue it. SMJ noted that RC and SMJ have some common interest here. SMJ suggested that RC call him again before he issues the application. SMJ will up-date RC on our own efforts to obtain third party disclosure. RC suggested that the agency might have contractual rights to inspect Babtie’s documents.”

[25]There was a further telephone conversation on the 6th March between the two men. Again the relevant parts of Mr James’ attendance note reads as follows:

“2 SMJ reported that he is making slow progress with Babtie and Nuttalls because the insurer’s solicitors have got involved. SMJ is still hopeful that this issue can be dealt with voluntarily. RC is proposing to issue his application this week. He has run it past Counsel. Counsel advises the application has more chance of succeeding if it is more narrow although RC cannot see how he can sensibly narrow it. RC will send a draft to SMJ for his comments. If SMJ cannot resolve the issue voluntarily SMJ suggested that we either expressly or implicitly support the application so that it has more chance of success. SMJ also noted it would be helpful if the parties could inspect the documents at the same time rather than sequentially as will be the case for the RPC documents.”

[26]Mr Crossingham was unhappy about the way in which the EA had gone about their disclosure obligations. He wrote two letters on that same day both making similar points. The first contained this passage:

“In a letter dated the 17th January 2006 you notified us that that your client had discovered at its Maidenhead site office a series of original documents which had not previously been disclosed. We were at that stage surprised that your client’s search had not extended to the Maidenhead site office, or that its search had failed to identify the documents referred to in your letter dated the 17th January. Not only did this confirm that your client’s list of documents dated the 2nd December 2005 was incomplete, it also suggested that your client was still discovering documents which neither your firm nor your client’s experts had seen previously, or had any opportunity to consider in investigating the matter. Our concerns as to your apparent inadequate investigations prior to the commencement of proceedings against our clients were confirmed when we came to the issue of third party disclosure and you confirmed that you had not seen or, it seems, even contemplated requesting documents from Babtie, the party responsible for supervision of the works and ensuring the quality of construction. We consider this oversight on your part (and your client’s part) startling.”

In his second letter, written after the telephone conversation referred to above, Mr Crossingham also made criticism of the way in which the EA had gone about dealing with the disclosure of other parties. He said:

“Insofar as third party disclosure is concerned, we understand that Babtie and Nuttall had initially agreed to disclose their files to you, but that having notified their insurers both have now retracted that offer and appointed solicitors who are not prepared to co-operate. We reiterate our surprise and concern that you did not carry out the non-party disclosure exercise as part of your investigations before issuing proceedings against our clients. We are somewhat surprised that either Nuttall or Babtie could refuse your client access to their files. We understood from our telephone conversation with your Mr James on the 1st March 2006 that you accepted that Babtie’s documents were within your client’s control. Certainly the QMS contract between your client and Babtie might justify such an argument.”

[27]The following day, the 7th March, the EA’s solicitors replied and, for the first time, appeared to distance themselves from the imminent application for pre-action disclosure. They said:

“If you wish to pursue an application for the third party disclosure against Babtie, Nuttall or anyone else, you are free to do so. We will let you have our comments on the terms of any such application if you provide us with a draft. We are not intending to pursue such an application at this stage, nor to contribute to your costs of so doing. We should also add that we believe that any such application must be carefully defined and proportionate. We do not, for the avoidance of doubt, accept that documents held by either Babtie or Nuttall are within our client’s control.”

[28]The application against the three contractors, Babtie, BB and Nuttall, was issued on the 9th March 2006. There was a hearing on the 24th March, but that hearing had to be adjourned because insufficient time had been allowed for it by LFP. The hearing was re-fixed for the 27th April.

[29]During March and April the EA’s solicitors pursued two rather different approaches with LFP on the one hand, and Babtie on the other. With LFP they complained about the issue of the disclosure application without their having seen it in draft and maintaining, despite the clear terms of the letter of the 3rd February, that they did not understand what documents were being sought. On the 21st March they said:

“...we were in contact with two of the third parties against whom you were seeking disclosure and wanted to see whether we could assist in reaching an agreed position on disclosure with them in order to minimise costs. The position remains the same, but we can do little without understanding what you are seeking.”

