Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd & Anor

In commercial litigation involving competing monetary claims, the party entitled to the net payment will generally be the overall successful party for costs. That is only the starting point. Under the Civil Procedure Rules, the court must make a just costs order after considering success on distinct issues, common costs, admissible settlement offers and the parties’ conduct.

An issue-based order should be used where required, but a proportionate costs order will often be more practical. A party may suffer a costs penalty for rejecting a nearly sufficient admissible offer without attempting negotiation. Conversely, a debtor’s persistent failure to make a realistic global offer may justify an adjustment in favour of the overall winner.

Following judgment in a long-running construction dispute, Jackson J determined the outstanding costs of the action. The principal issues concerned costs relating to three Scott Schedules and a separate preliminary issue.

Multiplex Constructions (UK) Ltd recovered a net balance of £6,154,246.79. It had, however, failed comprehensively on Scott Schedule 4 and had rejected a substantially more favourable admissible offer concerning Scott Schedule 1. Both parties had also missed opportunities to settle.

The central question was what costs order fairly reflected the overall result, the parties’ differing success on the schedules, their settlement conduct, and the practical choice between issue-based and proportionate costs orders.

1. Costs order. Cleveland Bridge was ordered to pay Multiplex 20% of Multiplex’s costs of the action, to be assessed on the standard basis. Each party was to bear its own costs of preliminary issue 11.

2. In commercial litigation involving reciprocal monetary claims, the overall winner is generally the party who receives the net payment. That conclusion supplies the starting point that costs should follow the event under the Civil Procedure Rules, r 44.3. It does not preclude adjustment for partial success, offers and conduct. This approach followed AL Barnes Ltd v Time Talk (UK) Ltd [2003] EWCA Civ 402 and Burchell v Bullard [2005] EWCA Civ 358.

3. The court should consider an issue-based order where it is needed, but should hesitate before adopting it because of its practical difficulty and the direction in r 44.3(7). A proportionate order may instead reflect relative success on particular issues while allowing the overall winner to recover common costs. The court applied the guidance in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507, Summit Property Ltd v Pitmans [2001] EWCA Civ 2020 and Aspin v Metric Group Ltd [2007] EWCA Civ 922.

4. The court treated the post-amendment approach in Carver v BAA Plc [2008] EWCA Civ 412 as generally applicable, not confined to personal injury litigation. Where an admissible settlement offer was nearly sufficient and was rejected without negotiation, a costs penalty might be appropriate. The court must also assess the parties’ wider conduct in seeking settlement.

5. Multiplex was the overall winner because Cleveland Bridge had to pay the net balance. Its recovery of costs nevertheless required substantial reduction. Multiplex had unreasonably rejected Cleveland Bridge’s December 2007 offer on Schedule 1 and had recovered only nominal damages on Schedule 4. Those matters justified allowing no recovery for the Schedule 1 costs and allowing Cleveland Bridge the Schedule 4 costs. Multiplex succeeded on Schedule 2 and was entitled to the common costs. The resulting provisional 10% recovery was increased to 20% because Cleveland Bridge bore the greater responsibility for failing to make a realistic offer to settle the whole action.

6. Preliminary issue 11 was a discrete phase. Multiplex won the design issue and Cleveland Bridge won the fabrication issue. As time and preparation costs were substantially equal, and disclosure failings offset each other, each party was ordered to bear its own costs of that issue.

not stated in the judgment.