Beattie Passive Norse Ltd & Anor v Canham Consulting Ltd (No. 2 Costs)

Indemnity costs require conduct or circumstances taking the case out of the norm. A defendant who beats its own Part 36 offer is not automatically entitled to indemnity costs, but the court must consider whether rejection of the offer was unreasonable and whether the case was unusually weak, speculative, opportunistic or exaggerated. The court may make different orders for different periods. A materially untruthful pleading on a central issue, combined with an exaggerated and factually untenable claim, may justify indemnity costs from the date on which that conduct occurred. The court may also make no order for costs for an earlier period, even where the defendant is ultimately awarded costs.

The claimants brought professional negligence proceedings concerning foundation design for two housing blocks. The substantive judgment dismissed NPS Property Consultants Ltd’s claim and awarded Beattie Passive Norse Ltd £2,000 against a pleaded claim of approximately £3.7 million: [2021] EWHC 1116 (TCC).

The defendant had made a Part 36 offer of £50,000, which the claimants failed to beat. The parties disputed the costs consequences, including whether the defendant should recover all costs on the indemnity basis. The issues included the claimants’ treatment of factual causation, the accuracy of a response to a request for further information, the refusal to mediate, expert evidence and the effect of the Part 36 offer.

1. Disposition. There was no order for costs in either party’s favour up to 13 March 2020. From that date, Canham was entitled to all its costs, assessed on the indemnity basis. The claimants were ordered to pay £500,000 on account within 14 days.
2. Part 36 and indemnity costs. Under CPR Part 36, the defendant was entitled to costs from 11 January 2021 because the claimants failed to beat the First Part 36 Offer. Applying Lejonvarn v Burgess [2020] EWCA Civ 114, the court also had to ask whether, at any stage after the offer, a reasonable claimant would have concluded that the offer represented a better outcome than the likely result at trial. The claimants’ refusal to accept the offer was plainly unreasonable.
3. Out-of-the-norm conduct. The claimants advanced a claim which ignored, and in part concealed, the fact that the foundations had been constructed from superseded drawings. Their answer to a request for information was positively untrue and was supported by a statement of truth. The claim was substantially exaggerated, opportunistic, unjustified and irreconcilable with the contemporaneous documents. Taken together, these circumstances satisfied the critical requirement identified in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879.
4. Other matters. Canham’s refusal to mediate in 2020 was not unreasonable in the circumstances, given the false factual case being advanced and the need for disclosure and witness evidence. The claimants’ expert evidence did not, by itself, justify indemnity costs, although the court gave a general warning about experts’ duties under Practice Direction 35 and CPR 35.3. The alleged lack of authority to issue BPN’s claim was disregarded because Canham had not pursued a strike-out application or put the issue to the relevant witness during the trial.

The judgment itself states that the substantive claim had previously been determined by the same court in [2021] EWHC 1116 (TCC). No application for permission to appeal was made. This judgment determined the consequential costs issues.