Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another [2022] SGHC 77

Costs

I gave my judgment on the merits of this action in Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another [2020] SGHC 165 (“Comfort Management”). This judgment deals with consequential issues arising from Comfort Management. Those issues are principally the costs of the action.

Costs

I now set out the grounds for my decision. I begin with the issue of costs as between the plaintiff and the first defendant.

Costs

The first defendant sought to recover a total of just over $780,000 from the plaintiff on two counterclaims: (i) a counterclaim for the costs of certain materials which the first defendant alleged it had ordered on the plaintiff’s instructions; and (ii) a counterclaim in contract or on a quantum meruit for certain works which the first defendant had completed under two variation orders (“VO1” and “VO2”).

Costs

Fifth, on the first defendant’s counterclaim, whether the first defendant had ordered materials costing $30,178.80 on the plaintiff’s instructions and was therefore entitled to recover the cost of that material from the plaintiff. I shall refer to this as “the Materials Issue”. I dismissed the first defendant’s counterclaim on the Materials Issue (Comfort Management at [168]).

Costs

Both the plaintiff and the first defendant claim to be the victor in this action. Each therefore submits that the other should be ordered to pay the costs of the action.

Costs

The plaintiff’s submission proceeds as follows. As a result of this action, the first defendant has been adjudged liable to pay a substantial sum to the plaintiff. The plaintiff could not have secured payment of that or any other sum from the first defendant if it had not commenced this action. The plaintiff is therefore the victor in this action and should recover its costs from the first defendant.

Costs

The first defendant’s submission proceeds as follows. The plaintiff recovered only 26% of its total claim of just over $1.5m. The first defendant succeeded on the more substantial Works Issue, Overpayment Issue and Defects Issue. On the Variation Orders Issue, the first defendant succeeded entirely on VO1 and substantially on VO2. The only issues on which the first defendant did not succeed were the Delay Issue and the Materials Issue. These two issues were relatively minor issues both in terms of quantum and in terms of costs. The first defendant is therefore the victor in this action and should recover its cots from the plaintiff.

Costs

The first question, therefore, is the proper approach to take in awarding the costs of an action such as this, where there are multiple claims and counterclaims with each party winning some and losing others. Answering that question requires examining the source and scope of the court’s power to award costs.

Costs

The source of the court’s power to award costs is s 18(2) read with paragraph 13 of the First Schedule to the Supreme Court of Judicature Act 1969 (2020 Rev Ed). The court has a very wide discretion in exercising this power. Thus, O 59 r 2(2) of the Rules of Court (2014 Rev Ed) (“the Rules”) provides that, subject only to express provision to the contrary, the court has “full power to determine by whom and to what extent the costs are to be paid”.

Costs

The general rule is that, if the court is minded to make any order for costs at all, the court’s discretion ought to be exercised to order costs to follow the event. As O 59 r 3(2) of the Rules provides:

Costs

An order for costs to follow the event simply means that the successful party in the litigation is entitled to recover its costs of the litigation from the unsuccessful party. Gloster J set out a useful and condensed summary of the applicable principles in HLB Kidsons (A Firm) v Lloyds Underwriters subscribing to Lloyds Policy No 621/PKID00101 & Others [2007] EWHC 2699 (Comm) (“Kidsons”) at [10]:

Costs

The starting point in exercising the discretion to award costs is ascertaining the event: Straker v Tudor Rose (a firm) [2007] EWCA Civ 368 at [11] per Waller LJ. Adopting this as the starting point serves two purposes. First, it identifies the successful party and therefore the party who is prima facie entitled under the general rule to receive his costs. Second, it identifies the unsuccessful party and therefore the party who bears the burden of establishing whether and to what extent the court should depart from the general rule.

