Blackpool Borough Council v Volkerfitzpatrick Ltd

In assessing costs after a substantial but incomplete recovery, the successful party is identified by examining who won in substance and reality, rather than simply who receives a payment. The court may depart from the usual costs order where there is material relative lack of success, unreasonable conduct, or an effective Part 36 offer. The assessment should avoid hindsight.

A withdrawn defendant’s Part 36 offer has no automatic costs consequences, but may remain relevant under Civil Procedure Rules 1998, rule 44.2. The reasonableness of rejecting it is assessed by reference to the claimant’s position at the time and the merits as they ought reasonably to have appeared, rather than wider commercial considerations. Indemnity costs require conduct or circumstances outside the norm.

The judgment determined costs following the court’s substantive decision in Blackpool Borough Council v Volkerfitzpatrick Ltd [2020] EWHC 1523 (TCC). The claimant had recovered £1,110,781.80 from a claim pleaded at almost £6.7 million, succeeding on six of seven principal heads but failing on the largest claim concerning cold formed components.

The defendant had made a Part 36 offer of £750,000 in August 2019, excluding certain claims. It later withdrew the offer. The issues were which party was successful, whether the claimant had unreasonably rejected the offer, whether its conduct justified indemnity costs, and how costs should be allocated between the claimant, defendant and fifth party Caunton Engineering Ltd.

1. Outcome. The claimant was the successful party against the defendant in substance and reality, despite recovering only a modest proportion of its pleaded claim. Caunton was successful against the defendant on the cold formed components claim.
2. The usual starting point under Civil Procedure Rules 1998, rule 44.2 was not determinative. The court had to consider all the circumstances, including relative lack of success, conduct and offers. Any departure should be approached cautiously and without the benefit of hindsight.
3. A withdrawn Part 36 offer could not attract the automatic consequences of rule 36.17, but remained a relevant circumstance under rule 44.2(4)(c). Following Thakkar v Patel [2017] EWCA Civ 117, the question was whether the claimant acted reasonably or unreasonably in failing to accept the offer while it remained open. That assessment required the court to consider the claimant’s position at the time and the merits as they ought reasonably to have appeared, not wider commercial factors.
4. The claimant possessed sufficient information, expert evidence and advice to assess its own case. The testing results had materially weakened its principal claims, and rejecting the offer therefore amounted to unreasonable conduct for costs purposes. The defendant’s unexplained exclusion of the tram doors claim justified preserving a costs entitlement for that issue.
5. Indemnity costs required conduct or circumstances taking the case out of the norm. Although there were criticisms of investigation, evidence and quantification, the claim was supported by reputable experts and was not so speculative, weak or thin that pursuing it to trial was outside the norm. Caunton was therefore not entitled to indemnity costs.
6. The court ordered the defendant to pay 80% of the claimant’s costs up to 5 September 2019; the claimant to pay 80% of the defendant’s costs thereafter, including specified additional-party costs; and the defendant to pay Caunton’s costs up to 5 September 2019, with the claimant paying them thereafter. No interim payment was ordered between the claimant and defendant. The claimant was ordered to pay Caunton £675,000 on account and the defendant £300,000.

The judgment was a supplementary first-instance judgment on costs following the substantive decision in Blackpool Borough Council v Volkerfitzpatrick Ltd [2020] EWHC 1523 (TCC).