This was the first express reference to this “contact” but no further information was given. As indicated above, another letter on the same day from the EA’s solicitors complained about LFP’s decision to go ahead and issue the application without letting them see a copy of the draft. There was also an argument about whether or not the EA should be given a copy of the application now it had been issued, although eventually this was provided.

[30]Although LFP did not know it, by this time the EA’s solicitors were involved in detailed discussions with Babtie as to the possibility of the EA inspecting the documents that were in Babtie’s possession. Those discussions began before the application was issued on the 9th March. LFP were not told about them. Neither were LFP told, in terms, about the possibility that the documents that they were seeking would be provided voluntarily by Babtie to the EA. Babtie’s solicitors were also unforthcoming on this topic. When Mr Gillies, Babtie’s solicitor, provided a statement in the pre-action disclosure application, he too made no reference to these discussions.

[31]It appears that, thereafter, on the 27th March and the 3rd April 2006, the EA’s solicitors attended Babtie’s offices to inspect and request copies of Babtie’s documents. Again, LFP’s solicitors were not told about these inspections. I have to say that the reason for the secrecy was, and remains, unclear. At one point it was suggested by the EA’s solicitors that Babtie’s solicitors had asked for these inspections to be kept secret until such time as it was agreed that they could be openly referred to, but this point was expressly refuted by Babtie’s Counsel at the hearing before me on the 27th April. Whilst the inspections were on a “without prejudice” basis until it was agreed that the documents could be copied and used, which did not happen until 19 April, that did not, of course, mean that the fact that these inspections were happening could not have been passed on to LFP’s solicitors. Indeed, there were numerous opportunities for the EA’s solicitors to tell LFP of the fact that they were taking place. For example, there was a debate in the correspondence in April about whether the Babtie documents were within the control of the EA. The EA’s solicitor said they were not, but omitted to make any reference to the fact that they had, by then, inspected those very documents on two separate occasions.

[32]In April the EA also provided further documents. It appears that some of these were documents that came from third parties (see, for example, the letter of 11th April and the photographs that had been taken by Nuttall). On the 20th April LFP’s solicitors wrote to the EA’s solicitors and said, amongst other things:

“On the 11th April you wrote to us enclosing a box of further documents from your client’s files which clearly already have been disclosed. Your explanation was that ‘during the course of interviewing witnesses we have also identified additional documentation not previously disclosed.’ Included within those documents were ‘a set of photographs taken during the construction process by Nuttalls’ and ‘a file of method statements relating to the structures which are the subject of these proceedings’. As you know, as a result of the inadequacies in your client’s initial disclosure (which was itself late) our clients have been forced to seek disclosure from third parties. As you also know, having been provided with our client’s disclosure application it seeks disclosure of construction photographs from Nuttall (e.g., see the first witness statement of Robert Crossingham at paragraphs 35(1)) and method statements also clearly within the categories of documents sought. Not only is it alarming that you are still discovering previously undisclosed documents at such a late stage, but it is still more so given that, to your knowledge, we have had to apply to third parties for documents which were at all times within your client’s control. This is clearly relevant to the issue of the costs of our client’s non-party disclosure application and we reserve the right to seek to recover some, or all, of those costs from your client.”

[33]On the 21st April 2006 the EA’s solicitor provided a statement in the on-going disclosure application. This was provided in answer to a request from me to understand the EA’s position in relation to the possibility of the joinder of other parties to the action, and the effect that that would have on the trial date in October. Although the statement did not really address that question, it revealed to LFP, for the first time, the details of the inspections as between the EA and Babtie. Mr Morris, the EA’s solicitor, said that Babtie had told him “I was not to inform the Defendants [LFP] of this until the outcome of my discussions with Babtie’s solicitors.” This was the point that was to be rejected by Babtie’s Counsel on the 27th April. It appears that it was only on the 19th April that Babtie’s solicitors had formally agreed to allow Mr Morris to have copies of the documents that he had flagged up in the two earlier inspections. It was only, therefore, at that point that the “Without Prejudice” nature of the voluntary inspection process had fallen away.

