Mouchel Ltd v Van Oord (UK) Ltd (No 2)

In the first judgment in these proceedings, [2011] EWHC 72 (TCC), I determined claims by Mouchel for a contribution under the Civil Liability (Contribution) Act 1978 (“the 1978 Act”). Those claims were made against Van Oord in respect of Mouchel’s liability to the main contractor, Kier, in respect to two claims by Kier relating to offshore works for a cooling water system at South Humber power station. Van Oord was a sub-contractor to Kier in relation to those offshore works and Mouchel gave advice and carried out design for Kier in relation to those works.

The two claims concerned, first, the unsuitability of Grimsby Middle Sand (“GMS”) supplied by Van Oord and placed above the immersed tube which provided the cooling water intake and outlet for the power station. The second claim related to liability for scour protection rock placed by Van Oord around the cooling water intake structures.

In the first judgment I held that, in respect of the payment of £100,000 made in a settlement between Mouchel and Kier, Mouchel would have been liable to Kier for £112,968 in respect of GMS and £36,380 in respect of scour protection, making a total of £149,348. I held that Van Oord had no liability to contribute in respect of the GMS but did have a liability to contribute in respect of the scour protection. I held that the contributions of Mouchel and Van Oord should be 65% and 35% respectively. Given that the overall liability of £149,348 had been settled for £100,000 I found that the settlement represented £75,540 for the GMS and £24,360 for the scour protection. On that basis I held that, in respect of Van Oord’s 35% contribution they were liable to contribute £8,546 (35% of £24,360).

The full and final settlement with Kier was in an overall sum of £517,500. In a witness statement dated 10 May 2009 from Mr David Binns, a commercial Director of Mouchel, he said that this sum was broken down with £100,000 being in respect of Kier’s damages together with £18,000 being for interest on that sum (3 years at 6%) and that the sum of £399,500 was negotiated in respect of Kier’s costs, disbursements and percentage uplift, based on roughly half of Kier’s costs with a 30% uplift and payment of the full sum of Kier’s disbursements to the date of the settlement.

There are now three further issues which arise:

I now deal with each of those issues in turn.

In paragraph 182 of the first judgment, where I dealt with the obligation of Van Oord to contribute £8,546, I stated that that same pro-rata calculation should also apply to the sum paid by way of interest. The parties have therefore agreed a calculation that the relevant contribution in respect of interest should be based on 8.546%. This percentage was based on the fact that Van Oord’s overall contribution towards the settlement sum of £100,000 was £8,546. Applying that percentage to the £18,000 agreed settlement for interest, the sum has been agreed by the parties at £1,534.68.

There are two elements of contribution for costs. First there is the contribution for Kier’s costs paid by Mouchel and, secondly, there is the claim for contribution for Mouchel’s own costs. I shall consider the two elements separately. However, it is convenient to review decisions in which, at least in relation to the first element, the court has considered the principles by which a party may be required to make a contribution for costs.

There are a number of decisions which have considered whether or not a party may recover a contribution to its costs under the 1978 Act. In J Sainsbury plc v Broadway Malyan (a firm) (1998) 61 Con LR 31 His Honour Judge Humphrey LLoyd QC had to consider a claim for contribution by architects against consulting engineers in relation to negligent design and supervision of a fire compartment wall in a supermarket. The claim was made on the basis that the architect had been negligent and the negligence had meant that the damage to the supermarket was more extensive than it should have been when a fire started in the store.

Judge LLoyd found that there was no obligation to contribute. He went on to say that if there had been an obligation to contribute then, even on a wide interpretation of the 1978 Act, the costs paid by the architect to the store owner as part of a settlement could not form part of the loss or damage in respect of which a party was entitled to contribution. He said this at paragraph 8.3:

“The point raised by the arguments on this topic is a short one but apparently requires the resolution of a conflict between the principle that reasonable settlements are to be encouraged (which inevitably means that costs are taken into account in arriving at the figure) and the wording of the 1978 Act. On that approach the Act must of course prevail as it is the source of BM's right to a contribution. It is therefore in my view irrelevant that if contribution were awarded on the basis of settlement then costs would only be considered as part of deciding objectively whether the settlement was reasonable overall (even though that may involve grappling with points of the kind made by Mr Moxon-Browne). If in Birse Construction Ltd v Haiste Ltd defects in works caused by a contractor's breach of contract were not for the purposes of the Act the same damage as the contractor's costs of putting them right then the costs of having to bring an action to enforce a duty by claiming damages in lieu of performance cannot be regarded as the same damage as that caused by failure to comply with that duty. Even if there had not been such guidance from the Birse Construction case (and leaving aside the situation where the party from whom contribution is sought could be said to be responsible for the costs that had to be paid under a settlement) costs in a case such as this arise from the defendant's decision not to accept liability and not from the original cause of action. The amount may well increase either because the defendant adheres to that decision or because either the claimant or the defendant is intractable (or both are) in not contemplating a settlement or in negotiating its terms, as Mr Moxon-Browne's submissions well illustrated. Even on a wide interpretation of either section 1 or section 2 of the 1978 Act costs could not therefore as a matter of fact form part of the loss or damage with respect to which a party is entitled to contribution and in any event could not be loss or damage for which a party such as EGP could be regarded as responsible. I also accept Mr Moxon-Browne's argument that costs may be incurred for reasons unconnected with the underlying damage and for which a third party is not to be held to be responsible. A detailed investigation of how costs came to be incurred is not consistent with the simplicity envisaged by the 1978 Act. On a liberal interpretation of the Act it would not in my judgment be material that an award of costs is determined by the exercise of the discretionary power given under section 51 of the Supreme Court Act since any compromise necessarily anticipates that a court will or may exercise its powers in favour of the party receiving payment, and as a result of the decision of the court there will be a liability whereas the liability referred to in section 6 of the 1978 Act is the primary liability (see the Friends' Provident Life Office case).

He then continued at paragraph 8.4 by saying that if there were a settlement, its terms and the circumstances leading up to it would or might be examined. He said that if costs were not isolated but were included in the settlement then they would obviously not be capable of being excluded. On the basis of the settlement in that case and various estimates which had been produced he was able to conclude that the settlement included a particular sum for costs which he deducted and based the claim for contribution on the settlement figure less that sum for costs.

That decision was considered by the Court of Appeal in BICC Limited v Parkman Consulting Engineers [2002] BLR 64 in which consulting engineers had paid £1,950,000 in settlement of claims arising from the reclamation work to an industrial waste tip to provide a site for development for light industrial purposes. They then sought a contribution against two parties: against the contractors who had constructed a bund and installed a membrane as part of the works to reclaim the tip and against a company who had been engaged to review the planned works before construction began. At first instance His Honour Judge Thornton QC dealt with Parkman’s claim for a contribution in respect of £600,000 for BICC’s costs which was included in the settlement sum of £1,950,000. That claim was made under section 51(3) of the Senior Courts Act 1981 (“the 1981 Act”) or alternatively as part of a contribution extending to the full sum of £1,950,000 under the 1978 Act. Judge Thornton held that he had no jurisdiction to make an order under section 51(3) of the 1981 Act but, distinguishing the Broadway Malyan decision, he held that Parkman were entitled to a contribution under the 1978 Act in respect of the full sum paid to BICC, inclusive of any part referable to BICC’s costs.

On appeal it was contended that the judge did have the power to make a costs order under section 51(3) of the 1981 Act but could not order any contribution under the 1978 Act in respect of the sum of £600,000 which Parkman contributed to BICC’s costs of the proceedings against them. In giving the judgment of the Court of Appeal, Henry LJ stated that neither counsel supported the judge’s conclusion that he had no power to make an order under section 51 (3) of the 1981 Act. He then added this at [115]:

“... we can record briefly that in our judgment the discretion given by the section is not limited so as to exclude an order in these contribution proceedings in respect of a sum paid to the original Claimant (Plaintiffs) in respect of their costs.”

Section 51(1) provides that the costs shall be in the discretion of the Court and section 51(3) states: “The Court shall have full power to determine by whom and to what extent the costs are to be paid.”

The Court of Appeal decided that Judge Thornton was entitled to award Parkman a contribution in respect of BICC’s costs on the basis that, on the evidence before him, the payment of £1,950,000 was in respect of “all claims by BICC against Parkman” and, as Judge Thornton had stated at paragraph 296 of his Judgment: “The settlement was, in its entirety, settling Parkman’s liability for the damage to BICC’s containment and, in consequence, may in its entirety found a contribution under sections 1(1) and 1(4) of the Act.”

