A & V Building Solution Limited v J & B Hopkins Limited

On 15 February 2023: [2023] EWHC 301 (TCC);

On 16 June 2023: [2023] EWHC 1483 (TCC);

On 6 October 2023: [2023] EWHC 2475 (TCC);

On 17 October 2023: [2023] EWHC 2576 (TCC);

On 18 June 2024: [2024] EWHC 1510 (TCC);

On 6 September 2024: [2024] EWHC 2295 (TCC);

On 3 October 2024: [2024] EWHC 2516 (TCC).

This Part contains a self-contained procedural code about offers to settle made pursuant to the procedure set out in this Part (“Part 36 offers”).

….

Form and content of a Part 36 offer

A Part 36 offer must—

be in writing;

make clear that it is made pursuant to Part 36;

specify a period of not less than 21 days within which the defendant will be liable for the claimant’s costs in accordance with rule 36.13 or 36.23 if the offer is accepted;

state whether it relates to the whole of the claim or to part of it or to an issue that arises in it and if so to which part or issue; and

state whether it takes into account any counterclaim.

(Rule 36.7 makes provision for when a Part 36 offer is made.)

Paragraph (1)(c) does not apply if the offer is made less than 21 days before the start of a trial.

….

A Part 36 offer which offers to pay or offers to accept a sum of money will be treated as inclusive of all interest until—

the date on which the period specified under rule 36.5(1)(c) expires; or

if rule 36.5(2) applies, a date 21 days after the date the offer was made.

A Part 36 offer to accept a sum of money may make provision for accrual of interest on such sum after the date specified in paragraph (4). If such an offer does not make any such provision, it shall be treated as inclusive of all interest up to the date of acceptance if it is later accepted.

Costs consequences following judgment

Subject to rule 36.24, this rule applies where upon judgment being entered—

a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer;

….

For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.

Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—

costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and

interest on those costs.

….

In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—

the terms of any Part 36 offer;

the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

the information available to the parties at the time when the Part 36 offer was made;

the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

whether the offer was a genuine attempt to settle the proceedings….

It is plain that the court's discretion to depart from Part 36.14(2), constrained as it is by a precondition that its full enforcement would be unjust, is much more circumscribed than the court's broad discretion under Part 44. Furthermore, the four specific considerations identified in paragraph (4)(a) to (d) disclose a common thread which focuses the injustice analysis upon the circumstances of the making of the offer and the provision or otherwise of relevant information in relation to it, rather than upon the general conduct of the proceedings by the parties. Nonetheless, I consider that the requirement to take into account all the circumstances of the case does enable the court to take a broader view in an appropriate case, so that it is not entirely disabled from having regard to questions of justice or injustice arising from the manner in which the offering party has made use of its costs expenditure prima facie now recoverable from the unsuccessful offeree, in the pursuit of its defence to the claim. If that were not so, then the protection of a generous Part 36 offer would enable the offering party to conduct its part in the litigation at the offeree's potential expense without regard to the obligations and constraints which the achievement of the overriding objective now place upon civil litigants. I recognise that, to a limited extent, the process of detailed assessment may be of assistance, but it seems to me to be wrong in principle to exclude the trial judge from modifying the otherwise rigorous consequences of Part 36.14(2) where satisfied that aspects of the offering party's conduct of the litigation subsequent to the making of the offer have not served the interests of justice. 

These differences in my judgment require this Court to consider the meaning and effect of Part 36.14 untrammelled by the decision in Kastor. My view as to the meaning of Part 36.14 is supported by the substantial line of authority to the effect that Part 36 is now a self-contained code, see, e.g., Ward LJ in Shovelar v Lane [2011] EWCA Civ 802 [2012] 1 WLR 637 at paragraph 52:

… Part 36 is a separate, self-contained code. It must be applied as such. If the offer is one to which the costs consequences under Part 36 apply, then it cannot be taken into account under Part 44 because, although CPR 44.3(4)(c) requires the court to have regard to "any payment into court or admissible offer to settle", those words are qualified by the words which follow namely 'which is not an offer to which costs consequences under Part 36 apply'. Part 36 trumps Part 44."

In deciding what costs order to make under 36.14, the Court does not first exercise its discretion under Part 44. Its only discretion is that conferred by Part 36 itself. The alternative construction requires the Court first to exercise its discretion under Part 44, on the basis of all the circumstances of the case, and then to exercise its discretion under Part 36, again having regard to all the circumstances of the case. This makes no sense.

It follows from the above, and in particular that Part 36 is a self-contained code, that the discretion under 36.14 relates not only to the basis of assessment of costs, but also to the determination of what costs are to be assessed. I agree with the Judge that Part 36 does not preclude the making of an issue-based or proportionate costs order. However, a successful claimant is to be deprived of all or part of her costs only if the court considers that would be unjust for her to be awarded all or that part of her costs. That decision falls to be made having regard to "all the circumstances of the case". In exercising its discretion, the court must take into account that the unsuccessful defendant could have avoided the costs of the trial if it had accepted the claimant’s Part 36 offer, as it could and should have done.