Costs

On the costs of the action, the trial judge started by holding that each party should bear its own costs of and incidental to the expert evidence adduced at trial. The expert evidence had been necessary purely to deal with the quantum meruit claim. The trial judge’s reasoning was that each party was equally responsible for the works having been undertaken and completed with no contract in place and therefore that each party was equally responsible for the difficulties of proving the nature and the value of the works which had made the expert evidence necessary (Barnes at [26]). The trial judge then found that the bulk of the time at trial was taken up with proving whether the contractor’s employee had been dishonest. Because the employer had won on that issue, the trial judge found that the employer should be seen as the successful party in the litigation. He accordingly ordered the contractor to pay half of the employer’s costs (Barnes at [27]).

Costs

The English Court of Appeal set aside the trial judge’s costs order. It ordered instead that the employer pay 25% of the contractor’s costs (Barnes at [30]). Longmore LJ held that the contractor was the successful party because the result of the litigation was that the contractor had been found entitled to receive a substantial sum of money from the employer. The trial judge had therefore gone wrong in principle in two ways: (i) by failing to find that the event was in the contractor’s favour; and (ii) by segregating the costs of the expert evidence as costs which need not follow the event. As Longmore LJ put it at [28]–[30]:

Costs

Implicit in Longmore LJ’s criticism of the trial judge’s approach is the fundamental importance of identifying the successful party at the very outset of exercising the discretion to award costs. Doing so makes it more likely that the discretion will be approached from the right perspective (see Kidsons at [10], cited at [26] above). Further, once the successful party has been identified, the court will be able to attach real weight to that party’s success throughout the exercise of the discretion to award costs, as the court is obliged to do (Re Elgindata (No. 2) [1992] 1 WLR 1207 (“Elgindata”) at 1213H per Nourse LJ).

Costs

Thus, if the trial judge in Barnes had attempted to identify the successful party at the outset of his exercise in awarding costs, he would have found that it was the contractor. It would then have followed that the contractor was prima facie entitled under the general rule to receive its costs from the employer. And that it was for the employer to persuade the trial judge that he should depart from the general rule and to what extent he should do so.

Costs

I arrive at that finding even though I accept all of the following to be correct. The plaintiff recovered only 26% out of its $1.5m claim. The plaintiff secured an unqualified success on only two of the six issues: the Delay Issue and the Materials Issue. Those two issues were minor both in terms of quantum and costs. The plaintiff secured only partial success on another two out of the six issues: the Works Issue and the Variation Orders Issue. Even then, my finding on the Works Issue and the Variation Orders Issue were much closer to the first defendant’s position than to the plaintiff’s. And the plaintiff failed outright on the remaining two issues: the Overpayment Issue and the Defects Issue.

Costs

The event in this action is therefore in the plaintiff’s favour. Under the general rule, the plaintiff is prima facie entitled to recover the costs of this action from the first defendant. The question which follows is whether I should exercise the discretion to depart from the general rule on the facts of this case. As I have mentioned, I have decided to exercise my discretion to deprive the plaintiff of 50% of its costs. I now explain why.

Costs

In the remainder of this judgment, I consider only the court’s discretion to depart from the general rule on the grounds that a successful party has failed on certain claims or issues which he raised in the litigation. I therefore do not consider the court’s discretion under O 59 r 7 of the Rules to order a successful party to pay all or part of the unsuccessful party’s costs arising from the former’s misconduct or neglect or from his unreasonable or improper act or omission. There is no suggestion that there is any basis in the facts of this case on which to exercise the discretion under O 59 r 7.

Costs

When a court departs from the general rule because a successful party has failed on certain claims or issues, the court can make two broad types of costs orders. The first type deprives the successful party of the right to recover all or part of his costs of the action from the unsuccessful party. I shall call this a “Type I order”. The second type requires the successful party to pay all or part of the unsuccessful party’s costs. I shall call this a “Type II order”.

Costs

Even though the court’s discretion to award costs is wide (O 59 r 2(2) of the Rules) and even though its discretion to depart from the general rule (O 59 r 3(2)) and to make a Type I order (O 59 r 6A) or a Type II order (O 59 r 6A and O 59 r 7) is equally wide, that discretion must nevertheless be exercised judicially. This means simply that the discretion must be exercised on fixed principles, adhering to reason and justice and not to private opinion or whim or even benevolence or sympathy, so as to produce results which are legal and regular rather than arbitrary, vague or fanciful: Sharp v Wakefield [1891] AC 173 at 179. The general rule coupled with a judicial discretion not to follow it gives every party a reasonable expectation that, if he succeeds, he will recover his costs from the unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at [134].

