Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd

Acceptance of a claimant’s Part 36 offer after the relevant period does not create an inferred presumption of indemnity costs. Where the applicable rule is silent, costs are ordinarily assessed on the standard basis, subject to the court’s discretion under CPR Part 44.3 and the usual conduct-based test. There is no intermediate basis for awarding indemnity costs.

The court may award interest on costs from the dates on which the receiving party paid relevant invoices. An interim payment on account should be a rough and ready approximation of the likely assessed costs, taking account of materially inaccurate costs estimates without treating an estimate as a cap.

Fitzpatrick made a Part 36 offer of £10.25 million. Tyco accepted it nearly a year after the relevant period had expired and before the postponed trial. The parties agreed that Tyco was liable for Fitzpatrick’s costs, but disputed whether those costs should be assessed on the indemnity or standard basis.

Fitzpatrick also sought interest on its costs and an interim payment on account. The issues were whether the indemnity-costs provisions applicable where a claimant beats its offer after judgment could be applied by analogy, whether the parties’ conduct justified indemnity costs, the appropriate date and rate for interest, and the amount of any interim payment.

1. Costs basis. The presumption of indemnity costs in CPR Rule 36.14 could not be inferred into CPR Rule 36.10(4) or (5). Those rules contain no equivalent presumption, and Rule 36.10(3) expressly provides for standard-basis assessment where an offer is accepted within the relevant period. The different procedural situations—acceptance before trial and judgment after trial—were not analogous.
2. There was no intermediate or “halfway house” basis for ordering indemnity costs. A claimant could obtain indemnity costs either under an express presumption, such as Rule 36.14, or by satisfying the ordinary conduct-based test under CPR Rule 44.3.
3. Tyco’s conduct did not justify indemnity costs. Late acceptance was permitted by the CPR. The claim was complex, involved several potential causes of delay, had been settled for about half the amount claimed, and had been difficult to evaluate. The parties’ overall conduct was generally reasonable. Fitzpatrick’s costs were therefore to be assessed on the standard basis if not agreed.
4. Interest. The court had discretion to award interest on costs. Fitzpatrick had incurred substantial costs after making a reasonable offer and had been deprived of the use of that money while Tyco delayed acceptance. Interest was payable at 1% above base rate on costs invoices paid after 14 February 2008, calculated from the date each invoice was paid.
5. Interim payment. An interim payment should be a cautious approximation of the likely assessed costs. The substantial discrepancy between Fitzpatrick’s estimates and its costs claimed justified using £2.5 million as the starting figure. Applying a 50% reduction and a further 75% cautionary calculation produced an interim payment of £937,500.

First-instance decision. No appellate history was stated in the judgment.