Cleveland Bridge UK Ltd & Anor v Multiplex Constructions (UK) Ltd

THE PRESIDENT: This represents something of a landmark for two separate reasons. The first point of particular interest to the court is it is Lord Justice Dyson's last appearance in this court and he is to be congratulated, as I'm sure everyone agrees, on his forthcoming promotion to the Supreme Court.

The second matter of interest to the parties is that it represents, I trust, the very final drama of this very long-drawn-out dispute between Multiplex and Cleveland Bridge.

Enough has been said, and I am certainly not going to repeat, judicially about the disproportion of certain aspects of this litigation. That's ground that doesn't require to be trod again. But I think it is only appropriate to acknowledge that despite the, as it appears to the court, undue length of the litigation, it has been conducted, so far as the court is concerned, in an exemplary manner by all those concerned and we would like to thank them for it.

By all those concerned, I mean not only leading counsel, who have borne the brunt of submissions to the court, but also junior counsel, solicitors and I have no doubt many people within each of the two client organisations who have supported their respective teams. It is, I'm sure, to be regarded in many respects as unfortunate litigation but at the same time it is litigation that has been very well conducted and thank you for that.

This court, on 19 February, gave judgment on appeals by each of the two parties against the decision Mr Justice Jackson, as he then was, had made on 30 September 2008, determining the quantum of the claims between the parties. The hearing today concerns costs in potentially three but in reality two respects.

The first respect is the straightforward matter, or relatively straightforward matter of the costs of these quantum appeals.

The second matter is whether, by reason of failure and success in the costs appeals, any of the costs orders which Mr Justice Jackson made upon his costs judgment should be revised and what that appropriate order should be.

The third matter, which in my judgment the court should decline to entertain, is whether there should be a wider revisitation of costs judgments which the judge made on the quantum in particular, which are not affected by the outcome of the quantum appeals.

The factual background between the parties is set out in brief terms in the judgment that I gave on 19 February 2010, with its references to previous judgments given in this court and by Mr Justice Jackson. It is not necessary to repeat any of that.

Following the quantum hearing, the judge determined that Cleveland Bridge were, on balance, liable to pay Multiplex £6,154,246, including interest. That sum broke down as follows:

On schedule 1, a large claim advanced by Multiplex succeeded only to the extent of £150,305 plus interest.

On schedule 2 there were large claims by Cleveland Bridge to be paid sums of money and large claims by Multiplex that they should be paid sums of money. In the result, upon schedule 2, the judge awarded Multiplex £4,020,061 plus interest amounting to £1.8 million, or thereabouts.

On schedule 4, Multiplex had alleged that it had suffered substantial delay and other damages in consequence of Cleveland Bridge's repudiation of the contract. They originally assessed the value of those damages at something in the region of £25 million although it was subject to a contractual cap of £6 million. In the event, Multiplex's schedule 4 claim failed and the judge awarded nominal damages only quixotically of £4 in respect of that part of the claim.

As part of his costs judgment the judge set out an analysis of the parties' conduct in the litigation and we have considered that. I shall refer later in this judgment to short parts of the judge's judgment in that respect.

In determining the question of costs, the judge took as his starting point the proposition that Multiplex could be characterised overall as the successful party in the litigation. He further assessed what percentage of the quantum proceedings as a whole and therefore what percentage of the total costs had been associated with different elements in the case. He concluded that a reasonable apportionment of costs was 10 per cent to schedule 1 issues, 30 per cent to schedule 2 issues and 40 per cent to schedule 4 issues, with 20 per cent, the remaining part, being attributed to common costs.

He determined not to make an issue-based costs order and no party has suggested before us that he should have done. He considered that a proportional costs order was practical. He factored into his assessment the proportion that he had assessed of each of the elements of the case and the respective degree of success of the parties in respect of each of those elements.

He reckoned that Multiplex had unreasonably rejected an offer made by Cleveland Bridge in relation to schedule 1 and determined that Multiplex should be awarded no costs in respect of that element of the claim, notwithstanding their modest financial success on schedule 1.

He treated Cleveland Bridge as the winners in respect of schedule 4 and treated Multiplex as the winners in respect of schedule 2 and the common costs. On a strictly mathematical basis, that approach would have entitled Multiplex to recover 10 per cent of the costs of the quantum proceedings. That's to say 40 per cent to Cleveland Bridge and 30 per cent plus 20 per cent to Multiplex, take one from the other, equals 10 per cent.