Costs

The court should therefore be slow to defeat this reasonable expectation ex post by declining to follow the general rule in a manner which is not stable and predictable. Furthermore, departing too far and too often from the general rule creates uncertainty and gives parties an incentive to engage in unproductive and undesirable satellite litigation over costs alone. Jackson LJ warned against this danger in the decision of the English Court of Appeal in Fox v Foundation Piling Ltd [2011] EWCA Civ 790 (“Fox”) at [62]:

Costs

In one sense, O 59 r 6A of the Rules is unnecessary. Order 59 r 3(2), which pre-dates O 59 r 6A, already allowed the court to depart from the general rule if “it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs”. Those words are wide enough to cover every conceivable type of costs order and every combination of circumstances as justification, not just a Type I or a Type II order on the justification contemplated by O 59 r 6A of the Rules.

Costs

But the purpose of O 59 r 6A is to draw specifically to the attention of litigants – and indeed to the attention of the court itself – that the discretion to make a Type I or a Type II order exists whenever a party succeeds in the proceedings overall but two criteria are satisfied: (i) the successful party “has failed to establish any claim or issue which he has raised in [the] proceedings”; and (ii) the successful party “has thereby unnecessarily or unreasonably protracted, or added to the costs or complexity of those proceedings”.

Costs

The principle on which the general rule rests is the indemnity principle. The indemnity principle holds that a party who succeeds in litigation is accorded complete justice if and only if he recovers compensation for the costs of the litigation in addition to the compensation he is entitled to under the substantive law: Ng Eng Ghee and others v Mamata Kapildev Dave and others (Horizon Partners Pte Ltd, intervener) and another appeal [2009] 4 SLR(R) 155 (“Ng Eng Ghee”) at [6]–[7]. Complete justice as between party and party therefore requires the successful party to receive an indemnity from the unsuccessful party for all of his costs of the litigation.

Costs

A Type I order is consistent with the compensatory objective of the indemnity principle. As I have shown, the correct approach to exercising the discretion as to costs is to ascertain the event and thereby to identify the successful party in the litigation at the outset of the exercise (see [26] and [34] above). A Type I order therefore operates merely to deprive a successful party of all or part of the costs to which he would otherwise be entitled. It amounts to no more than withholding an element of compensation from him despite his success in the litigation overall. The worst case for a successful party under a Type I order is that he has to bear all of his costs himself.

Costs

A Type II order is not merely inconsistent with the compensatory objective of the indemnity principle; it is the very antithesis of it. A Type II order requires a party who has established a right to recover compensation under the substantive law to compensate its opponent for the costs of the litigation necessary to vindicate that right and recover that compensation. A Type II order therefore not only nullifies but reverses an integral aspect of the compensatory justice which the indemnity principle seeks to accord to a successful party in litigation.

Costs

The indemnity principle has a second objective: to incentivise discipline in litigation. By shifting the costs of litigation to the unsuccessful party, the indemnity principle focuses the minds of parties – and in modern times, the minds of those who fund litigation or who insure litigants for their costs – on the need to assess carefully the strength of their case and their prospects of success not only at the outset of the litigation but also as it progresses (per Valerie Thean J in Element Six Technologies Ltd v IIa Technologies Pte Ltd [2020] SGHC 140 (“Element Six”) at [27] citing Dyson J (as he then was) in R v Lord Chancellor, Ex parte Child Poverty Action Group and another matter [1999] 1 WLR 347 at 356)).

