Laing O’Rourke Delivery Limited v Shepperton Studios Limited

Where both parties have addressed the court on interest, the court may depart from an adjudicator’s approach and determine the correct contractual basis, provided that doing so causes no unfairness. Where the contract treats VAT as part of the contract price, interest is calculated on that basis. Costs in separate Part 7 and Part 8 proceedings should ordinarily be considered separately. Where each party succeeds on one of two central issues, an issues-based order may be appropriate, with each party recovering an equal proportion of its costs. Costs claimed as Part 8 costs must have been incurred in those proceedings and must be reasonable and proportionate.

The parties had been involved in Part 7 enforcement proceedings and related Part 8 proceedings concerning construction issues and the sums due under an adjudicator’s decision. They were unable to agree the proper approach to interest and the allocation and assessment of costs.

The court considered whether to retain the adjudicator’s approach to interest, how the contractual provisions affected VAT, whether either party was the winner in the Part 8 proceedings, and the appropriate assessment of each party’s recoverable costs.

1. Interest. Both parties had addressed the court on whether the adjudicator’s approach to interest should be retained. The court therefore considered it open to depart from that approach and award interest on the correct contractual basis. There was no unfairness because the parties had made submissions on the issue. The contractual provisions required VAT to form part of the contract price against which interest was calculated. This approach was consistent with Pharos Offshore v Kenvor Morlift [2025] EWHC 2496 at [10]-[17].
2. Part 8 costs. The Part 7 and Part 8 proceedings were to be kept separate for costs purposes. Neither party was to be regarded as the winner in the Part 8 proceedings. Each party had succeeded on one of the two central issues, which were of similar substance and complexity. Each party was therefore ordered to recover 50% of its Part 8 costs.
3. Assessment. Costs claimed as Part 8 costs had to be costs incurred in the Part 8 proceedings. Costs incurred in the Part 7 enforcement proceedings, including fees for the Part 7 hearing, could not be recovered as Part 8 costs. The court assessed recoverable costs by reference to reasonableness and proportionality, reducing the claimed sums where appropriate.
4. The total sum due, including interest, was £3,838,392.77. Part 7 costs were summarily assessed at £75,954.50. Recoverable Part 8 costs were assessed at £26,395 for the claimant and £27,769.50 for the defendant. The draft order was to be sealed after confirmation of the calculations and any slips.