[34]Once it became apparent that LFP were going to obtain further documents from Babtie via the EA, they decided to abandon their pre-action disclosure applications against BB and Nuttalls. They were, therefore, obliged to pay the costs of their applications against those contractors. Although they continued the application against Babtie, on the 27th April LFP withdrew their application against Babtie as well. Again, they were ordered to pay Babtie’s costs. It is these costs of all three contractors, together with their own costs of the pre-action disclosure application, that LFP now seek against the EA.

[35]As to the documents that have been obtained by the EA through this process and passed on to LFP, Mr Morris identified the relevant categories that he had flagged up at the two inspections in March and April at paragraph 25 of this statement of the 21st April. He said:

“25 The categories of documents I identified on Babtie’s files as relevant to the construction allegations raised by the Defendants are as follows:- Contract 6 [BB] 25.1 Site instructions, method statements, channel cross section checks, value engineering documents, Babtie/Defendant’s correspondence, construction photographs and photograph register. Contract 9 [Nuttall] 25.2 Site instructions, method statements, Babtie/Defendant’s correspondence, correspondence with Nuttall, digital photographs (copies).”

Greater detail was provided in his letter to LFP’s solicitors on the 28th April, which identified the documents that were going to be provided on a site-by-site basis. Contract 6 [BB]

Contract 9 [Nuttall]

[36]I also have a two-page schedule of the documents that have now been provided by Babtie to the EA and which have been passed on to LFP. They include method statements, photographs, site instructions, correspondence, record sheets and inspection/approval requests. In my judgment there is a considerable degree of overlap between the documents sought by LFP against Babtie in their pre-action disclosure application of the 9th March and the documents in this two-page schedule which Babtie have provided to the EA for onward transmission to LFP as part of the voluntary disclosure exercise. D. The Claim for Costs in respect of Babtie

D.1 Preliminary

[37]For reasons which will become apparent below, I consider that very different considerations apply to the claim for pre-action disclosure against Babtie (and the costs thereby incurred), and the equivalent claims against BB and Nuttall. Accordingly, I deal with those claims separately. In respect of the claim for specific disclosure against Babtie I ask myself:(a) Were the Babtie documents disclosable by the EA? (Section D2 below)

(b) Why was the disclosure application made against Babtie and was it inappropriate or unreasonable? (Section D3 below)

(d) Are LFP entitled to claim against the EA the costs of their pre-action disclosure application against Babtie? (Section D5 below)

D.2 Were the Babtie Documents Disclosable by the EA?

[38]In my judgment, it is clear beyond doubt that many, if not most, of the documents sought by LFP against Babtie in their application of the 9th March should have been disclosed originally by the EA, because they were documents that were within the EA’s control. Take, for example, the documents in Babtie’s possession that comprised the “as built” records: the method statements, the photographs and other records, so many of which have now been provided. It is difficult to see how the employer who appoints a general supervisor to act on his behalf as his agent, overseeing the works on a complex construction project, is not entitled to have (and is in control of) the documents kept by the supervisor that demonstrate precisely how and what was being built on the employer’s behalf. Indeed, it seems to me that, such is the quasi-professional relationship between the employer on the one hand, and his supervising contractor on the other, that it would only be if the contract with the supervising contractor expressly denied that such documents were in the employer’s control, that such a case could even be argued.

[39]In fact, I consider that the contract between the EA and Babtie expressly provided that these categories of documents were within the EA’s control. The relevant clauses of the contract are set out in paragraph 42 of Mr Morris’ statement of the 20th June. They read as follows:

“3.1 The ownership and copyright in all drawings, reports, calculations, computer software, data and other documents provided by the client in connection with the work shall remain vested in the client... 3.3. At any time during this appointment when requested to do so or upon termination of this agreement the quality management supplier [Babtie] shall promptly deliver to the client all documents, papers and other property belonging to the client or acquired at the client’s expense which may be in the possession of control of the quality management supplier.”

[40]It seems clear to me that, again taking the “as built” records as an example, such documents were expressly within the EA’s control as a result of this provision. They were on any view ‘acquired at the EA’s expense’ as a result of the terms of the contract between the EA and Babtie. They were, therefore, either sent to the EA or, if not, the EA was entitled to them pursuant to this provision. I reject Ms Hannaford’s argument that, in some way, the documents being referred to here were documents that the EA had expressly requested to be provided, or had specifically paid for. I consider that such fine distinctions are not apparent from the words used, and would, in any event, be unworkable in practice.

