Van Dijk v Wilkinson

A costs discretion requires consideration of all material circumstances, including conduct, relative success on different issues and relevant settlement offers. A judge intending to make an order for a party that has not sought costs should give the other party an opportunity to respond. An appellate court may correct an error in the exercise of discretion, consider relevant subsequent developments and make an issue-based costs order. Success on one issue does not necessarily justify an overall costs order. In a fixed-price contract, agreed quantities are not ordinarily remeasured merely because a later challenge is made; the price remains subject to deductions for incomplete or defective work.

The claimant and a contractor disputed the final account and claims arising from building works at listed premises. After a 13-day trial of selected Scott Schedule items, the Technology and Construction Court found that the contractor had repudiated the contract, awarded limited damages and ordered the contractor to pay half the claimant’s costs. The contractor appealed the costs order. The claimant cross-appealed findings concerning lake works and a museum floor. The wider proceedings were later settled by consent, leaving those three matters for determination. The central issues were whether the substantive findings should be disturbed and how costs should be allocated in light of the trial results, the parties’ conduct, an unaccepted offer and the subsequent settlement.

Mr Justice Burton gave the first judgment, with Lord Justice Latham agreeing. The appeal was allowed and the cross-appeal was dismissed.

1. Lake works. The trial judge had found that the parties agreed a valuation of £46,214.07. The alleged double accounting was not properly advanced at trial, was raised only in general terms at the costs hearing and was not established by the expert report or evidence. There was therefore no basis for disturbing the agreed figure.
2. Museum floor. The trial judge had found that the works were subject to an agreed fixed price. In such a contract, any error in the initial measurements forms part of the parties’ contractual risk. The agreed sum remained subject to deductions for incomplete work and proved defects. The claimant’s proposed deductions were unsupported by evidence and would have required a disproportionate rehearing. The finding was left undisturbed.
3. Costs discretion. The judge erred in exercising his discretion. He failed to deal with the contractor’s material offer of 2 March 2000, despite the requirements of the Civil Procedure Rules 1998. He also made an order in favour of the claimant although the claimant had not sought costs below, without giving the contractor an opportunity to address that proposed order.
4. Reassessment. The Court of Appeal was entitled to consider the later settlement and exercise its own discretion. The contractor had substantially succeeded on the final account; the claimant had succeeded on repudiation but recovered only limited damages. The conduct of both parties and the unaccepted offer were relevant. Success on repudiation did not justify an overall costs order. The claimant was awarded two-thirds of the costs of the repudiation issue and claims arising from it, while the contractor was awarded the costs of the balance of the action, with the sums to be set off.

The appellants were awarded the costs of the appeal and cross-appeal, subject to detailed assessment. There was no order as to the costs of the interlocutory hearing, and no interim order for costs.

1. Court of Appeal (Civil Division): In [2001] EWCA Civ 1780, the appeal against the costs order was allowed and the claimant’s cross-appeal concerning the lake and museum floor was dismissed.
2. Technology and Construction Court, Queen’s Bench Division: His Honour Judge Peter Bowsher QC found repudiation, determined selected final-account and damages issues, and ordered the contractor to pay half the claimant’s costs.