I was not referred to any authority on the application of the injustice test under Part 36.14. For present purposes, the principles which I derive from the authorities are as follows:

The question is not whether it was reasonable for the claimant to refuse the offer. Rather, the question is whether, having regard to all the circumstances and looking at the matter as it affects both parties, an order that the claimant should pay the costs would be unjust: see Matthews v Metal Improvements Co. Inc [2007] EWCA Civ 215, per Stanley Burnton J (sitting as an additional judge of the Court of Appeal) at paragraph 32.

Each case will turn on its own circumstances, but the court should be trying to assess "who in reality is the unsuccessful party and who has been responsible for the fact that costs have been incurred which should not have been." : see Factortame v Secretary of State [2002] EWCA Civ 22, per Walker LJ at paragraph 27.

The court is not constrained by the list of potentially relevant factors in Part 36.14(4) to have regard only to the circumstances of the making of the offer or the provision or otherwise of relevant information in relation to it. There is no limit to the types of circumstances which may, in a particular case, make it unjust that the ordinary consequences set out in Part 36.14 should follow: see Lilleyman v Lilleyman (judgment on costs) [2012] EWHC 1056 (Ch) at paragraph 16.

Nonetheless, the court does not have an unfettered discretion to depart from the ordinary cost consequences set out in Part 36.14. The burden on a claimant who has failed to beat the defendant's Part 36 offer to show injustice is a formidable obstacle to the obtaining of a different costs order. If that were not so, then the salutary purpose of Part 36, in promoting compromise and the avoidance of unnecessary expenditure of costs and court time, would be undermined.

… the essential purpose behind Part 36 is to visit consequences upon parties of whom it can properly be said that they ought to have settled by accepting the other party’s offer, rather than taken the matter to trial ….

Furthermore, in making his determination, the judge did not take into account, as he should have, the fact that the defendant could have avoided all the costs of the trial by accepting the claimant’s favourable Part 36 offer. The considerations to which I referred apply even more strongly in relation to her costs after the effective date, when the question is not whether it is just for her to be awarded all her costs, but whether it would be unjust for that award to be made.

Again, on a without prejudice basis.

The sums involved are significant & in an informal arena ball park numbers are often [bandied] about, I acknowledge this, however they still have to have a level of explanation so the recipient can understand why they are being presented in that [fashion].

For example, I cannot see why retention is being added to the sum. I accept that retention is normally deducted however to me it appears that the revised [valuations] of works and variations are gross, so why the addition again on top of these numbers?

Therefore, while I agree in an informal take it or leave it situation a figure is all that is needed & on the basis of the figure that has been presented in your email below I can confirm that we are not prepared to accept the offer. In order to close this matter I am prepared to offer a payment of £10,000 in full and final settlement of all issues regarding this project.

Introduction

It is apparent, for the reasons set out in our Open Letter, that the Adjudicator's Decision does not in fact represent a victory for A&V. Our client is confident that it will be able to defeat the Adjudicator's Decision and would, in further proceedings, ultimately demonstrate that it has significantly overpaid your client.

Nevertheless, our client is aware that if the parties continue with this dispute, they will both incur significant legal costs and time, that is particularly the case for A&V who has not yet instructed legal representatives. Our client is also conscious of A&V's precarious financial position.

Our client is therefore willing to "cut its losses" on this dispute and the Sub-Contract.

The Offer

Subject to contract (the terms of a formal settlement being agreed), our client will offer to pay A&V the sum of £75,000.00 including any applicable VAT, interest and costs in full and final settlement (excluding latent defects) of any and all disputes arising out of and/or in connection with the Sub-Contract ("the Offer").

For the avoidance of doubt:

The Offer would cover the Adjudicator's Decision, any liability JBH has to A&V for the Adjudicator's fees, the Part 8 proceedings started by JBH, any interest on any of the above amounts and all legal/ representative costs.

Latent defects refers to defects which are not known to the parties or which could not be discovered with reasonable diligence.

The Offer is open for 7 days until 5pm on 3 February 2022, at which point it is automatically withdrawn.

Claim Number: HT-2022-000101

A&V Building Solution Limited v J&B Hopkins Limited

Without Prejudice Save as to Costs

We are writing to set out our settlement offer in relation to the above case, in accordance with Part 36 of the Civil Procedure Rules.

We will settle this case for the payment of £150,000, including interest, plus VAT. This offer is open for acceptance for 21 days from the date of this letter, in accordance with Part 36 of the Civil Procedure Rules. If the offer is not accepted within this time period, then interest, at the rate set out in the claim, with continue to accrue.

