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	England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> AMEC Process and Energy Ltd v Stork Engineers & Contractors BV (No. 3) [2002] EWHC B1 (TCC) (15 March 2002) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2002/B1.html Cite as: [2002] EWHC B1 (TCC)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		15th March 2002

Judgment No. 3


1. Introduction

1. This judgment is concerned with the costs of the action. The costs with which I am concerned are those of the claim and the counterclaim, those of the first trial which led to Judge Hicks' judgment dated 6 May 1999, those of a separate costs hearing which led to an order dated 6 December 2000 confirming that the costs of the hearing, the handing down of judgment hearing and the separate costs hearing would all be reserved to the trial judge and those of the second trial which were reserved by my order dated 17 May 2000. A number of specific issues were also raised by the parties requiring separate determination, the principal ones being Amec's applications for indemnity costs, an order for the costs of employing a large number of individuals from within its own organisation to assist in the preparation of its case and orders for an interim payment towards and interest on the costs awarded in its favour.
2. The importance of these issues to the parties may be gauged from the overall sums in costs that are in issue. Amec contends that it has incurred £5.7m in recoverable costs over the period 28 September 1997 until the conclusion of the trial on 29 April 2001. It also incurred a further £0.5m in costs not now claimed as being incurred before the dispute had crystallised or during the mediation exercise. Stork has not given full details of its costs but is claiming a total of £2.2m which it contends was the total of the costs thrown away by various amendments and abortive steps taken by Amec. It is clear from the detail provided to support Stork's cross claims for costs that Stork's overall expenditure in costs was of a similar order as Amec's costs expenditure. The overall effect of Stork's submissions as to the deductions and disallowances that should be made from Amec's claims for costs and the set offs to take account of its entitlements to costs for the amendments and other wasted expenditure would leave Amec with little or nothing by way of recovery.
3. These costs were incurred in a case where the total claim was for nearly £12m plus interest and the counterclaim was for nearly £3m and where the net recovery by Amec was for £6.439m plus £3.11m in interest or about £9.55m in total. They were also incurred in a case which was tried in three parts and where the principal trial was compressed into 35 working days but which, without the rigorous time limits which were scrupulously kept to by both parties and the enormous degree of agreement reached by the experts as to the primary facts, would have taken at least three times as long.
4. The complexities of the costs considerations and their importance to the parties is reflected by the timescale of the costs arguments that were deployed. The draft judgment, running to nearly 300 single spaced A4 pages, was handed down to the parties on 1 October 2001. The parties asked for 6 weeks to consider the judgment and develop their evidence and arguments about costs and 4 working days for the oral argument. Detailed evidence and written submissions were prepared and the argument occupied most of the time allotted for it. During the hearing, it became clear that Amec's detailed evidence, which had been served just before the hearing in support of a belated application for indemnity costs, had not been replied to sufficiently by Stork. At the parties' request, i adjourned the costs hearing after the conclusion of the oral argument for a further 6 weeks to allow Stork to address and reply to Amec's further evidence and for both parties to submit final concluding written submissions. This process finally ended with the service of all further material on 20 December 2001. This judgment takes account of all the evidence and the written and oral submissions served before and after the hearing as well as the full transcripts of the 4 days of oral argument that were also provided.

2. The Applicable Costs Regime

5. The action was started by a writ issued on 21 November 1997. The statement of claim was served on 12 June 1998. The Civil Procedure Rules came into force on 26 April 1999 for new actions started after the CPR came into force. However, the transitional arrangements provided that any new step taken after 26 April 1999 in an existing action was to be taken under the CPR and that any assessment of costs after that date was to be undertaken in accordance with the costs provisions of the CPR, namely CPR Parts 43 to 48 and the relevant costs Codes of Practice. The relevant Practice Directions concerned with the affect of the transitional arrangements on the assessment of costs makes it clear that any decision whether to allow costs incurred since 26 April 1999 will generally be taken in accordance with CPR Parts 43 to 48 and that there is a general albeit rebuttable presumption that no costs incurred before 26 April 1999 will be disallowed if such costs would have been allowed in a costs taxation before that date.
6. In this case, neither party contended that I should approach the pre-April 1999 costs in any different fashion to those incurred since or that there was any appreciable difference between pre-April 1999 costs and post-April 1999 costs. This was important since a significant proportion of Amec's costs that were incurred which were the subject of discussion, such as the costs of Amec's employees engaged in evidence preparation, might have been subject to different considerations in the pre-April 1999 period. Moreover, important decisions were taken and significant expenditure was incurred by Amec as to how to prepare and present the claims without the advantage of the pre-action protocol procedure, the case management powers of the court and the overriding objective being in force. Amec should not be penalised in any costs award in its favour if the approach to those costs leads it to recover significantly less costs than it might otherwise recover by applying analogous CPR costs principles.
7. Since the bulk of the costs in this action were incurred and the preparatory steps that were taken after 26 April 1999, it is appropriate, as I see it, that the whole action should be assessed by reference to the CPR and, in particular, by reference to the overriding objective established in CPR Part 1.
8. A further factor concerns the weight to be placed on costs cases decided under the Rules of the Supreme Court, such as Re Elgindata No. 2 [1992] 1 WLR 1207, CA and Re Nossen's Letter Patent [1969] WLR 638, Lloyd-Jacob J, which were referred to during the costs hearing. Such cases have little or no bearing on the interpretation and application of the CPR costs code. These cases were decided under the RSC and, in AEI Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507, CA, a case decided under the RSC, Lord Woolf MR pointed out that the CPR are much more specific as to the matters to which the courts should have regard in deciding what costs order should be made than the predecessor RSC, even though the overall discretion provided to the court under both costs regimes is equally broad.
9. It follows that I do not accede to Amec's submission that Re Elgindata No. 2 affords some guidance as to how I should deal with costs in this case nor to Stork's submission that Re Nossen's Letter Patent has any significant relevance to the question of how the costs of personnel employed by Amec who assisted in the claims, documents and evidence preparation exercises should be dealt with under the CPR.
10. It is helpful if I start my consideration of costs in this case by summarising the governing principles provided for by the CPR. These are as follows:

  1. Any step taken in an action should be taken so as to further the overriding objective of enabling the court to deal with cases justly. Particular attention, in this case, should be paid to the need to deal with the case in ways which are proportionate, expeditious, fair and so as to allot an appropriate share of the courts' overall resources (CPR 1.1).

  2. The court must further the overriding objective by active case management. In particular, in this case, active case management included encouraging the parties to co-operate with each other in the conduct of proceedings, the identification of the issues at an early stage, deciding which issues needed full investigation and which could be summarily disposed of, deciding on the order in which issues would be resolved, encouraging the use of ADR and the settlement of part or all of the case, making use of technology and giving directions to ensure that the trial proceeds quickly and efficiently (CPR 1.4).

  3. The court may, at any stage, direct a discussion between experts for the purpose of requiring the experts to identify the issues in the proceedings and where possible reach agreement on an issue and to prepare a statement for the court showing those issues on which they agree and disagree with a summary of their reasons for disagreeing (CPR 35.12).

  4. The general rule is that the unsuccessful party should be ordered to pay the successful party's costs (CPR 44.3(3)).

  5. In deciding what order to make, the court must have regard to the conduct of the parties. This consideration will include whether it was reasonable for a party to raise or pursue a particular allegation and the manner in which it pursued it and whether a successful claimant has exaggerated his claim (CPR 44.3). The reasonableness of the relevant conduct is to tested against the requirements of the overriding objective and the duty to manage cases so as to further that objective (CPR 1.1 and 1.4).

  6. The court may order a party to pay (1) a proportion of another party's costs, (2) costs from a certain date only or (3) costs relating to a distinct part of the proceedings. If practicable, the court should make either or both of the first two types of order rather than the third type of order (CPR 44.3(6) and 44.3(7)).

  7. The basis of assessment will ordinarily be the standard basis but the court will assess costs on the indemnity basis if the manner in which the has been conducted justifies an award on that alternative basis. The discretion to award costs on the indemnity basis must be exercised judicially but need not be based on a lack of moral probity or conduct deserving moral condemnation (CPR 44.4 and Reid Minty (A Firm) v. Gordon Taylor (A2/2001/0072), 29 October 2001, CA).

11. I have already stated that it is not usually helpful to refer to costs cases decided under the RSC costs regime when applying the replacement CPR costs regime to the facts of a particular case. This can be seen from this passage of May LJ taken from Reid Minty (A Firm)'s case:

"Being a new procedural code, the Rules are not to be taken as embodying or taking on board the baggage of the old Rules; and generally speaking, although there are exceptions, most of the procedural cases decided under the Rules of the Supreme Court (or indeed the County Court Rules) are not of relevance - or certainly not of central relevance - to an interpretation of these new Rules."

