ACC Bank PLC v Johnston practising as Brian Johnston & Co. Solicitors

Factual and Procedural Background

This final judgment concerns the allocation of costs arising between the Defendant and the second named Third Party in long-running proceedings initiated by the Plaintiff. The principal issues relate to costs from the third party proceedings and claims for indemnity regarding costs incurred in defending the Plaintiff's claim. The case has seen multiple prior judgments addressing liability, damages, third party contributions, and apportionment of damages. The Plaintiff's claim against the Defendant has been resolved with costs awarded, leaving outstanding costs issues between the Defendant and the second Third Party, as well as claims for indemnity and responsibility for costs associated with the quantum of damages.

Legal Issues Presented

1. Whether the Defendant is entitled to recover costs from the second Third Party in respect of the third party proceedings.
2. Whether the Defendant is entitled to an indemnity from the second Third Party for costs incurred in defending the Plaintiff's claim.
3. Whether the second Third Party is entitled to recover costs of the quantum hearing from the Plaintiff.

Arguments of the Parties

Defendant's Arguments

• The Defendant claims an indemnity from the second Third Party for costs incurred in defending the Plaintiff's proceedings, on the basis that but for the wrongdoing of the first Third Party (for whom the second Third Party is vicariously liable), the Defendant would not have faced the claim.
• The Defendant asserts entitlement to recover costs of the third party proceedings from the second Third Party.

Second Third Party's Arguments

• The second Third Party contends that the Defendant should only recover 70% of the costs of the third party proceedings, corresponding to the apportionment of liability.
• The second Third Party argues that the costs of the first two days of the third party proceedings have already been awarded against him, and thus no double recovery should occur.
• The second Third Party claims that his costs of the quantum hearing should be paid by the Plaintiff, given his partial success in reducing the damages awarded.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court analyzed the costs incurred during multiple hearings: the main liability hearing between the Plaintiff and Defendant, the third party proceedings between the Defendant and the second Third Party, the quantum hearing involving all parties, and the apportionment hearing. The Court noted that the Defendant had already been awarded costs for part of the hearing with some days set off against the Plaintiff’s awarded costs due to procedural failures by the Plaintiff.

Regarding the third party proceedings, the Court found that although the second Third Party was liable for 70% of the damages, this did not entitle him to limit the Defendant’s recovery of costs to 70%. The third party claim was a standalone case decided in the Defendant’s favor, and the Defendant was entitled to full costs unless it could be shown that the claim for full indemnity materially increased costs, which was not demonstrated. The Court emphasized that the second Third Party did not use procedural devices such as Calderbank letters to limit his liability or costs exposure.

On the Defendant’s claim for indemnity of costs incurred defending the Plaintiff’s proceedings, the Court rejected the argument. The Defendant had denied negligence and defended the claim, which was unsuccessful, and thus could not shift the burden of those costs to the second Third Party. The Court highlighted that the Defendant’s own unmeritorious defence and refusal to admit liability were the reasons for the costs incurred.

Finally, the Court addressed the second Third Party’s claim for costs of the quantum hearing against the Plaintiff. The Court found no entitlement to such costs because the second Third Party had not made any prior concessions or offers regarding damages, such as through a Calderbank letter, that would have triggered cost consequences. Therefore, the second Third Party bore his own costs of the quantum hearing.

Holding and Implications

The Court’s final decision was as follows:

• The Defendant is entitled to recover from the second Third Party the costs of the third party proceedings based on a six day hearing (including four days not previously awarded), replacing the earlier order for two days’ costs.
• The Defendant’s claim for an indemnity from the second Third Party for costs incurred in defending the Plaintiff’s claim is rejected.
• The second Third Party’s claim for costs of the quantum hearing against the Plaintiff is rejected.

The direct effect is that the Defendant recovers full costs of the third party proceedings from the second Third Party, but bears his own costs of defending the Plaintiff’s claim. The second Third Party does not recover costs from the Plaintiff. The judgment does not establish new legal precedent but applies established principles regarding costs allocation, indemnity claims, and the use of procedural mechanisms such as Calderbank letters.