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Mouchel Ltd v Van Oord (UK) Ltd

1 July 2011
The issues

Costs – Civil Liability (Contribution) Act 1978 – whether contribution limited to contribution to damages or damages and costs – whether party’s own costs recoverable.

The facts

Kier, the main contractor, brought two claims relating to off shore works for a cooling water system at South Humber power station. Van Oord was a subcontractor to Kier in relation to those off shore works and Mouchel gave advice and carried out design for Kier.

The first claim related to the unsuitability of Grimsby Middle Sand supplied by Van Oord. The second related to liability for scour protection rock placed by Van Oord around the cooling water intake structures.

The proceedings were settled by consent. In the total sum of £517,500. Of that sum £100,000 related to damages, together with £18,000 being for interest and the remainder, £399,500 in respect of Kier’s costs and disbursements. The remaining issue arose in respect of the contribution proceedings brought by Mouchel against Van Oord. The issues in stake were the amount, if any, of Van Oord’s contribution in respect of Kier’s costs; and what proportion, if any, of Mouchel’s costs of the main action should be paid by Van Oord.

The decision

Having regard to the authorities, and in particular BICC Ltd v Parkman Consulting Engineers, a decision of the Court of Appeal, the following principles could be derived:-

i) Where a party settled a claim made against it by a third party and in doing so paid costs to that third party, the Court had a discretion and might order that a party liable to make a contribution to that other party should pay those costs under Section 51 of the Senior Courts Act 1981.
ii) Those costs might also give rise to a contribution under the Civil Liability (Contributions) Act 1978. Where there was an overall settlement figure in respect of all claims, which included a sum attributed by the paying party to costs, such a payment could found a contribution claim under Sections 1(1) and 1(4) of the 1978 Act.
iii) Under the 1978 Act, a contribution was not limited to being a contribution in respect of damages but included a contribution based on liability for damages.

Kier’s Costs
Van Oord did not challenge the reasonableness of the settlement made as between Mouchel and Kier. On that basis there was no challenge as to the reasonableness of Mouchel paying those costs or as to the reasonableness of the amount of the costs. The issue concerned the basis on which there should be a contribution.

The evidence showed that approximately 30% of the costs were attributable to the first issue and 72% to the second issue. Van Oord should therefore be liable for 35% of the costs attributable to issue one, namely 10.5% of £399,500. This overall percentage was very close to the overall proportion of recovery of damages which stood at 8.456%. Given the inaccuracy of the evidence, the appropriate way of dealing with the contribution would be to adopt the same percentage of 8.456%, which would be the percentage of £399,500 for which Van Oord would be obliged to contribute.

Mouchel’s Costs
The Civil Liability (Contributions) Act 1978 made it clear that what was being granted was a right to contribute in respect of a party’s liability to a third party. That liability could include liability to the third party for costs. However, the Court saw no grounds upon which a party could seek a contribution in relation to its own costs, because that did not form a liability to a third party in respect of damage. It was a liability of the party itself in relation to proceedings brought by the third party. There could be therefore no claim by Mouchel under the 1978 Act for the costs it had incurred in the main action.

There was however a general discretion under Sections 51(1) and 51(3) of the Senior Courts Act 1981. The issue between Mouchel and Kier was confined to issues relating to Mouchel’s liability to Kier rather than anything to do with the primary liability of Van Oord to Kier. Van Oord had not been involved in the proceedings until a late stage in June 2008. In those circumstances the Court found it difficult to see the basis upon which it should exercise its discretion and make and Order that Van Oord should contribute to Mouchel’s costs in defending proceedings to establish Mouchel’s liability. Considering the matters to which the Court had to have regard under CPR 44.3(4) the Court found it difficult to see that there were circumstances in this case which would lead it to being just to make and Order that Van Oord should pay any of Mouchel’s costs. There did not appear to be any conduct by Van Oord to justify such an Order. In particular, in the context where Van Oord’s overall liability to contribute was only a small percentage of the overall settlement so that it could not have been a material factor in Mouchel deciding whether to settle or not and where the costs of the third party proceedings would reflect matters as between Van Oord and Mouchel, the Court did not consider it appropriate to exercise any discretion and award Mouchel a contribution for its costs of defending the claim by Kier.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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