Lloyds Bank Plc v McBains Cooper

Under Civil Procedure Rules 1998, the unsuccessful party usually pays the successful party’s costs, but the court retains a broad discretion having regard to all the circumstances. Failed issues justify a separate costs order only where they are sufficiently discrete and the resulting costs can be identified reliably. Issues such as causation and contributory negligence, which run through the litigation, are generally better reflected by a percentage reduction. A withdrawn Part 36 offer cannot receive the automatic consequences of a subsisting offer. It remains a factor under the general costs discretion, particularly where it has been replaced by a less favourable offer. Serious allegations which unnecessarily increase costs may justify deductions or payments in favour of the opposing party, but the court should avoid double counting.

The Bank succeeded in negligence proceedings against its project-monitoring surveyor arising from a property development loan. Liability and damages had been determined in earlier judgments. The Bank recovered £127,115 excluding interest, after credit for £288,323 recovered through an adjudication.

The present judgment concerned costs. The Bank sought its costs, including indemnity costs after a withdrawn offer. McBains Cooper sought an issues-based order or no order for costs, relying on the modest recovery, failed issues, the Bank’s conduct, its adjudication strategy and late allegations of recklessness. The court had to determine the appropriate application of the general costs discretion, the effect of withdrawn offers and whether particular issues justified separate costs orders.

1. The Bank was the successful party, so the general rule under CPR 44.2 was the starting point. That rule did not require a wholesale departure merely because the Bank recovered substantially less than it claimed or failed on some issues.

2. An issues-based order was inappropriate for reliance, causation and contributory negligence. Those issues ran through the project and the litigation, and their costs could not be isolated with sufficient reliability. They were instead reflected by depriving the Bank of 20% of its costs.

3. The Bank’s late and serious allegations of recklessness substantially caused both parties to incur the additional cost of leading counsel. The fair response was to deduct £125,000 from the Bank’s recoverable costs and require it to pay £150,000 towards McBains Cooper’s costs. The allegation did not justify a separate issues-based order.

4. The valuation evidence after the liability trial produced no advantage to the Bank. The Bank was therefore to bear its own later valuation costs, pay 50% of McBains Cooper’s corresponding expert costs and pay 50% of its legal costs for the February 2016 hearing, subject to the stated qualifications.

5. The January 2014 offer was withdrawn and replaced by a less favourable offer. Under CPR Part 36 it could not be treated as carrying the automatic costs consequences of a subsisting Part 36 offer. It was relevant only as a factor under CPR 44.2. The court therefore refused indemnity costs from the expiry of that offer.

6. The overall order was that the Bank recover 80% of its costs up to 31 July 2015, subject to the stated deductions and payments, and 100% thereafter subject to the valuation adjustments. Costs were to be assessed on the standard basis. McBains Cooper was ordered to pay £250,000 on account within 14 days.