However, having regard to the whole conduct of the parties, the judge considered that Cleveland Bridge's failure over the duration of the litigation to make any offer to settle the entire proceedings was one of the main reasons why the litigation had not been settled and he accordingly increased his 10 per cent assessment in favour of Multiplex to 20 per cent and in the result the judge's costs order was in favour of Multiplex in that respect.

There was a separate issue in relation to preliminary issue 11 upon which the judge made orders. Preliminary issue 11 has not featured in the quantum appeal and no separate submission has been maintained to conclusion in relation to those costs.

Cleveland Bridge had five grounds of appeal against the judge's quantum judgment. The first was in relation to preliminaries, the second in relation to his application of the decision of Sumpter v Hedges, the third, a wider version of the second, being a claim for restitution, the fourth in relation to rakers and the fifth in relation to labour costs.

Cleveland Bridge were granted permission to appeal in respect of the first three of these issues and refused permission in respect of the latter two. The fifth depended on success on earlier grounds of appeal.

Multiplex appealed in respect of two issues, SV399, site variation 399, where the judge had decided that Cleveland Bridge was entitled to £2,370,728 in respect of the valuation of work completed to 15 February 2004. The agreed value of this ground of appeal was in the order of £1 million. Multiplex also appealed in relation to matters concerning the release of retention. Multiplex were granted permission to appeal on each of these two grounds. The issues raised on these appeals related principally to parts of the judge's assessment of the schedule 2 claims, although the rakers issue also concerned a schedule 1 claim.

On the appeal Cleveland Bridge succeeded on one of their five grounds only; that is to say, the question of preliminaries. The Sumpter v Hedges and restitution grounds of appeal were dismissed and Cleveland Bridge failed to secure permission to appeal on the rakers issue. Accordingly the fifth issue did not arise. Multiplex succeeded on both their grounds of appeal.

In financial terms, Cleveland Bridge were substantially more successful overall than were Multiplex and in the result the quantum of damages was reduced from the amount that I mentioned earlier of something over £6 million including interest, to £3,168,366-odd, inclusive of interest.

In summary, Cleveland Bridge had significant substantial success net on these appeals. By contrast, Multiplex were successful on five of the appeal issues and Cleveland Bridge were successful on one of them.

Cleveland Bridge, through Mr Williamson, have advanced a general case in writing to the effect that they should be entitled to revisit in this court elements of the judge's decision on costs which have nothing to do with the outcome of the appeals or the appeals on quantum themselves.

In my judgment there is no proper basis for them doing so and we indicated this to Mr Williamson shortly after he began his submissions and he didn't, in the light of that indication, pursue those submissions in detail. They nevertheless were made to the court in writing and we have seen their nature.

In my judgment, there is no general costs appeal before the court. We have had drawn to our attention the terms of the notice of appeal, which relevantly contains the following.

In section 5, where the party is required to set out the order that they wish to appeal, the text reads:

In my judgment that statement gives rise to grounds of appeal relating to costs limited only to the extent to which the substantive quantum appeal is successful. It does not, in my judgment, give rise to any appeal on any wider basis. And accordingly, in my judgment, this appeal should be limited to, firstly, the costs of the appeal itself, and, secondly, any consequential costs adjustment which it would be right for this court to make as a result of the outcome of the appeals themselves. As to which I repeat that the outcome of the quantum appeal was in summary that Multiplex succeeded on five issues and Cleveland Bridge succeeded on one, but Cleveland Bridge's success significantly reduced, to the extent of halving it approximately, Multiplex's financial recovery on the quantum as a whole.

On the face of it, Multiplex remain the overall successful party but to a much reduced extent.

I take the costs of the appeal itself first. In my judgment, the point that is available for Cleveland Bridge to make, and which Mr Williamson makes on their behalf, is that although they succeeded on only one of the six heads of appeal, nevertheless their success far outweighed in financial terms any success that Multiplex had either in resisting Cleveland Bridge's grounds of appeal or in promoting their own.