Re: CA-2022-0008481 A&V Building Solution Limited v J&B Hopkins Limited

Without Prejudice Save as to Costs – Part 36, Civil Procedure Rules

A&V wants to resolve this matter without both parties incurring significant costs and therefore, we are putting forward an offer, set out below, under Part 36 of the Civil Procedure Rules (‘the Offer’).

We are prepared to settle the above claim and proceedings in the Court of Appeal for payment in the sum of £150,000 plus VAT, and plus costs in accordance with Part 36 of the Civil Procedure Rules.

For the avoidance of doubt, the Offer is made pursuant to Part 36. Therefore, if the offer is accepted within 21 days of the date of this letter, the relevant costs consequences set out in Part 36 of the Civil Procedure Rules will apply …

In the circumstances, we are instructed to put forward the following offer with a view to bringing all ongoing disputes between the parties to a conclusion:

In the circumstances, we are instructed to put forward the following offer in full and final settlement of the Proceedings, including the Appeal and associated claims regarding Application 14 and the Blizzard Decision as follows:

JBH agrees that the Order made in the Proceedings on 12 April 2022, including the declarations granted and costs awarded to JBH by Mr Justice Eyre are set aside;

The Proceedings including the Appeal are discontinued;

There is no order as to costs of the Proceedings or the Appeal (meaning the parties each bear their own costs);

JBH agrees that the sums due from A&V to JBH pursuant to the Smith decision are reduced by £17,400 (including VAT) to reflect and therefore set-off Mr Blizzard’s fees (for the avoidance of doubt, liability for this sum is accepted as a set-off only and JBH will not make any payment to A&V of this sum, or any part thereof); and

A&V agrees that it will not pursue (a) any sums allegedly due to it under the Blizzard Decision including any interest thereon, or (b) any claim for a notified sum or any other payment in respect of Application 14. Item (a) is subject to the set-off of Mr Blizzard’s fees in the amount of £17,400 including VAT at point 4.

Please note:

This offer is open for acceptance until 4pm on 22 September 2022 after which it will be automatically withdrawn.

For the avoidance of doubt, this offer does not compromise the parties’ ongoing claims as to the value of the final account or the Smith Decision.

The judgment given at the hearing on 12 April 2023 is at [2022] EWHC 1186 (TCC). Perhaps because of the way in which the matter had come before him, the judge did not deal with the adjudicator’s decision at all, save to note at [2] that the adjudicator’s findings were not binding on him. He said that he would “approach the matter on the footing of my interpretation of the documents and of the submissions before me”. He did not therefore approach the hearing from the starting-point that there was an outstanding adjudication decision in AVB’s favour, and that JBH were in a breach of clause 20.3 of the Sub-Contract in failing to make payment of the sum due to AVB.

So, as at the hearing on 12 April 2022, the position was that JBH were in breach of contract because they had not paid the first adjudicator’s decision and that, in the light of the ‘pay now, argue later’ mantra, that should have been the first order of business. Having determined the enforcement position, the secondary question for the judge was whether AVB should lose their entitlement to enforce the decision in the first adjudication on the basis of JBH’s Part 8 claim.

Although I consider that AVB were entitled to enforce the first adjudicator’s decision back in April 2022, that entitlement has long since been overtaken by events and, in particular, by the result of the second Final Account adjudication, which result JBH have applied to enforce. Moreover, as Mr Frampton correctly noted, no part of this appeal sought the payment of any sum by JBH to AVB, so this court does not have the power to award any such sum in any event. This all reflects the largely academic nature of this appeal, to which I referred at the outset of this judgment.

We write with reference to ongoing proceedings between A&V and JBH. For the reasons made clear in previous correspondence, JBH remains confident that it will successfully defend A&V's claims and it will ultimately be determined that Mr Smith's Decision in the final account adjudication accurately reflects the true value of A&V's account and its further alleged entitlements.

Nonetheless, JBH remains mindful that under the Civil Procedure Rules that litigants are expected to try to resolve their disputes whenever possible and that proceeding to trial, even if successful, is likely to lead to irrecoverable costs. We are, therefore, authorised to make A&V the following offer to settle under Part 36 (the "Offer").

Please note the Offer takes account of any counterclaim or set-off for the following sums which are payable by A&V to JBH irrespective of the outcome of claim number HT-2023- 000006:

Mr Smith's fees in the final account adjudication £13,962.00

JBH costs awarded in claim number HT-2022-000444 £20,822.00

Total £34,784.00

Terms of the Offer

This Offer is made pursuant to Part 36 of the Civil Procedure Rules ("CPR"), and is intended to be JBH's (the Defendant's) Part 36 offer. Therefore, JBH will be liable for A&V's costs of the proceedings in accordance with CPR 36.13, if the offer is accepted within 21 days of the deemed service date of this Offer, i.e. by 4 December 2023 (the "relevant period").

