DBE Energy Ltd v Biogas Products Ltd

Further to my judgment following the trial of this matter (“the main judgment”) ([2020] EWHC 1232 (TCC)), I must now address a number of consequential matters relating to interest and costs. These matters were argued before me on 18 May 2020 by

This judgment should be read together with the facts and findings in the main judgment, details of which are not repeated here. I use the same abbreviations in this judgment as I have used in the main judgment.

During the hearing, I decided that interest would be paid by Biogas at a rate of 1% over base, that Biogas would pay interest on costs awarded at the same rate and that Biogas would have 28 days in which to make payment of the judgment debt. There was no dispute between the parties that from the date of judgment (18 May 2020) to the date of payment, interest should run at the statutory judgment rate of 8%.

The remaining matters to which I now turn in this judgment are (i) the period from which interest should run on the judgment debt; (ii) the payment of costs; (iii) the scope of the costs order and (iv) DBE’s application for a payment on account of costs.

In my main judgment, I have awarded £224,303.77 by way of damages to DBE. This figure is made up of (i) costs which have already been incurred in installing temporary Landia Tanks, (ii) costs which are yet to be incurred in relation to the replacement and reinstallation of the Pasteuriser Tanks and (iii) future loss of revenue that will be suffered once the AD Facility is fully operational.

DBE submits that in respect of each of these three forms of loss, it is fair and just to exercise the court’s discretion pursuant to section 35A of the Senior Courts Act 1981 by awarding interest from the end of January 2019 (when the Pasteuriser Tanks failed and the cause of action accrued) to the date on which the Judgment debt is satisfied. However Biogas contends that the court should not treat each of these different forms of loss in the same way for the purposes of interest; Biogas submits that interest on costs already incurred should run from the date on which they were incurred, but that there should be no interest in respect of future costs of replacement and loss of revenue because these are damages which are yet to be incurred.

The court’s jurisdiction to award interest under the 1981 Act is discretionary. The purpose of an award of interest is fairly to compensate the recipient of interest for being deprived of money which he should have had.

In my judgment there is little difficulty with the costs that have already been incurred by DBE in relation to the temporary Landia Tanks. The conventional approach to economic loss of this type, suffered between the date of accrual of the cause of action and the date of judgment, is to award interest from the date on which the loss occurred (see B.P. Exploration Co v Hunt (No. 2) [1979] 1 WLR 783 per Robert Goff J at 846D, upheld on this point in the House of Lords, and the approach taken by this court in West v Ian Finlay [2013] EWHC 868 (TCC) per Edwards-Stuart at [389]). Miss Atkins provided a table in her skeleton argument setting out the various dates of loss in relation to incurred costs and, absent any submissions from Mr Cheung to the contrary, I accept the dates set out there together with her calculation of the days to judgment in respect of each head of loss. Interest on all costs incurred is to run from the date when each item of expenditure was incurred.

In support of his submissions that interest should run from the date of failure of the Pasteuriser Tanks (i.e. the date on which the cause of action accrued), Mr Cheung relied on Aerospace Publishing Ltd v Thames Water Utilities Ltd [2007] EWCA Civ 3. In that case, the Court of Appeal, carrying out a re-hearing on quantum, held that Aerospace was entitled to recover damages for the loss and destruction of a private archive on a diminution in value basis by reference to the cost of reinstatement of the archive. In circumstances where the archive had not yet been restored, it was argued that no interest was recoverable. The Court of Appeal rejected this argument:

“In my view there is a fallacy at the heart of Mr Rainey’s argument. It jumps from the true proposition that no remedial costs have yet been incurred to the false proposition that no loss has yet been incurred. The loss was incurred on 3 July 2001 and the fact that in the end the Judge – correctly so we are holding – favoured a computation of most of the loss by reference to the cost of a restoration not yet conducted does not alter the date of the loss. Informing therefore the Judge’s exercise of discretion to award interest under s. 35A of the Act of 1981 should have been “the basic principle that interest will be awarded from the date of loss”. So said Robert Goff J in a passage undisturbed on appeal in BP Exploration Co (Libya) Ltd v Hunt (No. 2) [1982] 1 ALL

ER 925 at 975j; and he proceeded to add that “the mere fact that it is impossible for the defendant to quantify the sum due until judgment has been given will not generally preclude such an award”” (per Longmore LJ at [93]).

In Woodlands Oak Ltd v Conwell [2011] EWCA Civ 254, the Court of Appeal followed the approach taken in Aerospace and rejected an argument that the Recorder had been wrong to award interest on a counterclaim in circumstances where, at the date of judgment, the sums claimed by way of counterclaim had not been incurred (per Sir Anthony May at [35]-[36]).

