EUROCOM LTD v SIEMENS PLC (No 2)
Technology and Construction Court
Ramsey J
th
12 February 2015
THE FULL TEXT OF THE JUDGMENT OF RAMSEY J
Introduction
1. In these proceedings, I handed down judgment on 7 November 2014, in the absence of the
parties. The parties have been unable to agree the cost consequences following that judgment
and this judgment is concerned with three cost issues. The first issue is whether the
Defendant (“Siemens”) should have its costs against the Claimant (“Eurocom”) on an
indemnity basis; the second issue is whether there should be a proportionate costs order to
reflect the issue of breach of natural justice on which Siemens did not succeed and the third
issue is what sum should be allowed by way of summary assessment of those costs.
The basis of assessment
2. I turn first to the question of whether the costs should be assessed on the indemnity basis.
Miss Fionnuala McCredie QC, who appears with Mr Paul Bury on behalf of Siemens,
submits in summary that the conduct of Eurocom, including the conduct of Knowles acting
on their behalf, was so unreasonable as to justify an order for indemnity costs. She relies on
the conduct of Mr Giles in completing the RICS nomination form for the nomination of an
adjudicator, which in my previous judgment at paragraph 65 I held raised a very strong prima
facie case of fraudulent misrepresentation. She also relies on the conduct of Knowles and the
solicitors subsequently instructed in failing to deal with the enquiries made about the RICS
nomination form and the basis upon which it was said that there was a conflict.
3. Ms Serena Cheng, who appears on behalf of Eurocom, submits that the grounds put
forward by Miss McCredie are not sufficient to justify an order for indemnity costs. She
submits that the conduct of Mr Giles forms no part of the conduct of Eurocom in these
proceedings. She also submits that there has been no finding of fraud and that there is nothing
in Eurocom's conduct of these enforcement proceedings that takes this application out of the
norm so as to justify an order for indemnity costs.
4. I now turn to consider those arguments.
5. The principles on which indemnity costs are to be awarded are sufficiently wellestablished. They have recently been referred to in this court by Akenhead J in Savoye &
Savoye Limited v Spicers [2015] EWHC 33 TCC.
6. I summarised those principles in BSkyB v HP Enterprises [2010] EWHC 862 TCC at [35]
and I consider that, in the light of the further authorities cited, those principles still hold good.
There I stated:
“Whilst it is not necessary for there to be a moral lack of probity or conduct deserving
moral condemnation to justify indemnity costs, there must be something in the
circumstances to take the case out of the norm. That may be either because of the
nature of the allegations in the case or because of other conduct of the relevant party:
see Reid v Minty [2002] 1 WLR 2800; Kiam v MGN Ltd [2002] 2 All ER 242;
Excelsior v Salisbury Ham Johnson [2002] EWCA Civ 879.”
7. Whilst in Simms v The Law Society [2006] 2 Costs LR 245 at [16], Carnwarth LJ (as he
then was) explained that the court will principally be concerned with the losing party's
conduct of the case rather than the substantive merits of the party's position, as stated in
BSkyB v HP Enterprises at paragraphs [37] to [40], in cases where fraud is alleged and
established, the court may take that conduct into account.
8. In this case Eurocom pursued an application for summary judgment to enforce an
adjudicator's decision where there was, as I found, a strong prima facie case that the
adjudicator's appointment was a nullity because of a fraudulent misrepresentation made in the
RICS nomination form by those acting on behalf of Eurocom. The position is, therefore, that
this is a case where, for the purpose of summary judgment based on an adjudicator's decision,
a party has to assess the merits of the application. I consider that, in the context of summary
judgment, a strong prima facie case of fraud is a matter which takes a case such as this out of
the norm. There are not many, if any, cases of adjudication enforcement which raise that sort
of contention.
