The Cultural Foundation & Anor v Beazley Furlonge Ltd & Ors

In determining costs after a trial of preliminary issues, the court must identify the successful party by reference to substance and reality, while retaining a broad discretion to make issue-based or proportionate orders where justice requires it.

That approach is particularly appropriate where preliminary issues have been tried before the overall outcome is known. The court should consider the importance of each issue, the parties’ relative success, the overlap between issues, the reasonableness of pursuing failed points, and the practicability of apportioning costs. A proportionate order may reflect both success on core issues and failure on discrete subsidiary issues. Payments on account and interest on costs should be fixed pragmatically, subject to detailed assessment.

The judgment concerned consequential costs and related orders following a judgment dated 8 May 2018 which determined ten preliminary issues in litigation between insureds, primary insurers and excess insurers concerning professional indemnity cover for claims against an insolvent architects’ firm.

The claimants were broadly successful on the policy-period issues, but unsuccessful on aspects concerning defence costs and post-award interest. The excess insurers succeeded on several issues against different parties. The court therefore had to determine the appropriate allocation and proportion of costs, payments on account, interest on costs and time for payment.

1. Costs approach. The court treated the claimants and excess insurers as broadly successful, but held that the outcome on separate preliminary issues required a departure from a simple order that costs follow the event. The court had a wide discretion under the CPR 44.2, including power to make proportionate orders, and the overriding aim was to achieve overall justice.
2. An issue-based or proportionate approach was especially appropriate because the parties had agreed, and the court had ordered, a trial of preliminary issues before the overall winner could be identified. Common or housekeeping costs could therefore be prorated across the issues. The court considered the importance of the issues, the overlap between them, the parties’ degree of success and the fact that ASD had chosen to contest issues on which it failed.
3. As between the claimants and Beazley, the court awarded costs on Issues 1–4 to ASD and ADNEC, subject to a modest deduction for unsuccessful aspects of those issues. Beazley received most of its costs of Issue 5, subject to a discount reflecting the claimants’ overall success and the interrelationship between the issues. ASD was awarded 65% and ADNEC 53.5% of their preliminary-issues costs against Beazley.
4. As between the excess insurers and the other parties, an issue-by-issue approach was held to be fair and practicable. The excess insurers recovered 85% of their costs of Issues 1 and 2 from Beazley, their costs of Issue 6 from ASD and ADNEC equally, their costs of Issue 7 from Beazley, and costs relating to Issues 8–10 subject to the stated offset and percentage reductions. Costs of unused evidence concerning consent to defence costs were costs in the case.
5. All costs were to be assessed on the standard basis. Payments on account were ordered. Interest was to run from payment of the costs by the recovering party, at 2% above Bank of England base rate until one month after delivery of the detailed bill, and thereafter at the Judgment Rate. The liable parties were given 28 days to pay.