Henry LJ then said this at [121] to [123]:

“121.

Moreover, even if part of the payment was expressed to be made in respect of BICC's costs, we are not persuaded that the words of sections 2 or 6(1) of the Act preclude the making of a contribution order in respect of that part. Section 1(1) defines the person who is entitled "... to recover contribution ..." and the person from whom it may be recovered. Section 2(1) does not expressly limit the amount of contribution to the amount payable in respect of liability "... for the damage in question ..." - section 2(3) might, but would not necessarily have this effect; and section 6(1) again defines the person who can claim contribution, without expressly limiting his recovery to the "compensation" he is liable to pay to the injured person.

122.

The common law background is provided by the Court of Appeal's decision in Biggin & Co Limited -v- Permanite Limited [1951] 2 KB 314. The amount paid under a reasonable compromise with a third party may be taken as the measure of damages in a breach of contract claim. There the settlement figure included the third party's costs, and one of the reasons for the Court of Appeal's decision was that costs were saved by the settlement of the third party proceedings (see page 326). Judge Lloyd acknowledged that

"... reasonable settlements are to be encouraged (which invariably means that costs are taken into account in arriving at the figure)." (page 77)

123.

Our present view is that the 1978 Act enables the party claiming contribution to recover a contribution towards a payment made in respect of the injured party's costs: but it is sufficient for the purposes of the present case that the judge was entitled to have regard to the whole of the settlement figure paid in respect of "all claims". We would so hold.”

It was argued that Judge Thornton was wrong to apply the overall 50% contribution assessment to the £600,000 which Parkman had paid in respect of the BICC costs. They said that there was no evidence as to what costs BICC had in fact incurred, nor whether they were concerned with BICC’s claims against Parkman for design faults, matters with which it was said that the contractor was not concerned. It was also said that there was no assessment which would have indicated the extent to which the costs were recoverable from Parkman in the action. In dealing with those contentions, at [125] to [126] Henry LJ said this:

“125.

These contentions raise a number of issues. Was the settlement reasonable? The judge thought that this was conceded by Cumbrian (see paragraph 85 above), although Mr Marrin submitted to us that the burden of proving that it was reasonable rested upon Parkman, and that the burden was not discharged. Secondly, the absence of detailed assessment is a factor relevant to the question whether there is power to order contribution in respect of a payment on account of costs, which we have considered above (paragraph 117(e)). Thirdly, does Cumbrian have a valid complaint that the payment was in respect of costs incurred by BICC in relation to their design claims against Parkman? It seems to us inevitable that any of BICC's costs for which Parkman were potentially liable must relate to BICC's claim against them, not against Cumbrian.

126.

However, none of these considerations, in our judgment, impinge upon the fact that the judge was entitled to make an overall assessment of the amount of contribution which Parkman should recover from Cumbrian in respect of the total payment of £1,950,000, and in our judgment he was.”

In Nationwide Building Society v Dunlop Haywards (DHL) Limited and Cobbetts [2009] EWHC 254 (Comm) Christopher Clarke J dealt with a case where valuers, DHL, had fraudulently overstated the value of commercial property and where solicitors, Cobbetts, were alleged to have acted negligently in relation to actions in respect of the loans secured on the property. Cobbetts settled proceedings by the acceptance of a CPR Part 36 offer and subsequently made an offer which was accepted in respect of costs. Cobbetts, then sought a contribution from DHL in respect of the costs which they had paid to the Building Society, CBS.