9. But that on its own may not be enough for, as I held in BSkyB v HP Enterprises at [45] the
underlying fraudulent conduct of an employee may not justify indemnity costs. In this case,
however, the conduct which gave rise to the strong prima facie case of fraud arose in the
conduct of the adjudication not the underlying merits of the claim. In addition, despite the
statement in the nomination form being drawn to the attention of Knowles first in January
2014 and then again in February 2014, there was no response by them to the proper enquiries
as to the basis of the conflicts of interest relied on in the nomination form. I consider that this
strongly indicates that, internally, the fact that wrong information had been put in the RICS
nomination form was realised by those acting on behalf of Eurocom. That was something
which, in my judgment, called for an answer but it was not given an answer because there
was no proper answer or explanation that could be given.
10. When solicitors, Wheelers, were instructed by Eurocom in May 2014, the same point was
put to them but again it was not responded to. What is more, in the witness statement by the
solicitor supporting the summary judgment application, there was no mention of the
nomination point which had been drawn to his attention as had the earlier correspondence.
11. It was only after the court, on its own initiative, in the order of 28 July 2014, required
Eurocom to state what the alleged conflict was, that Mr Giles produced his first witness
statement from which it was clear that he admitted that most of those named did “not have a
conflict as such” and that he “largely” used the conflicts box as a “pre-emptive rejection list”.
That, in my judgment, was the position that Mr Giles was either saying internally within
Knowles at the time or should have been saying. That should have raised very serious
concerns as to the basis upon which Eurocom were going to pursue an application for
summary judgment. Those concerns should have been raised, first of all, initially because of
the enquiries made by Siemens, and, secondly, should clearly have been raised by the terms
of the order of 27 July 2014. That order was a clear indication from the court of the central
importance of that particular issue in the case.
12. Whilst I can understand the concern of Eurocom to be paid the substantial sums awarded
by the adjudicator, despite the conduct of their agents in completing the RICS nomination
form, I consider that the conduct in relation to this aspect was unreasonable to a high degree
in, first, failing to deal with the obvious difficulties by not responding to the enquiries made
and therefore ignoring the serious consequences until the court intervened. Secondly, it was
unreasonable to a high degree, not to realise or not take account of the matters which were
apparent when Mr Giles produced his witness statement in which he gave evidence which
clearly led to the findings I made.
13. That evidence clearly justified a finding of a very strong prima facie case of fraudulent
misrepresentation and, although as Ms Cheng submits the legal basis may have taken some
analysis, I consider that the general principle that fraud unravels everything, is a well-known
principle applicable to this case. That evidence and its effect was a matter which should
properly have been taken into account by Eurocom at an early stage before issuing an
application for summary judgment and, in any case, when the importance of the point was
raised by the court.
14. I therefore consider that this is a case where there has been unreasonable conduct to a
high degree, quite apart from the very strong prima facie case of fraudulent
misrepresentation. Those matters therefore take this case out of the norm and justify an order
that Siemens should be entitled to have its costs assessed on an indemnity basis.
15. I now turn to the question of whether this is an appropriate case for there to be an issuebased order.
Issues based order
16. As Ms Cheng correctly submits, a substantial amount of time and therefore costs, which
she assesses at some £22,375 of Siemens' costs, was spent in dealing with the defence of
failure to comply with natural justice which was raised by Siemens and on which it failed.
The question is whether on that basis there should be an issues based proportionate costs
order in this case.
17. Such an order is clearly made where a party has raised a defence unreasonably. I therefore
have to consider first whether that is the case here. In my previous judgment I set out the
chronology of what had happened in this case. There is no doubt that over some 60 days of
the adjudication, which also included the Christmas period, there were many instances where
time pressures were put on Siemens so that they had little time to deal with complex
allegations. One of the main reasons for the findings that there was no breach of the rules of
natural justice, was the fact that, despite the pressures placed upon Siemens, it was, in the
event, able to and did deal with the matters which were raised, even the argument raised at
the very last moment by the adjudicator.
18. This is not a case where it can properly be said that the facts did not justify raising a
defence based on a breach of natural justice, although I consider on the facts that defence was
not made out. Therefore, I do not consider that Siemens can be criticised for raising the point
of breach of natural justice in the light of the difficult and complex history of the adjudication
proceedings in this case.