[41]I further consider that the EA’s consideration and statement of its contractual position in respect of the documents in the possession of Babtie has been most unsatisfactory. It is clear that the EA did not ask themselves, prior to the preparation of their original list of documents in December 2005, whether the Babtie documents were, as a matter of fact or law, within their control. When the EA did, apparently, ask themselves this question in February/March 2006 they failed to grapple with it properly, limiting themselves to unhelpful and bare denials, such as the one in the letter of the 7th March, which amounted to a simple non-acceptance that such documents were within their control.

[42]The failure to grapple with this fundamental issue extended right up to the hearing on the 23rd June. I had thought (and in this view I was, apparently, joined by Ms Smith, on behalf of LFP) that Mr Morris had belatedly conceded that at least some of the Babtie documents were in EA’s control. This was as a result of paragraph 43 of his statement which stated:

“Whilst the scope of this contractual entitlement may, I believe, have entitled the Claimant to obtain copies of third party reports, LFP drawings, minutes prepared by the Environment Agency and the like in the possession of Babtie, all these were already available either through the Claimant’s or the Defendant’s disclosure.”

[43]However, Ms Hannaford submitted that this was not a concession; that the statement said “may have entitled” and not “does entitle”. When pressed as to whether the EA accepted that any of the Babtie documents that were the subject of LFP’s application for pre-action disclosure were within the EA’s control, Ms Hannaford’s response was that not all of the Babtie documents were within the EA’s control, which may well have been right but was not quite an answer to my question. She would not be further drawn on which categories of documents that had been within the CPR 31.16/31.17 application were, or might have been, within the EA’s control.

[44]As I have said, this rather opaque position stems directly from the fact that neither the EA, nor their solicitors, had asked themselves months ago the questions that I was putting to Ms Hannaford in argument on 23 June. For the avoidance of doubt, I find that, had the EA considered this question properly in 2005, they would have quickly concluded that, for the reasons given above, many, if not most, of the documents held by Babtie were within the EA’s control and, therefore, fell to be disclosed by the EA in early December 2005. Thus, the EA were in breach of their primary disclosure obligation, a breach which was only repaired in late April/early May 2006 with the provision by the EA to LFP of the documents identified at paragraphs 35 and 36 above.

D.3 Why was the Application made against Babtie and was it Unreasonable/Inappropriate?

[45]On behalf of LFP, Ms Smith argued that the disclosure application was made against Babtie because LFP wanted sight of the documents, particularly the as-built records, that Babtie had in their possession, and that by early 2006, it was clear that the only way that LFP were going to see those documents was to make an application for pre-action disclosure. Against that, Ms Hannaford argued that the application should not have been made; that it was premature, too widely drawn and aggressively pursued. She argued that the application did not arise from any defaults on the part of the EA.

[46]I do not accept Ms Hannaford’s careful submissions on this point. First, I find that, if the EA had complied with their disclosure obligations many, if not most, of the Babtie documents would have been included in their original list and there would have been no need for LFP to make a separate disclosure application against Babtie. In addition, I consider that it is impossible for Ms Hannaford to argue that the application was too widely drawn, given my finding that there is a close correlation between the documents sought by LFP against Babtie in their application of 9 March, and the documents that Babtie have now supplied. Perhaps too many categories were identified in the original application, but that can often be said, with the benefit of hindsight, in relation to applications of this sort. Moreover, the categories were properly refined by Ms Smith later in March.

[47]In addition, I do not consider that the application against Babtie was premature. I consider that LFP waited for as long as they dared before making that application. By the time it was made, I accept that LFP had no real option but to go to court. LFP were conscious, just as I was, that the trial date in October was rapidly approaching and that questions as to disclosure and possible further parties to the action had to be sorted out sooner rather than later.