Costs

A Type II order is inconsistent also with the disciplinary objective of the indemnity principle. A party will have little incentive to exercise discipline in litigation by making reasonable concessions or reaching reasonable compromises at any stage if the consequences of pressing on with a weak case to judgment includes a realistic prospect of securing a Type II order against the successful party. Further, a party who has a strong case but who is risk averse will be incentivised to make unjustified concessions or compromises if he apprehends even a small risk of a Type II order. The risk averse are typically persons of modest means. For a person of modest means, the risk of a Type II order is a more significant deterrent than even the worst case scenario on a Type I order. Unlike his own costs, he will have had no knowledge of or control over the amount and nature of his opposing party’s costs as those costs were mounting up.

Costs

The Court of Appeal in Ng Eng Ghee at [1] recognised that “unmerited barriers in the path of recovering reasonably incurred costs might well have the chilling effect of deterring parties, in future, from legitimately pursuing or defending their rights”. In that context, a Type II order is not simply a barrier to recovery: it is a reversal of recovery. A Type II order has fundamentally different consequences on the balance of incentives and disincentives facing those who seek access to justice than a Type I order, with disproportionate impact on litigants of modest means.

Costs

Taxing costs under a Type II order is a substantially more difficult task than taxing costs under a Type I order. A Type II order creates at least three additional difficulties. First, a Type II order requires the court to tax parts of both sides’ costs. Second, it will be difficult if not impossible in any litigation, no matter how simple, to segregate the costs of an individual issue: (i) from the common costs of the litigation; and (ii) from the costs of litigating the other issues in the litigation. By common costs, I mean those costs which the successful party would have had to incur even if he had not raised the issues on which he failed. Finally, the difficulty of the task is compounded by requiring the costs assessor to unravel all of this in retrospect and with hindsight at the time of taxation (see Smithkline Beecham plc and another v Apotex Europe Limited and others [2004] EWCA Civ 1703 (“Smithkline Beecham”) per Jacob LJ at [5]).

Costs

On the other hand, a Type I order requires the court to tax only the successful party’s costs. implementing the order follows as a matter of mere arithmetic. Further, a Type I order enables the court to take a broad brush or a rough and ready approach to assessing the appropriate deduction to make from those costs to account for the claims or issues on which the successful party failed. After all, the goal is simply to arrive at a costs order which “reflects the overall justice of the case” (Travelers Casualty and Surety Co of Canada v Sun Life Assurance Company of Canada (UK) [2006] EWHC 2885 (Comm) (“Travelers Casualty”) at [11] per Clarke J).

Costs

The exercise necessary to assess both sides’ costs issue by issue for a Type II order is therefore itself likely to lead to delay, increased costs and satellite litigation. Not only that, but assessing costs issue by issue is likely to make no contribution to increasing precision in the award of costs or in the quality or completeness of the justice rendered to both parties in the litigation. As Jacob LJ put it in Smithkline Beecham:

Costs

For reasons of pragmatism, therefore, a Type II order is justified only if the issues on which the successful party failed in the litigation can be segregated from the common costs and the other issue-based costs so that they can be quantified without that exercise itself leading to increased costs, further delay and satellite litigation. I should note at this point that all of the difficulties associated with making a Type II order are present, although perhaps not to the same degree, when the court fixes costs as a gross sum under O 59 r 9(4)(b) of the Rules rather than ordering the costs to be taxed.

Costs

A Type I order also requires the issue-based costs to be susceptible to segregation. However, because a Type I order takes a broad brush or a rough and ready approach to deprive the successful party of a flat proportion or percentage of its costs, the segregation need not be as neat as it would have to be for a Type II order.

Costs

Assume that a plaintiff (P) brings an action against a defendant (D) which raises three issues. There is no counterclaim. To secure judgment, P needs to succeed on only one of the three issues in the action. After a trial, the court decides that P succeeds on the first and second issues but fails on the third. That suffices for P to recover compensation from D. Assume further that a reasonable amount for costs reasonably incurred by each party for the entire litigation, assessed in accordance with the Guidelines for Party-and-Party Costs Awards in Appendix G of the Supreme Court Practice Directions (“the Costs Guidelines”) is $100,000 broken down as follows:

Costs

The court can exercise its discretion to make a costs order which follows the general rule. If it does, P will recover the full $100,000 in costs from D, even though P failed on the third issue. This is because P succeeded in the litigation overall. The event is therefore in his favour. He is awarded an indemnity of $100,000 to complete the justice which the litigation has accorded him. In our costs regime, this indemnity is not an actual indemnity but a deemed indemnity assessed in accordance the Costs Guidelines (see Then Khek Koon and another v Arjun Permanand Samtani and another and other suits [2014] 1 SLR 245 at [163]–[165]).

