The Cultural Foundation (American School of Dubai) v Beazley Furlonge Ltd & Ors

INTRODUCTION

This judgment deals with further matters of costs arising in this case. On 8 May 2018 I handed down judgment following a trial of ten preliminary issues ([2018] EWHC 1083 (Comm)). The hearing of matters consequential upon that judgment took place on 12 July 2018, being the earliest date on which it was possible to convene a hearing that all four parties could attend. I dealt on that occasion with two applications for permission to appeal, and gave directions for the next stages of the action. The parties also made detailed submissions on the somewhat complex costs issues which arose, on which I subsequently handed down a judgment ([2018] EWHC 2185 (Comm)). Those previous judgments set out the background to the case.

The parties were not able to reach agreement about the costs relating to the 12 July 2018 hearing, and proposed that they be dealt with based on written submissions pursuant to an agreed timetable.

Altogether the parties served more than 50 pages of written submissions. However, because the subject-matter is merely the costs of and relating to a one-day hearing of consequential matters, I do not consider that it would be proportionate to address here each and every point made. I have had careful regard to all the points made in the submissions, and set out below my reasoning on the key points in contention and my conclusions.

PRINCIPLES

Having considered the rival submissions on these matters, I have concluded that I should follow the following approach when determining the incidence of costs in relation to the hearing on 12 July 2018 and the associated preparatory work.

First, and generally, I have regard to the applicable general principles set out in §§ 28-33 of my costs judgment dated 15 August 2018, derived from CPR 44.2 and the relevant case law and White Book notes.

Secondly, the costs of the part of the hearing on 12 July 2018 relating to directions for the future conduct of the case (including the associated preparatory work) should in my view be costs in the case, rather than being allocated in accordance with the outcome of the preliminary issues trial. These costs relate to the litigation as a whole rather than specifically to the preliminary issues, and should ultimately be allocated accordingly.

Thirdly, I consider that there should be no order as to costs as regards the unsuccessful applications for permission to appeal made on 12 July 2018 (including the associated preparatory work). Clearly the unsuccessful applicants should not recover those costs. Conversely, whilst the court sometimes hears from respondents to such applications, it does not generally require respondents to make submissions against the grant of permission. I note that note 52.3.6 of the White Book indicates that one advantage of applying to the first instance judge for permission to appeal is that “an application at this stage involves neither party in additional costs”. At least in the present case I do not consider it appropriate to order costs in favour of the respondents.

Fourthly, some costs-related issues – including the allocation of costs between the different preliminary issues – had to be addressed for the purposes of both: (a) the position as between the Claimants and Beazley, and (b) the position as between the Claimants and Excess Insurers. (As to (b), ASD says the principal issue between ASD and Excess Insurers was as to the allocation of costs between the different preliminary issues.) I do not consider it appropriate to allocate such costs – as ASD has proposed, in its suggested 95%/5% split – almost entirely to (a) with only the incremental costs required solely by Claimants/Excess Insurers issues being allocated to (b). I do not think the fact that ASD sought costs from Beazley but not from Excess Insurers provides sufficient reason to treat (a) rather than (b) as the reason for the costs having been incurred. Instead, I think it fair to seek to form a view, even if only on a fairly rough and ready basis, as to how the costs are likely to have split as between (a) and (b).

Fifthly, the costs should in my view be allocated having regard to the relative degrees of success on the costs issues themselves, by reference to the position the parties took on those issues. That is not necessarily the same as their relative degree of success on the preliminary issues themselves. It is also not necessarily the same as the percentages of costs that were allocated to the parties in my judgment of 12 July 2018. For example, it was always clear and accepted that Beazley would be a paying party. It does not follow that Beazley should automatically be the paying party as regards the costs issues themselves: rather, that depends on relative degrees of success on those issues, by reference to the positions the parties took on the costs issues. For the same reasons, I do not consider ‘costs in the case’ to be the appropriate order in respect of the costs currently under consideration.

DISPOSITION OF COSTS

As between ASD and Beazley, ASD was successful to a substantial degree, but not entirely, on the costs issues. I preferred ASD’s approach and evidence as to the manner of allocation of costs (though I discounted ASD’s proposed percentage slightly); and it was necessary for ASD to make its application on 12 July in order to achieve the result it did in respect of the preliminary issues costs. On the other hand, I did not accept ASD’s submission that it should recover all its costs, preferring instead a partially issues-based approach. Viewing the matter in the round, I consider that ASD would prima facie recover 75% of its costs of the costs issues (by which I mean, in this judgment, the costs of the 12 July 2018 hearing and associated preparatory work in so far as they concerned the costs issues as opposed to directions and permission to appeal). However, I consider it fair to allocate its costs as to two thirds to the position between ASD and Beazley and one third to the position between ASD and Excess Insurers. Overall, therefore, ASD should recover from Beazley 50% of its costs of the costs issues.

As between ASD and Excess Insurers, I consider that there should be no order for costs. As ASD point out, there were limited issues of principle between ASD and Excess Insurers; Excess Insurers achieved only a small proportion of the payment on account they sought from ASD; and ASD prevailed on some issues, namely whether Excess Insurers were successful on preliminary issue 5, the methodology for allocating costs between issues, and the treatment of the costs of Excess Insurers’ witness statements on the consent issue.