This is salutary advice to a judge sitting at first instance, particularly when the costs issues that must be dealt with arise in a complex or unusual case or involve considering the conduct of particularly complex and difficult litigation. Such an unusual case highlights, and does not lead to a departure in any way from, the need to apply the overriding objective and the principles applicable to considerations about costs undertaken under the costs regime imposed by the CPR.

3. The Claims and Counterclaims and the Parties Overall Conduct of the Case

3.1. Introduction

12. Given the complexities of this case and the costs considerations that have arisen, it is necessary to take account of the broad nature of the parties' disputes with which the action was concerned, as to how the parties prepared for the trials of these disputes and as to the procedures they adopted with the assistance of the court for their preparation and presentation. Only then can the parties' specific complaints and submissions be considered and the broad principles of the CPR costs regime applied.

3.2. The Early History of Amec's Claims

13. The early history of the claims may be briefly summarised. The topsides were being designed, fabricated, constructed and installed on the barge between 15 February 1995 when the contract took effect and 14 June 1996. Additional work was undertaken on the barge until sailaway on 24 August 1996. From November 1995, Amec submitted claims for the disruption and acceleration measures that were occurring in the form of both individual claims and monthly valuation applications. Amec's last valuation application, number 22, was submitted on 31 January 1997. With few and limited exceptions, Stork rejected these various applications and claims and little was certified or paid towards them. During the later months of 1996 and up to the last commercial meeting held on 20 February 1997, limited and spasmodic commercial meetings and negotiations took place but little was agreed or paid. Amec suggested mediation as a means of seeking to resolve these disputes but Stork rejected this suggestion as being premature.
14. In the next 6 months, Amec's claims were then finalised and submitted to Stork. These were submitted initially in the form of a final interim application for payment dated 13 March 1997 and then in the form of claims submissions based on taking three sample modules as examples of the overall loss that had occurred. These claims were the subject of a high level claims meeting and claims negotiations held in Schiedam on 5 July 1997. This meeting was agreed to be subject to without prejudice privilege. The breakdown of these negotiations at a further without prejudice meeting held in Schiedam on 24 September 1997 led to Amec working on the details of its pleaded claim from October 1997 until the statement of claim was served in June 1998. This work was undertaken in two stages. Initially, Amec's claims team worked on the detail of the claims. Then, Amec's litigation team, including leading counsel, joined with the claims team to assist in advising on the shape and content of the claims and in the drafting of the statement of claim and its many schedules. This second stage started with the issuing of the generally indorsed writ in November 1997 which was served in early 1998 and the service of the statement of claim and its accompanying schedules in June 1998.
15. The striking feature of all of Amec's applications for payment, valuations submissions, claims submissions and supporting details from the first moment when they were prepared by Amec in about November 1995, mid-way through the contract, until the lead up to the two Schiedam meetings is that all of them contained details of the claims which were ultimately tried. The claims evidenced by all these documents were based on the lost hours for which Amec contended there had been no payment. Moreover, all these claims were based on the same variations and late submissions of non-conforming design drawings that Amec relied on at the trial. Finally, all these claims were seeking to recover Amec's costs and losses arising from the delay, disruption and acceleration that these variations and drawing submissions had caused.
16. Stork has consistently maintained that Amec's claims were substantially amended and changed, most notably in the weeks leading up to the trial. I am only concerned at this stage with that suggestion as it applied to Amec's claims submissions prior to and during the Schiedam meetings. During that period, the methods of analysing and presenting the primary facts developed and expanded. Included in this development was a process of refinement as to the method by which the lost hours were evaluated. However, the primary facts and the consequent claims, being the variations and late issued drawings and the consequent increase in manpower for which there had been no or inadequate payment and for which payment was claimed, remained constant.
17. In the weeks leading up to the first Schiedam meeting, Amec's claims team prepared detailed supporting documentation based on taking three modules as samples. Since these Schiedam meetings were held under without prejudice conditions, these documents were not adduced in evidence. However, it is clear that Stork's approach to these documents, and to the suggestion that Amec's losses could be verified by a module sampling technique, was that neither the documentation nor the sampling technique verified was appropriate to identify any recoverable loss.
18. By the conclusion of the second Schiedam meeting, Amec was in no doubt of Stork's overall approach to its claims. Stork's approach was, in summary, that no disruption had occurred; that no link between any variation or late issued drawing and any disruption had been established; that the claims failed for being presented as global claims and that the only approach to the verification of loss would be one which linked lost hours associated with individual drawings and variations to specific hours and employee's time; that disruption could only be seen to have occurred if employees were unable to work at all rather than being able to work unproductively; that the sampling method of seeking to establish claims was inherently flawed; that any loss that occurred was occasioned by Amec by the inadequate rates contained in its tender and by its working methods and that the contract conditions precluded the claims both because the suggested loss was defined as being included within the contract rates and because of repeated failures to follow the procedural conditions precedent to payment.

3.3. Amec's Pre-Writ Costs

19. Amec's claims for costs starts in October 1997 when Amec's claims team started work on drafting the documents for use as pleadings in the proposed action. Estimated costs of approximately £380,000 were, however, incurred by Amec in the period up to 24 September 1997 which it was stated in evidence by Amec's witnesses could not be claimed as costs. However, at least part of this sum would appear, in principle, to be recoverable under the CPR costs assessment regime. This is because the period between the submission of the last valuation by Amec on 31 January 1997 and the second Schiedam meeting held on 24 September 1997 was a period when the parties, and in particular Amec, were preparing for and following a pre-action procedure very similar to that prescribed since October 2000 for TCC actions by the TCC pre-action protocol. This action is a paradigm of those for which the TCC pre-action protocol procedure has been devised. That procedure seeks, and the procedure followed by Amec and Stork sought, to achieve an early definition of the ambit and detail of all disputes between opposing parties, to inform each party of the details of the opposing party's allegations and to enable the parties to embark on meaningful and informed without prejudice meetings. The aim of these meetings held by those following the TCC pre-action protocol procedure is either to achieve a compromise of all disputes or to narrow their ambit and to eliminate as many potentially contentious issues as possible.
20. Since a pre-action protocol procedure is now required to be followed before proceedings are started in a case such as this one, the reasonable costs involved in working through that procedure are recoverable in any subsequent post-trial costs assessment carried out under the CPR where a trial was nonetheless necessary because the pre-action protocol procedure failed to prevent a trial. Equally, where the parties agreed to follow a similar procedure in an action whose costs are subject to CPR assessment but which was started in the period before the TCC protocol was devised and came into force, the reasonably incurred costs resulting from following such a procedure ought in principle to be recoverable.
21. I would not regard Amec as being disentitled to claim these costs in the detailed assessment proceedings that are still to come, or at least to claim such costs as would now be claimable under the pre-action protocol regime had the TCC pre-action protocol been in force from January 1997, merely because of a failure to appreciate this possibility by those preparing Amec's witness statements for use at the costs hearing.

3.4. The Preparation and Service of the Primary Pleadings

3.4.1. The Claims Team

22. Amec had assembled, during the contract, a large claims team comprising quantity surveyors and management personnel to work on the preparation of claims documentation. The personnel concerned were mainly Amec's own staff, whether originally deployed on the topsides contract or seconded from other projects or locations, and suitably qualified staff engaged from an agency. This team was headed from the latter part of 1996 until November 1998 by Mr Martin Banks. On his leaving Amec at that time, he was replaced by his deputy, Mr Paul Pegman who both gave written and oral evidence at the trial and a witness statement for use in the costs proceedings. In the period following the Schiedam meetings, Amec retained Mr Prudhoe as its principal expert witness. Mr Prudhoe is a forensic quantity surveyor with much experience in the formulation, preparation and presentation of claims in the heavy engineering field and he is a partner in the firm of Trett Associates. Mr Prudhoe advised on the methods to be used in analysing the thousands of primary documents, in collecting and collating the primary data and in presenting that data in an intelligible and visually comprehendible form. Although Mr Prudhoe's firm provided back up services to him and the claims team, the great majority of the search for and the collection and collation of evidence from the documents was undertaken by the claims team, albeit following Mr Prudhoe's guidance and advice.
23. Amec also retained Masons as its solicitors in October 1998. Masons are a large international firm of solicitors whose areas of expertise and specialisation particularly include construction, information technology and engineering disputes. Their principal office is located in London but they have other offices in, amongst other major cities, Leeds and Manchester. Masons have been regularly retained by Amec in recent years and the instructions for the topsides disputes came through Amec's Legal Manager, Mr Andrew Taylor who was Called to the Bar in 1975. It was Mr Taylor who decided that the claims would be prepared by Masons working through its Leeds office, a location chosen because of its convenient location to Wallsend around which the documents and witnesses were located and near to which Mr Prudhoe and his staff were also located. A further factor pointing to the employment of Masons' Leeds office was the significantly lower hourly rates charged by that office compared to those charged by its London office. Mr Taylor, in his witness statement, estimated that a Leeds partner's time was charged out by an amount which was at least £60 per hour less than an equivalent London partner's time.
24. At an early stage, Masons instructed leading counsel to advise on the claims and on the appropriate method to adopt in preparing and then presenting them. In addition, Mr Keith Hartley gave particular and extensive consideration and advice to the problems of preparation and presentation thrown up by such large and potentially unwieldy claims. Mr Hartley was the partner who had been specifically instructed by Amec and he led the extensive legal team assembled by Masons to work on these claims. He is very experienced in engineering dispute resolution.