In light of these authorities, I accept Mr Cheung’s submission that, insofar as the cost of the replacement and reinstallation of the Pasteuriser Tanks is concerned (together also with management fees and the costs of a programmer (which have been invoiced but not yet paid), I should award interest from the date of accrual of the cause of action.

Miss Atkins argues that this approach would result in overcompensation because, if one takes the loss as arising on the date of accrual of the cause of action, it would not have been necessary for DBE to carry out the temporary replacement. I do not, however, follow that argument. The evidence was clear in this case that it was not possible to obtain a permanent replacement for the Biogas Pasteuriser Tanks sufficiently quickly after their destruction to ensure that the seed already in the Digester Tanks would not start to deteriorate and die. That is why it was necessary to source a temporary solution.

In summary, therefore, I award interest on the costs of replacement and reinstallation of the Pasteuriser Tanks, together with management fees and the costs of a programmer from the 29 January 2019.

In my judgment, the loss of revenue claim cannot be treated in the same way as the claim in respect of future remedial costs.

The loss of revenue claim was argued at trial on the basis that a loss would be incurred once the AD Facility had ramped up to full capacity (which, as at the date of trial it had not yet done). DBE argued that the delay caused by the failure of the Pasteuriser Tanks was critical in that it affected the ultimate date of commencement of operations at the AD Facility, pushing that date back by (as I have found) a period of two weeks.

During the course of the hearing on consequentials, Mr Cheung sought to argue, by reference to a Facility Agreement and an Amended Facility Agreement, that DBE had been forced to borrow at high rates of interest in circumstances where it had suffered loss by reason of the failure of the Pasteuriser Tanks. However, this evidence was not before the court at trial and there is no evidence whatever from DBE to link its borrowing at varying times between April 2019 and February 2020 with the failure of the Pasteuriser Tanks in January 2019. Indeed, the evidence at trial showed that the AD Facility encountered other problems in commissioning and ramping up which caused delay but which had nothing whatever to do with the Pasteuriser Tanks’ failure. Accordingly, I fail to see how this point has any relevance to the question of the date from which interest should run in respect of the loss of revenue claim.

There is no evidence before the court that the AD Facility has yet reached full capacity.

Doing the best I can to ensure a just result which reflects the fact that the loss of revenue claim did not crystallise in January 2019, was not an inevitable claim for loss and was expressly claimed at trial as a loss that would only be incurred upon the AD Facility finally reaching full capacity, I am not going to award any interest in relation to this head of loss.

DBE’s submissions on costs are straightforward. It says that, as the winning party, it is entitled to recover all of its costs of these proceedings to be assessed on a standard basis, if not agreed. In its skeleton argument for the consequentials hearing, DBE made these submissions both by reference to the provisions of clause 16.9 of the DBE Terms and by reference to the provisions of CPR r. 44.2, but in the face of objection from Biogas (based, with some justification, on the failure to establish on the evidence a breach of clause 16.9 of the DBE Terms at trial), Mr Cheung confirmed that he only pursued this submission by reference to CPR r. 44.2. Accordingly, I say no more about clause 16.9 of the DBE Terms, save to note that Mr Cheung nevertheless relies on Biogas’ alleged unreasonable failure to mediate in the context of his general submissions on costs.

Biogas accepts that it is inevitable that, as the losing party, it will have to pay a substantial proportion of DBE’s costs on the standard basis. However, it contends that in circumstances where DBE has been unsuccessful in relation to two distinct elements of its claim (namely the claim for damages in relation to the Tank Heaters (“the Tank Heaters Claim”) and the claim for damages amounting to 15 weeks of lost revenue (“the Delay Claim”)) this is an appropriate case for the court to make an issues-based costs order (in particular an order for payment of Biogas’ costs on the Tank Heaters

The relevant legal principles are set out in detail in the judgment of O’Farrell J in Triumph Controls – UK Ltd v Primus International Holding Company [2019] Costs LR 1571 at paragraphs [7]-[15] and there is no need to repeat them here. Suffice to say that I have regard to those paragraphs, to the provisions of CPR r. 44.2 and to the guidance given in the authorities cited by O’Farrell J in that case in giving this judgment. I have also read and considered the decision of Yip J in Amanda Jayne Welsh v Walsall Healthcare NHS Trust [2018] EWHC 2491 (QB), to which I was also referred by Miss Atkins. This case appears to me to set out the same principles as appear in Triumph Controls.

In light of the positions of the parties, I must decide whether there is any good reason to depart from the general rule that DBE should, as winning party, have all of its costs.