Costs

The court can exercise its discretion to depart from the general rule by making a Type I order. It if does, it will deprive P of his costs on the third issue ($20,000) and order D to pay P his costs only of the first and second issues ($80,000). This is equivalent to awarding P only 80% of his costs. The court will have arrived at the order by applying the indemnity principle on the first and second issues and by ignoring the indemnity principle on the third issue. An order of this type is what the English cases call a “proportional” costs order (see Rule 44.2(6)(a) of the English Civil Procedure Rules 1998 (SI 1998 No 3132) (UK) (“the CPR”)).

Costs

The court can exercise its discretion to depart from the general rule by making a Type II order. If it does, it will order D to pay P’s costs of the first and second issue ($80,000) and order P to pay D’s costs of the third issue ($20,000). After setting the two sums off against each other, D will be ordered to pay costs of $60,000 to P. This type of order is what the English cases call an “issue-based” costs order (see Rule 44.2(6)(f) of the CPR and Multiplex at [72(iv)]).

Costs

The Type II order in this example appears to be no different from a Type I order that D pay P 60% of his costs or, to put it another way, a Type I order depriving P of 40% of his costs. But that is not the conceptual basis of the order. The conceptual basis involved the court applying the indemnity principle on the first and second issues and reversing the indemnity principle on the third issue.

Costs

The difference can be seen even more clearly by varying the example to assume it would have been reasonable for D to have incurred costs of $50,000 for the third issue rather than $20,000. The effect of the same Type II order would be that D would owe P $50,000 in costs on the first and second issues, but that P would owe D $50,000 in costs on the third issue. The net effect of this Type II order would be the same as an order requiring each party to bear its own costs of the entire action. But the conceptual basis would be fundamentally different.

Costs

This illustrates why I consider a Type I order and a Type II order to be different in kind, not merely in degree. A Type II order reverses the objectives of the indemnity principle and therefore the objectives of the general rule that costs should follow the event.

Costs

The difference in kind between a Type I order and a Type II order is unjustifiably elided or eroded if O 59 r 6A of the Rules is read as permitting the court to make a Type II order on precisely the same justification as a Type I order, despite the width of the court’s discretion to make costs orders under O 59 r 2(2) and to depart from the general rule under O 59 r 3(2).

Costs

Kidsons is an example of a party who raised issues unreasonably. The event in Kidsons was in favour of the defendants. Applying the general rule would therefore result in an order that the defendants recover all of their costs of the litigation from the plaintiff. But the defendants raised two substantial defences only to abandon both of them before trial. The plaintiff estimated, on a broad brush approach, that it had incurred just over £225,000 in costs in preparing to meet these two defences (at [14]).

Costs

Gloster J held that the defendant was liable to pay the plaintiff’s costs of preparing to meet these defences even though the defendant was the successful party in the litigation overall (at [14]–[16]). Rather than ordering the plaintiff’s costs of those two issues to be taxed in addition to the defendant’s costs of the entire action, Gloster J gave effect to her decision by allowing the plaintiff to deduct the gross sum of £225,000 from the taxed costs which the plaintiff would ultimately have to pay the defendants.

