McGlinn v Waltham Contractors Ltd & Ors

Where separate categories of claim are tried separately, a successful party may receive the costs of a distinct category which it has wholly defeated, even though other issues remain for later determination. The court should adopt an issue-based approach reflecting the substantive result, rather than a winner-takes-all approach. CPR 44.3(7) does not require a percentage order where the costs of the distinct issue can be assessed more fairly and readily than overall proportions. A payment on account should normally be ordered after a costs entitlement is established, using a rough assessment of the likely recoverable sum.

The claimant brought proceedings concerning defects in the design and construction of a house in Jersey. Wilson Large was joined as the fourth defendant in relation to specified defects and later in relation to separate over-valuation and over-payment allegations.

The defects issues were tried first and the claimant’s claims against Wilson Large on those issues were dismissed. The over-valuation issues were reserved for a later trial. Wilson Large sought its costs of the defects issues and an interim payment under CPR 44.3(8). The central questions were whether costs should be deferred until the later trial and whether CPR 44.3(7) required a proportionate costs order rather than an order for the costs of the distinct defects issues.

1. Costs of distinct issues. Wilson Large was entitled to its costs of and occasioned by the defects issues. Those issues were a separate category from the later over-valuation allegations, and Wilson Large had succeeded on both liability and quantum in relation to the defects claims. The later outcome of the over-valuation trial could not alter that result.
2. Split trials. The usual caution concerning costs in a split trial applies principally where liability is determined before loss and damage, and the claimant’s ultimate recovery remains uncertain. It did not apply where separate categories of liability and quantum had been identified and conclusively determined.
3. Issue-based costs. CPR 44.3 introduced a more sophisticated approach than the former winner-takes-all rule. Partial costs orders should reflect the level of success. The defects allegations constituted a distinct part of the proceedings under CPR 44.3(6)(f), and their costs were capable of relatively easy assessment. CPR 44.3(7) therefore did not require a percentage order under CPR 44.3(6)(a). An order by reference to costs incurred during specified periods under CPR 44.3(6)(c) was also appropriate.
4. Security for costs. The existence of a bank guarantee was a factor but did not justify delaying the costs order, particularly since the guarantee had expired and was less than the costs incurred.
5. Payment on account. Applying the approach in Mars UK Ltd v Teknowledge Ltd (Costs) [1999] Costs LR 44, the payment should be a lesser sum which the successful party would almost certainly recover, assessed on a rough and ready basis. After excluding disputed VAT, allocating 25 per cent of the costs to the over-valuation issues, allowing for assessment risks and applying a further 75 per cent, the appropriate interim payment was £180,000, payable on 27 March 2007.