In support of its contention that I should not so depart, DBE makes the following main points:

In arguing to the contrary, Biogas argues that the majority of the points raised by DBE by way of unreasonable conduct on the part of Biogas will be compensated in costs in any event, but submits that DBE’s own conduct engages the provisions of CPR r. 44.2(5) in every respect, namely the manner in which the claim was pursued, the reasonableness of bringing particular claims and the extent to which a claim has been exaggerated. In particular, Biogas relies upon:

By reference to these main points (and a few others set forth in its skeleton), Biogas contends (i) that DBE’s decision to pursue the Tank Heaters Claim absent any reliable evidence in respect of causation was unreasonable and caused the parties to incur unnecessary costs; and (ii) that DBE’s pursuit of the Delay Claim quantified by reference to a 15 week period was also unreasonable and exaggerated and itself created an impediment to settlement negotiations.

Both parties referred me to various Without Prejudice Save as to Costs offers that have been made by each side at differing times during the proceedings, but none of these offers seemed to me to take matters much further.

Having regard to the parties’ submissions and applying the relevant principles referred to above, I have concluded that it would not be appropriate in this case to make an issues-based costs order, but that a proportional costs order would be appropriate to reflect Biogas’ success in defending the Tank Heaters Claim and in reducing the Delay Claim from 15 weeks to 2 weeks. My reasons are as follows:

In the circumstances, I accept Biogas’ submission that DBE’s conduct, as set forth in 27(d) above, should be reflected in costs. However, in circumstances where an issuesbased costs order invariably creates practical difficulties (not least because of the difficulties involved in seeking to dissect the issues and the costs incurred in relation to each issue) and given the terms of CPR r. 44.3(7), it seems to me that the factors I have identified in 27(a)-(c) above militate in favour of a proportional order for costs.

Standing back, as I am required to do, and considering the extent to which it is just to deprive DBE of any of its costs, I accept that there were discrete areas of evidence arising out of the Tank Heaters Claim and the 15 week Delay Claim which took up time during the trial and would have caused Biogas to incur costs in successfully defending those claims which would not otherwise have been incurred. That can be reflected in a proportional costs order.

Doing the best I can and having regard to the points I have made above as to the likelihood of the trial (both in cost and length) being largely unaffected had the Tank Heaters Claim and the Delay Claim for 15 weeks not been pursued, I conclude that

I should add that, in arriving at this conclusion, I have not had access to any costs budgets (as occurred in Welsh v Walsall Healthcare NHS Trust), owing to the fact that this case was heard under the Shorter Trials Scheme and no costs budgets were therefore required. Accordingly, I have had to apply a broad brush with a view to trying to achieve justice between the parties having regard to my own impression of the amount of time that the Tank Heaters Claim and the 15 week argument in respect of the Delay Claim will have taken up in comparison to the other issues before me at trial. This is obviously not an exact science and does not reflect any precise mathematical analysis, but it is the only way that I can try to achieve a just and fair outcome as between the parties.

One final point arises by reason of this case having been pursued under the Shorter Trials Scheme. Pursuant to PD 57AB, for cases heard on the Shorter Trials Scheme the court will summarily assess the costs save in “exceptional circumstances”. Given that the parties are now in agreement that this case was not, in fact, suitable for the Shorter Trials Scheme in the first place (a point to which I have drawn attention in the main judgment at paragraph 12), it is now common ground between the parties that costs should be subject to detailed assessment.

DBE contends that the costs order in its favour should cover not only the costs of these proceedings generally, including the costs of the CMC and the PTR (at which orders were made that costs should be in the case), but also (i) DBE’s costs incidental to these proceedings including the costs of compliance with the Pre-Action Protocol and the costs of a failed mediation; (ii) DBE’s costs of successfully opposing Biogas’ application at the CMC to transfer the case out of the Shorter Trials Scheme, which were ordered by the court to be borne by Biogas in any event; and (iii) the costs of

Section 51 of the Senior Courts Act 1981 provides that the court has the discretion to award “the costs of and incidental to all proceedings”. Mr Cheung relied on the decision in Vellacott v The Convergence Group Plc [2007] EWHC 1774 per Rimer J at [226]-[227] for the proposition that these words give the court a broad discretion to award costs for compliance with the Pre-Action Protocol and for a failed mediation.

I did not understand Miss Atkins to argue that I had no jurisdiction to make such costs orders. Instead, Miss Atkins argued that, in the circumstances of this case, it would not be just for DBE to recover its costs in relation to either matter. In relation to the PreAction Protocol, this was because she submitted that in fact DBE had not complied with the Protocol; in relation to the mediation, she submitted that the court would need to have a great deal more information as to what had taken place at the mediation than was currently available to it, before it could make an order for costs.