Costs

It appears that the English courts were initially enthusiastic about the discretion to make a Type II order under their equivalent of O 59 r 6A of the Rules. The high water mark of this enthusiasm appears to be the decision of the English Court of Appeal in Summit Property Limited v Pitmans (a firm) [2001] EWCA Civ 2020 (“Pitmans”). That was an action for professional negligence. The plaintiff failed in the action because it could not establish causation. But the plaintiff did succeed in establishing breach of duty, which took up most of the time at trial. The trial judge ordered the plaintiff to pay 30% of the defendants’ costs and the defendants to pay 65% of the plaintiff’s costs. At [16]–[17], Longmore LJ held that a successful party could be subject to a Type II order even if he did not act unreasonably or improperly, following A.E.I. Rediffusion Music Limited v Phonographic Performance Limited [1999] 1 WLR 1507:

Costs

Other English cases, some of which I have already cited (see Fox at [44] above, Smithkline Beecham at [64] above and English at [65] above), have re-emphasised the conceptual importance of ascertaining the event and identifying the successful party at the outset of the exercise of awarding costs and the pragmatic difficulties associated with making a Type II order.

Costs

Another instructive case is the decision of the English Court of Appeal in Burchell. In that case, a contractor sued an employer. The employer raised counterclaims against the contractor. The contractor succeeded on the claim, but the employer succeeded on parts of the counterclaim. The result of the litigation was that the employer owed a net sum to the contractor. The trial judge made separate costs orders, awarding the costs of the claim to the contractor and the costs of the counterclaim to the employer. On appeal, Ward LJ held (at [29]–[30]) that the recorder was right not to have awarded the contractor the costs of both the claim and the counterclaim, right not to have made a Type II order on the claim and on the counterclaim but was wrong to have made two costs orders, each following the separate events on the claim and the counterclaim. He ought to have made a single Type I order instead:

Costs

Bearing all of this in mind, my view is that the principles applicable when assessing costs in a matter where there are multiple claims and issues are as follows:

Costs

None of this is of course intended to be prescriptive, exhaustive or even comprehensive. In particular, it is not intended to prescribe how the discretion to award costs should be exercised in those classes of litigation where, by reason of the characteristics of typical litigation in that class, the court may more readily be prepared to make Type II orders than in general commercial litigation (see [84] above). This may go some way towards explaining any difference of emphasis in my distillation of the principles and the analysis in Element Six, which dealt with a costs order in patent litigation (see Element Six at [32]–[36]).

Costs

Further, as I have mentioned, this analysis leaves out of account the court’s discretion to make a Type II order under O 59 r 7 of the Rules. That discretion arises by reason of a party’s misconduct or neglect or his unreasonable or improper act or omission. That includes but is wider than a party’s decision to raise a claim or issue in the litigation on which he fails. Further, the court may make a Type II order under O 59 r 7 even if the party’s act or omission did not protract or add to the costs or complexity of the litigation. As I have mentioned, there is no suggestion that this case comes within the scope of O 59 r 7.

Costs

By way of further example, the plaintiff pursued the Defects Issue even though it was unable to adduce any contemporaneous evidence to support its claim that Lead imposed back charges of $86,606.41 on the plaintiff for the rectification costs which Lead had allegedly incurred as a result of the first defendant’s defective work.

Costs

By raising these issues, therefore, I am satisfied that the plaintiff unnecessarily added to the length and complexity of this action. I therefore consider it just, in the exercise my direction under O 59 r 6A of the Rules and the third Elgindata principle, to make a Type I order depriving the plaintiff of 50% of its costs of this action. I consider that doing so suffices on a broad brush approach to compensate the plaintiff, consistently with the indemnity principle, for the common costs of this action, the costs of the issues on which it succeeded entirely and a just proportion of the costs of those issues on which it succeeded partially, all the while attaching real weight to my finding at the outset of this exercise that the plaintiff was the successful party in this litigation overall.

Costs

I now consider whether to make a Type II order instead of a Type I order. This would award to the first defendant all or part of its costs of defending the plaintiff’s claims and advancing the first defendant’s counterclaims even though, as I have found, the plaintiff succeeded in the litigation overall.

