This case highlights a number of issues that the court may take into consideration when exercising its discretion in awarding costs. If they are to avoid the risk of being penalised on costs, parties should endeavour to exercise good litigation practice, which includes making a realistic settlement offer as early as practicable and before significant litigation costs are incurred,and complying promptly and comprehensively with any disclosure orders.
Facts and original dispute on liability
This case, heard by the Admiralty Court in London, involved a collision in September 2007 between a seismic survey vessel, Western Neptune, and a container vessel, St Louis Express, in the Gulf of Mexico. The Western Neptune was towing a spread of gun arrays and streamers (the former send out sound waves generated by compressed air and hydrophones and the latter record the echo) at night, when the St Louis Express crossed astern of the Western Neptune and collided with the array.
The claimant owners of the Western Neptune alleged that the collision was caused by the negligence of the St Louis Express and they brought proceedings against the defendant owners of the St Louis Express claiming damages of about £25 million. The St Louis Express suffered no damage and consequently there was no counterclaim.
The defendants conceded during the trial that they bore the majority of the blame for the collision because the St Louis Express had entered the "safety box" around the Western Neptune (3 miles ahead, 3 miles on each side and 6 miles astern). This had been requested by one of the vessels supporting the Western Neptune acting as a "guard" vessel for the convoy by contacting approaching vessels on behalf of the Western Neptune. It was accepted that the St Louis Express had altered her course to port improperly, crossed the array's path and had not recognised the significance of warning lights on the buoys attached to the end of the array.
There was, however, a dispute as to whether the claimants were partly to blame for the collision. The question also arose as to whether the array was to be treated as part of the Western Neptune for the purposes of the collision avoidance rules. Having consulted with the nautical assessors sitting with him in the Admiralty Court, Mr Justice David Steel accepted their view that the tow must always be treated as part of the towing vessel for the purposes of collision avoidance. In this case, the Western Neptune's array, as a tow (part of which was on the surface) was to be considered an integral part of the vessel.
The judge also drew attention to the fact that, after the collision, the claimants and the master of the Western Neptune introduced some significant changes to navigational procedure during surveying operations, including the introduction of a new arrangement for guard vessels whereby, if two vessels were available, the second would be placed one mile astern of the tail buoys, with all approaching vessels being required to pass astern of that vessel. In addition, the master's standing orders in relation to traffic monitoring and broadcasting of the exclusion zone were amended.
However, Mr Justice David Steel emphasised that this did not of itself mean the original practices were deficient. Rather, he said that "nothing is so perfect that it can not be improved" and referred to the 19th century case of Hart v L & Y Railway, quoting Brownwell J, who said that "people do not furnish evidence against themselves simply by adopting a new plan in order to prevent the recurrence of an accident".
Giving judgment on liability, the judge found that it should be apportioned as follows: 2/3 St Louis Express and 1/3 Western Neptune. A dispute then arose as to what extent Western Neptune's owners' costs should be recovered from the St Louis Express owners.
Dispute on costs
The claimants argued that they were the winning party and were entitled to the entirety of their costs. They relied on The Antares II [1996] 2 LLR 482 in support of the proposition that the fact that they had been found one-third to blame for the collision and thus could only recover two-thirds of their claim was not in itself a sufficient reason to reduce the level of recoverable costs.
The judge started his analysis by stating that the court's discretion as to the award of costs had to be exercised in accordance with Civil Procedure Rule (CPR) Part 44.3, namely that the successful party in the litigation is entitled to an order for costs and that any consideration of a departure from that starting point must have regard to all the circumstances of the case, including the conduct of the parties – see The Krysia [2008] EWHC 1880 (Adm).
The defendants, on the other hand, argued that the claimants should only recover a proportion of their costs consistent with the apportionment of liability for the collision and the claimants' allegedly unsatisfactory conduct in respect of settlement proposals and disclosure. In particular, the defendants made a settlement offer in April 2008, before significant costs had been incurred, proposing apportionment of liability at 60/40 in favour of the claimants, with costs in the same proportions. Yet it was not until January 2009 (just over a month before the trial) that the claimants reverted with their own settlement offer on the basis of liability being apportioned 80/20 in their favour, together with payment to them of all their (by then) substantial costs.
Additionally, there was a significant amount of very late disclosure by the claimants of highly relevant material. In particular, this material included documents relating to the defendants' case that the Western Neptune had failed, as the situation developed, to dive her streamers to a depth such that the St Louis Express could safely pass over them. This reflected a change in the claimants' case, very late in the day, from an argument that diving was not practical, to a position that diving could not be achieved in time (the claimants lost the argument in any event). The judge found that this was an additional factor that the court had to feed into the question of apportionment pursuant to CPR 43.3(7).
The decision
Mr Justice David Steel held that the apportionment of liability in the substantive dispute was a relevant factor to the issue of costs, but it was not determinative. Rather, the court was entitled to exercise its discretion as to costs flexibly.
The judge found that there were a number of circumstances that justified a departure from the starting point. First, as regards proposals for settlement, the claimants' offer was substantially wider of the mark than the defendants' earlier offer (and £3.5 million more than the claimants eventually recovered) and had been made almost a year later, by which time most of the costs had been incurred.
As to the late disclosure, this related largely to the diving issue, which represented the bulk of expert evidence and occupied a significant proportion of the trial.
Taking into account these factors, the judge held that the claimants should recover only 65% of their costs, with no order as regards the defendants' costs.
Lessons to be learned
In addition to the court's comments on the application of the collision regulations to tows and the introduction of post collision precautions by the claimants, a number of interesting issues arose in relation to good litigation practice.
A party making a settlement offer should do so as early as practicable and before significant litigation costs are incurred. The offer made should be pitched at a realistic level and should be based on as accurate an assessment of the merits as is possible.
Any disclosure orders made by the court should be complied with in a timely and comprehensive fashion. Where there is an order for specific disclosure which a party considers is unduly wide, it is important to apply to the court for restriction of the scope of disclosure sought, for example on the grounds it is immaterial or disproportionate. In the present case, no such application was made by the claimants.
Finally, the parties should identify the individual issues relevant to their case as early as possible and endeavour to avoid any changes in their arguments that might lead to unnecessary waste of costs.
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