The Governors and Company of the Bank of Ireland (1) and Bank of Ireland (UK) PLC (2) v Watts Group PLC [2017] EWHC 2472 (TCC)


Facts: The case concerned the Claimant bank bringing professional negligence proceedings against the Defendant, arising out of the failure of a development company to whom the bank had lent money. In a judgment dated 12th July 2017 the High Court judge dismissed the claim. It was agreed that the Claimant would meet the Defendant’s costs. At a hearing on 3rd October of 2017 there were two principal issues to be dealt with the first (and subject of this article) being the basis of the assessment of those costs.

By way of a background, before trial the Defendant had made three offers as follows:-

  • Part 36 of £75,000.00 in October 2015;
  • Part 36 of £150,000.00 in August 2016; and
  • A costs-inclusive offer of £545,000.00.

As a result the Claimant accepted that it was liable to pay the Defendant’s costs of the action and that it is liable to pay interest on those costs from October 2015. The parties also agreed that interest ought to be paid at 2% over base rate for the relevant period. The principal dispute between the parties concerned the basis of assessment. The Defendant sought an order for indemnity costs and the Claimant contended standard basis was appropriate. The arguments of the Defendant were as follows:-

Defendant: (1) they contended that the Claimant’s claim ought never to have been brought; (2) they say that they had made offers which had been beaten; and (3) they contended that the Court’s criticism of the Claimant’s expert made this an extreme case further justifying indemnity costs.

The Court did not agree with the Defendant’s argument that the claim was destined to fail, notably stating that “when considering the proper basis of the assessment of costs, the court must avoid the dangers of hindsight”. The Court contended that the claim failed owing to the excellence of Counsel’s cross-examination of the Claimant’s factual witness, essentially the case “won” at trial, by no means was it foregone conclusion.

The Court additionally and quite properly highlighted that unlike a successful Claimant (CPR 36.17(4)(b)) the fact that the Defendant beat the relevant offers does not give rise to an automatic entitlement to indemnity costs. Save for accepting that this position is “misaligned”, the Court did not elaborate although the rules are widely considered to be as they are owing to the double penalty already imposed upon a Claimant, in losing their entitlement to costs for the period following expiry of the offer, and also losing their own entitlement to costs for the same period.

The fact that the Defendant was actively making offers in respect of the claim, in the Court’s view was further evidence in support of their classification of the claim as one having commercial value, which flies in the face somewhat of their argument that the claim was destined to fail. The Court did however order that the costs of the Defendant’s expert ought to be assessed on an indemnity basis as should the costs of and occasioned by the Claimant expert’s oral evidence at trial.

The costs of the Defendant’s expert ought to be assessed on an indemnity basis as should the costs of and occasioned by the Claimant expert’s oral evidence at trial.

This was owing to criticisms specifically relating to the Claimant’s expert evidence. Save for this exception, the Court considered standard basis costs to apply.

The decision in this case effectively solidifies what is already contained within the rules. Whilst we consider the Court’s decision to be right in law we do not consider the Part 36 position to be misaligned. The disparity present between the benefits accruing to a Claimant who makes a successful Part 36 offer (indemnity costs) and those accruing to a Defendant (standard basis costs) is, in our view, entirely appropriate.