Costs

Second, as I have explained, a Type II order raises a number of practical difficulties. It is difficult to separate the common costs of the litigation from the issue-based costs. It is even more difficult to separate the issue-based costs from each other. I do not consider that it is practicable to make a Type II order, particularly bearing in mind the marginal utility of doing so, if any, in achieving precision or justice in achieving the compensatory or disciplinary objectives of the indemnity principle (see [64]–[65] and [83] above).

Costs

I now turn to fix the quantum of costs which the plaintiff is entitled to recover from the first defendant.

Costs

The trial of this action took 8½ days. In its costs schedule filed together with its closing written submissions, the plaintiff indicated that the costs it would be seeking as against both defendants if it succeeded in this action was $413,000 for professional fees under Section I plus $393,099 in disbursements under Section III. Now that the plaintiff knows the outcome of the litigation, the plaintiff submits that the first defendant ought to pay the plaintiff between $330,000 and $380,000 for professional fees plus between $280,000 and $320,000 for disbursements.

Costs

The first defendant derives that figure of $195,000 by applying the daily tariff of $20,000 to $30,000 per day of trial for construction disputes set out in Part III(A)(i) of the Costs Guidelines which were in force at the time of trial. It is common ground that it is those Costs Guidelines which apply and not the Costs Guidelines now in force. The first defendant therefore takes the daily tariff at the midpoint of the range, ie, $25,000. Applying that rate for the first five days of trial at 100% of that figure and for the remaining 3½ days of trial at 80% of that figure, ie $20,000, the first defendant arrives at the figure of $195,000. That implies a multiple of 7.8 on the daily tariff: [(100% x 5 x T) + (80% x 3.5 x T)] = 7.8 x T (where “T” represents the daily tariff).

Costs

I do not accept the plaintiff’s submission that a reasonable amount for professional fees reasonably incurred in this action is in the range of $330,000 to $380,000. These figures divided by 7.8 imply a blended daily tariff of between $42,300 and $48,700, rounded off. That is well beyond the daily tariff stipulated in the Costs Guidelines. When asked to explain this deviation, plaintiff’s counsel accepted that this action was not of sufficient complexity to justify a departure from the daily tariff set out in the Costs Guidelines. She justified the professional fees of $330,000 to $380,000 on the basis that the Costs Guidelines cover the professional fees only for the trial itself, and do not cover professional fees for pre-trial and post-trial work. On that basis, her submission in fact was that a reasonable amount for professional fees for the 8½-day trial alone was $195,000. The difference between that figure and the range of $330,000 to $380,000 which the plaintiff claims is therefore for the professional fees of pre-trial and the post-trial work.

Costs

I do not accept the plaintiff’s submission. The Costs Guidelines used the number of days of trial as a proxy for the complexity of the entire matter. The figure of $195,000 derived in accordance with the Costs Guidelines is therefore the guideline for the professional fees of the entire action, and not simply for the trial itself. This figure was intended by the Costs Guidelines to be a deemed indemnity covering all work done in an action resulting in a trial of 8½ days’ duration, from the date solicitors are first instructed up to and including all post-trial matters.

Costs

That is confirmed by comparing the applicable Costs Guidelines to the Costs Guidelines currently in force. The current Cost Guidelines expressly specify different tariffs for pre-trial work, trial work and post-trial work. Plaintiff’s counsel submits that this serves merely to confirm the premise on which the applicable Costs Guidelines rested. I do not accept that submission. By specifying expressly that separate tariffs will now apply for pre-trial, trial and post-trial work, the current Costs Guidelines have changed the premise on which the applicable Costs Guidelines rested.

Costs

Further, I do not accept that there is any rational basis for professional fees in the range of $330,000 to $380,000 which the plaintiff now claims. The plaintiff indicated in its costs schedule that it would claim the total sum of $413,000 for professional fees if it succeeded in the entire action, ie as against both the first defendant and the second defendant. It now claims professional fees in the range of $330,000 to $380,000 on the basis that between 80% and 92% of that sum of $413,000 can be apportioned to its claim against the first defendant alone. I accept the first defendant’s submission that the plaintiff has provided no rational basis for this apportionment. Plaintiff’s counsel does not explain in her written submissions how she arrived at those figures. And she accepted in her oral submissions that she could not do so.

