Neutral Citation Number: [2009] EWHC 250 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Date: Wednesday, 11th February 2009

Before:

MR. JUSTICE AKENHEAD
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B E T W E E N :

	MODULECO	Claimant	
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	CARILLION	Defendant	
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MR. Sean Wilken (instructed by Charles Russell) appeared on behalf of the Claimant.

MS.Rachel Ansell  (instructed by Barlow Lyde and Gilbert) appeared on behalf of the Defendant.

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JUDGMENT

MR. JUSTICE AKENHEAD: 
	Introduction and history
1	This application is an application under Part 31 of the Civil Procedure Rules for pre-action disclosure.  Briefly, the background to this application is that the defendant, Carillion Construction Limited (“Carillion”), was part of a consortium or part of a company, Clinicenta, which was interested in bidding for a project, a Department of Health scheme known as the South London Electives.  It seems clear that the claimant, Moduleco Limited (“Moduleco”), and Carillion worked together, at least to some extent, in seeking to secure a successful bid for this particular project.  Moduleco would, if the bid had been successful, be a subcontractor to provide a modular form of building which would have been used at, primarily, Tooting Hospital, and Carillion doubtless would have been the main contractor.  Moduleco was working with Carillion on a number of other potential projects.

2	Unfortunately, the South London Electives project was cancelled by the Department of Health before any work on the ground was done. At that stage, Moduleco believed that it had a claim, possibly in contract or quasi-contract, against Carillion for what might be termed abortive costs and possibly losses relating to this project, together with various other projects; some 240 hours were said to have been expended by Moduleco on the South London Electives project.  On 22 August 2007, Moduleco's solicitors served a Pre-action Protocol letter of claim which addresses the different projects.  The claim in respect of the South London Electives project was for £137,232 plus VAT.  There were various other issues as well relating to copyright matters.  

3	Although the Pre-action Protocol process has not been completed, nonetheless the parties reached certain accommodations which have led at least indirectly to this application.  The primary accommodation was an agreement contained in a letter dated 6 December 2007 from Carillion to Moduleco, signed by both parties and, it is accepted, intended to have legal effect.  So far as the London South Electives' project is concerned, the following (materially) was said:

"As Moduleco are aware, the scheme has been cancelled by the Department of Health.  Carillion have submitted a claim to the Department of Health through Corderoys in respect of their abortive costs (“Carillion's claim”).  
Carillion propose the following way forward in relation to Moduleco's abortive costs on the London South Scheme:  

1.  Carillion confirms that it has included a claim of £137,232 plus VAT for Moduleco's abortive costs as part of Carillion's claim.  Carillion can confirm that Corderoys have been provided with all the information that Moduleco has submitted to Carillion to date and that this has been submitted as part of Carillion's claim.  Carillion will provide as much information as possible to Moduleco, having regard to the nature of any confidentiality agreements with the Department of Health to ensure that Moduleco are kept updated as to progress of Moduleco's claim.  

2.  Carillion is willing and in fact requires the involvement of Moduleco in the claim process to ensure that an appropriate level of compensation is secured for Moduleco.  In trying to achieve this, Carillion will use reasonable endeavours to provide Moduleco with the opportunity to discuss, where appropriate and possible, their costs with the appointed representative for the Department of Health.  

3.  Moduleco acknowledge that Carillion cannot be liable to Moduleco for any claim by Moduleco against Carillion that has arisen out of any failure by Moduleco to submit sufficient details and/or evidence of their claim.  Moduleco further confirm that as long as Carillion fully comply with the spirit and letter of this agreement then Moduleco's claim for abortive costs will be capped at £137,232 plus VAT.  Carillion will inform Moduleco as soon as reasonably practicable, if the Department of Health or Corderoys request, any further information in respect of Moduleco's claim.  Carillion acknowledge that to date all requested information has been provided by Moduleco.  Carillion further acknowledge that any settlement Carillion might agree with the DoH will not be binding upon Moduleco.  

4.  Upon settlement of Carillion's claim for abortive costs being achieved, Carillion will, insofar as is possible, having regard to the nature of any confidentiality agreement between the Department of Health and Carillion, promptly provide Moduleco with as much detail as possible of the settlement in respect of Moduleco's claim.  If possible, having regard to the nature of any confidentiality agreement, Carillion will at the same time provide Moduleco with any extracts from the settlement agreement relating to Moduleco's claim.  In the event that the settlement with the Department of Health does not identify Moduleco's claim as a separate head of claim, then Carillion will make a claim to Moduleco proportionate to the total value of Carillion's valid claim as against the settlement achieved.  .....  