3.4.2. The Problems Confronting the Claims Team

25. The team were acutely aware of the problems of claim presentation arising from the Wharf Properties case and other cases concerned with disruption claims of a global nature. The team saw the problems as being these:

  1. Disruption, particularly when it had been so extensive and caused by so many different causes, is difficult to establish and a causal link between individual causes and losses almost impossible to show.

  2. Global claims, that is claims which are based on establishing that the totality of disruption losses was caused by the totality of causative events, may in principle be claimed but are likely to fail unless each supporting fact is established in full.

  3. There is no agreed or clearcut method or methods of identifying and quantifying disruption and many of the available methods are widely held to be incapable of satisfying empirical, contractual or evidential standards of proof.

  4. Whatever method of proof is adopted, the pleadings should set out a party's case as to causative events, causation, loss and methods of proof with sufficient clarity so as to enable the opposing party to know what case it is facing, to prepare its own case and to provide a manageable agenda for the trial. In particular, a claiming party should set out what case, if any, it is advancing as to how any global or rolled up claim should be reduced or valued in the event of it achieving only partial success in the proof of the primary facts that it is relying on.

  5. Where the project, as this one, was a large one with many thousands of documents and with many documents in electronic form, the marshalling of the data and its analysis would depend, in part, on the use of appropriate software. Choosing the appropriate programs, adapting the programs and loading the software with the primary data would be difficult, skilled, time consuming and expensive operations and much care and thought would be needed in these exercises.

  6. The preparation of the evidence to support the claims would involve a huge task of assembly and presentation so that it emerged in a reliable and meaningful form. There was, in reality, no obvious dividing line between the pleadings and particulars setting out the claims, the primary evidence needed to establish the claims, the methods of analysis needed to marshal and analyse the evidence and the expert quantity surveying evidence needed to reach conclusions as to the causes and consequences of disruption that had occurred.

  7. At every stage of preparation, Amec would have to tread an almost impossible dividing line between failing to particularise its case sufficiently and providing so much detail that no clearcut agenda for trial had emerged.

  8. Given Stork's attitude to Amec's claims that had been displayed throughout the lengthy process of applications, discussions, negotiations and settlement talks, it was reasonable to anticipate that Stork would seek to harry Amec procedurally at every step along the road to trial and therefore the procedural steps had to be prepared with unusual care and detail.

  9. Stork would contest each part of each step along the road to recovery. This contested approach would include Stork disputing the following: the existence of the primary facts relied on; the allegations of causation and loss; the contractual basis of claim; the authenticity of the records relied on; the existence of the suggested procedural preconditions to payment and the suggested methods of establishing the claims by resort to sample modules and lump sum or global methods of proof. Stork would also seek to show that Amec had mismanaged the project in almost all of the steps that it had taken.

26. It is clear that Amec acted reasonably in taking decisions which, in effect, sought to give effect to these overriding objectives. Given the size of the tasks and the uncertainties involved, Amec is not necessarily to be faulted if some of the steps taken can be seen with hindsight to have been unnecessary or involved unnecessary expenditure. In considering whether Amec should be entitled to all or the major part of its reasonably incurred costs, it is necessary to test the steps that were taken by reference to their reasonableness taken against this background.
27. It is also necessary to take account of the fact that these preparations were undertaken prior to the introduction of the CPR in April 1999. It is easy to forget how different the procedural climate was in the pre-CPR days. At that time, it was not possible or expected that a party pursuing large scale disruption claims would involve the case management judge or the opposing party in decisions as to how to plead a disruption case; how to sort out, marshal and analyse the primary documents; how to analyse the primary facts; as to the choice of the appropriate software program for use in preparing, devising and analysing the claims; as to the involvement of party and jointly appointed experts at an early stage in the fact gathering exercises; as to the curtailing of witness statements and as to the methods of proof that should be adopted given the availability of the Civil Evidence Act 1995 and the extensive powers given to the court by the CPR.
28. Nowadays, a party in Amec's position in a case of this kind should first arrange for a first Case Management Conference as soon as the claim has been issued and before any detailed pleading preparation has been undertaken. The documentation before the court would be confined to that exchanged during the pre-action protocol procedure. In the context of this case, such a CMC would have been arranged to take place in October 1998 as soon as a generally indorsed writ had been served and before the claims team had started work. The court would have had placed before it the documentation presented to the Schiedam meetings and the details of the final valuations and any associated claims. The court would then have given directions that would have involved both parties as to what preparatory work should be undertaken by both parties in terms of pleadings, fact analysis, discovery, document retrieval, expert witnesses involvement and schedule preparation and as to how this work should be carried out.
29. However, in 1997, under the last days of the ancien regime involving the Rules of the Supreme Court, it was left to a claimant to undertake much of this work unaided by the court and to serve a hugely detailed claim. The necessary major case management decisions needed for such steps to be taken had first to be taken by the claiming party unaided by the defendant or the court. The defendant then had to respond, again unaided by the court. Only then did the court have a first opportunity to involve itself in the case management process.
30. It follows that any consideration of whether Amec, as the successful party in this litigation that involved large scale disruption claims, should recover the bulk of its costs should make allowance for the fact that the necessary early and expensive preparatory steps that had to be taken were taken on the basis that Amec had to prepare most of the detail of its case without assistance from Stork and without the benefit of knowing that both parties would be subject to the overriding objective imposed on parties by the CPR.

3.4.3. Formulation of the Claims

31. The claims team decided that it had to assemble all data concerned with the planning and programming of the project, the production and issue of each drawing, the work process involved in each stage of production, the delivery of materials, the fabrication and delivery of spools, the labour involved in each stage of work, the productivity achieved in each material stage of work, the valuation of the works at each stage, the payments made, the breakdown of the rates used, applicable and prevailing labour and employment practices, the physical state of the work at each stage, time and motion studies of different stages of the work and the content of punch lists, defects schedules and lists of outstanding work. This overall decision was, given the circumstances, a reasonable one.
32. This decision involved a tremendous feat of evidence and documents gathering. As Mr Hartley stated:

"the data in Amec's possession was truly impenetrable. ... Data sets could not be linked together or linked to manual records; some computer records had been over-written to maintain "on-line" reporting during construction; some data had been neglected during the crucial later phases of construction; ... the volumes of data and other material were so large as to be not only unmanageable but to all intents and purposes incomprehensible without computer assistance."

It was clear from the tips of the documents and data icebergs that were presented to the court during the trial that this summary is, at best, accurate and, at worst, a significant under-statement of Amec's claims team's difficulties.

33. Stork contended that these difficulties were entirely of Amec's making since it should have kept accurate and reliable records during the project. It should not have been necessary for Amec to have had to reconstruct the project historically from its fragmented records or to have had to work with records which were so impenetrable.
34. I reject these contentions. First of all, Stork never indicated to Amec during the project how the data should be maintained or presented nor did it give any meaningful indication as to the extent to which it would challenge any claims. During the project, apart from general denials and non-answers to applications and claims, both parties concentrated on achieving completion on time despite the obvious difficulties being encountered. Furthermore, the extent and scale of the disruption could not have been anticipated and was not apparent until Amec had had an opportunity to step back and review the whole project once it had been completed.
35. Secondly, Stork never provided its own analysis of what had caused the disruption that had occurred but merely kept putting Amec to proof. Partnering on the scale involved in this project involved, or should have involved, Stork during the valuation exercises from an early stage of the project in being proactive in suggesting what it disputed and why it adopted that position and in identifying methods of proof that it would accept in the analysis of the project data. Such a stance would have obviated the need to analyse and collate so much data and was one that it was reasonable for Amec to have expected that Stork would adopt. It was only after the project had been completed that the extent of Stork's obduracy became clear and the extent of the analytical exercise that Amec would have to carry out was revealed.
36. Finally, there was no evidence that Amec was unreasonable or negligent in the way that it kept and recorded its data. Stork had insisted that the data recording on this project was to be exceptional in its extent and detail and this necessitated much overwriting of data as work continued. Given the extent of the data that was recorded, it is remarkable that Stork had not obtained the relevant data during the project as part of its valuation exercises and it was not reasonable to assert, long after the project had been completed, that Amec should have maintained contemporary and running records in the detail subsequently required to prove its case.