At [81] Christopher Clarke J adopted the approach of the Court of Appeal in BICC and said this:

“Cobbetts have paid CBS in respect of their costs in the sum of £555,000, which was the amount of Cobbetts’ part 36 offer on costs which CBS accepted. In BICC Limited v Cumbrian Industrial Ltd [2002] Lloyds Rep PN the Court of Appeal expressed its (obiter) “present view” that a party claiming contribution could recover a contribution made in respect of the injured party’s costs. It did so on the basis that the words in section 2 and 6(1) of the Act did not necessarily preclude the making of a contribution order in respect of costs. The Court did not adopt the approach of HHJ Lloyd in J Sainsbury plc v Broadway Malyan [1998] 61 Con L.R. 31 Judge Lloyd had held (obiter) that neither “compensation” within section 6 nor “damage” within section 2(3) included a right to recover or a liability to pay costs, which required a detailed investigation “not consistent with the simplicity envisaged by the 1978 Act”. The Court of Appeal was not persuaded that the words of section 2 or section 6(1) precluded the making of a contribution order in respect of costs, because section 2(1) did not expressly limit the amount of contribution payable in respect of liability for the damage in question, nor did section 6(1) limit recovery available to the person claiming contribution to the compensation which he was liable to pay to the injured person.”

He then went on to consider what contribution should be made in respect of costs. He indicated that there was a complication in that case compared to the BICC case because costs that CBS had been awarded against DHL considerably exceeded those which had been agreed by Cobbetts. He held that this must be because the claim against Cobbetts settled and the claim against DHL was a claim in fraud. He added this at [82]:

“If the two defendants had both been innocent parties who had both reasonably defended the action to the same stage the appropriate approach might be to aggregate the costs that they had each had to pay the claimant and apply the appropriate proportions to the aggregate figure. Such an approach treats the total costs as if they were an addition to the Claimant’s damages; and shares them out in the same proportion as applies to the compensation for the damage.”

In Bovis Lend Lease Limited v Saillard Fuller and Partners (2001) 77 Con LR 134 His Honour Judge Thornton QC dealt with a case where the contractor settled a claim for a flood and sought a contribution against architects and mechanical and electrical engineers. The contribution was also sought in relation to a sum which had been paid in respect of costs. That case was decided prior to the decision of the Court of Appeal in BICC. Judge Thornton reiterated the approach that he had taken at first instance in BICC and said this at [224]:

“The sum which may be used as the basis of a contribution claim is: ‘any payment made or agreed to be made in bona fide settlement or compromise of any claim made against him in respect of any damage’ (s 1(4) of the 1978 Act). There is no suggestion that Bovis acted unreasonably in initially contesting GA’s claim or in incurring a costs liability to GA in the sum of £70,000 or that it acted unreasonably in agreeing to pay costs in that amount. The claim and its defence, and the costs’ consequences of making and defending the claim, were all consequences of the notional victim’s claim in respect of damages suffered by that notional victim. The claim was for damages based on Bovis’ liability for that damage. The costs therefore formed part of that claim and of the compensation recoverable by GA for the flood damage. These conclusions emerge from an application of ss 1(6) and 6(1) of the 1978 Act to this cause.”

In the context of the current case I consider that the following can be derived from those decisions and from an analysis of the 1978 Act and the 1981 Act.

First, where a party settles a claim made against it by a third party and in doing so pays costs to that third party, the court has a discretion and may order that a party liable to make a contribution to that other party should pay those costs under section 51 of the 1981 Act: BICC at [115].

Secondly, those costs may also give rise to a contribution under the 1978 Act. In BICC the Court of Appeal held that where there was an overall settlement figure in respect of all claims which included a sum attributed by the paying party to costs, such a payment could found a contribution claim under sections 1(1) and 1(4) of the 1978 Act: see BICC at [120] and [123]. That principle was adopted by Christopher Clarke J in Nationwide Building Society and by Judge Thornton QC in Bovis Lend Lease.

I also consider that under the 1978 Act a “contribution” is not limited to being a contribution in respect of “damages” but includes a contribution based on “liability for damage”. This can be derived from the wording of the following provisions:

This is a case where Van Oord does not challenge the reasonableness of the settlement made as between Mouchel and Kier. On that basis, there is no challenge to the reasonableness of Mouchel paying those costs or as to the reasonableness of the amount of those costs. The issue therefore essentially concerns the basis on which there should be a contribution from Van Oord for those costs. Van Oord have accepted that, in principle, they have a liability to contribute in respect of those costs.

In the present case the agreement between Kier and Mouchel set out in the schedule attached to the Tomlin Order is in the following terms:

“The Defendant shall pay to the Claimant the sum of £517,500.00 … such sum being paid and accepted in full and final settlement of all claims between the Claimant and Defendant... including all claims for damages, fees, interest, costs, disbursements and VAT.”