7.  Moduleco will stay all legal proceedings against Carillion and/or Clinicentre Ltd. in respect of any financial claim they may have against Carillion and/or Clinicentre under the London South contracts until either they have been notified as to the outcome of Moduleco's claim or three months have passed from the date their claim was submitted to the DoH, whichever was the sooner."  

4	Upon a proper and sensible construction of that contract, Carillion undertook during the processing of the claim to provide, "as much information as possible to Moduleco, having regard to the nature of any confidentiality agreements with the Department of Health to ensure that Moduleco are kept updated as to the progress of Moduleco's claim".  There is some importance in those words, in particular "as much information as possible".  There is no limitation there on what that information should be - it could be in writing, oral, electronic or otherwise, but Carillion undertook to provide it.  

5	Finally, in clause 4, it was made clear that if possible Carillion will "provide Moduleco with any extracts from the settlement agreement related to Moduleco's claim", and secondly, that they will "promptly provide Moduleco with as much detail as possible of the settlement in respect of Moduleco's claim".  Again, these are subject to confidentiality, but it was clearly intended that there would be as much disclosure of information, relating to the progress of the claim and its final resolution, as possible, subject to confidentiality.  I will return to that later.  

6	It is unnecesary to go into the details of the dispute that has emerged as to whether or not there was compliance with the agreement of 6 December 2007 with regard to pursuing the claim. I will not speculate as to what the settlement agreement ultimately achieved provided for, because, by about August or September 2008, it was apparent that a settlement had been, or was about to be, achieved between Carillion and the Department of Health which allowed Carillion some £2.5 million in satisfaction of Carillion's claim.  Carillion's claim apparently had included Moduleco's claim for £137,000, but information released and revealed by Carillion indicated that nothing was included in the settlement agreement and/or allowed by the Department of Health or its consultants for Moduleco's claim.  

7	Thus it was that, the lines to some extent having been drawn, on 3 December 2008, Moduleco, wrote to Carillion asking in substance for the documents which are the subject matter of the application, albeit with some variants.  They wrote on that date:

"We entered into the agreement of 6th December in good faith and in the expectation that Carillion would use reasonable endeavours to promote our claim and other obligations it had accepted within that agreement.  It is not clear that you have done so.  We are not satisfied with the outcome of Moduleco's claim and anticipate that we may well have a legal claim against Carillion in regard to breach of the December 6th agreement.  In order that we can fully understand what happened and identify at an early stage what has gone wrong, we require copies of the following information." 

	There were then set out five classes of documents, which broadly form the subject matter of this current application.  They were, briefly summarized, Carillion’s claim document to the Department of Health, correspondence,  emails, minutes and notes in which Moduleco’s claim was referred to, the Department’s accountant’s report on Carillion’s claim and the settlement agreement between Carillion and the Department.

8	There seems to have been no immediate response to that, and Moduleco's solicitors wrote to Carillion on 17 December 2008, making it clear what they considered the terms of the December 2007 agreement meant and asserting that Carillion would provide all possible information.  They referred at that stage to the possibility of an application being made to the court for pre-action disclosure.  

9	Carillion responded on 23 December 2008, saying:

"It is unclear from your letter the specific basis of Module Co's alleged claim and therefore exactly what documents are required to be disclosed by Carillion…
Furthermore, the time frame that you have set out is wholly unrealistic.  The first reference to an application to the Court has been made in your letter dated 17 December.  This does not give us enough time to comply with the deadline you have set down…  
We can confirm that it is our intention to provide your client with appropriate documentation within a reasonable time period, if it is our duty to do so." 
He also raised the issue of the existence of confidentiality agreements impinging on what could be disclosed.

10	That was responded to on the same day directly by Mr Joy of Moduleco to Mr. McPherson of Carillion, spelling out that they required the documents, and explaining that they had:

"... every right to be provided with these documents, indeed, there is an implicit undertaking in the Agreement of December 6th 2007 that you would provide us with a copy of your claim and of the settlement deed, along with the other information we require." 

	At the end he says:

"We will also pay reasonable copying costs should there be any.
I hope you will now provide these documents and save us all a lot of time and trouble."  

11	There was a meeting on 14 January 2009 at which some information was handed over.  I do not need to go into that because it is clear that the parties have now agreed, belatedly, that more information and more documentation should be provided than was handed over then.  