In my judgment, that should not result in a costs order for which Mr Williamson contends; rather, it seems to me that Multiplex should be regarded as being significantly more successful on these appeals taken as a whole than were Cleveland Bridge.

If one simply looks at the issues on which Multiplex succeeded, they succeeded on five and failed on one. If one looks at the time, effort and expense that one supposes were spent respectively on these six issues, it is quite clear to me that a greater proportion of those elements were spent on those issues where Multiplex were successful than on the single issue where Cleveland Bridge was successful.

On the other hand, in my judgment, effect should be given in any costs order to the fact that Cleveland Bridge's financial success was greater on their one ground of appeal than on those upon which Multiplex succeeded.

In my judgment, in those circumstances, Multiplex should be awarded 25 per cent of their costs of the appeal.

As to the judge's costs order, Mr Williamson submits that Multiplex should no longer be regarded as the successful party and/or that their success has been so reduced that they should no longer have a costs order in their favour. It is necessary to look in just a little bit of detail at some of the things that the judge said in his judgment in this respect.

First of all, the judge, in a very careful judgment, referred to a number of principles that he proposed to apply in relation to the costs. In paragraph 72 of the judgment he had eight principles that he referred to. Neither party has suggested that these principles were wrong and those principles included these two. Number 6:

There were numerous offers, some of them under Part 36 and some not, which each of the two parties made to the other during the course of the litigation and these have been drawn to our attention. Neither party made what in the event turned out to be an effective Part 36 offer under the Rules. We have, however, had drawn to our attention a letter which Multiplex wrote, dated 20 March 2008. That was just before the parties were about to embark on the main part of the long-drawn-out quantum hearing, which took place in March, April, and I think May of 2008. Of that, the judge said this, paragraph 37 of his judgment:

The judge then quoted paragraph 7 of that letter to which I will return shortly and went on in his paragraph 39:

As I say, I shall return to that letter shortly.

Having considered matters further, and recalling that the judge's outcome exclusive of interest was that Multiplex were entitled to something over £4 million, that to be compared with the £5 million to which the judge had referred as given in the letter of 20 March 2008, the judge said at paragraph 85:

Pausing there, that paragraph reflects what the judge had said about the letter of 20 March 2008 in paragraph 37 and 39 to which I have referred. The judge then went on in paragraph 89:

Mr Williamson submits that whereas the judge's quantum answer of something over £4 million plus interest, reaching something over £6 million in all, may have justified a reasonably close comparison with the £5 million which Multiplex had offered in the letter of 20 March, that comparison is no longer available to them. The figure of something over £4 million has been reduced to about £1.8 million, the success figure for Multiplex exclusive of interest, and Mr Williamson submits that that puts a different complexion on the costs order that should be made.

It is in that context that I look in slightly greater detail at the letter of 20 March 2008. Paragraph 2 of this letter states:

Paragraph 7, which is the one that the judge quoted in paragraph 38 of his judgment:

The following paragraphs deal summarily but nevertheless explicitly with each of 13 issues relating to schedule 2. Explanations are given of Multiplex's view as to the likely or reasonable outcome of those 13 issues and the result of that is gathered together in a short schedule at the end of the letter.

The short schedule indicates an assessment in Multiplex's favour of £5,525,769 and it was in the light of that that the letter concluded with an offer to compromise schedule 2 by them receiving £5 million exclusive of interest.

Mr Stewart has explained to us that if one leaves out of account preliminaries, which was number 2 of these 13 items and which was the issue upon which Cleveland Bridge succeeded and Multiplex failed, on this quantum appeal, the assessments of the other items, which would reduce to something in the order of £2.3 million or £2.4 million, was really quite close to the assessments which the judge himself made and which are maintained on those other schedule 2 items.

As to preliminaries, paragraph 10.2 of the letter says this:

It was, of course, that issue which Multiplex succeeded on before the judge, but failed on Cleveland Bridge's appeal to this court.

In my judgment, this letter plainly was, as the judge described it, a constructive proposal to try to dispose if not of the whole quantum issue, at least of a major schedule 2 part of it.

What is more, I am persuaded that Mr Stewart is correct in saying that, with the exception of preliminaries, where Multiplex took a line which eventually proved not to be successful, these were offers which approximated quite closely to the actual result. And as to the preliminaries, not only were Multiplex in general terms offering to negotiate about any aspect of the action or any aspect of the schedule 2 issues, but they were also in effect offering in terms to fight the preliminaries issue, which was a quite short contractual issue, if only it were possible to compromise the other matters in that letter.