[48]Although I accept Ms Hannaford’s submission that the application was pursued by LFP relatively aggressively, I do not think that, in the round, this is something for which LFP’s solicitors can be criticised, particularly given the rather unhelpful responses they got from those acting for the three contractors. I certainly do not think that any significant additional costs were caused as a result of the way in which the application was pursued. Whilst the application clearly indicated that Babtie might become a party to the action, that was unsurprising given the terms of CPR 31.16, and was wholly unremarkable if, as LFP maintained, there were defects in the work which Babtie failed to pick up during their performance of their supervision/QMC role.

[49]For all these reasons I reject the suggestion that the application in respect of Babtie for pre-action disclosure was unreasonable or inappropriate and/or that the costs were incurred because of the nature of the application or the way it was conducted. I consider that the making of this application was the only option for LFP given the EA’s failure to comply with their disclosure obligations in respect of the Babtie documents.

D.4 Can criticisms be made of EA’s conduct in respect of the Babtie documents?

[50]In my judgment a certain amount of criticism can be made of the EA’s conduct in respect of the Babtie documents. The first and most obvious one is the EA’s failure at any time to grapple with the question as to whether or not the Babtie documents, or even some of them, were within their control. This is a point I have dealt with in some detail above.

[51]In addition, it seems to me that the EA’s solicitors could have been more open with LFP’s solicitors about their discussions and arrangements with Babtie’s solicitors. This may well not have prevented the CPR 31.16/31.17 application from being made against Babtie in the first place because, by the 9th March, there were simply discussions between the respective solicitors about the possibility of voluntary inspection. But once it had been agreed between them that such “Without Prejudice” inspections would take place in late March/early April I consider that the fact of such inspections should have been disclosed to LFP’s solicitors. This may well have caused them to take a different view of the continuing application against Babtie and the hearing that had been fixed for the 27th April.

[52]The essence of this criticism of the EA’s conduct is that, at a time when everyone knew that LFP had embarked on a lengthy, expensive, contested application for pre-action disclosure against three different parties, the two parties who had access to and control of many of the documents involved in the application were themselves involved in a disclosure exercise which might make that application irrelevant, without telling LFP’s solicitors about that exercise at all. In my judgment LFP’s solicitors should have been told about the inspection exercise considerably earlier than they were.

[53]However, I want to stress that this finding as to conduct should not detract from the principal default on the part of the EA that arises in respect of the Babtie documents. That default was their failure to appreciate that much of this documentation was within their control and that, therefore, this inspection exercise should have been carried out months ago, prior to the preparation of their original list of documents in December 2005. D.5 Are LFP entitled to claim against the EA the costs of their application against Babtie?

[54]I consider that, for the reasons that I have given, LFP’s application against Babtie was reasonable and appropriate. It arose as a result of the EA’s failure to deal with their disclosure obligations properly. The principal breach that led to the application was the EA’s failure to grapple with the question as to their control of the Babtie documents, and to list such documents in their list of the 2nd December 2005.

[55]Moreover, the correctness of LFP’s position has been borne out by subsequent events. The documents belatedly supplied in late April/May by the EA, emanating from Babtie and the voluntary disclosure exercise, correlate closely to those sought by LFP in their original application of the 9th March. That further demonstrates that LFP’s original request was reasonable and should have been seen as such by the EA either prior to December (on the basis that the Babtie documents were generally in their control and no application by LFP should have been necessary to point that out), or, at the very latest, on receipt of LFP’s solicitor’s letter of the 3rd February, which set out clearly the categories of documents sought.

[56]Accordingly, as a result of this analysis, it seems to me that, subject to one exception identified in paragraph 57 below, LFP have demonstrated a clear entitlement to an order requiring the EA to pay both their costs, and Babtie’s costs, of LFP’s application for pre-action disclosure against Babtie of the 9th March. All of the material set out above leads me to exercise my discretion in favour of making such an order. For the avoidance of doubt, the order that I make is made pursuant to CPR 44.3 and arises out of the EA’s failure to comply with their disclosure obligations and, in particular, their failure to disclosure many, if not most, of the Babtie documents in their original list of December 2005.