The proceedings
12	Thus it was that this application was issued in the TCC on 15 January 2009, asking for an order under Part 31.The application sought disclosure of the documents sought in the email of 3 December 2008 and the confidentiality agreements referred to in Carillion’s letter of 23 December 2008. Ramsey J. gave directions on 19 January 2009, which has led to this hearing today.  There was a first witness statement of Peter Joy of Moduleco in support of the application, which attaches an amount of documentation from which I have quoted already.  That was responded to by Mr. McGowan of Carillion.  He is a commercial manager, who, it is clear from the contemporaneous documentation, was, to some extent at least, involved in the project with Moduleco.  In some respects he says that Carillion would consent to an order but needed an order to overcome confidentiality difficulties; however, in other respects he challenges the entitlement to the disclosure sought.  There was a second witness statement of Mr. Joy submitted in this case, dated 5 February 2009.  

13	An accommodation was reached between the parties, I am told, yesterday evening, so that it is now agreed, subject to costs, what the draft order should be.  In my judgment, the substance of that order is similar but not identical to the classes of documents that were sought in the application.  There have been variants.  Thus, for instance, it is now agreed that where appropriate there should be redactions to preserve confidentiality.  There have been some limits in terms of time limits being put on the documents that were sought, and indeed there has been an additional class of documents which has been agreed should be provided.  In effect, by agreeing to this order, Carillion, properly, accepts that Moduleco is entitled to the classes of documents sought.

14	Therefore, the only issue before me today is the question of costs; it is very unfortunate that the parties have not been able also to come to some accommodation on costs, but the court is here is to resolve differences which cannot be resolved between the parties.  

15	Moduleco submitted a statement of costs which totals £12,170 with regard to its costs of and occasioned by the application, including the hearing today.  Carillion's costs are said to be £26,602, although a relatively small element of this may relate to the costs of compliance with an order requiring the documents now agreed to be provided to the claimant.  Some of the hours already incurred by Carillion’s solicitors have apparently been applied to considering the documents or some of the documents sought and indeed to some extent redacting elements of them prior to disclosure.  

16	Bearing in mind that the likely total value of Moduleco's claim is £137,000 plus VAT, if these bills were to be accepted, the parties will have spent something over £40,000 including VAT on an application which has now been consented to in substance.  That is a very unfortunate state of affairs.  

17	The position so far as the costs of pre-action disclosure is concerned is set out in CPR Part 48.1(2) and (3):

"(2) The general rule is that the court will award the person against whom the order is sought his costs - 

(a) of the application; and 

(b) of complying with any order made on the application.  

(3)  The court may however make a different order, having regard to all the circumstances including - 

(a) the extent to which it was reasonable for the person against whom the order was sought to oppose the application; and 

(b) whether the parties to the application have complied with any relevant pre-action protocols"  

18	I ignore for the purpose of this hearing the issue as to whether the parties have complied with the TCC Pre-action Protocol.  There was a Pre-action Protocol letter of claim, but it was taken into account by the parties in the December 2007 agreement, so that will not in any way, so to speak, be held against either party.  The parties proceeded upon an apparently agreed basis in a way thought sensible to try and resolve their differences through the December 2007 agreement.  

