Harrison & Ors v Shepherd Homes Ltd & Ors

In multi-party proceedings, the court has a broad discretion as to costs. It may order an unsuccessful defendant to pay costs incurred in pursuing another defendant where the claims were reasonably brought, connected, and alternative in substance. A determination that the other defendant was liable is not always necessary. The court should avoid disproportionate proceedings to determine liability solely for costs purposes. Where proceedings against another defendant remain stayed and liability has not been determined, the appropriate order may be no order as to costs between those parties. Costs may nevertheless be recovered from the unsuccessful defendant where its conduct reasonably caused the claimant to involve the other defendant.

The claimants brought defect proceedings against Shepherd Homes Ltd, National House-Building Council and NHBC Building Control Services Ltd concerning foundation defects in properties. The court had previously found Shepherd liable and the foundation claims against it were subsequently settled. Claims against the NHBC parties remained stayed after compliance with the construction pre-action protocol. The NHBC carried out remedial works to several properties, but liability had not been determined in the proceedings.

The judgment concerned responsibility for the costs incurred in pursuing the NHBC parties, the costs of the NHBC’s unsuccessful strike-out and summary judgment application, and the future status of the stayed proceedings.

1. Costs discretion. Under CPR 44.2, the court retains a broad discretion, guided by all the circumstances, including party conduct and the issues on which a party succeeded. The jurisdiction to make a Bullock or Sanderson order survives the CPR.
2. Multi-party costs. The relevant factors include whether the defendants were sued in the alternative, whether the causes of action were connected, whether it was reasonable to join and pursue the additional defendant, and whether one defendant had blamed another. The claims against Shepherd under section 2 of the Buildmark Policy and against NHBC under section 3 were alternative in substance and sufficiently connected. It was reasonable for the claimants to pursue NHBC, particularly because Shepherd had encouraged its involvement.
3. NHBC costs. The remedial works carried out by NHBC were performed under its policy obligations and independently of the proceedings. They did not make NHBC an unsuccessful party. Nor could NHBC be treated as successful while liability remained undetermined. It would be disproportionate and futile to direct a trial solely to determine liability for costs. There was therefore no order as to costs between the claimants and the NHBC parties, save for the specified application and abandoned claims.
4. Orders against Shepherd. Shepherd was ordered to pay the claimants’ costs of the foundation claims against NHBC, excluding the strike-out application and the abandoned claims in paragraphs 25 and 54 of the Particulars of Claim. No order was made against Shepherd for costs concerning NHBC-BCS.
5. NHBC was ordered to pay the claimants’ costs of its strike-out and summary judgment application, subject to the costs of the abandoned claims. The stay of the proceedings against the NHBC parties was continued.

This was a first-instance costs judgment. The court referred to its earlier foundation-defects judgment, [2011] EWHC 1811 (TCC), in which Shepherd Homes Ltd had been held liable.