On the face of that document the settlement was a lump sum. However in the statement produced by Mr Binns, as already stated, he sets out at paragraph 13 that there was a sum of £100,000 for Kier’s damages together with £18,000 for interest and he also says that the sum of £399,500 was negotiated in respect of Kier’s costs. It is common ground that, on the evidence, whilst the settlement agreement expressed the sum as a single figure, the parties had reached that figure on a negotiated basis making the allowances as set out in Mr Binns’ statement for damages, interest and Kier’s costs. Indeed that is the way in which matters have proceeded and I have been asked to consider separately the contribution in respect of the damages, interest, and costs.

The parties do not seek to differentiate between the sum which might be payable for costs under section 51 of the 1981 Act and the sum which may be payable for a contribution under the 1978 Act. Whilst that has been a convenient way to proceed, I bear in mind that a decision based on the exercise of the discretion under section 51 will take account of the matters set out in CPR 44.3 whilst the 1978 Act states that the contribution shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question. As I set out in my first judgment the causative potency in relation to the damage is likely to be the most important factor in assessing contribution.

On behalf of Mouchel Mr Steven Walker submits that the factors to be considered include the extent of Van Oord’s liability to Kier and the amount of the sum of £399,500 agreed for costs attributable to, first, the selection of GMS, secondly to the damages suffered around the intake heads and thirdly to other matters. He submits that the court will normally award the same contribution in respect of costs as in relation to the other damage, as happened in the BICC case. However he recognises that this is not a case where the liabilities of Mouchel and Van Oord to Kier were co-extensive. Mouchel were liable to Kier, both for the GMS and scour around the intakes whereas Van Oord was only liable for scour around the intakes. He submits that the court should consider what proportion of the costs were attributable to damage for which Van Oord was not liable and that therefore Van Oord would not be required to contribute to costs relating to the GMS issue.

He submits however that it would not be just and equitable to use the same pro-rata calculation for the costs as was applied in relation to damages and interest. He submits that in any litigation a significant part of the costs cannot be allocated to discrete issues and therefore on a strict pro-rata approach nothing would be allowed for those costs. He submits that the fact that the 35% liability of Van Oord only led to an overall contribution of 8.546% in terms of damages should not lead to the conclusion that that particular percentage is the appropriate contribution in respect of costs.

Instead Mr Walker relies on the evidence of an analysis carried out by Mouchel’s solicitors and dealt with in the third witness statement of Mrs Heidi Kapadia. That analysis was based on a consideration of the statements of case, expert reports and witness statements and having reviewed some 998 paragraphs and sub-paragraphs of those documents the conclusion was that 32% dealt with the suitability of the GMS material;14% dealt with scour protection around the intakes and 54% dealt with other matters.

Using those figures Mr Walker submits that the appropriate calculation is that the costs of the GMS issues, that is 32% of the main action costs, should be deducted and Van Oord should pay 35% of the remaining costs giving an overall figure of 23.8%. He submits that the starting point should be that Van Oord should pay 35% of Kier’s costs of £399,500 alternatively 23.8% of those costs.

On behalf of Van Oord Mr Jonathan Selby, like Mr Walker, recognises that the starting point is Van Oord’s responsibility for the scour adjacent to the intake structure. However he submits that this does not advance matters because the fact and cause of that damage was not in issue in the main action which focussed solely on whether or not Mouchel was liable for the damage. He submits that in considering what contribution is appropriate the court should take into account the fact that the main action had nothing to do with the workmanship issues on which Van Oord’s liability was based.

He says that Kier only raised issues for which Van Oord was not responsible and that Van Oord was not a party to the main action and was not involved in any pre-action protocol process which preceded it. He points out that the main action was commenced in July 2007 and that Van Oord was only joined into the proceedings as a party in June 2008. As a result he says that it is difficult to see what, if any, costs of the main action were incurred by Kier as a result of matters for which Van Oord has been found responsible. He submits that, given the modest extent of Van Oord’s responsibility for the scour around the intake heads, it did not, in the event, make commercial sense to involve Van Oord in those proceedings. His primary position is that Van Oord should not have to make any contribution in relation to costs.