Costs

I therefore accept the first defendant’s submission that a daily tariff of $25,000 is the appropriate daily tariff for this action. The issues were neither particularly complicated nor particularly straightforward. The daily tariff which is appropriate is therefore at the midpoint of the range stipulated in the Costs Guidelines. It follows from this that I accept the first defendant’s submission that $195,000 is the appropriate deemed indemnity for the professional fees which the plaintiff reasonably incurred in this action. For reasons I have already given, the Costs Guidelines intend this figure to account for all work in the action, ie pre-trial work, trial work and post-trial work.

Costs

On a broad brush approach, I consider that only 20% of Mr McGeoch’s expert evidence was of assistance to me. This is not intended to be a criticism of Mr McGeoch, his expertise or his report. As an expert witness, he cannot be faulted for assuming the factual case of the party appointing him to be correct. My finding is merely that 80% of Mr McGeoch’s fees are not a reasonable amount for costs which the plaintiff reasonably incurred. Therefore, his fees are irrecoverable to that extent from the first defendant as between party and party.

Costs

Order 59 r 1(1) of the Rules defines “costs” as including disbursements. On my findings so far, a reasonable amount for the costs which the plaintiff reasonably incurred in this action is $303,611.89, comprising $195,000 for professional fees plus $108,611.89 for disbursements.

Costs

I must now deprive the plaintiff of 50% of its costs in accordance with my Type I order. I therefore allow the plaintiff’s costs as against the first defendant only in the sum of $151,805.95.

Costs

The second defendant was wholly successful in his defence. The event in this action as between the plaintiff and the second defendant is clearly and entirely in the second defendant’s favour. The general rule indicates that costs should follow the event. There is no basis for any type of departure from the general rule, whether by making at Type I order, a Type II order or otherwise.

Costs

The second defendant is therefore entitled to recover his costs from the plaintiff without qualification.

Costs

In his costs schedule, the second defendant claimed $271,780 for professional fees and $12,438.40 for disbursements.

Costs

The plaintiff submits that the second defendant’s claims are excessive. The plaintiff submits that a reasonable figure for professional fees is between $100,000 and $120,000. The plaintiff arrives at this figure by applying the daily tariff for ordinary contractual disputes under the applicable Costs Guidelines, ranging between $15,000 and $17,000. The plaintiff seeks to apply this daily tariff because it submits that the plaintiff’s claim against the second defendant was contractual in nature. The plaintiff also submits that most of the 8½ days of trial related to the plaintiff’s claim against the first defendant, such that costs payable to the second defendant should be even lower than the lower end of the range.

Costs

However, I also accept the plaintiff’s submission that it was the first defendant that defended the bulk of the claims in the action and pursued a counterclaim. Seen in this light, the figure of $271,780 which the second defendant claims in his costs schedule for professional fees is unreasonably high. That is no doubt why the second defendant’s counsel moderated that figure to $154,000 in oral submissions. This includes $148,000 for the professional fees of the action and $6,000 for the professional fees of two interlocutory applications for which costs were reserved.

Costs

The second defendant’s counsel also asks for GST to be added to the professional fees. The figures set out in the applicable Costs Guidelines for professional fees are all-in figures. There is no scope to add GST to those figures.

Costs

I therefore accept that a reasonable amount for costs reasonably incurred by the second defendant in this action is $166,438.40 comprising $154,000 for professional fees and $12,438.40 for disbursements.

Costs

I accept the first defendant’s submission that this is not a case where the plaintiff can hold the first defendant liable directly or indirectly for the costs which the plaintiff will have to pay the second defendant for the plaintiff’s failed action against him.

Costs

In my view, therefore, the plaintiff acted unreasonably in bringing this claim against the second defendant. There is no justification for visiting the costs of that failed claim on the first defendant either directly or indirectly.

Costs

Accordingly, the plaintiff must pay the second defendant his costs of this action without any right to recover those costs from the first defendant.