3.4.4. Amec's Methods

37. Ultimately, Amec decided upon the principal methods of analysing and presenting the supporting data that it regarded as being necessary to establish that a huge number of lost or unremunerated hours had occurred and that virtually all of these lost or unremunerated hours were caused by the factors it relied on.

(1) Establishing the Contract Ground Rules.

38. Amec's approach was that it should first establish the contractual ground rules under which the work was carried out. This involved three exercises.
39. Firstly, the number of hours that the contract price could be said to have provided for had to be ascertained. Any work carried out within that overall contractual framework was not claimable since it was to be taken to have been included in the contract rates for payment. However, this involved the definition of the contractual scope of work, a difficult task.
40. Secondly, the scope of work provided for in the contract price had to be identified. Since the work had only be partly designed at contract stage but Amec had contracted to complete the whole work for a lump sum and within a defined timescale and since the difference between design development and varied work was difficult to identify, this was an important but difficult task.
41. Thirdly, Amec had to define the programme or contractual requirement for the delivery of design drawings since no claim could be maintained for any drawings delivered within that contractual timescale. Since the Rev A programme was inevitably rudimentary, this was a difficult task.

(2) Base Programme and As Built Programmes

42. Amec's first task was to construct a so-called base programme and as built programmes which identified the notional programme that would have been issued as Rev A had the full scope of work been identified at the contract stage. This involved a detailed analysis of the tender build up, the scope of work and the variations and the issued drawings. Using this work, Amec constructed both types of programme.

(3) Variations, Drawing Issues, Holds, Materials Issues, Module Work Progress

43. Amec then had to analyse the work content and work progress of the work. This involved a module by module reconstruction of the drawings issued, the work undertaken and the progress of the work. The issue of materials, the production of spools, the fabrication, installation, shot blasting, painting and module movement through the various stages of production had all to be identified and tabulated.

(4) Hours Worked and Costs

44. Amec then had to identify the hours actually worked and the costs that had been incurred, largely by reference to manhours, materials and plant usage and overheads.

(5) Analytical Methods

44. There are many different ways of analysing the mass of data assembled by Amec. It chose the following and Stork never suggested any other or different methods:

Comparisons of Programmed and Actual Drawing Delivery.

As a way of showing, in overall and representational terms, the potential for disruption, Amec compared the pattern of delivery of drawings module by module with the contractual delivery dates provided for by its base programme exercises. This work was much misunderstood by Stork throughout the case. It did not purport to show actual disruption but merely that a project where the actual delivery of necessary design information departed so radically from the intended pattern would inevitably be one which was subject to severe disruption.

Productivity.

Amec prepared graphs showing a comparison between the output achieved by the labour force, calculated by reference to payments, and the output that would have been achieved had the intended or programmed methods of construction been achieved. These showed a significant reduction in productivity.

Impact Programmes.

Amec prepared impact programmes which attempted to show what progress would have been achieved had the events that occurred not been matched with any increase in resources. This exercise, an adjunct and follow up to the base programme exercise, showed a notional increase in the contract period of at least 10 months would have occurred but for an increase in resources. This was a well known technique which is often used as a representational means of showing that delay and disruption must have occurred. It was never intended to provide a quantified claim.

Lost Hours.

Amec attempted to determine, using empirical methods of analysis, what number of lost hours had occurred as a result of the separate and discrete heads of claim it had identified. Since these heads of claim were merely artificial parts of the whole, being the total number of lost hours, they were not separate claims but were merely an attempt to make the overall claim both intelligible and one which would not fail if Amec lost on its primary global or Wharf Properties claim.

Breaches and Variations.

Amec also sought to divide the causes of disruption into breaches of contract and variations. This exercise was essentially an insurance policy in case Stork succeeded in showing that contractually based valuation claims were not maintainable or that late delivery of drawings did not amount to a default by Stork. It was also undertaken because there were fears that Amec could not recover loss of profit on its valuation claims. However, since Article 13 succeeded in effectively merging breaches and variations, this exercise was ultimately not needed.

Building Up the Lost Hours.

The empirical approach adopted by Amec involved it in an attempting to use readily useable models or formulae which had been devised empirically by claims consultants over a number of years as a means of showing that disruption must have occurred in defined situations. This approach, albeit a rough and ready one, could provide a formulaic means of determining what degree of disruption had occurred in defined circumstances. This data was ultimately of no assistance to Amec because it was modelled on levels of disruption of a different and lower order of magnitude than that that Amec was subject to.

45. It must be appreciated that Amec's case was always, essentially, that the totality of its lost hours was caused by its having had to employ about 200,000 additional manhours of labour to accommodate the variations, breaches and late issued and non-user friendly drawings. This additional use of resources could be linked to the re-programming exercises that occurred which were, in turn linked to the drawing issues and variations that had occurred. The use of graphs, bar charts, histograms, base, as built and impact programmes, lost hours build ups using empirically modelled formulae and the breach/variation dichotomy were all separate and discrete means of attempting to show that the unbelievably complex project, with its unmanageable volume of empirical data and primary fact, had produced, or must on balance have produced, this total volume of lost hours. Stork never could, or would, see or accept that that was how the claims were being presented.

3.4.5. Presentation and Proof

46. The statement of claim, when served, was the longest and most detailed pleading that I have ever seen. It ran, with the particulars served later, to 12 files and contained a huge number of schedules, appendices and annexes. The document as a whole lacked any supporting commentary which summarised for the uninitiated the structure and contents of the document and a guide to the logic, structure, thinking or method of production. Furthermore, most of the supporting schedules and the like constituted evidence. Although these are cogent criticisms that may be made of the original pleading, Stork never sought to obtain from Amec a supporting commentary at the time the pleading was first served and, had it asked for such a document, Amec would undoubtedly either have been ordered to serve it or would have rapidly produced it without order. Its absence should not now count against Amec when costs are being considered. Indeed, when Stork sought to strike out the statement of claim in its entirety, it did not do so on grounds of prolixity, undue complexity or incoherence but, instead on the substantive ground that the claim as pleaded was global in nature and consequently unsustainable in law. That application was unsuccessful, indeed Judge Lloyd made no order on the application following a two-part contested hearing. Furthermore, I ruled at the trial that the schedules should be decoupled from the pleadings and should stand as evidence, thereby reflecting the reality of these documents. Thus, Amec had served with its pleading a vast quantity of evidence which constituted much of the primary facts needed to support its pleaded case. The criticism that it was served in a somewhat unwieldy form is one of form.
47. One particular schedule was particularly valuable. This was schedule 24 which contained an indispensable and coherent summary of the history of the contract. It became the working guide at the trial for the factual evidence and enabled all factual to be put into its appropriate context. Indeed, once its content and structure had been mastered, it served as the overall guide to Amec's factual case whose lack I have already drawn attention to. However, much of its content consisted of a summary of the primary evidence which was itself summarised in the plethora of schedules and the like.

3.5. The Claims and Counterclaims

48. Amec's claims in the proceedings that were set out in the statement of claim served on 12 June 1998 were of three separate but related categories which were as follows: (1) a total of £3.3m was claimed under 24 different heads for variations. (2) A total of £9.46m was claimed for the combined effects of these heads of claim: (i) prolongation; (ii) disruption; (iii) secondary disruption and (iv) acceleration. Consequent head office overhead expenditure and profit on these heads of claim were also claimed. (3) An extension of time and a consequent release from any liability to pay liquidated damages were claimed.
49. There were few disputes as to the existence and content of the alleged variations so that these disputes as to variations were largely about their quantification and, in particular, as to the extent that the contract rates for variations should be enhanced so as to give effect to the delayed and disrupted working conditions under which they had been performed. Amec claimed that these conditions had resulted in additional hours being worked which were not provided for in the contract rates. The cause of the second and third categories of claim were pleaded as being the large number of variations, the late supply of drawings and materials and the non-fabrication friendly form in which the design information was provided.
50. The various headings under which the claim for £9.46m was claimed were separated out into claims under the contract and claims for damages for breach of contract. These two types of claim were effectively the same since the contract provided that any breach of contract was to be valued as if it had been a variation to the contract. These claims were then further separated out into the 4 headings that I have summarised. The essence of each head of claim was that additional unremunerated hours were worked as a result of the variations and the late issue and unfriendly nature of the many design drawings. These events were also pleaded as having caused the time overrun that had occurred.
51. Thus, as pleaded, all of Amec's pleaded claims were based on the lost hours that had been worked as a result of the many separate variations and the late issue of drawings that had occurred. These lost hours represented additional hours for which no remuneration had been recovered.
52. Stork, on receiving the statement of claim, arranged with Amec to hold the first CMC with the rota'd judge, Judge Lloyd. At that CMC, held on 10 July 1998 under the RSC, the judge and the parties agreed on an overall strategy for the management of this case. It can be seen now that the case has been tried out to a conclusion that some of the steps taken by the parties have lengthened the overall time from inception to judgment and have increased the costs without particular assistance in progressing the dispute. Indeed, I adopt the description of this approach provided by Mr Timothy Gulliver, the partner in Winward Fearon, in charge of the case for Stork. This firm have been the solicitors who have acted for Stork throughout. In a witness statement served as part of these costs proceedings, he stated:

