Buildability Ltd v O’Donnell Developments Ltd

Costs – Basis of assessment – Proportionality – Disputes arising between parties for delay in completion of building works – Adjudicator granting defendant extension of time – Claimant seeking declarations as to conditions precedent for granting extensions – Parties agreeing amended form of declarations by consent – Parties agreeing costs issues to be settled by court — Whether claimant entitled to costs having secured declarations albeit in amended form — Order for costs in claimant’s favourThe claimant was the main contractor employed to design and build the Cube building in Birmingham. The main contract was dated 22 June 2007. In September 2007, the claimant entered into a subcontract with the defendant, whereby the latter undertook to carry out the ground works, drainage and concrete frame works for the development.Disputes resulted in an additional agreement supplementing the original terms of the contract. Other disputes concerning delays in the completion of the works were referred to adjudication. The defendant sought extensions of time and the adjudicator found in its favour.The claimant disagreed with those decisions and commenced proceedings under CPR 8. It sought declarations that certain contractual notices were conditions precedent to awarding extensions of time. The court gave directions for the hearing. The claimant entered into a conditional fee agreement with its solicitor in respect of those proceedings and notified the court and the defendant of the arrangement. This provided for a 100% mark-up on solicitors’ fees should the proceedings succeed. The defendant applied to set aside the directions order and dismiss the claim. The parties agreed terms as to declarations in the Part 8 proceedings but left the question of costs to be decide by the court. That gave rise to issues concerning the proportionality of the parties’ costs and the applicability of the conditional fee agreement. Each side argued that the other should pay its costs.Held: The court made a reduced order for costs in the claimant’s favour.(1) The rule was that the unsuccessful party would pay the costs of the successful party: CPR 44.3(2). It was not always easy for the court to determine success when the parties had agreed terms (save for costs) other than by reference to the order that the parties had agreed. In the instant case, the defendant had agreed that court declarations should be made against it as sought by the claimant, although in amended form. The defendant would still have been able to argue that the declarations should not have been granted because they had no practical effect or for any other reasons that the court could have taken into account in deciding whether to grant declarations. In the instant proceedings, the claimant had secured at least two valuable declarations. Accordingly, it was the successful party and, subject to certain points, was entitled to its costs.(2) However, the defendant had partly succeeded in its application. Although it had not secured the orders sought, the court had made it clear that two of the declarations that the claimants had agreed to amend were problematic. If the claimant had not done so, it would probably not have secured the declarations as originally sought. Overall, no order as to costs should be made with regard to the defendant’s application. Although the defendant had not secured the relief sought, it had established that two of the declarations were flawed. Moreover, this was an obvious case for costs to be assessed on a summary basis. No hearing had taken place and it was important that the issue of who paid what costs should be settled in good time. There were no difficulties in assessing the costs.(3) CPR 44.4 identified that the court, whether dealing with costs on a summary or detailed assessment basis, primarily proceeded on the basis of allowing costs which were proportionate and whether costs were reasonably incurred or reasonable and proportionate, at least when dealing with costs on a standard basis. In the instant case, it had been accepted case that costs should be on a standard basis. The practice direction provided further insight as to what happened when a contingency fee agreement had been made.In the instant case, the risk assessment that had been carried out when the contingency fee agreement was negotiated set out the basis on which the 100% mark-up was said to be reasonable and realistic. Had the claimant lost, no fees would be payable. It reflected the risks inherent in the claim, the fact that the subject area of law was of a specialist and technical nature and the claimant’s solicitor’s assessment of the risks. The problem with such risk assessment was that it had to have been based on the declarations that were then sought but that were subsequently amended. It was also unclear how success was to be measured; no evidence or argument had been put before the court on that point.It would be inappropriate and unreasonable for any contingency fee to be allowed. The claimant had made no effort to comply with the TCC Pre-Action Protocol, which assisted the parties in resolving matters in a cheaper and less confrontational way than court proceedings. Although the defendant had not complained at the time, it had raised that issue on the question of costs. Had the protocol been followed, it was likely that an agreement similar to the one eventually agreed would have been reached earlier and before any contingency fee agreement was necessary. Even if the protocol did not have to be followed, the claimant had been very confrontational; a more conciliatory approach would have been more cost-effective.(4) In principle, the claimant should receive its costs save for those incurred in connection with the defendant’s application, exclusive of any additional liability. The total claimed seemed disproportionately high for relatively simple legal issues in proceedings that were resolved within around five weeks of the letters before action. The figures put forward had to include a not insignificant amount for amending the claim form, which should not, as a matter of principle, be allowed because the cost of amendments would usually be borne by the amending party.Simon Lofthouse QC (instructed by HBJ Gateley Wareing LLP, of Birmingham) appeared for the claimant; Stephen Furst QC (instructed by Trowers & Hamlins LLP) appeared for the defendant.Eileen O’Grady, barrister