O'Rourke Construction Ltd v Healthcare Support (Newcastle) Ltd & Ors

Costs following a Part 8 claim should reflect the parties’ overall success and the costs generated by particular issues. A purely issue-based order is inappropriate where it would require disproportionate and unproductive analysis. The court may instead make a pragmatic percentage order that fairly reflects the outcome. The order should account for unsuccessful issues which materially increased preparation costs, while recognising the party that substantially succeeded overall. Observations about proportionate costs may assist the costs judge or settlement, but do not replace detailed assessment where costs are not agreed.

The judgment concerned costs after a Part 8 construction claim involving the claimant, Healthcare Support (Newcastle) Ltd and Newcastle upon Tyne Hospitals NHS Foundation Trust. The claimant had sought seven declarations and succeeded on one, in a modified form. The court had previously concluded that the claimant was substantially closer to the correct contractual construction than the Trust, while HSN’s position most closely reflected the outcome.

The issues were the appropriate allocation of costs between the three parties, the effect of the claimant’s failure on declarations 6 and 7, the proportionality of the costs incurred, and interim payments on account.

1. Costs order. The court rejected a pure issue-based costs order. The costs were already high, and a detailed comparison of each party’s costs would serve no useful purpose. A pragmatic and proportionate order should instead reflect, in general terms, each party’s success on the issues.
2. The claimant’s failure on declarations 6 and 7 was material because those declarations introduced a potentially inappropriate factual inquiry into a Part 8 claim and significantly increased the Trust’s preparation costs. Nevertheless, the claimant was the substantial winner as against the Trust. The Trust was therefore ordered to pay 70% of the claimant’s costs up to and including the hearing, and 100% of its costs of preparing submissions on costs.
3. HSN’s position most closely reflected the outcome. It was entitled in principle to substantially all of its costs, subject to a modest reduction because its success was not total. The claimant was ordered to pay 90% of HSN’s costs, with the Trust required to reimburse the claimant for 75% of those costs. HSN was not required to contribute to either party’s costs.
4. The figures incurred were disproportionate for a one- or two-day Part 8 claim. The court’s estimates of proportionate figures were expressly observations to assist the costs judge or settlement. If the costs could not be agreed, they were to be subject to detailed assessment on the standard basis.
5. Interim payments on account were ordered: £140,000 from the Trust to the claimant, £97,500 from the Trust to HSN, and £19,500 from the claimant to HSN, payable within 14 days of hand-down unless otherwise agreed.