His secondary position is that any contribution should be no higher than the 8.546% contribution that Mouchel recovered in respect of the £100,000 liability element of its settlement with Kier. He submits that given Van Oord’s modest contribution to the primary liability there is no reason why Van Oord should make a higher contribution for the secondary liability for costs. He also submits that any contribution should be limited to the costs that were incurred after Van Oord was joined in the proceedings in June 2008. He submits that from the statement of costs, Kier’s costs up to 30 May 2008 were £322,882.06 and that, taking account of a CFA up-lift, the costs would have been substantially more, even at that stage, than the £399,500 paid by Mouchel to Kier under the settlement in respect of the costs of the main action. He submits that even on this basis there should not be any recovery.

As Van Oord, correctly in my judgment, does not challenge the principle of Mouchel being able to recover a contribution of the sum that they agreed to pay Kier by way of costs, the issue I have to consider is what contribution Mouchel is entitled to recover in respect of the sum of £399,500 for Kier’s costs which formed the basis of the settlement between Mouchel and Kier.

I accept that the starting point must be my finding that in relation to the scour protection around the intakes the contributions of the parties were Van Oord: 35% and Mouchel: 65% and that there was no liability to contribute for the GMS.

Just as in the Nationwide case, this was not a case where Kier’s costs were incurred in respect of matters for which both Van Oord and Mouchel were responsible. It is therefore necessary, in my judgment, to make an assessment of the extent to which the costs of £399,500 agreed by way of settlement may be properly attributable to matters concerned with Mouchel’s liability to Kier for scour around the intakes rather than Mouchel’s liability to Kier for the GMS. In this respect I accept Mr Walker’s submission that on the basis of the BICC case the relevant question is not the extent to which the costs were incurred by Mouchel in dealing with the workmanship defects of Van Oord in relation to the scour protection around the intakes. Necessarily the issues between Mouchel and Kier were concerned with Mouchel’s design liability. Although at paragraph 57 of the Re-Amended Particulars of Claim there is a reference to it being discovered that scour protection around the intake and outfall heads was failing, in paragraph 131 of the Re-Amended Defence Mouchel denied that their design of the scour protection around the intake and outfall heads was erroneous or that it had failed. They did not contend that there was a failure in terms of workmanship for which Kier would be responsible.

The question therefore is the extent to which it is possible to make an assessment of the lump sum paid for costs of £399,500 so as to differentiate between costs relating to the GMS, costs relating to the failure of the scour protection around the intake heads and other matters. The only analysis which provides any guide is that which is attached to the witness statement of Mrs Kapadia. I accept the submission by Mr Selby that merely counting the number of paragraphs in which a particular issue is dealt with in pleadings, expert reports or witness statements does not reflect the costs which have been spent but rather that the cost will be dependent on the time devoted to dealing with those issues. It does however provide some guidance and I propose to use it as a starting point bearing in mind the caution Mr Selby has properly raised.

Mr Selby did refer me to the estimate of costs prepared by Kier during the course of the litigation up to 30 May 2008. This showed that Kier had incurred costs, excluding any uplift, up to that date of over £320,000, with some £155,000 estimated as future costs. I find that estimate of little assistance in dealing with what costs might be attributable to any particular aspect of Kier’s claim or otherwise in making any necessary apportionment of those costs.

In addition Mr Selby provided further written submissions after the hearing, to which Mr Walker responded, in which Mr Selby proposed that the apportionment could be based on consideration of what costs might have been incurred by Kier in pursuing a claim of £36,380 relating to the scour around the intake. He says that costs of such a claim might be £20,000 to £30,000 at most so that the contribution of Van Oord at 35% would be £7,500 to £10,500. Mr Walker objected to the further submissions but also submitted that the question of what costs might have been spent dealing with the workmanship claim was not the issue. Rather, he submits, the question is what contribution should be made to the payment of £399,500 for costs paid by Mouchel to Kier for its costs as part of the reasonable settlement. I consider that Mr Walker’s submissions are well founded and that, essentially the question is to analyse a contribution to the sum of £399,500 which was agreed for costs. An analysis of what it might have cost, even if properly based and founded in evidence, would be of limited assistance when the reasonableness of the costs is not in dispute.