[57]I said that there was an exception to this. The order that I make will exclude the costs thrown away by Babtie and LFP as a result of the hearing on the 24th March 2006. There was never going to be sufficient time to hear the pre-action disclosure applications in the 1½ hours that had been allowed by LFP. That hearing should have been adjourned by consent to a date agreed between the parties and the court. Indeed, at one point, it looked as if that was going to happen, but for reasons which are still unclear, in the end, all parties attended before me on the 24th March. It seems to me, therefore, that the costs thrown away as a result of that attendance should not be to the EA’s account. I find, however, that all the other costs incurred in respect of the application for pre-action disclosure against Babtie were to the EA’s account. In particular, contrary to Ms Hannaford’s submission, I do not believe that it was practical for the application against Babtie to be withdrawn any earlier than it was.

[58]For all these reasons I order that, save for the costs thrown away by Babtie and LFP as a result of the abortive hearing on the 24th March, the EA must pay to LFP:(a) LFP’s costs of their application for pre-action disclosure against Babtie dated the 9th March 2006

(b) Babtie’s costs of that application which had been ordered to be paid to Babtie by LFP. E. The Claims against BB and Nuttall

E.1 Preliminary

[59]I now turn to deal with the application in respect of the costs of the claims for pre-action disclosure against BB and Nuttall. I do that by asking the same questions as I asked in respect of the application against Babtie. As will become clear below, however, the answers to those questions are very different.

E.2 Were the BB/Nuttall documents disclosable by the EA?

[60]To some extent I am hampered in giving a conclusive answer to this question because I have not seen the contracts between the EA and BB, and the EA and Nuttall. Therefore, the particular reason why I concluded that the bulk of the Babtie documents were within the EA’s control (namely the express provisions of clause 3.3 of the QMC contract) is not available to LFP in respect of the documents held by BB and/or Nuttall.

[61]In addition, it seems to me that the relationship between the EA and Babtie was very different to the relationship between the EA and the two contractors, BB and Nuttall. Babtie were supervisors. They, therefore, acted as the EA’s agent in performing at least some of their tasks on site. It was a quasi-professional relationship which was, of course, another reason why I concluded that the Babtie documents were within the EA’s control.

[62]In contrast, there is no question of any quasi-professional or agency relationship arising as between the EA and BB and Nuttall. Their relationship was the same as that between any employer and his building contractor. It is, I believe, almost impossible to argue as a matter of principle that the employer has, in his control, all the documents that are physically in the possession of the building contractor. There is, as far as I am aware, no authority for such a proposition.

[63]For these reasons, therefore, on the limited evidence that I have, I must reject the suggestion that the BB/Nuttall documents should have been in the EA’s list of the 2nd December 2005. I do not, therefore, consider that the EA were in breach of their fundamental disclosure obligation to LFP by failing to provide them with the BB/Nuttall documents at that stage.

E.3 Why was the disclosure application made against BB/Nuttall and was it inappropriate or unreasonable?

[64]The first point to make is that, contrary to Ms Smith’s submission, I find that the categories of documents sought in the pre-action disclosure application against BB and Nuttall were significantly different to the categories of documents sought against Babtie. Any overlap between them was very small. Accordingly, LFP’s decision to issue pre-action disclosure applications against BB and Nuttall was a separate decision (involving separate documents) to their decision to pursue Babtie. Why was it made?

[65]It seems to me that the application was made because LFP wanted sight of those different documents that they thought would be in the possession of BB and Nuttall. Since they could not have expected to obtain those documents from either the EA or Babtie, it seems to me that LFP’s decision to make the application had very little to do with the EA or any alleged default on the part of the EA. It is very difficult, therefore, to see how or why the EA should now be liable for the costs of the applications against BB and Nuttall.

[66]I would be reluctant to describe the CPR 31.16/31.17 application against BB and Nuttall as inappropriate or unreasonable. It was plainly not going to be straightforward in all the circumstances to persuade the court that an order should be made, but it was possible that at least some of the categories of documents could have been the subject of a court order. I do, however, find that in relation to the documents held by BB and Nuttall, the categories of documents sought were too widely drawn, and that the applications against those two contractors could and should have been much more limited. Accordingly, to that extent, I accept Ms Hannaford’s submissions as to the nature of the applications made against BB and Nuttall.