19	Reliance has been placed by Ms. Ansell, Counsel for Carillion, on the authority of SES Contracting v. UK Coal plc [2007] EWCA (Civ) 791, in particular the leading judgment of Moore-Bick L.J.  Essentially I have regard to the whole of his judgment, but in particular Paras.17, 22, 23, 24 and 25:
“17. CPR Rule 48.1 provides that, where a person makes an application for disclosure before proceedings, the general rule is that the court will award the person against whom the order is sought his costs of the application, but that the court may make a different order having regard to all the circumstances, including the extent to which it was reasonable for the person against whom the order was sought to oppose the application. Although a respondent to an application may incur some costs merely in considering what response to make to an application of this kind, in most cases he will only incur substantial costs if he opposes it. By laying down a general rule that the respondent will be awarded his costs, therefore, I think that the Rules implicitly recognise that it will not usually be unreasonable for him to require the applicant to satisfy the court that he ought to be granted the relief which he seeks. The reason for that (if it be necessary to find one) lies, I think, in a recognition that a private person who is not a party to existing litigation which brings with it an obligation of disclosure is entitled to maintain the privacy of his papers unless sufficient grounds can be shown for overriding it and that it is for the person seeking to invade that privacy to justify doing so. At all events, the rule is clear in its terms and provides the point of departure for a judge dealing with the costs of an application of this kind.
22. However, that was not all that there was to it. Reading paragraph 84 of the judgment as a whole, I think it is reasonably clear that the judge did think that UK Coal had behaved unreasonably in the manner of its opposition to the application… He referred to the fact that UK Coal had, as he put it, deliberately confronted SES with a wall of witness statements which looked impressive and intimidating, thereby seeking to fend it off without providing any of the documents that might have allayed its concerns… I detect in that comment more than a hint of a criticism that UK Coal had acted unreasonably in that it had both added to the costs of preparation and prolonged the hearing without putting forward objective evidence in the form of contemporaneous documents that would have given its case real substance. 
23. The question then is whether that provided sufficient grounds for ordering UK Coal pay the whole of SES's costs of the application. Mr. Béar reminded us that a judge has a wide discretion in the matter of costs and that an appellate court should not interfere with his exercise of that discretion unless it is satisfied that he has failed to take into account a relevant factor, had taken into account an irrelevant factor, or reached a conclusion that was plainly wrong. He also submitted that the judge may well have taken into account matters which he did not specifically mention but which lent additional support to his decision. 
24. I accept Mr. Béar's submission as to the approach the court should take, but in my view the judge did fail to have sufficient regard to an important factor, namely, the general rule that the respondent to an application of this kind is normally entitled to his costs. Although he referred to rule 48.1(2) at the outset of his judgment on costs, he does not appear to have fully appreciated its significance or considered what kind of conduct would justify the court in going so far as to order the respondent to bear the whole of the costs. In that context he does not appear to have taken account of the fact that a not insignificant part of the applicant's costs are likely to have been incurred in preparing and issuing the application and filing evidence in support of it. I think it is dangerous to assume that the judge had in mind matters to which he did not refer unless there are cogent grounds for doing so. The fact is that, short of ordering UK Coal to pay the costs of SES on the indemnity basis, the judge's order was the strongest available to him. If one is starting from the position set out in rule 48.1(2) one would expect an order of this kind to be made only in a case where it was clearly unreasonable for the respondent to oppose the application or where the manner of his opposition was so unreasonable as to make it appropriate to require him to bear the whole of both parties' costs. Although Mr. Moriarty sought to place some reliance on the case of Bermuda International Securities Ltd v KPMG [2001] 1 Lloyd's Rep. PN 392, in which the judge made no order for costs where the respondent had unreasonably resisted the application "root and branch", I do not find that case very helpful. This court only had to be satisfied, as it was, that it was open to the judge to make that order; whether he could justifiably have gone further was a question that did not arise. In any event, each case is different and decisions on costs must reflect the particular facts of the case, taking into account rule 48.1 (2) and the policy behind it. 
25. For the reasons I have given I am persuaded that the judge's exercise of discretion in this case was flawed and that this court must exercise its own discretion in the matter. After nearly three days the judge was well placed to assess not only the nature of the evidence filed by UK Coal but also the extent to which its approach to the application had affected the preparation for the hearing and the hearing itself. I see no reason to differ from his assessment and I would therefore approach the question of costs on the basis that the criticisms he made were well-founded. In my view there was ample material to justify a departure from the general rule, but not to the extent of ordering UK Coal to pay the whole of SES's costs. I would set aside his order and substitute no order as to costs.” 

  	It is important that, if the court is going to depart from the general rule so far as costs are concerned, it needs to consider the extent to which it was reasonable or unreasonable for Carillion in this case to oppose the application and whether there came a stage when the opposition became unreasonable.  

20	Ms. Ansell effectively seeks an order that there should be an order for costs in her client's favour, with a summary assessment to take place when the order has been complied with, but that her clients should be paid £15,000 on account.  In my judgment, there is some distinction between this case and the SES case, and it is that, unlike in the SES case, in this case the parties agreed in a binding way that certain information should be provided; although the application is brought under CPR Part 31, nonetheless a material factor is that at least some of the information which has now been provided seems to me clearly to be information which would be required to be provided under the agreement.  Thus, for instance, there would and should have been no great difficulty in providing the settlement agreement, albeit with elements redacted to protect confidentiality.  That seems to me clearly covered by Clause 4 of the December 2007 agreement.  Similarly, under Clause 1 of that agreement, minutes of meetings and correspondence and indeed a consultant's report prepared on behalf of the Department of Health could and should have been provided pursuant to that agreement, again regard being had to confidentiality.  It is clear that the parties placed considerable trust in each other pursuant to that agreement; in Clause 3, when they refer to Carillion's compliance with the spirit and letter of this agreement, they were not intending to stand analytically on the precise wording of the agreement.  The spirit behind it clearly was that Carillion would provide all information necessary to enable Moduleco to know how its claim was being and had been treated by the Department of Health and indeed by Carillion, as well as how the settlement produced whatever result it did produce.  Therefore, I consider that, at least for certain and substantial elements of the information and documents which it is now agreed should be provided, it could properly be said that in all probability they should have been provided pursuant to that agreement.  

