Mostcash Plc & Ors v Fluor Ltd

An issue-based approach to costs is inappropriate where the issues argued and decided at trial do not match the issues formally ordered for determination. Applying it to the formal issues may be pointless where the successful party won each issue. Applying it to issues formulated only after trial, against that party’s opposition, may be unjust. The court may also decline to resolve a subsidiary issue solely to support an issue-based costs order where doing so would be disproportionate. Costs should ordinarily reflect the outcome on the question at the root of the litigation.

Mostcash Plc & Ors v Fluor Ltd concerned an appeal from preliminary-issue proceedings in the Technology and Construction Court before His Honour Judge Thornton QC. The claimants sought damages alleging failure to exercise care and skill in design, procurement and construction management for a paper recycling plant. Fluor relied on a January 1998 settlement agreement and provisions of the September 1996 EPCM agreement. The appeal succeeded on the settlement issue. The claimants accepted that the tort claim was barred by section 10.7, so the action against Fluor had to be dismissed. The principal remaining question was the proper costs order, given the mismatch between the formally ordered and actually tried issues.

Disposition and underlying result. Lord Justice Chadwick delivered the first judgment, and Lord Justice Waller agreed. The court allowed Fluor’s appeal. Fluor was entitled to rely on the January 1998 settlement agreement as a bar to the contractual claims. Although Fluor failed on the construction argument that the EPCM agreement itself excluded contractual damages, that issue became immaterial. The tort claim was precluded by section 10.7 and was not challenged on appeal. The action against Fluor was therefore dismissed.

1. Issue-based costs. The court declined to adopt an issue-based approach. The formally ordered preliminary issues did not correspond with the issues actually argued and decided at trial. Treating the formal issues as determinative was pointless because Fluor had succeeded on each of them in the Court of Appeal. Treating the later-formulated issues as determinative would have been unjust because they were formulated after the trial and in the face of Fluor’s opposition, which the Court of Appeal considered well founded.
2. Proportionality. It was disproportionate to determine the unresolved Unfair Contract Terms Act point merely to create a discrete issue for costs. The court was not required to decide that issue for the purpose of making an issue-based order.
3. Orders. Costs were ordered to reflect the outcome. Fluor was awarded its costs of the action and the appeal. An interim payment of £100,000 was ordered. The £40,000 previously paid by Fluor on account of the preliminary-issue costs was to be repaid with interest at the commercial rate of base rate plus 1 per cent, within 21 days. Permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): Fluor appealed from preliminary-issue proceedings in the Technology and Construction Court before His Honour Judge Thornton QC. The appeal was allowed.
2. Technology and Construction Court: The lower court had decided issues concerning the settlement agreement, the scope of liability under the EPCM agreement, estoppel, rectification and the Unfair Contract Terms Act. The judgment records decisions handed down on 11 January 2002 and 19 April 2002, but gives no citation.