National Museums and Galleries On Merseyside (Trustees of) v AEW Architects and Designers Ltd [2013] EWHC 3025 (TCC)

“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.”

“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)[2002] 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)[2002] 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[2012] EWHC 749 (Comm), and this Court in Walter Lilly & Co Ltd v Mackay & Anr[2012] 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 [2011] EWCR 664 (Comm) and The Mayor & Burgesses of the London Borough of Southwark v IBM UK Limited [2011] 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.”

“(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.”

“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.”

“If in fact you accept liability then we respectfully request and require written conformation of this admission by return” 4Mar. 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”

“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.”

“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.”

“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.”

“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.”

“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…”