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Sugar Hut Group & Ors v AG Insurance [2014]




EWHC 3775 (Comm)

Mr Justice Eder today handed down his judgment on costs issues following his substantive judgment on the 20th October 2014 in the matter of the Sugar Hut Group v AG Insurance. The Claimants were ordered to pay the costs of the claim from the 14th June 2014, save for the costs of the discrete issue as to the amount of interest that was appropriate. They were also entitled to recover only 70% of their costs prior to that date, subject to a detailed assessment if not agreed.

Permission to appeal the costs order was sought by Andrew Post QC on behalf of the Claimants, and was refused by the judge, who stressed that he had taken the view that the Claimants’ conduct was such that there was a very good reason for him to depart from the general rule about costs. He explained that the Claimants had plainly failed on certain issues which had led to a percentage reduction in their costs. In addition he wished to emphasize that he had awarded all costs of the action to the Defendant post the 14th June 2014 not merely because of the negotiations and offer letters between the parties, but also because the claim had very much been exaggerated and the Claimants had failed to comply with their disclosure obligations and other matters as set out in his substantive costs judgment. Mr Justice Eder stressed also in refusing permission to appeal that the case was one that was exceptional on its facts and turned on the specific conduct of the Claimants, such that there were no issues of general principle involved in his decision.

Angus Piper of 1 Chancery Lane (instructed by Caytons solicitors) represented the Defendant on the permission hearing as well as on the substantive costs hearing and at the trial (where Richard Slade QC represented the Claimants).

In his substantive judgment on costs, Eder J accepted Mr Piper’s submission that the Defendant’s Part 36 Offer of the 23rd May 2014 did not attract the automatic consequences of Part 36, but that it could properly be considered under the court’s wider Part 44.2 discretion on costs. He recognised that there were a number of discrete issues where claims were maintained during the trial, but £Nil was recovered by the Claimants. The judge held that those issues involved substantial amounts of money, and also substantial time in disclosure and in lay and expert evidence. He also held that the Claimants’ attempts to argue that post-fire turnover (which occurred after the Sugar Hut nightclub came to feature on the popular TOWIE television programme) should be taken into account had been rejected in their entirety. Given the Claimants’ failures on these discrete and important issues a costs reduction of 30% was appropriate.

In addition, the Defendant had made a Part 36 Offer in a letter dated the 23rd May 2014, which expressly based the offer on gross business interruption losses of £600,000, plus interest at 2.5%, producing a net Part 36 offer figure inclusive of interest of £250,000. In the event, the Claimants at trial recovered gross business interruption losses of just £568,000, albeit they persuaded the court to allow interest at 5%, such that there net recovery inclusive of interest was £277,000.

The judge held that although the letter did not contain an admissible offer to settle or attract the automatic provisions of Part 36 (as Mr Piper conceded), it could and should nonetheless properly be taken into account as a matter of conduct and in accordance with the wide discretion of the court. The judge held that the claim was very much exaggerated, and also accepted Mr Piper’s submission that the Claimants had dragged their heels on disclosure and conducted the disclosure process on a piecemeal basis with fresh documentation still being disclosed just two months prior to trial. Even at trial, there were gaps in evidence, and the Claimants’ approach caused real difficulties to the Defendant in taking appropriate precautions to protect its position. He held that the Claimants’ response to the suggestion that business interruption was worth £600,000 was unreasonable, and for all of those reasons awarded the costs of the action from the 14th June 2014 to the Defendant, as well as making the separate 30% deduction for issue based costs from the period prior to that date.  

As set out above, permission to appeal the costs order was refused. There has been no attempt to appeal the substantive judgement.