Skanska Construction UK Ltd. v Egger (Barony) Ltd.

In exercising the costs discretion, the court must assess the overall course of the litigation. The successful party is ordinarily identified by the net monetary outcome, but success is not the sole measure. The court must also consider partial success, the parties’ conduct before and during proceedings, the reasonableness of pursuing issues, settlement opportunities, offers, exaggeration, delay and lack of candour. Where claims and counterclaims are technically complex and closely interwoven, a percentage order applying to the whole costs is appropriate. The assessment should consider the cumulative and evolving picture rather than isolated snapshots of individual claims.

The judgment concerned the costs consequences of extensive construction litigation arising from the development of an automated chipboard factory. The claimant recovered substantial sums on its claims, while the defendant succeeded on parts of its counterclaim. The litigation involved separate liability and quantum trials, numerous claims, technical expert evidence and extensive disputes about contract administration, extensions of time, valuation and remedial works.

The court considered which party was successful overall and how each party’s conduct affected the costs and the failure to settle. The central issue was the proper exercise of the discretion under Civil Procedure Rules 1998, Part 44.3.

1. Outcome. The claimant was the overall net winner. The defendant was ordered to pay the claimant’s costs, subject to assessment or agreement and capped at 55% of the total costs.
2. Under Civil Procedure Rules 1998, Part 44.3, the general rule that the unsuccessful party pays the successful party’s costs is subject to the court’s discretion. The court must consider all the circumstances, including conduct, partial success and offers to settle.
3. The most important indication of success was the party required to pay money to the other. That was not conclusive. The court also had to evaluate the true cost of achieving the result and whether conduct made that cost disproportionate.
4. The court rejected an assessment based on isolated comparisons between the amount claimed at a particular stage and the amount ultimately recovered. In complex litigation, the court should stand back and assess the evolving dispute, including the cumulative effect of the parties’ conduct.
5. Egger’s failure properly and contemporaneously to administer the contract, deal with records of direction and extensions of time, and engage candidly with claims materially increased the cost and difficulty of the proceedings. SCL’s exaggerated claims, contract/no-contract position and reactive conduct also contributed to the failure of settlement and had to be reflected in the order.
6. Interest formed part of the economic reality of the dispute and could not be ignored when assessing recovery and settlement consequences. Value added tax was part of the sums recovered but was not treated as part of the parties’ recovery for this purpose.
7. Because the claims and counterclaim were closely interwoven and difficult to disentangle, a percentage order relating to the whole costs was preferable to separate orders for individual claims.