In the result, Cleveland Bridge gave no positive response whatever to that constructive offer to negotiate towards a settlement of all or part of schedule 2. On the contrary, their letter of 28 March 2008 makes a short offer to settle the entire proceedings on a basis which would have included, among other things, Multiplex having to forego costs orders which they had already obtained in their favour arising out of the various preliminary issues.

Where does all that leave the question of the costs order that the judge made in the light of adjustments which were made on this appeal? In my judgment, the answer to that is this: firstly, Multiplex remain the overall successful party, albeit in a reduced amount; secondly, the judge's judgment as to the conduct of the parties and in particular that to which he had referred in paragraph 89 of his judgment, where he said that at no point between 6 June 2006 and today had Cleveland Bridge ever offered to make any payment in settlement of the entire proceedings, remains an unaltered criticism of their conduct despite their success on this appeal. And the analysis which I have attempted to describe, which Mr Stewart makes, of the letter of 20 March 2008, in my judgment is a correct analysis and takes the majority, if not all, of the sting out of the single real submission that Mr Williamson has; that is to say that Multiplex's financial success on the quantum issues was very substantially reduced as a result of Cleveland Bridge's success on the preliminaries issue.

That offer was not only an offer to negotiate about all the items on schedule 2; it was also a reasoned, sensible and constructive offer to negotiate most of the issues but, if necessary, to have a short contested hearing on the preliminaries issue. If anything like that had been taken up, the costs of the quantum hearing would have been very substantially reduced, if not eliminated.

In my judgment these considerations lead to the conclusion that although Cleveland Bridge have succeeded to the extent they have on the quantum appeal, there should be no adjustment of the costs order which the judge made below.

For these reasons, I would make the costs order that I have indicated.

LORD JUSTICE DYSON: I agree.

LORD JUSTICE STANLEY BURNTON: I agree. I particularly wish to associate myself with the remarks made by the President at the beginning of his judgment.

MR STEWART: My Lords, two final matters. The first is that unprompted congratulations would have been very much better from me at the beginning but, although they were prompted, they are nonetheless genuine and I should have said so earlier and I apologise to the man who is still Lord Justice Dyson for a few more minutes for not having done so.

LORD JUSTICE DYSON: Thank you.

MR STEWART: Secondly, so far as the costs of this appeal are concerned, Mr Williamson in his skeleton says that they are approximately £350,000 on each side, that is paragraph 8 of his skeleton. 25 per cent of that would come to £87,500. I would ask for an order for costs on account of that of £50,000 in relation to the costs of the appeals.

THE PRESIDENT: You don't want a summary assessment in the 87,000?

MR STEWART: I would be very happy with it, yes. In the alternative --

THE PRESIDENT: I don't think we would do that other than by consent because it is more than a day. It doesn't come within the Rules.

MR WILLIAMSON: My Lord, I haven't seen any costs particulars so I'm not in a position to deal with it.

MR STEWART: I'm simply relying on what my learned friend says in paragraph 8:

That's what I'm relying on.

THE PRESIDENT: Mr Williamson, he wants 50,000 on account.

MR WILLIAMSON: He does, yes. So far as that's concerned -- just before I deal with that point, I should just extend and indeed expand the apologies to my Lord Lord Justice Dyson because I opened the appeal so there was no apology warranted from Mr Stewart but there certainly is from me. I can only plead to the pressure of business on more pressing matters today.

My Lords so far as the claim on account is concerned, 25 per cent is 87,500. All I would say is that making due allowance for the possibility of a reduction on detailed assessment, 40,000 is more appropriate than 50,000.

MR STEWART: Done.

LORD JUSTICE STANLEY BURNTON: By date? 14 days.

THE PRESIDENT: The quantum appeals, if we haven't already made this order, are allowed or dismissed to the extent that we indicated on 19 February. As to the costs, Multiplex are to have 25 per cent of their costs of the appeal. Otherwise no alteration in the judge's costs order. Cleveland Bridge to pay £40,000 on account within 14 days of today. Detailed assessment otherwise. Thank you very much.