Having considered the submissions made by both parties, I am not satisfied that it would be just to order that Biogas should pay DBE’s costs of either its compliance with the Pre-Action Protocol or its costs of mediation. I say that for the following reasons:

DBE’s costs in this regard are already the subject of a costs order in its favour and I did not understand Miss Atkins to seek to contest that order or to suggest that it should be revisited. Accordingly, I need say nothing further on this issue.

DBE seeks a summary assessment of these costs as per its statement of costs of 24 February 2020 in the sum of £2,497.80. In short, it says that it is entitled to these costs in circumstances where the majority of the redactions proposed by DBE were conceded by Biogas.

Biogas opposes such an order. Miss Atkins argues that DBE failed to raise the issue of these redactions at the PTR (when Waksman J was required to consider submissions as to redactions to Mr Marshall’s report) and that the redactions that DBE ultimately proposed to the Joint Statement did not follow the order made by Waksman J at the PTR. She also points out that the scope of the necessary redactions was agreed between the parties at trial and that, in the circumstances, it was not unreasonable for Biogas to refuse to consent to DBE’s application, particularly where it was made less than a week before the start of trial.

I reject Miss Atkins’ submissions. Waksman J required substantial redactions to be made to Mr Marshall’s expert report at the PTR and it should have been obvious to Biogas that similar redactions would need to be made to the Technical Experts’ Joint Statement as a consequence. It ought not to have been necessary for DBE to issue an application for the necessary redactions to be made and it ought not to have taken intervention from the court at the start of the trial before Biogas was prepared to entertain the possibility that redactions were required. Biogas ought to have appreciated that the Technical Experts’ Joint Statement contained evidence from Mr Marshall which was inadmissible in light of the decision made by Waksman J at the PTR and it ought to have taken appropriate steps to remove that evidence long before the start of trial.

In the circumstances (and given that Miss Atkins did not address me on the proposed level of the summary assessment that DBE is inviting me to make) I assess DBE’s costs of this application in the sum of £2,497.80.

DBE seeks a payment on account of costs pursuant to CPR r. 44.2(8). It is now well established that a payment on account should be ‘a reasonable sum’. Mr Cheung drew my attention to the principles summarised at paragraph 44.2.12 of Volume 1 of the

Owing to the fact that these proceedings are within the Shorter Trials Scheme, there are no costs budgets available. However, in order to assist the court, RPC has produced a signed summary breakdown of DBE’s costs to date showing (i) the approximate allocation of the costs to the phases typically shown in a Precedent H cost budget and (ii) a breakdown of the approximate costs allocated to each fee earner. DBE points out that these costs do not include wasted costs occasioned by Biogas’ unreasonable conduct in respect of the preparation of the trial bundle and that DBE has kept its costs at a reasonable level by proceeding under the Shorter Trials Scheme and prioritising the use of junior fee earners and/or junior counsel wherever possible for the majority of the work items. DBE accordingly submits that the costs represented in the detailed breakdown (which amount to a total of £425,187.44 to the end of trial, together with further estimated costs of the consequentials hearing of £32,428) are within the realistic and reasonable range of costs of recovery in detailed assessment proceedings.

DBE submits that a payment on account of approximately 70% of these costs would be a reasonable sum.

Biogas does not dispute DBE’s entitlement to a payment on account of costs but it points out that any such payment will need to reflect the court’s decision in relation to the overall costs of the action (i.e. my decision that Biogas should pay to DBE 90% of its costs). Further, insofar as RPC’s summary breakdown of DBE’s costs is concerned, Biogas notes that the rate claimed for the partner of £495 per hour exceeds the recoverable rate for London Grade 1 by quite some considerable margin (the applicable rate being £409).

My attention was drawn again to the judgment of O’Farrell J in Triumph Controls at paragraphs [27]-[36] on the issue of payment on account of costs and I have regard to the principals set out there in paragraphs [29]-[31]. In particular I note that that was also a case in which there had been no detailed bill of costs prepared and RPC (also solicitors for the winning party in that case) had prepared a high level breakdown of the costs incurred, to which the court had regard.

The recoverable costs in this case, limited to 90% of DBE’s costs following detailed assessment, seem likely to result in a payment of a reasonably substantial sum to DBE. However, given that I have held that the damages recoverable are £224,303.77, it would appear that there is (at least) scope for argument over whether the costs set forth in the RPC summary breakdown of costs are disproportionate to the claims. In that regard, I can very well see that the point advanced before me as to the rate claimed by the partner at RPC may gain traction on assessment.

In the circumstances (and doing the best I can on the information available to me) I am of the view that a reasonable sum on account of costs is £200,000, which is just shy of 50% of the total costs bill put forward by DBE after a 10% reduction to account for the decision I have made in this judgment.