  "[Judge Lloyd] was anxious to attempt measures which might break the litigation down to manageable proportions but which, with the wisdom of hindsight, may be seen as not achieving their purpose. Other measures taken later, such as the trial of the first preliminary set of issues, which in the event turned out to be of little use in narrowing the gap between the parties; the "expert-led" progress of the expert evidence and the (perhaps wrongly understood by Stork) order to commence discovery by catalogues of files before pagination were all attempts to deal with the vast scale of this litigation and were seen by both parties as sensible at the time. In the result each such decision may now be seen as in fact prolonging the litigation. But that does not mean Stork are to be seen as obstructive or unco-operative."

I agree with the whole of that passage. In particular, I would stress that Winward Fearon were fully co-operative throughout and prepared and presented Stork's case with a high degree of professionalism. However, Winward Fearon had to act on the instructions of Stork and, in contesting every fact and issue, in not formulating a positive case until the trial was nearly upon the parties and in holding back from both its own legal and expert witness team and Amec's entire litigation team a vital part of the history and background facts of the project, being that concerned with the design reviews that took place during the design development of the topsides, because this history was so clearly contrary to Stork's case, Stork's behaviour was unreasonable and contributed significantly to the size, complexity and the expense to Amec of this case.

53. Stork's defences, were initially put forward in its original defence which was served in outline on 30 September 1998. An outline defence had been ordered by Judge Lloyd in July 1998 since it was hoped that, initially, issues would be tried which might reduce or eliminate the discovery and further documents and fact gathering exercises otherwise in prospect. This outline defence effectively put every aspect of Amec's claims in issue. The defence denied that Stork had been responsible for any breach of contract or for any departure from the contract procedures with regard to the timing, form and content of the variations; it denied that many of the variations were variations at all; it denied that Amec had either accelerated the work or had suffered any loss, including any lost hours, as a result of any of the delaying and disrupting events relied on by Amec and it asserted that Amec had failed to plead or put forward any factual basis for its allegations on causation that the alleged delaying events caused the alleged loss. In so far as a positive case was advanced, it was confined to general assertions that any under recovery and delay were caused by Amec's uneconomic tender, by the delay and inefficiencies of both Amec and its sub contractors and by the working methods that Amec adopted on the turret contract which interfered with the topsides contract. The defence, for good measure, also asserted that the contract payment code contained in Article 13 represented a complete and exclusive basis for payment and that in consequence, no additional contractual provision or alleged breach of contract could be relied on to base Amec's claims; that there were no substantive grounds provided for by that Article that allowed for additional payment; that the notification, recording and claiming procedures enshrined in Article 13 had not been followed and that compliance with these procedures was a condition precedent to payment.
54. In short, Stork's defence put in issue each of Amec's allegations and the totality of the factual and contractual basis on which Amec's case was based.
55. Stork's counterclaims were put forward as both set offs against Amec's claims and as counterclaims standing alone and were of three kinds. Firstly, Stork claimed liquidated damages for delay. Secondly, it claimed a credit or repayment of sums allegedly overpaid because certain items of work had been overvalued. Thirdly, there was an additional category of contra charges. These counterclaims totalled as follows: (1) liquidated damages which totalled approximately £1m; (2) overpayment and (3) contra charges which together totalled £1.24m. The liquidated damages claim was intimately interconnected with Amec's claims since the alleged delay in achieving the stages of mechanical completion and being ready for pre commissioning occurred, on Amec's case, entirely as a result of the factors on which it based its claims. The remaining suggested deductions and contra charges were also closely connected with the claims since the facts and events on which the underlying claims were based were the same as those raised by Amec's claims and also by Stork's defences to those claims and, in truth, involved an attack on discrete parts of the overall claim for lost hours and its constituent parts put forward by Amec.

3.6. Subsequent Developments

56. There is no need, as I see it, to consider in any detail or summarise the subsequent tortuous procedural developments in this case save those that are relevant to specific allegations or claims raised by the parties in their detailed submissions as to costs. Each development, and the overall scope and shape of the action which I have summarised form the background against which the parties costs submissions are to be considered.

4. Overall Approach

4.1. Claim and Counterclaim

57. The first question I must consider is whether the action should, for costs purposes, be looked at as a whole or whether, instead, the claim and counterclaim should be considered separately. Stork's overall approach involves a separate consideration of these two parts of the case.
58. However, I am clear that Stork's counterclaims were so intimately part of the defences it was pursuing and so wrapped up in the claims that Amec was pursuing that it would be nonsensical to treat the counterclaims as separate or discrete from, the claims. The appropriateness of this approach can be seen when it is realised that the counterclaim for liquidated damages was a necessary corollary to Stork's case that the only delay and disruption that occurred was of Amec's sole making and the counterclaim for a revaluation of some of the work items and the counterclaims for defective or inappropriate work were part of Stork's defence and an antidote to Amec's various claims for payment for unremunerated or lost hours.

4.2. Variations and Disruption

59. A further suggested distinction sought by Stork was between the claims for variations and those for disruption. It is true that the variations claims were separately itemised in discrete schedules and passages in the pleadings, were ordered to be tried separately and were compromised separately from any discussion about other claims and were worked on by different members of the parties' legal and expert witness teams from those working on the balance of the case. However, this separation occurred because of a series of pragmatic decisions taken by the court and the parties as part of their ongoing attempts to make the overall dispute manageable.
60. The factual reality was that the variations disputes were about disruption and the extent to which Amec could claim an entitlement to the additional costs of executing these variations on top of contract rates because of the additional labour resources needed to execute them compared with the labour resources built into those contract variation rates. The overall settlement of the variations claims just before the first trial, largely to be devoted to these claims, was achieved because the parties, in reality, re-allocated the disruption part of these claims back into the main dispute and then relatively easily, albeit following much expert witness time, settled the remaining parts of the variations disputes.

4.3. Amec's Alleged Change of Case

61. Stork spent much time seeking to show that Amec had fundamentally changed its case soon before the trial. The change, if it occurred at all, was not recorded in any pleading since the parties agreed that there would no be a need for any amendments to the pleadings nor any adjournment or adjournment application following the suggested change of case. This procedural amnesty was based on two matters: the suggested change of case by Amec and on what Amec suggested was a substantial change of, or addition to, Stork's defence contained in the witness statements it had served.
62. In summary, Stork contended that the expert evidence served by Amec from its principal expert, Mr Prudhoe, showed that Amec was presenting its case for payment for its so-called lost hours on a new basis. Stork's contention was that Amec was making four fundamental changes to its case: (1) it was abandoning its reliance on an empirical or formulaic basis of assessing the extent of disruption that had occurred and on the academic research evidence on which the relevant formulae were based; (2) it was abandoning the split of the lost hours into the various categories previously put forward; (3) it was abandoning its method of the assessment of the lost hours, which derived the lost hours total by building this up by an addition of the various individual totals for each of the now abandoned categories of disruption; and (4) it was abandoning its reliance on impacted programmes. Instead, as Stork saw Amec's revised case, that case was now to be presented on a global basis by ascertaining the total number of hours worked, deducting the total number of hours for which payment had been made and then claiming the balance. These changes, if they had occurred at all, were only to be ascertained by careful consideration of the voluminous expert evidence served by Mr Prudhoe.
63. By way of a counter to this suggested change of case, Amec suggested that the witness statements showed that Stork was now relying, for the first time, on a series of positive cases which were intended to show that the whole or most of any disruption that had occurred had been caused by a series of acts of, and courses of action adopted by, Amec which were breaches of contract, amounted to negligent or poor management and were within Amec's control and at its contractual risk. Despite being required to plead the entirety of its positive case at an earlier stage of the procedural history and having failed to do so, the witness statements confronted Amec with a vastly expanded and significantly different defence from that pleaded hitherto.
64. It is clear to me that, broadly speaking, Stork's suggestion that Amec was altering its case is unfounded whereas Amec's suggestion that Stork was adding new and significant positive cases to its defence, despite failing to plead them previously, is well founded. So far as Amec's case is concerned, the only changes were in its abandoning two of the several methods of analysing the primary evidence previously contended for and in its indication that it would only be giving marginal or passing reliance on a third method. It was abandoning reliance on the disruption formulae and on the split between various categories of disruption and it was to place only marginal reliance on impacted hours.
65. However, the heart of Amec's case remained unchanged. The primary evidence on which it was based was unaltered, the many different ways of analysing that evidence, save in the respects I have summarised, remained in full and the total or global claim for lost hours remained intact. As evidence of the fact that Amec was presenting at root a global claim for lost hours, Stork had unsuccessfully attempted to strike out Amec's entire pleading at a much earlier stage of the proceedings on just that ground. Thus, at worst, some marginal work involved in the analysis and response to peripheral methods of analysis of primary data had been spent abortively. It is doubtful, indeed, whether Amec would have needed to amend its case or its pleadings once Mr Prudhoe's report had been served even if no pleadings amnesty had been declared. There would certainly have been no need for any adjournment of the trial had such been sought by Stork.
66. Stork, on the other hand, was clearly amending its case and, had Amec sought to have excluded much of Stork's factual evidence on the grounds that it was putting forward, at too late a stage, an unpleaded positive case, it would have had strong grounds for making that application.