In those circumstances and bearing in mind the caution raised by Mr Selby, I turn to consider the analysis in Mrs Kapadia’s witness statement. Taking the figures for costs for GMS, scour protection at the intake and other matters of 32%, 14% and 54% as set out in paragraph 26 of the witness statement, I consider that this indicates that as between GMS and scour protection over twice the paragraphs related to GMS compared to the scour protection. The “other matters” are not specifically related to either the GMS or the scour around the intake but are general or common matters which might properly be applied to either the GMS claim or to the scour claim.

I do not consider that the approach put forward by Mr Walker of saying that 32% should be deducted is an appropriate way to derive the relevant costs. The effect of that would be to say that 32% related to GMS and 68% related to scour because of the impact of the 54% which relates to other or general matters.

In my judgment, a better approach is to consider the proportion as between GMS and scour around the intake and use that same proportion in relation to other general or common matters. Together the paragraphs of the documents which related to GMS or to scour around the intake came to 46%. If the relative proportions of that overall 46% are considered, that would lead to 70% (that is 32%/46%) being related to GMS and 30% (14%/46%) being related to scour protection.

Taking those figures then the relevant amount of costs in relation to GMS would be 70% of £399,500 for the GMS and 30% of £399,500 for the scour protection. Van Oord would then be liable for 35% of that 30% of £399,500 so that the Van Oord contribution would be 10.5% of the £399,500.

This indicates that taking this approach and accepting the analysis contained in Ms Kapadia’s witness statement the overall proportion of costs at 10.5% is very close to the overall proportion of recovery of damages at 8.456%. In my judgment this would indicate that in this case the incidence of costs was similar to the incidence of damages. Given the inaccuracy and the criticism that can be made of Mrs Kapadia’s analysis I consider that the appropriate way of dealing with the contribution for the sum paid by Mouchel for Kier’s costs would be to adopt the same percentage of 8.456% as is applied to the damages. In that way I consider that the analysis in Mrs Kapadia’s witness statement supports the principle that in this case the percentage contribution in relation to costs should follow the percentage contribution in relation to damages and interest.

Given that in settlements, particularly global settlements, it is not possible to differentiate between costs and damages and bearing in mind that experience shows that very often the precise attribution by one or both parties of a sum in a settlement to damages or costs may be a matter of administrative or accounting convenience, I consider it undesirable, unless there is strong evidence to show to the contrary, to differentiate between the percentage recovery of damages and the percentage recovery for costs. In those circumstances I conclude that Van Oord are obliged to contribute 8.456% of the £399,500 negotiated and paid by Mouchel in relation to costs. That amounts to a sum of £33,781.72.

Mr Walker submits that the same principle, as applies to a contribution for Kier’s costs, should also apply to a contribution for Mouchel’s costs of dealing with the main action. As he points out those costs exclude the costs of the third party proceedings by Mouchel against Van Oord which will be the subject of a further decision depending on the outcome of these issues.

In relation to Mouchel’s costs of the main action Mr Selby submits that they are not recoverable under the 1978 Act and that the only basis upon which Mouchel can be entitled to such costs is under the court’s discretion contained in section 51(1) and 51(3) of the 1981 Act. He submits that many of the factors that are material to the question of a contribution in respect of Mouchel’s costs are the same as the factors relevant in relation to a contribution for Kier’s costs. Further he relies on the fact that Van Oord was only joined in proceedings at a late stage and without any compliance by Mouchel with the pre-action protocol. He says that this caused difficulties to Van Oord.

Again he submits that Van Oord should not be required to make any contribution to Mouchel’s costs of the main action alternatively any contribution should not be higher than 8.546%. He points out that the costs that Mouchel incurred in the main action would always have been incurred by Mouchel regardless of whether Van Oord was found liable for its workmanship. He submits that the limited responsibility of Van Oord means that Mouchel would always have had to defend the main action in any event. He submits that Mouchel’s costs of the main action were not affected by anything to do with Van Oord. He submits that given the lack of compliance with the pre-action protocol the court should refuse to permit Mouchel to recover any of their costs from Van Oord.

In relation to this issue the first question is the basis on which Van Oord might be liable to Mouchel for the costs which Mouchel incurred in dealing with the claim by Kier up and until the stage when Mouchel compromised the main claim by the terms of the settlement.

