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

The court considered the appropriate costs order after a substantive judgment in which one claimant's claim was dismissed and the other recovered a small award of £2,000. The defendant had made two Part 36 offers, the first for £50,000 (open until 11 January 2021) and the second for £110,000. The central legal question was whether the defendant should recover all of its costs of the action, assessed on the indemnity basis, rather than the conventional costs consequences of CPR Part 36.17(3) and CPR Part 44.2.

The judge applied the governing principles from CPR Parts 36 and 44 and relevant authorities (including Lejonvarn, Excelsior, Fox, Widlake and Excalibur), asking whether the claimant's conduct and the state of the case took it "out of the norm" so as to justify departure from the ordinary costs rule and an award of indemnity costs. Key factual findings were that the foundations as constructed were not the foundations as designed by the defendant (Foxdown had used superseded drawings), that the claimants had advanced pleadings and further information which were factually inaccurate (notably Answer 22 of the Further Information dated 13 March 2020), and that the quantum claim had been exaggerated and opportunistic.

The judge rejected the submission that the claimant expert's conduct alone justified indemnity costs, and also held that the defendant's refusal to mediate in 2020 was not unreasonable in context. On the cumulative facts, the judge found the case to be outside the norm and ordered that there be no costs order for the parties for the period prior to 13 March 2020; from 13 March 2020 the defendant recover all costs on the indemnity basis. A payment on account of £500,000 was ordered to be paid by the claimants within 14 days.

Background and parties: The claim arose from alleged negligent design of foundations by Canham Consulting Limited for two residential blocks. The claimants were Beattie Passive Norse Limited and NPS Property Consultants Limited. The buildings were constructed by Beattie Passive Construction Limited (associated with BPN) and a specialist subcontractor Foxdown Engineering Limited, who used superseded foundation drawings stamped "Issued for Construction". Block A was demolished and later Block B was also demolished; the demolition was due to multiple defects not solely linked to foundations. At trial the court dismissed NPS's claim and awarded BPN £2,000 in respect of partial remedial works to foundations.

Procedural posture and relief sought in this judgment: This is a costs judgment following the substantive decision. Canham sought an order that it recover all of its costs of the proceedings from commencement on the indemnity basis, notwithstanding its entitlement under the defendant's First Part 36 offer to costs from 11 January 2021. The claimants sought the conventional Part 36 outcome: claimants' costs up to 11 January 2021 and the defendant's costs thereafter.

Issues framed:

• Whether the defendant should recover its costs from commencement of the action and on the indemnity basis, or whether the conventional Part 36 consequences should apply;
• Whether the claimants' conduct (including pleadings, further information and approach to mediation) and the nature of the claims justified departure from the norm; and
• Whether any particular witness or expert conduct (notably the claimants' expert and a late witness statement from a director) independently justified indemnity costs.

Court's reasoning: The court applied CPR Part 44.2 and Part 36.17 and considered authorities explaining that indemnity costs require something taking the case "out of the norm". The judge found that (i) the claimants had advanced a case that ignored and misstated the central factual causation issue (that Foxdown had built to a superseded design), (ii) the Further Information Answer 22 of 13 March 2020 was positively untrue and was signed under a statement of truth, (iii) the quantum claim was grossly exaggerated and opportunistic relative to the reality of recoverable loss, and (iv) the claimants had refused to engage properly with a Notice to Admit Facts. The court rejected the proposition that the expert's poor performance alone justified indemnity costs, and held that Canham's refusal to mediate in 2020 was not unreasonable given the claimants' conduct. Taking all circumstances together the litigation was outside the norm; accordingly the court made no order for costs prior to 13 March 2020 and ordered that Canham recover all its costs from 13 March 2020 on the indemnity basis. The court also ordered a payment on account of costs of £500,000 within 14 days.

This is a first-instance costs judgment. The court ordered that there be no order as to costs for either party for the period prior to 13 March 2020. From 13 March 2020 onwards the defendant, Canham Consulting Ltd, shall recover all of its costs of the proceedings, to be assessed on the indemnity basis. The court ordered the claimants to pay a payment on account of costs of £500,000 within 14 days. The rationale was that from 13 March 2020 the claimants had been conducting the litigation on a false factual basis (notably Answer 22 of the Further Information), and the claim had been exaggerated and opportunistic such that the case fell outside the norm and justified indemnity costs and a substantial payment on account.