Environment Agency v Lewin Fryer & Partners

A court may use its broad costs discretion under CPR 44.3 to require a party whose disclosure breach caused another party reasonably to incur costs to reimburse those costs, including costs payable to a non-party.

Disclosure extends to documents within a party’s control, including documents held by an appointed supervising contractor where the contractual and agency relationship gives the employer a right to possession or inspection. The position differs for an ordinary building contractor, whose documents are not generally within the employer’s control merely because the employer commissioned the works.

The Environment Agency claimed damages from Lewin Fryer & Partners for alleged negligent and defective design of a flood alleviation project. Lewin Fryer applied for pre-action disclosure against three contractors involved in construction and later abandoned those applications.

Lewin Fryer sought from the Environment Agency its own costs and the costs payable to the contractors. The central issues were whether the Agency had breached its disclosure obligations, whether those breaches caused the applications, and whether the court had power to make the requested costs order.

1. Power to award costs. The court had power under CPR 44.3 to order the Environment Agency to pay costs incurred in pre-action disclosure applications against third parties. The relevant question was whether the Agency’s disclosure breach reasonably caused the costs and whether, considering all the circumstances, the order was appropriate.
2. Disclosure obligations. Standard disclosure required disclosure of documents on which a party relied, which adversely affected its own or another party’s case, or which supported another party’s case. The obligation included a reasonable search, extended only to documents within the party’s control, and continued throughout the proceedings. Parties also had a general duty to co-operate and to keep each other informed about relevant third-party inquiries.
3. Babtie documents. Documents held by Babtie, the general supervisor and quality management supplier, were within the Agency’s control. Babtie acted as the Agency’s agent in supervising the works, and the contract required delivery of documents belonging to the Agency or acquired at its expense. Many of the documents should therefore have been disclosed in December 2005. The Agency’s failure to address that issue and disclose the documents was a breach.
4. The application against Babtie was reasonable and was caused by that breach. The Agency’s later voluntary inspection exercise substantially overlapped with the documents sought. The Agency was ordered to pay Lewin Fryer’s costs and Babtie’s costs, subject to excluding costs thrown away by the abortive hearing on 24 March 2006.
5. Balfour Beatty and Nuttall documents. The Agency had not shown control over documents held by those ordinary building contractors. Their documents were not generally within the employer’s control merely because of the employer-contractor relationship. The applications were therefore unconnected with any relevant disclosure breach by the Agency, and the Agency was not liable for those costs.
6. The costs of the present application were allowed in part and rejected in part. Remaining costs issues were left for agreement or written submissions.

First instance decision. No prior appellate decision is stated in the judgment.