4.4. The Size of Amec's Recovery

67. Stork, in its costs submissions, suggested that there had been a substantial lack of recovery by Amec or, in other words, there was a substantial shortfall between sum claimed and recovered. In monetary terms, Amec's claims, in total, were for about £11.5m for which it recovered about £6.4m. By way of comparison, Stork's counterclaims totalled about £2.4m for which it recovered about £150,000.
68. Although, in numerical terms, Amec recovered substantially less than it had claimed, the reason was almost entirely because the method of valuing the lost hours claim was decided to be by way of a valuation rather than by way of direct costs, albeit that the valuation exercise, involving fixing an hourly rate for each of the lost hours, took into account the direct costs involved. Amec succeeded on every other issue and, as I have already indicated, the variations claims were settled for a substantial sum, less only the disruption element which was transferred to the lost hours claims. Effectively, I allowed a rate per hour between £10 and £20 less than those claimed.
69. Stork's minimal recovery shows how comprehensive Amec's success really was. Since the counterclaims, as I have already decided, where merely the obverse of, and set up as pure defences to, Amec's claims and since so little was recovered by Stork, I regard Stork's limited success as disentitling it to any costs on the counterclaim and as not requiring any reduction in costs otherwise due to Amec.
70. It is noteworthy that Stork, despite the many reasons advanced for not paying Amec's costs in full, has not advanced any argument based on the difference between my awarded method of valuation and that claimed. The only argument was that the mere numerical difference between claim and award required a substantial reduction. However, no costs would have been saved had Amec put forward its claim on the valuation basis I awarded since all the direct costs of undertaking the work, which were pleaded and proved at the trial, would have had to have been pleaded and proved in any event. It follows that since Amec has succeeded in full save for this one issue, since its recovery was by any standards substantial and since no costs savings would have been incurred had the valuation method been confined on the pleadings to that awarded by me, there is no need, nor any justification, in reducing Amec's recoverable costs as a result of any perceived shortfall between the sums claimed and those awarded.

4.5. Indemnity Costs

4.5.1. The Basis for Awarding Indemnity Costs

71. A further significant issue arose when Amec, somewhat belatedly just before the costs hearing, gave Stork notice that it was putting forward a claim for indemnity costs. Since Stork was given a full opportunity of preparing and serving additional evidence to meet this claim and since, as Amec pointed out, such a claim should not be made unless there are clear grounds for making it which needed additional time to formulate. I allowed Amec to mount its additional claim for indemnity costs.
72. Under the CPR, the starting point in any costs consideration is that a successful party is ordinarily entitled to such costs as it has incurred in pursuing its case unless the court, exercising its discretion in accordance with CPR principles, decides otherwise. However, a party is never entitled to costs which were unreasonably incurred or were disproportionate in amount (CPR 44.4). The court will order such costs as a party is entitled to be assessed on the standard basis unless it expressly orders that the more generous indemnity basis should prevail. The difference between the two is that, on the standard basis, any doubts as to whether a receiving party has incurred costs reasonably or proportionately are to be resolved in favour of the paying party (Stork) whereas, on an indemnity basis, the converse is the position, the burden of proof is shifted and any doubt is to be resolved in favour of the receiving party (Amec). The parties agreed that the difference between the two is that an indemnity assessment yields about 15% more by way of an award of costs than a standard assessment.
73. This difference was explained in greater detail by Woolf MR in a CPR costs case, Petrograde Inc v. Texaco Ltd. (unreported, 23 May 2000), as follows:

  "However, it would be wrong to regard [indemnity costs] as producing penal consequences. An order for indemnity costs does not enable a claimant to receive more costs than he has incurred. Its practical effect is to avoid his costs being assessed at a lesser figure. When assessing costs on the standard basis the court will only allow costs "which are proportionate to the matters in issue" and "resolve any doubt which it may have as to whether costs were reasonably incurred or reasonably proportionate in amount in favour of the paying party". On the other hand, where the costs are assessed on an indemnity basis, the issue of proportionality does not have to be considered. The court only considers whether the costs were unreasonably incurred or for an unreasonable amount. The court will then resolve any doubt in favour of the receiving party. Even on an indemnity basis, however, the receiving party is restricted to recovering only the amount of costs which have been incurred (see Part 44.3 and Part 44.5)."

74. The court has a wide discretion as to which basis of assessment to award. Guidance for this decision, when taken under the CPR, is provided by the recent decisions of the Court of Appeal in Reid Minty (A Firm) v. Gordon Taylor (unreported), 29 October 2001, A2/2001/0072 and that of Langley J in Amoco (UK) Exploration Company v. British American Offshore Limited (unreported), 22 November 2001. The principles may be summarised as follows:

  1. An award of costs on an indemnity basis is neither penal nor in any way an expression of disapproval of, or a reflection about, any immoral or improper conduct of the paying party.

  2. The court has a wide discretion as to whether or not to order costs on an indemnity basis. This discretion must be exercised judicially in circumstances where it is fair and reasonable to do so.

  3. Ordinarily, circumstances in which an indemnity basis of costs will be appropriate are those in which the court is implicitly expressing disapproval of the conduct of the case by the paying party or where that conduct was unreasonable.

  4. However, in an exceptional case, indemnity costs may be awarded where such disapproval is not present. Such cases, being exceptional, are cases where it is reasonable to award costs without considering the proportionality of the expenditure involved and where the overriding objective of litigation and the justice of the case is achieved by assessing costs in a way that resolves any doubts as to the reasonableness of any particular item of costs or its amount in favour of the receiving party.

  5. Even where costs are assessed on an indemnity basis, the assessment is compensatory only since a receiving party cannot ever recover more than he has expended.

