Colour Quest Ltd & Ors v Total Downstream UK Plc & Ors (Rev 1)

An indemnity costs order requires conduct which takes the litigation out of the norm. Moral condemnation is unnecessary, but ordinary unsuccessful advocacy is insufficient. A court assessing abandoned allegations should be cautious about conducting a detailed merits review and should assess the parties’ conduct without hindsight. A legitimate request for clarification of a Part 36 offer may affect the date on which the offer is treated as made. Part 36 interest is intended to provide protection on a generous and commercial basis. Although the Judgment Act rate cannot be varied, the court may postpone the date from which interest runs where the costs are exceptionally large and the case is outside the norm.

The judgment dealt with matters outstanding after a substantial commercial claim concerning the Buncefield incident. The principal issues were whether various parties should receive costs on the indemnity basis, the effective date and interest consequences of a Part 36 offer, allocation of costs between claims, the applicable Judgment Act interest date, and whether assessment of costs should be postponed pending an appeal.

The court considered the conduct of Total, Chevron and the other parties in relation to negligence, foreseeability, vicarious liability, contractual issues and the presentation of the claims. It also addressed clarification requested under CPR 36.8 and the operation of CPR 36.14, CPR 40.8 and CPR 47.8.

1. Indemnity costs. The court applied the principle in Excelsior Commercial v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879 that conduct must take the case out of the norm. Moral condemnation is not required. Total’s prolonged denial of negligence, despite its internal investigation, was sufficiently unreasonable to justify indemnity costs on that issue until the relevant admission and clarification were made.
2. The withdrawal of an allegation does not itself establish that it was hopeless. Realistic concessions should be encouraged. Following Brawley v Marcynski (No 2) [2003] 1 WLR 813, the court should adopt a broad and comparatively short assessment of the category into which the withdrawal falls, particularly where the only issue is standard or indemnity costs. Total’s position on foreseeability, assessed without hindsight and in light of the size and complexity of the claim and the expert material, was not sufficiently unreasonable to justify indemnity costs.
3. Chevron’s claims for indemnity costs failed. The issues concerning vicarious liability, the operator of the site, off-site negligence and the scope of instructions and best practice remained legitimately arguable. Costs were also apportioned between Shell’s claims according to the issues actually established or lost. WLPS/UKOP were not deprived of their costs merely because other claimants covered overlapping interests.
4. Part 36. BP’s clarification request was legitimate because the offer’s scope was uncertain. Applying Ford v G.K.R. Construction [2000] WLR 1397, the appropriate date for acceptance was extended to 28 June 2008. The appropriate interest rate on costs was three-month LIBOR plus 4%, reflecting the generous and commercial protection intended by Part 36.
5. Judgment Act interest. Under Thomas v Burn [1991] 1 AC 362, the 8% Judgment Act rate was not open to variation. However, CPR 40.8 permitted the court to postpone the commencement date. Because of the exceptional size of the costs and the disparity between costs claimed and costs ultimately assessed, interest was postponed for six months.
6. Total’s application to postpone assessment of Chevron’s costs pending appeal was refused. The likely appeal concerned only a limited part of the costs, while postponement would cause substantial delay.

First-instance post-judgment costs and interest determination. The judgment records that leave to appeal had been given on some matters, but no appellate decision is stated.