Mr Walker submits that such costs can give rise to a contribution under the 1978 Act whereas Mr Selby contends that the 1978 Act does not give rise to a liability for Van Oord to contribute to the costs which Mouchel themselves have expended. I consider that Mr Selby is right. The provisions of the 1978 Act make it clear that what is being granted is a right to contribute in respect of a party’s liability to a third party. As set out above that liability can include liability to that third party for costs. However, I see no grounds upon which a party can seek a contribution in relation to its own costs because that does not form a liability to a third party in respect of damage. It is a liability of the party itself in relation to proceedings brought by the third party, but that does not make it a liability to the third party for damage. In those circumstances I do not consider that there is a claim by Mouchel under the 1978 Act for the costs that Mouchel incurred in the main action.

There is however, it is common ground, a general discretion under sections 51(1) and 51(3) of the 1981 Act and if there is any claim by Mouchel for costs against Van Oord I consider it has to establish that claim under those provisions.

It must be borne in mind that, in this case, prior to the settlement Mouchel had brought third party proceedings against Van Oord seeking a contribution. The costs of those third party proceedings will have to be determined at a future date, but that is a conventional route by which one or other of Van Oord or Mouchel may obtain a costs order against the other. In cases where the third party proceedings consist of a claim which is passed through to the third party, then depending on the outcome of the third party proceedings, if the third party is liable to a defendant and the defendant is liable to the claimant then the third party may have a liability to pay the defendant’s costs which would include costs which the defendant had incurred in defending the claim by the claimant.

The case of contribution proceedings is different. The claim made by a claimant against a defendant establishes whether or not there is liability in respect of damage and if so what sums are to be paid in respect of that liability which is the foundation of a claim for contribution. Unless and until that liability is determined or a settlement is reached and the sum payable ascertained, there is no liability on another party in contribution proceedings to contribute or to contribute a particular sum.

As is clear from the issues between Mouchel and Kier they were confined to issues relating to Mouchel’s liability to Kier, rather than anything to do with primary liability of Van Oord to Kier. Indeed in this case Van Oord was not involved in the proceedings until a late stage in June 2008. In those circumstances I find it difficult to see the basis upon which the court should exercise its discretion and make an order that Van Oord should contribute to Mouchel’s costs in defending proceedings to establish Mouchel’s liability, in such circumstances.

In terms of CPR 44.3(2) the court would generally follow the rule that the unsuccessful party will be ordered to pay the costs of the successful party. In the context of contribution proceedings, that rule applies as between Van Oord and Mouchel in respect of the costs of the third party proceedings. But it is difficult to see how, by Mouchel incurring costs in defending the claims by Kier up to the time of settlement, it can be said that the costs of Mouchel should be borne by Van Oord as being the unsuccessful party.

Equally considering the matters to which the court has to have regard under CPR 44.3(4) I find it difficult to see that there are circumstances in this case which would lead to it being just to make an order that Van Oord should pay some of Mouchel’s costs. There does not appear to me to be any conduct by Van Oord to justify such an order. And this is borne out by considering the various matters included as conduct in CPR 44.3(5). The fact is that Van Oord were not involved until very late in the main action and then by way of contribution proceedings and I do not see that there is anything in that conduct which justifies making an order that Van Oord should pay some of Mouchel’s costs. In particular, in the context where Van Oord’s overall liability to contribute is only a small percentage of the overall settlement so that it cannot have been a material factor in Mouchel deciding whether to settle or not and where the costs of the third party proceedings will reflect matters as between Van Oord and Mouchel, I do not consider that it is appropriate to exercise my discretion and award Mouchel a contribution for its costs of defending the claim by Kier.

Indeed in none of the cases to which I have been referred has the court dealt with the issue or decided that a contributing party should pay the costs incurred by the party in defending proceedings by which it established the premise for a contribution claim. Whilst there might be cases which would make it just for a contributing party to make payment of some of the other party’s costs of defending proceedings against a third party, there is nothing in this case to suggest that this is appropriate here.

Accordingly, in my judgment this is not a case where I should exercise my discretion under section 51(1) and section 51(3) of the 1981 Act and accordingly I do not order Van Oord to make any contribution in relation to Mouchel’s costs of the main action.

As a result, I find that Van Oord is liable to Mouchel as follows:

I invite the parties to make submissions as to the future conduct of these proceedings and any ancillary matters.