The terms of the Offer are as follows:

Consequences of Failure to Accept

If A&V does not accept the Offer, and JBH obtains a judgment which is equal to or more advantageous than the Offer, JBH intends to rely on CPR 36.17. In other words, JBH will be seeking an order that A&V pays JBH its costs from the date when the relevant period expires and interest on those costs.

If A&V considers the Offer to be in any way defective or non-compliant, please let us know by return.

We are writing to respond to your Part 36 Offer dated 9 November 2023. After careful consideration, and while A&V are confident of being successful in this matter A&V are willing to make a counteroffer in an effort to reach an amicable resolution.

Details and Terms of the Counteroffer:

Amount Offered for Settlement: £600,000, including interest+ VAT.

Time Limit for Acceptance: This counteroffer is valid until l51 December 2023 [21 days from the date of this letter], in accordance with Part 36 rules.

Costs: The settlement sum includes costs of the proceedings up to the date of acceptance.

JBH to pay A&V the sum of £600,000, including interest + VAT [the Settlement Sum] in full and final settlement of claim no. HT-2023-000006 and all claims either party may have against one another in respect of and/or arising out of the Mouslecoomb Campus project….

To 4 December 2023;

4 December 2023 to 1 March 2024;

1 March 2024 to 18 June 2024;

18 June 2024 to the present.

J&BH’s 9 November 2023 offer was quite close to a sufficient offer;

A & V’s Counter-Offer on 10 November 2023 was a long way from being a realistic assessment of A & V’s entitlements;

J&BH’s expert witness, Mr Geale, presented his first invoice for his services in the sum of £5,000 plus VAT of £1,000;

J&BH’s solicitors incurred what I have calculated as being £3,536 (net of VAT) in respect of costs relating to instructing Mr Geale.

Ancillary matters as to interest;

Sundry issues as to such matters as Mr Smith’s fees;

The costs consequences in respect of the period to 4 December 2023;

The costs consequences in respect of the period 4 December 2023 to 1 March 2024;

(A new matter) issues relating to A & V’s application for a Third Party Debt Order.

As to interest, A & V had substantial successes as to the rates and statutory basis upon which interest should be awarded;

A & V failed in an attempt to go behind the previous agreement as to the amount already paid;

J&BH failed in an attempt to reduce the amount payable by reference to CIS deductions;

J&BH has failed in an attempt to persuade the Court that it should not bear the costs of this action up to 4 December 2023;

J&BH has mainly failed in an attempt to persuade the Court that it should not bear A & V’s costs of this action between 4 December 2023 and 1 March 2024, and, on the contrary, I have decided that J&BH should pay those costs: however, a contrary allowance in A & V’s favour has led to a net figure in J&BH’s favour, mainly because of the very low hourly figure allowed to a litigant in person;

A & V has failed in an attempt to persuade the Court that it should not bear the costs of this action between 1 March 2024 and 18 June 2024, and, on the contrary, I have decided that A & V should pay those costs;

J&BH has brought an application for a Debt Management Order: I have not as yet dealt with that matter.

This rule applies where the court orders (whether by summary assessment or detailed assessment) that the costs of a litigant in person are to be paid by any other person.

The costs allowed under this rule will not exceed, except in the case of a disbursement, two-thirds of the amount which would have been allowed if the litigant in person had been represented by a legal representative.

The litigant in person shall be allowed –

The amount of costs to be allowed to the litigant in person for any item of work claimed will be –

A litigant who is allowed costs for attending at court to conduct the case is not entitled to a witness allowance in respect of such attendance in addition to those costs.

For the purposes of this rule, a litigant in person includes –

A&V Building Solution Limited (A&V) represented by myself, Mr Alex Paduraru as a Litigant in Person (LIP), respectfully submits these submissions as to costs in these proceedings. There submissions are made pursuant to CPR 44.2 and CPR 46.5, and in accordance with the Court’s direction in paragraph 48 of the draft judgment.

Mr Paduraru, acting as a litigant in person, has undertaken an extensive and burdensome level of legal and administrative work that would otherwise have been carried out by legal professionals. This work, by its nature, has involved the same level of complexity and diligence that solicitors and counsel typically perform. Despite the demanding nature of these proceedings, I, Mr. Paduraru, was compelled to act as a litigant in person due to JBH’s refusal to honour Mr Blizzard’s adjudication decision and pay the sum due to A&V, which caused substantial financial strain.

JBH’s non-compliance with its obligations including the wrongful issue of Part 8 proceedings in bad faith, left A&V in a dire financial position, depriving the company of the resources to retain legal counsel. JBH’s failure to pay the £150,000 awarded by Mr Blizzard in January 2022 effectively denied A&V its right to secure legal representation, thus forcing me to act as a litigant in person throughout these protracted proceedings.

I have had to take numerous days off work, resulting in lost income, in order to manage and deal with this case.