4.5.2. The Award of Indemnity Costs

75. Amec's application for an award of indemnity costs is, on analysis, based on the cumulative effect of the following factors.
76. Contract Partnering. The topsides contract was not, in any formal sense, a partnering contract but it could only operate satisfactorily if both parties co-operated with each other to an unusually great extent and kept each other fully informed of its own internal difficulties, its plans and projections and any anticipated problems that were looming. These requirements were buttressed by the unusually detailed planning and reporting obligations imposed expressly on Amec and, as a means of enabling Amec to fulfil these obligations, by necessary implication on Stork. However, Stork failed to provide Amec with a great deal of necessary information. In particular, it failed to keep Amec informed about the design changes, holds, stress reviews, variations, materials deliveries or delays to any, or any sufficient extent. These failures undoubtedly enhanced Amec's difficulties in carrying out and completing the contract in the changed conditions Amec was subject to.
77. Stork's Attitude and Contract Performance. Stork, as the employer in a form of contract which had no separate independent engineer valuing the work, had a contractual obligation to value Amec's work and to suggest not only what was due but as to how it should be valued. Amec, of course, had to submit valuations but Stork had a proactive role. It was not merely to accept or reject Amec's valuations but had, additionally, to suggest how any valuation it disputed should be recalculated. This obligation arose from the contractual partnership created by the topsides contract.
78. However, Stork did not ever attempt to recognise or discuss the valuation claims for disruption during the course of the contract or to suggest how it felt these claims should be valued. Instead, it doggedly declined to recognise that Amec had any disruption claims and, indeed, was reprimanded by the Management Committee, SBM and Shell for failing to recognise the disruption that the many variations and other delaying factors within its control were causing Amec. Nonetheless, Amec continued to find that its valuation claims were being dismissed without any significant explanation as to why, or any acceptance of the validity in principle of these claims or as to how the primary factual background and the mountains of paperwork should be analysed and presented in order to assess what if any lost hours had occurred.
79. Stork's Reaction to Amec's Claims. Amec attempted to accommodate Stork by spending much time and energy in preparing disruption claims based on three sample modules. These claims, at various stages of their preparation, were discussed in informal and then formal commercial meetings and finally at the Schiedam meetings which were held without prejudice but on the basis of voluminous documentation presented by Amec and hardly any response documentation. Stork also rejected the suggestion of a mediation at this stage. At the end of this process, Stork rejected the claims without any detailed reasoning and, in particular, rejected the possibility of analysing or presenting the claims based on sample modules. Thus, somewhat belatedly, Amec was faced with the need to analyse the whole of the primary factual background, to synthesise the mountain of paperwork and present a claim of a global nature on the totality of every module constructed.
80. Stork's Assistance in Analysing the Claims. Once the claims had been prepared and pleaded, Stork made no attempt to react proactively. It made no suggestion as to how the factual material should be analysed, no suggestion for joint collaborative analysis of the material once the pleadings had been served and as part of the preparation of its defence, no meetings between experts at an early stage or as to how it contended the disruption should be analysed. Throughout, Stork's response was purely defensive and reactive. Its attitude was that it had no obligation "to do Amec's work for it", no obligation to put forward alternative methods of analysing the facts, no obligation to suggest at an early stage what faults or failures existed in Amec's chosen methods of analysis or as to what documents were needed for analytical purposes and as to how those documents could usefully be collated and sifted. Stork's attitude was not, in a claim of the size and type being presented, an appropriate one in the official referees' court under the RSC. It was even less appropriate in the Technology and Construction Court under the CPR.
81. Stork's Assistance in Defending the Claims. Once the claims had been pleaded, Stork had an obligation to plead in detail to those claims. However, little was done by way of responding, line by line, to the schedules. A particularly glaring omission was the absence of any pleading, point by point, to the core and extremely significant schedule that summarised the relevant factual background to the performance of the topsides contract, appendix 24. Moreover, Stork appointed 3 separate experts rather than relying, as Amec did, on one expert. This precluded Stork from taking an overview of Amec's claims or its defences and precluded a coherent development of its technical case at trial. Other failings included a refusal to plead to the extremely helpful isographs which provided coloured 3-D representational evidence as to the paucity of design information in November 1995, evidence which was critical to Amec's case and to its success at trial, a refusal to set out its detailed case on significant schedules until serving its closing submissions and a refusal to acknowledge the efficacy and significance of the somewhat lately produced experts' agreements which, on Stork's case, were little more than arithmetical exercises but which were, on analysis, significant in pointing to the extent of the disruption that had occurred.
82. Stork's Lack of a Positive Case. Stork had an obligation to plead every ground upon which it asserted Amec had caused delay and were also directed to serve such particulars by Judge Lloyd during the protracted interlocutory case management sessions that he conducted in a less than successful attempt to bring an element of good management into the presentation of Stork's case. Little by way of such pleading or particulars were served and the huge range and extent of Stork's positive case only emerged from a perusal of its voluminous witness statements, largely those of Mr Hamelijnck which were remarkable for their range, length, generality and for the large number of erroneous assertions and factual statements that they contained.
83. Stork's Performance in Relation to Stress Appraisals. At the heart of Stork's continuous and obstructive obfuscation was its performance with regard to producing details, discovery, evidence or explanations with regard to the stress reviews that occurred and which, on analysis, were the principal cause of the disruption that Amec experienced. Without the evidence that was finally wrung out of Stork's witnesses in cross examination, a vital part of the case, entirely within Stork's knowledge and control, was absent. Indeed, this absence left Amec groping like a blind man in a blackout for a needle in a haystack. This failure, which lasted continuously from early in the topsides contract until a late stage in cross examination of Stork's witnesses, contributed greatly to the time and costs expended in preparing and presenting the case by both sides. The failure is the more marked since it was not revealed until after all Amec's factual witnesses had been cross examined and had concluded their evidence.

4.5.3. Amec's Entitlement to Indemnity Costs

84. Given the size and scope of the task confronting Amec as a result of the approach adopted by Stork throughout the parties relationship from mid-1995 until mid-way through the cross examination of its witnesses in February 2001, it seems to me clear that this is one of those exceptional cases where indemnity costs should be awarded even if there is no disapproval of Stork's conduct. Such cases are exceptional but this case is one where it would be reasonable to award such costs so that on the detailed assessment, Amec and the assessment process would not have to consider the proportionality of the expenditure involved. Moreover, the overriding objective of litigation and the justice of the case is achieved in this case by assessing Amec's costs in a way that resolves any doubts as to the reasonableness of any particular item of costs or its amount in favour of Amec as the receiving party.
85. However, if necessary, and as a second and discrete basis for ordering such costs, I would go further since it is clear to me that the size, timescale and extent of Stork's denial of Amec's claims reached the point at an early stage which was both unreasonable and obstructive and that behaviour continued, as I have sought to show, in the same vein from then onwards throughout the history of this litigation. An award of indemnity costs is both fair and reasonable and would mark the court's disapproval of the manner in which Stork's case overall was presented.
86. Thus, I find that Amec is entitled to have all costs to which it is entitled assessed on an indemnity basis.

5. Amec's Claim for Costs

5.1. Amec's Claim

87. Amec claims the entirety of its costs on an indemnity basis. It succeeded on all heads of claim, save for the inconsequential claim for additional payment for looking after the barge whilst it was being stored prior to sail away, and it did so in the face of Stork's conduct which, as I have already found, merited an award of costs on an indemnity basis.
88. Given my findings that the claim and counterclaim were so intimately linked together, there is no good reason for seeking to award or assess the costs of the claim differently from those of the counterclaim. Moreover, since the Part 1 and Part 2 trials were so intimately connected and were only tried at separate times in an attempt, largely unsuccessful, to reduce the issues and trial time and to secure an early compromise of the disputes as a whole, there is no good reason for award or assessing the costs of Part 1 separately from Part 2.
89. It follows that unless there are special reasons for reducing or eliminating Amec's prima facie entitlement, Amec should recover all its costs of Parts 1 and 2 on an indemnity basis and Stork should recover none of its costs.

5.2. Stork's Reasons for a Reduction of Amec's Costs Entitlement

5.2.1. Amec's Application on 12 November 1999

90. Amec, having largely succeeded at the preliminary issues trial conducted by Judge Hicks, sought an order for costs. Stork, at Judge Hicks' prompting, sought to persuade Judge Hicks that he should reserve the costs consideration until the trial because there might be a payment into court, as there was. Judge Hicks did not decide finally what order to make but a subsequent hearing was convened at Amec's request after which Judge Hicks reserved the costs and reserved the costs of the further hearing. 92. It appears to be an unfortunate consequence of the payment into court provisions that a party cannot, or may possibly not, be entitled to an immediate costs order or assessment. Although this was more obviously the position under the RSC, it is not so obviously the position under the CPR. However, Judge Hicks felt constrained by an earlier decision of his own to make a costs reserved order and, following full argument, made a similar order for the day long hearing of that costs argument. Under the CPR, Amec would have probably been entitled to its costs order for the of the preliminary issues forthwith. The only reason for not obtaining that order was the existence of a wholly inadequate payment into court which, in conjunction with Stork's counterclaims which failed counterclaims, precluded any immediate payment of any part of the sum in excess of ?1m agreed to be due to Amec on both the compromised and judicially determined Part 1 claims.
91. For these reasons, the fair order for the costs of the application on 12 November 1999 should be no order as to costs, so that the relatively small sum for each party should be borne by that party.

5.2.3. Amec's Costs of the Part 1 Trial

92. Stork seeks an order reducing Amec's recovery of its costs by 2/3 for the compromised variations, no order as to the costs of the hearing on 8 March 2000, an order requiring Amec to pay 2/3 of Stork's costs of the counterclaims. These reductions from the costs otherwise recoverable by Amec are sought because it is contended that the costs of the claim and counterclaim should be assessed separately, that Amec only succeeded to a limited extent on its variations claims which were exaggerated and that the contested Part 1 claims ended in a draw with each party winning something.
93. As has already been stated, a court should ordinarily not separate out distinct parts of the proceedings in a CPR costs exercise, particularly when the relevant parts of those proceedings are intimately inter-connected. In this case, as I have already found, Amec was the net winner to a substantial extent, the costs of the counterclaim were incurred in an unsuccessful defence of Amec's claims and that the claims of Amec largely succeeded and the defences of Stork largely failed. I do not regard the limited success of Stork as meriting any reduction in Amec's costs and the costs involved in those limited issues on which it succeeded would have been incurred even if Amec had conceded those issues from the outset.
94. Stork also sought an order that any additional costs thrown away by the time spent in an aborted attempt to devise further preliminary issues associated with the impacted programmes issues. However, it was granted an order that such costs should be paid to it in any event. It cannot now seek to recover additional costs associated with this work by a second order relating to it couched in more generous terms than the order made by Judge Lloyd originally.
95. No reduction in costs for these matters is, therefore, required.