As between ADNEC and Beazley, I consider that the same approach should apply as I have taken as between ASD and Beazley, notwithstanding that ADNEC’s primary case was that costs should be costs in the case and it sought a similar costs order to that made in favour of ASD only as a secondary case. Beazley was ordered to pay to ADNEC a significantly greater proportion of ADNEC’s costs than Beazley was prepared to concede. As with ASD, some of ADNEC’s costs will have related to issues relevant to the position vis a vis Excess Insurers, including allocation issues, whether or not they were also relevant to the ADNEC/Beazley position. Overall, I consider that ADNEC should recover from Beazley 50% of its costs of the costs issues.

As between ADNEC and Excess Insurers, I agree with ADNEC that there should be no order as to the costs of the costs issues. ADNEC did not resist the costs order ultimately made in favour of Excess Insurers, and succeeded where it took issue with them (in relation to the costs of Issues 5, 9 and 10).

As between Beazley and Excess Insurers, Beazley accepted that Excess Insurers should recover somewhere between 9% and 39% of their costs against Beazley (as indicated in the illustrative diagram Beazley’s counsel handed up at the 12 July hearing), arguing that Excess Insurers should have adopted a ‘watching brief’ on issues 1-4 and that, where they did not do so on those issues, Excess Insurers had been largely unsuccessful. Its primary position on the costs of issues 1-4 was that “Excess Insurers should not be entitled to recover from it their costs of those issues; alternatively that any costs awarded to Excess Insurers in relation to these issues should be limited to such part of their costs as would have been incurred if Excess Insurers had limited themselves to a “watching brief” (i.e. had adopted a similar approach to ADNEC)”. Beazley also submitted that there should be no order for costs as regards the witness statements on the consent issue.

Excess Insurers sought from Beazley their costs of issues 1, 2 and 7, no order on issues 3 and 4, and 50% of their costs of the witness statements on the consent issue (with costs in the case as a fall-back position).

In the event I concluded that Excess Insurers should have 85% of their costs of issues 1 and 2, and all of their costs on issue 7, and that the costs of the witness statements on the consent issue should be costs in the case.

Overall I consider that Excess Insurers were significantly more successful than Beazley, though not wholly successful, on the costs issues, and that the appropriate order is that they should recover from Beazley 50% of their costs of the costs issues.

SUMMARY ASSESSMENT/PAYMENT ON ACCOUNT

ASD and ADNEC sought summary assessment of their costs, and Beazley did not resist this in principle. Summary assessment is a proportionate means of dealing with these costs in order to avoid the further cost and delay of a detailed assessment.

ASD’s costs summary, in respect of the costs of the costs issues alone (excluding directions and permission to appeal), indicates a grand total of £70,842, including 23 hours of solicitor time at an hourly rate of AED 3,216 (about £678), 28.4 hours at AED 2,575 (about £543) and 30.2 hours at AED 2,225 (about £469). I agree with Beazley that, even bearing in mind the rates chargeable in the market in the Dubai and City of London legal markets, in the context of an issue about costs these figures are very high (and may suggest insufficient delegation), and that the grand total is higher than would be proportionate, at least on an inter partes basis, bearing in mind the nature and subject matter of the 12 July hearing. Viewing the matter in the round, I think it just summarily to assess 100% of ASD’s costs at £44,000, of which the 50% payable by Beazley will be £22,000.

ADNEC’s costs summary in respect of the costs issues alone indicates a grand total of £48,396, including about 11 hours at AED 3,079 (about £647) and 44 hours at AED 2,677 (about £563). The comments I made above in relation to ASD apply to a lesser degree to ADNEC. Viewing the matter in the round, I think it just summarily to assess 100% of ADNEC’s costs at £35,000, of which the 50% payable by Beazley will be £17,500.

ADNEC’s costs schedule explains that the costs shown in part A of it were also shown in the costs schedule ADNEC produced for the 12 July hearing in respect of its costs of the preliminary issues. It will, as ADNEC points out, be necessary to ensure, when the costs ordered in favour of ADNEC on that occasion are assessed or agreed, that there is no double counting with the costs disposed of in this present judgment.

Excess Insurers’ costs summary in respect of all three issues dealt with on 12 July 2018 indicates a grand total of £53,752, including about 10 hours at £325 and 59 hours at £280.

Unlike ASD and ADNEC, Excess Insurers do not seek summary assessment. Instead they ask for their costs to be the subject of a detailed assessment on the standard basis, and they seek a payment on account.

In order to determine the figure for a payment on account, it is necessary to form a broad estimate of how Excess Insurers’ costs figure will split as between the different aspects of the hearing on 12 July. As a very broad estimate, the directions and permission to appeal issues occupied of the order of 40-45% of the hearing on 12 July, and about half of Excess Insurers’ skeleton argument. However, it seems likely that the costs issues will have given rise to a significantly larger proportion of the preparation time. Overall I consider it just to assume that 70% of Excess Insurers’ stated costs, i.e. £37,626, related to the costs issues, of which Beazley’s 50% would (prior to any discount for assessment) be £18,813. Having considered the hours spent and rates claimed, I think it appropriate to order a payment on account of £12,500. I hope that the parties will be able to avoid the need for a detailed assessment.

As a result, Beazley will be liable to pay, in respect of the costs of the costs issues:

INTEREST ON COSTS

Given the sums involved and the relatively recent dates on which the costs will have been incurred, I do not think it necessary or proportionate to order interest from the dates of payment of these costs.

Interest should run on the sums awarded to ASD and ADNEC at the Judgment Rate from the final date for payment i.e. from 28 days from the date of this judgment.

Interest should run on the costs due from Beazley to Excess Insurers: