Costs News

13 September 2018
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Costs of discontinuance “could be paid” by another defendant and not the claimant

There is no reason in principle why, on discontinuance, a costs order can be made against another defendant rather than the claimant, a High Court judge has said.

However, the argument to do so in the case before Mrs Justice Jefford was not made out, she found.

The dispute in BAE Systems Pension Funds Trustees Ltd v Bowmer and Kirkland Ltd [2018] EWHC 1222 (TCC) arose out of the design and construction of a warehouse on the Winsford Industrial Estate in Cheshire.

The judge said it was not unreasonable for BAE to commence proceedings against a second defendant, Geofirma Soils Engineering Limited, because limitation was nearing, but it eventually discontinued after establishing the Geofirma was not involved in the actions which were the subject of the claim.

BAE asked the court to depart from the default position under part 38.6, namely that the claimant should pay the costs of discontinuance, and instead order that Geofirma's costs be paid by the first defendant, Bowmer and Kirkland.

This was because of what it argued was Bowmer’s failure to indicate that Geofirma was not involved, which would have prevented most of the costs arising.

Jefford J said: “Mr Lamont [counsel for BAE] recognises that there is no authority in which, on discontinuance, a costs order has been made against another defendant to the proceedings.

“But he argues, rightly in my view, that I have a wide jurisdiction in respect of costs under part 44, and that it would be open to me to make such an order if I were minded to do so.”

Bowmer’s counsel argued that the application was “fundamentally misconceived” because, in effect, it sought a Sanderson order, where an unsuccessful defendant pays the costs of a successful defendant directly.

“That sort of application arises at the conclusion of a trial where there is potentially a successful and an unsuccessful defendant. In this case, there is a quasi-successful defendant, Geofirma, who have been let out of this action, but there is no unsuccessful defendant, and she says, therefore, that it is simply not open to me to make an order under part 38.6 that she should pay costs of another defendant.

“I am not persuaded, as I have already indicated, that that is right and that there are no circumstances in which a court could order a defendant to pay the costs of another defendant against whom proceedings have been discontinued.

“I say that given the wide jurisdiction of the court and the possibility of envisaging unusual circumstances, for example, where a claimant had been positively misled by one defendant into suing another, where such an order might then be appropriate.

“But that is not this case, and the absence of any authority in which such an order has been made seems to me to be some indication, at least, of how unusual such a case would be.”

Jefford J did, however, accept Ms Sinclair's submissions that the cases in relation to Sanderson orders provide 'some' – “and I underline the word "some" – guidance as to how I should approach this matter.”

The judge concluded: “I have already said that I do not consider that it was unreasonable of BAE to commence proceedings against Geofirma, but the risk that they took was that those proceedings might turn out to be ill-judged.

“Further, as I have also observed, they pleaded a positive case that Geofirma had carried out lime stabilisation works and was in breach of the contract in certain respects in doing so. That repeated, if you like, the taking of the risk that those allegations would not be made out.

“This was further, as Ms Sinclair QC has submitted, not a case in which BAE was put up to making those allegations by Bowmer and Kirkland, who had never, as such, pointed the finger at Geofirma and had said from the outset that no lime stabilisation works had been carried out by anybody.

“It simply does not seem to me, in those circumstances, that the request that was made for clarification of the extent of Geofirma's works could somehow have the effect of transferring that risk on to Bowmer and Kirkland.

“Up until the date of the case management conference, which, as I have said, was a little over five months from the letter of claim, it does not seem to me that Bowmer and Kirkland could be criticised for the time that they had taken or were taking to investigate matters which had occurred many years earlier, and in circumstances where they themselves were not making and had not made any positive allegation against Geofirma.

“By the time of the case management conference when that issue was ventilated, an order was made by me which was intended to clarify the position or flush out whether there was any further information to be provided by Bowmer and Kirkland that would justify a claim against Geofirma.

“Bowmer and Kirkland complied with the court's order, and it goes too far to say that, in the spirit of case management or cooperation in the modern conduct of litigation, they ought to have gone further in making the other parties and, in particular, the claimant aware of the conclusion that they had reached (as to whether there should be Part 20 proceedings) at a significantly earlier stage than I had ordered, so as to obviate the incurring of any costs by Geofirma.

“That was not the order that I made. It seems to me quite unfair to suggest that Bowmer and Kirkland ought to have complied with some other timetable. For all those reasons, I will dismiss this application.”

Mr C Lamont (instructed by Gowling WLG (Birmingham)) appeared on behalf of the claimant; Ms F Sinclair QC (instructed by Mills and Reeve) appeared on behalf of the defendants.

 

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