Wates Construction Ltd v HGP Greentree Allchurch Evans Ltd 10.10.05

Conduct of a claimant was such as to justify a penal costs order against them.

The claim arose out of the collapse of a roof at a large retail unit in Salisbury. The owners of the building pursued a claim in respect of their loss/damage and expense arising out of the collapse, against the builders Wates.

The allegations by the Claimant against Wates were based upon negligent design of the drainage system of the flat roof. Initially Wates denied the claim and issued Part 20 proceedings against HGP. The Part 20 proceedings against HGP were subsequently discontinued on the first day of the trial and although Wates accepted they must pay HGP's costs of the Part 20 proceedings, there was a dispute as to the basis upon which those costs should be assessed by the Court.

HGP believed that the case against them was so unmeritorious that their costs should be assessed on the indemnity basis rather than the standard basis. Solicitors will always incur costs in the course of any case, which ultimately the Court regards as not essential for the conduct of the litigation. For example, if a solicitor reports on the progress of the case and is then asked by the client to write a further report for the use of their auditors, that second report is technically not an expense which is incurred in connection with the litigation. On the standard basis that item of expense would not be recovered from the losing party but on the indemnity basis it would be.

Where costs are considered by the Court on what is known as the standard basis then the successful party can anticipate that on any assessment there will be a shortfall in their costs recovery that could be as high as 15 to 20%.

HGP claimed that the allegations made by Wates lacked merit from the very beginning and that the manner in which the litigation was conducted by their solicitors was so unreasonable that the costs should be ordered on an indemnity basis (in which case, there would be no shortfall).

Decision

The Judge recognised that in the first period of activity Wates and/or their solicitors were open to criticism for the manner in which the pleadings were formulated, the failure to give proper disclosure or to deal with a request for further information. However, the Judge took the view that the manner in which the case was conducted was all part of the "rough and tumble" of ordinary litigation.

By August 2005 however, when witness statements were to be exchanged, the Judge took the view that it must have been clear that Wates simply did not have any ammunition with which to attack HGP. The roof collapse was due to matters for which HGP were not responsible by virtue of deviations from the design on the part of Wates. Any lingering doubts that Wates had that they might have an argument were effectively killed off when on 10 August 2005 the parties' experts discussed the allegations and reached agreement in writing which in effect exonerated HGP. HGP's solicitors recognised the potential to enhance their claim for costs on 27 September 2005 and put Wates and their solicitors on notice that if there was not an immediate agreement to discontinue the action against HGP then they would seek the costs of the trial on the indemnity basis.

The Judge considered that whereas up to 10 August 2005 the conduct of the litigation was within normal parameters, following the meeting on 10 August 2005 it must have been clear to Wates and their solicitors that their position was hopeless. Accordingly, he ordered indemnity costs to be paid from 11 August 2005, on the basis that on that date the parties would have received the notes of agreement between the experts which condemned Wates claim to failure.

Comment

Although Wates resisted the claim for indemnity costs, it is difficult to see how they could have resisted it from at least 27 September 2005 when HGP had offered to let them out of the action on the basis they paid costs on the standard basis, an offer which was accepted only on the first day of trial. However, the Judge did not base his decision upon the offer contained in that letter but upon the fact that once the experts had agreed on 10 August 2005 that there was no evidence to support the allegations being made by Wates, their conduct became culpable.

This case is a warning to claimants not to pursue a weak case beyond the point where the limitations of their case are established by the evidence or indeed lack of evidence