21	It is unnecessary for me to make a finding as to whether each and every document should have been provided pursuant to the December 2007 agreement because of course the documents, or most of them, have not yet been provided, although elements of some of them have been. It does seem to me, however, extremely likely that some at least of the documents which are the subject matter of the order would have had to be provided contractually in any event.  

22	Subject to the contractual argument, Carillion was quite entitled to await an application and then decide what they wanted doing with it.  Thus, it would always be the case that the Moduleco's costs of issuing the application and probably its first witness statement, would have to be borne by it; thereafter, Carillion would be entitled to the reasonable costs of reviewing the application carefully and then deciding what to do.  But it does seem clear that, up until a date towards the end of January when Mr. McGowan's witness statement seems first to have been prepared, although dated 2nd February 2009, Carillion was quite entitled, pursuant to the rules, to review the application and decide what to do.    

23	However, between the service of Mr. McGowan's witness statement and late last night, there seems to have been an unnecessary amount of time and effort incurred by Carillion in working out how they could get to the accommodation which they did last night.  Although I have not examined in great detail what has happened, and indeed have not been referred specifically by counsel to some of the documents, it appears that Carillion instructed its solicitors only after the application was issued.  They seem to have come on the record on or about 23rd January 2008.  By the service of Mr. McGowan's witness statement, it seems that, although some limited accommodation was being offered, the accommodation, which was finally achieved, was not then being offered by Carillion. The objections and qualifications being raised were either unjustified or would take little to resolve.  There was an extensive exchange of emails and it was the Moduleco's solicitors who suggested the very obvious way out of resolving problems of confidentiality, which were primarily to be achieved by redaction.  

24	Although it was reasonable for Carillion carefully to consider and to respond to the application, by the end of January, 2008, the pragmatic decision should have been made by them to accept in broad terms that the application should be allowed, subject to what were ultimately relatively minor alterations.  The redaction was a very obvious way of overcoming confidentiality problems, and Carillion could very easily just have said: “we are happy to give these documents but elements of them will need to be redacted and you will have to leave that to our good faith to redact properly".  So far as the timing was concerned, the bulk of the documentation sought had to relate to the period between the time that Carillion put in their claim in mid 2007 and September 2008 by which date the settlement with the Department of Health had been achieved. The timing restriction that was introduced under the final draft order is one which was eminently easily resolvable.   

25	I have formed the view that there came a point when Carillion ceased to act reasonably.  On an application like this, it is important therefore that I take that into account.  Doing the best that I can, it seems to me that this is a case where in broad terms Carillion should have its costs paid, but there should be a reduction to reflect what I consider to have been their unreasonable stance beyond the service of Mr. McGowan's witness statement on 2nd February.  Again, doing the best that I can, it seems to me that the appropriate allowance is that Carillion should have half its assessed costs of the application.  

26	So far as assessment is concerned, Ms. Ansell makes the legitimate point that, because there may be an overlap between what her clients' solicitors have done in terms of collating the documents, there should not be a summary assessment now and there should be an assessment thereafter.  So far as the order I propose to make is concerned, it is this:  Carillion should have half of its costs of and occasioned by this application and hearing, and  it should have all its reasonable costs of compliance with the order to which it has agreed. The summary assessment is deferred and the parties have permission to apply in that regard..  

27	So far as payment on account is concerned, an appropriate allowance to make at this stage is £5,000, which should be payable within 14 days.  

28	I have to say, and I hope this will assist the parties agreeing the costs rather than coming to the court for a summary assessment, that I do regard the defendant's bill as disproportionately high.  Of course it is open to any party to agree to their solicitors doing whatever the solicitors do; that is the client's choice.  But in terms of whether it is reasonable for the other party to pay all those costs, the purpose of an assessment is to determine what is reasonable.  Given that the end claim is likely to be no more than £130,000, a bill of £26,000 is, in my view, disproportionate to date, particularly when in substance there is agreement as to the order to be made.  I will not at this stage highlight as excessive any particular elements of the bill that has been put in, and I do very much hope that parties will agree the assessment after it has been complied with.  I make it clear that, if there are elements within this bill that relate to compliance with the order, i.e. elements of the order that have already been complied with, that that is not covered by the half that I have ordered to be allowed to Carillion.  There is some suggestion in the bill that some seven or eight hours - possibly more, possibly less - have been spent in effect on compliance.  Given what I have seen and heard to date, I can not see that the costs of compliance should be very much.   

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