Zagora Management Ltd & Ors v Zurich Insurance Plc & Ors No. 3 (Costs)

Costs remain discretionary despite the general rule that they follow success. The court may make a group or proportionate costs order where legally separate claims were pursued for the same commercial purpose. A broad-brush assessment is permissible where it is practicable and the judge has sufficient case knowledge.

An admissible settlement offer is generally compared with the eventual judgment, including relevant interest, but the circumstances and terms of the offer remain important. Unreasonable conditions may prevent an offer from providing costs protection. A claimant’s failure to beat an offer does not automatically justify a costs penalty.

This was a costs judgment following the court’s substantive judgment and supplemental judgment on interest. The individual leaseholder claimants had succeeded substantially against Zurich Insurance Plc and East West Insurance Company Ltd, while Zagora Management Ltd had failed against those defendants. All claimants had failed against Zurich Building Control Services Ltd.

The court considered the effect of the parties’ relative success, conduct and settlement offers under CPR Part 44.2. The central issues were whether separate claims should be treated collectively for costs purposes, whether proportionate or time-based orders were appropriate, and whether the offers justified costs consequences.

1. The general rule under CPR Part 44.2 is that the unsuccessful party pays the successful party’s costs, but the court has a broad discretion having regard to all the circumstances, including conduct, success on particular issues and admissible settlement offers.

2. As between the claimants and ZBC, the claimants’ success in proving deceit justified a departure from the general rule for the period before the offer. However, their failure to confront the substantial reliance difficulties, and their failure to beat ZBC’s admissible offer, justified an order for ZBC’s costs from 13 June 2018. A time-based order was preferable because it was proportionate, reduced assessment complexity and produced a fair overall result.

3. As between the claimants and ZIP, the court could assess costs between the claimants as a group despite their legally separate claims. Zagora’s claim had been pursued for the same commercial purpose as the leaseholder claims. The commercial reality therefore justified a collective approach.

4. A proportionate order did not require detailed information allocating costs between claims. Following Budgen v Andrew Garden Partnership [2002] EWCA Civ 1125, a broad-brush assessment was permissible where making such an order was practicable and the judge had sufficient knowledge of the litigation.

5. The ZIP offer was compared with the eventual judgment, while taking account of the circumstances existing when it was made. The offer was not reasonable because it imposed unjustified indemnities, releases and a requirement that ZIP determine the claimants’ liability for costs. The claimants had therefore not acted unreasonably in refusing it. The principles concerning admissible near-miss offers in Coward v Phaestos [2014] EWCA Civ 1256 remained fact-sensitive.

6. The court allowed a 7.5 per cent reduction for Zagora’s unsuccessful agreement-to-rectify claim and a further 12.5 per cent reduction for relative lack of success and the claimants’ unrealistic approach. The total reduction from the claimants’ costs against ZIP was therefore 20 per cent. No further conduct-based adjustment was made.

This was a first-instance costs judgment following:

• High Court (Technology and Construction Court) — principal judgment dated 30 January 2019, [2019] EWHC 140 (TCC).
• High Court (Technology and Construction Court) — supplemental judgment on interest dated 7 February 2019, [2019] EWHC 205 (TCC).