The work undertaken by me, Mr Paduraru, includes, but is not limited to:

JBH’s conduct throughout this litigation has been nothing short of oppressive. JBH has repeatedly refused to engage in good faith settlement discussions, rejected the reasonable efforts of A&V to resolve the dispute outside of court, and needlessly prolonged these proceedings, causing A&V to suffer financially and operationally. This has forced A&V to expend significant time, money, energy, and resources in an effort to secure the payment that JBH was obligated to provide from the outset.

Had A&V [had] the opportunity [of having] been represented by solicitors and counsel in these proceedings, the costs incurred by A&V would have been no less than those of JBH, which currently stand at £166,359.02 as per JBH’s approved costs budget following the CCMC hearing ….

These figures, approved by the Court, provide a reasonable estimate of the legal fees that A&V would have incurred had it not been forced to act as a litigant in person.

Therefore, applying the two-thirds rule under CPR 46.5(2)(a)(i), A&V claims only £110,906.01 (and/or two-thirds of JBH final costs as they may have increased since) as recoverable Litigant in Person (LIP) costs. This figure reflects the substantial time spent and legal work undertaken by me, Mr Paduraru, and is justified by the fact that my work mirrored the scope, time and complexity of work performed by JBH’s legal team in this case HT-2023-000006.

[REIMBURSEMENT] OF COURT FEE

A&V incurred a court fee of £10,000 in January 2023 to initiate these proceedings. This fee was an essential disbursement, necessitated by JBH’s failure to comply with the Pre-Action Protocol for Construction and Engineering Disputes. JBH’s refusal to pay the amounts due under the adjudicator’s Mr. Blizzard decision left A&V with no option but to pursue legal action in this Court. The fee of £10,000 represents a direct financial loss to A&V, which should be fully reimbursed .

….

CONSULTANT/QUANTITY SURVEYOR COSTS

In addition to the Litigant in Person costs, A&V also incurred expenses for the valuable services of Mr. Judd, a construction consultant and quantity surveyor. Mr Judd’s expertise was crucial to the technical aspects of this case, particularly in relation to the measured works and the variation account. The complexity of these matters required an expert understanding of the construction industry, contractual variations, and project valuation.

Mr. Judd’s role extended beyond technical evaluation. He provided indispensable support in preparing evidence, advising on construction practices, and assisting with the analysis of the Defendant’s submissions. His input was fundamental to presenting A&V’s case more clearly and comprehensively.

Furthermore, Mr. Judd played a significant role in attempting to resolve the dispute without the need for adjudication or court proceedings and the Court is aware of this fact. Mr. Judd engaged in extensive correspondence with JBH in an effort to reach an amicable resolution. Regrettably, JBH consistently rejected these overtures, demonstrating a clear intention to resist payment through procedural delays and obstructions. Mr. Judd’s efforts to avoid unnecessary litigation underscore the unreasonable stance adopted by JBH, forcing A&V into further litigation despite the possibility of earlier settlement back in 2021.

A&V claims only £10,569.12 for Mr. Judd’s services, which were necessary for proper conduct of this case …

As to the amount of costs, the Claimant claims two-thirds of the total costs set out in the Defendant’s costs budget.

The Claimant’s position is incorrect. The Claimant is not entitled to, and the Court should not order, a theoretical figure by reference to the Defendant’s costs.

CPR 46.5(2) is an overall limit or cap (see commentary to the White Book at 46.5.1), that a litigant in person’s costs should not exceed, save for disbursements, two-thirds of the amount which would have been allowed if it had been represented. That does not mean the Court can or should award a litigant in person two-thirds of a represented party’s costs.

the Claimant has failed to provide any, or any credible, evidence to allow the Court to make an award of costs on this basis.

As to CPR 46.5(4)(a):

As to CPR 46.5(4)(b):

In summary, the Court should order that the Defendant is to pay 30% of the Claimant’s costs up to 4 December 2023 in the maximum amount of £1,000 (c.30% of £3,000) plus disbursements ….

Firstly, on analysis of the invoices provided by the Claimant, the costs claimed do not relate to these proceedings. Mr Judd confirmed in his evidence at trial that he was now acting free of charge. The entries on the invoices provided all relate to the appeal, the adjudications or the enforcement proceedings. The only line item which does not do so is the final invoice (MS-1076) where £2,177.50 is claimed for:

“Pre Action protocol claim letter/Final Account spreadsheet 28/11/22 including review and incorporating adjudication evidence and commentaries.”

That is the only figure which could be considered costs of and occasioned by these proceedings.