19. Despite that, there are cases where an issue-based order is appropriate even if it was not
unreasonable to raise a particular defence. Those are generally cases where there has been a
final trial. In adjudication enforcement proceedings, matters proceed at a rapid pace and
provided that a defence is not unreasonably raised I do not consider that a successful party
should be deprived in costs if it loses on a defence, particularly in a case such as this. I also
consider that the courts are moving against encouraging parties to seek to take a fine tooth
“comb” (to adapt a phrase used by Chadwick LJ in Carillion v Devonport Royal Dockyard
[2005] EWCA 1358 at [86]) and to go through and analyse each of the issues and therefore
seek a proportionate, issues based costs order.
20. In this case, I have had cited the well-known passage from Jackson LJ's judgment in Fox
v Foundation Piling [2011] 6 Costs LR 961, where at [62] he said that there had been a
growing and unwelcome tendency by first instance courts and in the Court of Appeal, to
depart from the starting point set out in CPR 44.2(2)(a), which is that an unsuccessful party
should pay the successful party's costs. He indicated that:
“Such an approach may strive for perfect justice in the individual case, but at huge
additional cost to the parties and at huge costs to other litigants because of the
uncertainty which such an approach generates.”
21. In my judgment, this is a case where Siemens reasonably raised the breach of natural
justice defence and, in the context of this particular summary judgment application and in the
light of the approach indicated by Jackson LJ in Fox v Foundation Piling, this is not a case
where I should make an issues based costs order because Siemens lost on one issue.
22. As a result, I hold that Siemens are entitled to its costs of these proceedings to be assessed
on an indemnity basis.
Summary assessment
23. I now turn to the sums involved. As summarised in paragraph 18 of Miss Cheng's
submissions for this hearing, the statements of costs which were before the court, show that
the claimant's costs were some £68,000 whereas the defendant's costs were some £125,000.
Those very substantial costs reflect the complexity of the matters which I have had to
consider on this application for summary judgment in the sum of £1.6 million.
24. When one is assessing costs on an indemnity basis, there is no requirement for the costs
to be proportionate to the matters in issue and any doubt as to whether costs were reasonably
incurred or reasonable in amounts is resolved in favour of the recovering party. As Lord
Woolf pointed out in Lownds v Home Office [2002] 1 WLR 250 at [6] for those reasons “the
indemnity basis of costs is considerably more favourable to the receiving party than the
standard basis of costs.”
25. In this case in her skeleton argument, Miss Cheng has made a number of criticisms of the
statement of costs. Where the court has to carry out a summary assessment, it necessarily
(and thankfully) does not have the detail in terms of the documentation that would be put
before the costs judge on a detailed assessment.
26. In relation to the overall costs in this case, I do not consider that I can assess whether
Siemens' costs are reasonable or unreasonable in amounts merely by comparison of the two
parties' costs. However, I consider that the two areas where, on a detailed assessment, there
would be further investigation and a reduction; that is for the work on documents and for
counsel's fees.
27. I consider that there cannot be any criticism in terms of the hourly rate for the solicitor at
Siemens, but I consider that the time which has been spent on documents is an area where, on
detailed assessment, there would be a reduction. Equally in this case, counsel's fees are high.
They are higher than one would normally see in this case but that is accounted for, in part,
because they were instructed by in-house counsel and, in part, by the complexity of the case.
I accept that combining the in-house solicitor's costs and counsel's fees, they may be taken to
represent the equivalent of instructing external solicitors. But what has to be looked at is
whether for the particular work which was carried out here by the particular people, the costs
were unreasonable in amount or unreasonably incurred.
28. I consider that both in terms of work on documents and in terms of counsel's fees, Ms
Cheng has raised sufficient doubt as to whether they are unreasonable in amount and
unreasonably incurred, that I should make a deduction to those figures which total some
£96,000.
29. In my judgment, the appropriate overall deduction in this case should be one of about
£10,000 and therefore, on a summary assessment the figure I allow, an overall figure of
£115,000. That figure, therefore, is the costs which I award to Siemens against Eurocom on
an assessment of the costs of these proceedings on an indemnity basis.