[67]As I have already indicated, I also accept Ms Hannaford’s submission that there was very little overlap between the documents sought from Babtie and the documents sought from BB and Nuttall. As a result of that, it is unclear to me why, once the EA’s solicitors had indicated what documents would be coming from Babtie as a result of the voluntary disclosure arrangements, the applications against BB and Nuttall were so quickly abandoned. True it is that some of the documents sought from BB and Nuttall had either been supplied voluntarily by the EA in April (for example, method statements and photographs) or were provided via Babtie, but the vast bulk of the documents sought from BB and Nuttall in the LFP application of the 9th March had neither been promised nor provided.

[68]It is impossible not to conclude that, once LFP realised that they were going to get a good deal of documents from Babtie, they chose, quite sensibly, to cut their losses and abandon their difficult and potentially expensive application for different documents against BB and Nuttall. However, that decision, sensible though it was, only confirms my view that both the making of the applications against BB and Nuttall, and the decision to abandon them, had very little to do with the EA and could not be linked to any default on their part. E.4 Can criticisms be made of the EA’s conduct in respect of the BB and Nuttall documents?

[69]In my view the answer to this question is plainly No. Indeed, no particular criticisms are made by LFP. This was not a case, unlike the Babtie documents, where there was some separate voluntary disclosure regime about which LFP were unaware.

[70]Again, it is right to note that some of the BB/Nuttall documents were provided in April by the EA. It appears that this may have arisen as a result of the clearing of an office that had not previously been checked. Whilst this was a breach of the EA’s disclosure obligations, I consider that it is both unrealistic and unfair to penalise the EA in consequence. In a large case with a considerable amount of documentation and a number of separate sites, it is possible that these sorts of lapses will occur. I am entirely satisfied that nothing turns on it. It could not be said that, if these documents had been provided earlier, there would have been no pre-action disclosure application against BB and Nuttall. E.5 Are LFP entitled to claim against the EA the Costs of their Applications against BB and Nuttall?

[71]For the reasons set out above I consider that LFP are not entitled to claim against the EA the costs of their applications against BB and Nuttall. Unlike the application in respect of the Babtie documents, there was no breach of the EA’s disclosure obligations in respect of the documents in the possession of BB and Nuttall. Neither can criticisms be made of the EA’s conduct in respect of the documents in the possession of these two contractors. LFP decided to pursue BB and Nuttall in respect of pre-action disclosure for reasons which were and are unconnected to the EA. The application was maintained and then abandoned, again for reasons unconnected to the EA. It would be wholly wrong now to order that the EA should be liable for the costs of that application.

[72]For the avoidance of doubt, since there was no breach by the EA of their disclosure obligations, no order against the EA under CPR 44.3 could be made in respect of the applications against BB and Nuttall. That just leaves CPR 48.1. For the reasons set out above, there are no grounds at all for making what would be a very unusual order under that provision, to make the EA liable for the costs. F. Conclusions

[73]For the reasons set out above I reject LFP’s claims for the costs arising out of their applications for pre-action disclosure against BB and Nuttall.

[74]For the reasons set out above I allow LFP’s claim for the costs arising out of the application against Babtie. The only element of the costs incurred by LFP and the costs incurred by Babtie in relation to that application which I disallow were the costs thrown away as a result of the hearing on the 24th March 2006.

[75]In short, in respect of the Babtie documents, I accept Ms Smith’s submission that, if (as they should have done) the EA had provided in December 2005 or January 2006 the documents that have now been provided by Babtie, LFP would not have issued their application of the 9th March. The EA are therefore properly liable for such costs. In respect of the documents in the possession of BB and Nuttall, however, I reject that same submission. The documents now provided barely correlate with those sought in the 9th March application against BB and Nuttall. The application was made and then abandoned for reasons which were nothing to do with the EA and, therefore, the EA should not be liable for the costs of that application.

[76]That just leaves the costs of this application against the EA, which I have allowed in part, and rejected in part. I have not heard any arguments on costs, so I will have to leave that point over, although I would hope that liability for the costs of this application could be agreed. If not, I require short written submissions on all remaining costs issues to be provided by noon on Tuesday 11 July, and I will deal with such issues on paper prior to 4.30 pm on the 14th July 2006.