The Defendant accepts that a more nuanced, and to some extent distinct, approach has been adopted in adjudication enforcement proceedings. Octoesse v Trak Special [2016] 6 Costs LR 1187 was a claim for a claim consultant’s costs in adjudication enforcement proceedings. Jefford J. set out the relevant principles as follows at [29]:

“In my judgment, Agassi is not, therefore, authority for a general proposition that costs of claims consultants or other consultants who give advice and support in litigation can never be recovered. The principles I derive from that decision are these:

i)

Where a litigant-in-person seeks to recover the costs of a consultant’s assistance, the relevant question is whether, in the particular instance, the consultant’s costs are recoverable as a disbursement.

ii)

That question is answered by posing and answering the question whether those costs would have been recoverable as a disbursement if it had been made by a solicitor.

iii)

Costs would be recoverable as a disbursement by solicitors if the work is such as would not normally be done by solicitors.

iv)

But there nonetheless may be specialist assistance the cost of which would be recoverable.”

Applied to this case, drafting a letter of claim is work which is normally done by solicitors. A solicitor would not therefore normally be able to recover the disbursement incurred paying Mr Judd to draft the letter of claim.

The factors outlined by Jefford J at [30] to [34] as to why “specialist assistance” may be required in adjudication enforcement proceedings (or a Part 8 claim following an adjudication) – i.e. the abbreviated timescales and that the issues often arise from the adjudication – do not apply in this case. This was a full Part 7 proceedings.

Alternatively, if the Court considers an element of specialist assistance would have been recoverable, it is unlikely that a solicitor would have relied entirely on a claims consultant to prepare a letter of claim. A solicitor would only have used a claims consultant to input on particular points. As a rough assessment, a maximum of 50% of the disbursement, or 8 hours, should be recoverable (similar to the instructions and liaising with counsel at para. [47(ii)] of Octoesse). 50% of the relevant item is c. £1,000.

Mr Paduraru’s time: £3,800

Court Issue fee: £10,000

Mr Judd’s fees: £1,500

Total: £15,300

In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –

have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;

not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and

take into account any comments made pursuant to rule 3.17(3) and recorded on the fact of the order.

In Harrison the Court of Appeal decided not to proffer any guidance as to what will constitute a “good reason” for departing from an agreed or approved budget, stating that this can safely be left to the individual appraisal and evaluation of costs judges by reference to the circumstances of each approach to the need to find “good reason”. Costs judges should approach this topic having in mind the three-stage test known as the Denton principles …. Accordingly, the assessing court might consider the significance of the case including in particular (a) the need for litigation to be conducted efficiently and at proportionate cost and (b) the need to enforce compliance with rules, practice directions and court orders.

That a party seeking to recover more than the amount set out in its cost estimate has to establish “good reason” why it should be allowed to do so;

The need to enforce compliance with rules, practice directions and court orders;

That the cost management system can only work if those providing cost estimates to the Court exercise considerable care in formulating the costs estimates;

That if the Court extends parties latitude in forgiving mistakes in costs estimates, the cost management structure is liable to be undermined;

That parties should not be held to cost estimates in respect of costs which could not have been anticipated with the exercise of reasonable diligence;

That, in the language of a distinguished American politician, there are “known unknowns” and “unknown unknowns”. In the context of cost estimates, the parties presenting a cost budget to the Court have the option of informing the Court of uncertainties of which they are aware in estimates put forward in their skeleton arguments, in oral submissions or in contingencies or footnotes in the cost estimate;

That the closer the production of the cost estimate is to the time when the relevant costs will be incurred, the less latitude will be giving to a party which makes what turns out to be an erroneous assessment of the costs to be incurred: in this case the cost management exercise was carried out unusually close to trial;

That in this case, the assessment of J&BH’s costs is being carried out in the context of A & V’s failure to beat a Part 36 offer. In a commercial case such as this, a party deciding whether to accept a Part 36 offer (whether within the initial time period for acceptance or after that period on the usual basis as to costs) is entitled, and should be expected, to make such a decision on the basis that the cost estimate is a competently and thoroughly prepared estimate of the offering party’s future costs, and an accurate statement in good faith of the costs already incurred.

Witness statements £2,500

PTR £930

ADR £1,228

Total £3,558

Firstly, the Defendant’s incurred costs in this period include costs incurred between 1 March 2024 and 26 March 2024, which are not therefore within the approved estimated costs. The costs incurred between 1 March 2024 and 26 March 2024 total £24,922.27 (time costs: £10,405 and disbursements: £14,517.27)…..

…. £24,922.27 is the costs in fact incurred between 1 March 2024 and 26 March 2024 (the date of the CCMC). That figure includes costs recorded as incurred costs in the cost budget. The breakdown to the £24,922.27 figure is as follows:

The total of the above elements is £24,314.20. Subject to a small discrepancy (which JBH is unable to precisely identify the cause of) of £608.07, this aligns with the costs claimed by JBH for the period 1 March 2024 to 26 March 2024 per JBH’s Submissions on Costs dated 27 September 2024.

