Fitzroy Robinson Ltd v Mentmore Towers Ltd

In commercial litigation involving claims and counterclaims, the party who ultimately receives payment will generally be regarded as the successful party. That remains so where the successful party fails on an important issue, although the failure may justify a proportionate deduction from its costs.

The court should begin with the general rule that the successful party receives its costs, then consider all the circumstances, including conduct, offers and the relative importance and cost of particular issues. Indemnity costs may be appropriate where a party’s unreasonable conduct continues after it should have recognised its likely liability, particularly where realistic settlement offers are rejected.

This was a costs judgment following liability and quantum judgments in proceedings by Fitzroy Robinson Limited for unpaid architectural fees against Mentmore Towers Limited, Good Start Limited and Anglo Swiss Holdings Limited.

Fitzroy Robinson recovered substantial unpaid fees. The defendants’ counterclaims failed except for fraudulent misrepresentation, which produced a modest reduction in the fees recoverable. The issues were which party was successful, what deduction should reflect the failed allegation, the appropriate basis of assessment after the liability hearing, and whether an interim payment on account should be ordered.

1. Successful party. Fitzroy Robinson was the successful party. It recovered substantial fees, while the defendants’ counterclaim failed apart from an allegation which produced only a modest reduction. The fact that the fee claim was ultimately advanced under a different contractual provision did not make the earlier claim invalid or hopeless. The court applied the approach in Multiplex Construction (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 and A L Barnes v Timetalk (UK) Ltd [2003] EWCA Civ 402; [2003] BLR 331.
2. Issue-based reduction. The finding of fraudulent misrepresentation was an important issue which occupied substantial hearing time and required a costs deduction. A 25 per cent deduction from Fitzroy Robinson’s costs up to 21 July 2009 was fair, notwithstanding that the issue reduced the fee recovery by only about 5 per cent. The assessment reflected both the time taken and the seriousness of the allegation.
3. Basis of assessment. The defendants were ordered to pay 75 per cent of Fitzroy Robinson’s costs up to 21 July 2009 and 100 per cent thereafter to 20 November 2009, all on the standard basis if not agreed. From 20 November 2009 onwards, the costs were payable on the indemnity basis. The defendants’ conduct was unreasonable: they failed to take a realistic view of their likely liability, dis-instructed an expert contrary to court orders, sought unsuccessfully to adjourn the quantum hearing, failed to comply with orders, and made an unrealistically low offer. The court took the non-Part 36 offers into account by analogy with the consequences contemplated by CPR Part 36.
4. Payment on account. Applying CPR 44.3(8) and Mars UK Ltd v TeKnowledge Ltd [1999] 2 Costs LR 44 and Beach v Smirnov [2007] EWHC 3499, the court ordered an interim payment of £250,000 on account of costs.

This was a first-instance costs judgment following the liability judgment dated 7 July 2009, [2009] EWHC 1552 (TCC), and the quantum judgment dated 21 December 2009, [2009] EWHC 3365 (TCC), in the same litigation.