5.2.4. Stork to recover its Costs of Amec's Amendments

96. Stork relies on the suggested amendments of its case from its pleaded case that had been developed in the Statement of Case in June 1998, the amended Statement of Case and the re-amended Statement of Case to seek a substantial reduction in Amec's costs entitlement.
97. However, as I have already found, there was no substantial change of case. At worst, Amec dropped reliance on the attempts to apportion the global lost hours claims to its various constituent parts, on impacted programmes and on the formulaic methods of disruption assessment. I deal below with the specific costs associated with dropping these additional strands to Amec's case.
98. It follows that there should be neither a reduction on this general ground nor any imposition of a costs penalty.

5.2.5. Impacted Programmes

99. Although the impacted programmes were hardly relied on at the trial, the expenditure incurred on their preparation was largely productive. The costs of preparing evidence associated with the impacted programmes were a relatively inconsequential add on to the costs of preparing base programmes, which were a necessity, and as built programmes, which were highly desirable. thus, the work and costs involved in the pure impacted exercise could not have been substantial.
100. However, of greater importance than the actual quantum of costs is the consideration that Amec had to devise from scratch a series of exercises necessary to show that Stork's complete denial of Amec's disruption case and its refusal to provide any positive input into the question of how that case should be examined, compiled and presented. The extent of the disruption and of the primary evidence available to found the proof of that disruption were unprecedented in their scale and it is not surprising that some of the analytical methods adopted were unsuccessful. The attempt to use impacted programmes was not unreasonable and the use of expert evidence, including that from Dr Cree, was a reasonable adjunct to Amec's case.
101. No reduction for Amec's costs of preparing impacted programme evidence should be made.

5.2.6. Work on the Schedules

102. Stork contends that the schedules were impenetrable, largely unnecessary and in any case only evidence of potential disruption rather than of actual disruption. The experts spent many hours discussing these schedules which, at trial, were found to have little evidential value.
103. I do not accept Stork's strictures about these schedules. It was necessary for Amec to undertake a formidable exercise in analysing the primary facts. The exercise had both a positive and a negative utility. In positive terms, it enabled the extent, scope and size of the disruption to be demonstrated, largely by means of the experts' agreements which were founded on them. Negatively, the exercise highlighted how improbable was Stork's positive case once this emerged. It is true that the method of presenting the schedules without a clearly drafted document with them which guided the uninitiated reader through them was extremely unhelpful. However, in the context of this case, that is a trivial objection and was overcome since the experts, in their many meetings, explained the content and scope of these schedules to each other and reached a series of extensive and helpful agreements which shaped and, ultimately, led to the overall result of the case.

5.2.7. Academic Research

104. This ground of objection, based on the formulaic methods of assessing disruption, fails for the same reasons as the impact programme objection failed. Furthermore, Stork failed to take the obvious step open to it at an early stage, namely of suggesting that the parties jointly appointed Professor Horner as an expert, whose work largely supported the formulaic methods relied on. Had Professor Horner been appointed jointly and asked to report to the parties jointly at an early stage, the method would have been dropped before many of the costs complained about by Stork were incurred.
105. Amec's incurring of costs under this head was reasonable and no deduction should be made for these costs.

5.2.8. Stork's Costs

106. Stork adduced detailed evidence from a costs draftsman as to the costs it had incurred in dealing with the perceived change of case and in dealing with the abandoned parts of Amec's case. This exercise was largely valueless since the costs draftsman did not describe in factual terms what the wasted work was or how he assessed the times and costs attributed to it. However, more generally, Stork is entitled to none of these costs. Since Amec was reasonable in putting forward a variety of means of analysing the evidence, even those that were unsuccessful in their aims, Stork cannot reasonable recover its costs, particularly in the absence of having put forward reasons at an early stage why those methods should not be developed, or as to how the disruption should be analysed or as to how the methods of analysis with which it had doubts could be developed jointly using one expert team reporting objectively to both parties.
107. Stork is entitled to none of its claimed costs.

5.2.9. The Planning and Abortive Trial Bundles

108. Stork resists having to pay for the preparation of a first abortive trial bundle and a second unused series of trial bundles dealing with planning matters.
109. In my view, no special order is warranted for this expenditure. Both parties, by agreement, left pre-trial preparation to the last minute and, in the consequent haste, steps were inevitably taken by each side which were both wasted and would not have been taken had pre-trial preparations been conducted at a more conventional speed. Thus, within reason, mistaken expenditure, if excusable given the haste required by the accelerated methodology jointly agreed to by both parties, is recoverable. It is for the costs judge, using an indemnity basis of assessment, to decide whether these costs are recoverable using conventional indemnity costs methods of assessment.

5.2.10. The Costs of the Time Spent in Preparation by Amec's Own Personnel

110. Amec engaged its own personnel and agency staff to undertake much of the work involved in collating, analysing and presenting the primary evidence and the supporting evidence of Mr Prudhoe. These personnel also undertook much of the preparation of the visual evidential aids such as isographs, histograms, graphs, bar charts, photographs, tables, as built programmes and overlays. Had this work been undertaken, at greater expense and with the use of many more hours of time, by legally qualified personnel employed by Masons, as Amec's solicitors, this work would in principle be recoverable. However, Stork maintains that it is irrecoverable in principle because of the impact of the Richards & Wallingford case decided in 1984 and the even older case of Re Nossen's Patent. Both cases, having been decided under the RSC, are of no assistance in determining this question under the CPR, even if the wording of the relevant rules is similar.
111. CPR 43.2(1)(a) defines costs as including:

"fees, charges, disbursements, expenses, remuneration ...".

In principle, the time charges involved in employing these personnel fall within each of these categories of costs. It is a matter for detailed assessment whether the tasks performed, on an hour by hour basis, the numbers of hours claimed, the personnel involved and the hourly rate or other disbursement, were incurred at all and, if so, were properly and reasonably incurred. However, it would be contrary to the overriding objective if necessary expenditure which was incurred at less expense than would have been involved had Amec's solicitors' employees undertaken the work, was not recoverable in principle.

112. I find that the claimed expenditure is recoverable in principle.

6. Interim Payment and Interest

113. Amec claims an interim payment towards its costs. This is now ordinarily ordered, particularly where the costs award will be substantial. The conventional bracket is about 50% - 662/3% of the estimated costs. In this case, Amec's estimate of costs is about £5.7m, to which must be added a proportion of Amec's pre-writ costs. Since Amec is entitled to an indemnity assessment, I will award Amec £3m as an interim payment.
114. Amec also claims interest. A court under CPR assessments, may award interest on costs in its discretion. This is clear from CPR 44.3(6)(g). I have been shown the judgment of Langley J in the Amoco case where he stated:

"10. For my part, I think it may well be appropriate, at least in substantial proceedings involving commercial interests of significant interest both in balance sheet and reputational terms, that the court should award interest on costs under the rule where substantial sums have inevitably been expended perhaps a year or more before an award of costs is made and interest begins to run on it under the general rule. ... I have no difficulty in accepting that costs of such an order [£16m] have had to be financed and paid over a substantial period of time. ... I would consider it appropriate in principle to award interest upon such costs from payment to judgment."

115. I agree with these sentiments and that they are directly applicable to this case since the costs, although not in the Amoco scale, are still huge in size and much of those costs were incurred many years ago. The fairest way of awarding costs is to adopt a broad brush and award interest on the whole of the costs but for half of the period of the litigation, namely for 2 years of the 4-year period from November 1997 to November 2001. From the date of judgment, statutory interest will run under the Judgments Act. Thus, interest will be awarded at a composite rate of 6% on the totality of the award of costs, including the interim payment sum of £3m, for 24 months culminating on 22 November 2001. Thereafter, judgment rate interest will run on the sum of costs until payment of that component part of the costs.

7. Conclusion

116. Amec is to recover its costs in full on an indemnity basis with an order for detailed assessment if not agreed save that there is to be no order as to the costs of the hearing on 12 November 1999. Stork is not entitled to any of its costs other than as provided for by existing orders. There shall be an interim payment of £3m forthwith. Interest will be paid at 6% for 24 months up to 22 November 2001 and, thereafter, at the judgment rate on the totality of the costs. The relevant sums for an interim payment of costs and associated interest will be paid within 14 days of the application for permission to appeal hearing on 15 March 2002.