…. the reduction in estimated costs was made by the Court during oral submissions at the CCMC to account for the increase in incurred costs of £14,526. This reflected costs incurred between 4 March 2024 and the time of the CCMC on 26 March 2024. The revised budget was filed on 3 April 2024 as that was the date by which it was to be filed, however it did not capture incurred costs after 26 March 2024 because the date of the Costs Management Order was 26 March 2024.

£837 in respect of invoiced costs between 1 and 3 March 2024;

An invoice from Mr Geale in the sum of £8,951.25;

An unexplained discrepancy of £608.07.

The Defendant’s estimate assumed that there would be only 1 report from Mr Geale. The Defendant did not anticipate that (i) Mr Paduraru would challenge the veracity of Mr Geale’s qualifications, requiring time to be spent on correspondence and retrieving his certificates; (ii) Mr Geale would file a supplemental report in relation to a further statement from Mr Paduraru, and (iii) the Claimant would raise written questions of Mr Geale and allege that he has not responded to them. These are good reasons to depart the budget. The overall expert reports phase of £32,354.50 are reasonable and proportionate given the issues covered and the significant value of the claims they addressed.

Preparing our supplementary report for disclosure dated 26 April 2024

Reviewing the witness statement from Alex Paduraru, dated 17 April; discussing this with HK in a Teams call on 19 April and undertaking all work necessary in preparing and finalising the supplementary report for disclosure dated 26 April.

Preparing for trial, conference with Counsel, travelling to London and assisting at trial.

All works necessary in preparing for and attending conference with Counsel on 13 May 2024; reviewing relevant sections of the Court bundles; reading Claimant and Defendant’s opening submissions sent with your email on 13 May; preparing the list of questions for Counsel to ask the Claimant, as discussed in conference, in my email of 13 May; reviewing the Claimant’s updated skeleton argument and the supplementary bundle; responding to your emails of 14 May; preparing my email of 14 May setting out my views of the negative creditor; research into tax treatment of DLAs; reviewing the new disclosure from the Claimant regarding sub-contractors and preparing an analysis of this; preparing detailed analysis of the Claimant’s personal expenditure for inclusion in the court bundle; review of further disclosure from the Claimant of A&V tenders.

The additional trial preparation costs related to the following unanticipated events: (i) on 30 April 2024, the Claimant sought an order that Mr Geale had not answered questions of him under CPR 35.6 and sought an order under CPR 35.6(4) that the Defendant could not rely on his evidence or recover the cost of his evidence, (ii) the Claimant sought disclosure of Mr Geale’s instructions, (iii) on 10 May 2024 the Claimant sought disclosure of the Principal Contract which had to be retrieved and then was disclosed, (iv) time was spent identifying and removing duplicated documents from the prior bundles included in the trial bundle, and (iv) the Defendant’s solicitors produced a schedule identifying the bundle page references for the marked up drawings at bundle pages 2208 to 2210.

The additional trial costs reflected (i) Mr Geale having to attend the trial for 2 days, as opposed to the 1 day estimated, (ii) the additional and late disclosure provided by the Claimant during the trial which required review and taking of instructions, (iii) time spent preparing the chronological bundle of key documents requested and provided to the Court following the Judgment, (iv) the unanticipated several rounds of further submissions and judgments post Judgment No. 5.

Cost budgeted figure £82,535.50

Less phased work not done £3,558

Net cost budgeted figure £78,977.50

Additional Geale report £1,979

Trial Preparation £5,000

Trial £3,000

Total £88,956.50

The Defendant’s solicitors further stated on 3 May 2024: “Please confirm whether you require a hard copy of the Trial Bundle and, if so, please provide us with an undertaking by return that you will be responsible for our reasonable copying charges (which is standard practice).” … In response, the Claimant confirmed that it required a hard copy (the Claimant in fact asked for 2 hardcopies however only 1 was provided as the Claimant failed to agree to pay for the second copy in advance as requested by the Defendant) and stated “I acknowledge responsibility for covering the [reasonable] copying charges.” … The Defendant’s solicitors explained on 7 May 2024 that the copying charges were £3,130.80 per bundle …

This cost has not been billed by the Defendant’s solicitors to the Defendant.

The sum was instead billed to the Claimant …. but has not been paid.

A credit must also be given for this sum.

That A & V will receive £10,820.55 in respect of the period to 4 December 2023;

That A & V will pay J&BH £6,636 in respect of the period from 4 December 2023 to 1 March 2024;

That A & V will pay J&BH £88,956.50 in respect of the period from 1 March 2024 to 18 June 2024.

That A & V will give a credit to J&BH for £3,130.80 in respect of copying costs.

In respect of the period to 4 December 2023, the biggest single element is the issue fee of £10,000. Interest on this figure should run from the date of issue of the Claim Form to this judgment at the rate of 4% over base rate until the date of this judgment. On the other, minor, figures the costs should be assessed at the same rate from the mid date of this period;

In respect of the period from 4 December 2023 to 1 March 2024, there is a net sum payable from A & V to J&BH. Most of the cost element payable was billed to J&BH after 1 March 2024. In my view the fair result is for this to be treated as incurring interest from the date of due payment of J&BH’s solicitors’ invoice of 8 March 2024, namely 22 March 2024 until the date of this judgment. The rate will be the rate which J&BH itself contended to this Court in the enforcement proceedings for amounts due to it from A & V, namely a flat rate of 4% per annum;

In respect of the period from 1 March 2024 to 18 June 2024, it seems to me that the usual approach of taking the midpoint in the period should be adopted, with the rate being 4% consistently with my decision at sub-paragraph (2) above;

As to the credit for copying costs, J&BH has thus far incurred no expense.

In cases where there are different judgments in favour of both the Claimant and the Defendant, including judgments/orders on costs, the Court’s practice is generally to allow those cross-judgments to be set-off against each other. In other words, only a single net balancing payment needs to be made.

The principle and application of this power was explained in Fearns v Anglo-Dutch Paint & Chemical Co Limited [2010] EWHC 2366 (Ch), [2011] 1 WLR 366 at [36] to [38]:

“36.

As well as by agreement, cross-liabilities can be netted off (and thus extinguished to the extent of the other) pursuant to a judgment of the court. Before such a set-off can be effected it is of course necessary that the existence and amount of each liability has been established by agreement or judgment.

37.

CPR r 40.13 applies where the court gives judgment for specified amounts both for the claimant on his claim and against the claimant on a counterclaim: in such circumstances the court may order the party whose judgment is for the lesser amount to pay the balance. More generally, it has long been the practice of the courts as part of their inherent jurisdiction over their own proceedings to allow cross-judgments given in the same action, or in different actions, to be set off against each other: see Edwards v Hope (1885) 14 QBD 922; Reid v Cupper [1915] 2 KB 147 and In re A Debtor (No 21 of 1950) (No 2); Ex p The Petitioning Creditors v The Debtor [1951] Ch 612. As these cases show, this jurisdiction encompasses judgments for damages and also orders for costs. Unlike legal or equitable set-off, such a "set-off" involves treating the judgment in favour of one party as satisfying pro tanto the judgment in favour of the other. There is accordingly an extinction of liabilities.

38.

It is clear from the authorities mentioned, and from the word  "may" in CPR r 40.13(2), that the power of the court to order such a set-off is discretionary. In Edwards’s case Brett MR, at p 926, and Bowen LJ, at p 927, described the power as "an equitable jurisdiction" . By this they plainly did not mean a jurisdiction exercised by courts of equity (as they were referring to the practice of the common law courts) but a jurisdiction to order a set-off where the court considers it just and equitable to do so.”

[emphasis added]

Such a set-off, and order for a single net payment, was made in Fearns where the claimant had judgment in its favour for c.£36k but was ordered to pay c.£300k as an interim payment on account of the defendant’s costs. The Court ordered that these cross-orders/entitlements were to be set-off at [68] to [77], explaining at [76] that:

“Applying the test for equitable set-off or exercising the court’s discretion, the connection between the two sums is such that justice plainly requires that they be set off. If one looks simply at the position of Mr Fearns and leaves aside the effect of the order on his creditors, I cannot see how it could be right for him to receive a payment of damages without giving credit against the payment for the liability in costs which he has incurred in pursuing the claim to recover those damages. The justice of the matter seems to me equally clear if one considers the effect on Mr Fearns’s creditors, for whose benefit the litigation has in large part been maintained. It would in my view be manifestly unjust that they should receive a share of the damages free of the liability to make a payment on account of the defendants’ costs which was part of the cost of obtaining the damages award.”

[emphasis added]

In this case too, the Court should allow a set-off or mutual extinguishing of the various Judgment debts. It would be manifestly unjust and inequitable for the Claimant to receive payment of the main judgment sum without giving credit against that payment for the liability in costs it has incurred in pursuing the claim to recover the main judgment sum.

Given the Claimant’s financial position, any other order would undermine the intent and purpose of CPR Part 36 and be inequitable:

I confirm the main judgment sum and interest awarded to A & V in the sum of £161,144.36 as set out in the Defendant’s assessment of the account;

The stay on the Enforcement Order is released;

The sums due under the Enforcement Judgment in respect of Mr Smith’s fees and J&BH’s legal costs together with interest (£39,480.46 as at 2 October 2024) will be treated as having been set off on 2 October 2024;

The costs are assessed in the sums set off above;

Credit will be given to J&BH for the copying charges of £3,130.80;

The net amount due to A & V is £33,298.02.

Of the sum of £33,298.02, 20% will be remitted to HMRC, namely £6,659.60.

There will be a Third Party Debt Order in the amount of £26,638.42.

There will be no order as to costs in respect of the application for a Third Party Debt Order.