Source: https://tmcls.co.uk/mann-ors-v-transport-for-london-2018-ewca-civ-1520/
Timestamp: 2020-08-13 06:07:39
Document Index: 395816526

Matched Legal Cases: ['art 36', 'art 36', 'EWCA ', 'ART 36', 'EWCA ', 'EWCA ', 'art 36', 'art 36', 'art 36', 'art 1', 'art 1', 'art 36', 'art 36', 'UKPC ', 'EWCA ', 'EWCA ', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36', 'art 36']

CPR Part 36 and the Upper Tribunal - TMC Legal Services Limited
The Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules and Practice Directions do not contain provisions corresponding to those in the self-contained procedure in CPR Part 36 and parties are not free unilaterally to appropriate into them the much more elaborate “carrot and stick” regime provided therein. In the Upper Tribunal indemnity basis costs are only awarded in exceptional circumstances.
MANN & ORS v TRANSPORT FOR LONDON [2018] EWCA CIV 1520
BEATEN OFFERS : INDEMNITY BASIS COSTS : PART 36 : UPPER TRIBUNAL
Under the CPR
The approach of the Civil Procedure Rules is a relatively simple one: namely, if one party has made a real effort to find a reasonable solution to the proceedings and the other party has resisted that sensible approach, then the latter puts himself at risk that the order for costs may be on an indemnity basis: Reid Minty v Taylor [2001] EWCA Civ 1723.
Indemnity costs are appropriate where the conduct of a paying party is “unreasonable to a high degree” and “not … merely wrong or misguided in hindsight”: The Governors and Company of the Bank of Ireland v Watts Group Plc [2017] EWHC 2472 (TCC)
A claimant’s offer does not have to have been “unreasonably” refused for costs to be awarded on the indemnity basis: Kiam v MGN Ltd. (No.2)] [2002] EWCA Civ 66; McPhilemy v Times Newspapers Ltd. (No.2) [2002] 1 WLR 934; OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465.
However, outside of CPR Part 36:
“[it] is very important that the Reid Minty case … should not be understood and applied for all the world as if under the Civil Procedure Rules it is now generally appropriate to condemn in indemnity costs those who decline reasonable settlement offers” Kiam v MGN Ltd
In the Upper Tribunal indemnity basis costs are only awarded in exceptional circumstances: Para 12.4 Upper Tribunal (Lands Chamber) Practice Directions.
The Tribunal’s discretion as to costs is a deliberately broad discretion, exercisable in a wide variety of proceedings. The Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 as amended by The Tribunal Procedure (Amendment No.3) Rules 2013 do not contain provisions corresponding to those in the self-contained procedure in CPR Part 36, including the provisions for “Costs consequences following judgment” in CPR 36.17. [25]
Parties are not free unilaterally to appropriate into the Rules or Practice Directions the much more elaborate carrot and stick regime provided by CPR Part 36. [30]
The Tribunal’s decision in this case to decline to award indemnity costs on the basis that the claimants had beaten their own offers was, in the procedural context relevant to the costs decision that it was required to make, appropriate and lawful. [32]
The question in this appeal was: should the court overturn the decision of the Upper Tribunal (Lands Chamber) (“the Tribunal”) not to award successful claimants their costs of pursuing claims for compensation under Part 1 of the Land Compensation Act 1973 on the indemnity basis, where the compensation awarded to them had exceeded offers of settlement made by them before the hearing?
Claims were brought in the Tribunal by 19 claimants under part 1 of the Land Compensation Act 1973 for compensation for depreciation in the value of their properties resulting from the use of public works comprised in the Coulsdon Inner Relief Road conducted by Transport for London (TfL).
In the course of the action each of the claimants made an offer, dated 18 January 2015, open for acceptance until 29 January 2015 and headed “Without Prejudice Save as to Costs” on the basis that TfL would pay a specified sum “in full and final settlement of the claim for compensation … plus interest …“. 18 of them were for compensation for a depreciation in value of 3.25%, plus costs on the standard basis; the other was for a depreciation in value of slightly less than 1%, again plus costs. Each offer was also made expressly on this basis:
“The Claimant intends to rely upon this offer in relation to the issue of costs and will be inviting the Upper Tribunal to make an order for costs to be paid on the indemnity basis in the event that the Claimants beat this offer at trial.”
The offers were repeated in identical terms on 2 November 2015, again open for acceptance for 21 days.
After the offers were made, three of the claimants abandoned their claims. Four settled their claims and the other 12 claimants succeeded in their claims before the Tribunal being award compensation at levels between £3,000 and £13,000, beating the offers made.
Tribunal’s Decision on Costs
TfL was to pay the individual costs of the 16 successful claimants;
the three claimants who withdrew their claims were to pay TfL’s individual costs of their claims and a defined proportion of TfL’s common costs up to the date of their withdrawal;
TfL was to pay a defined proportion of the common costs of the consolidated references; and
TfL was to pay the surveyors’ fees of the successful claimants.
The costs were ordered to be assessed by the Registrar of the Lands Chamber on the standard basis in the absence of agreement.
TfL was to make a payment on account of costs of £350,000 within 14 days.
The claimants appealed on grounds that Tribunal erred in law in deciding that the costs of the successful claimants should be assessed on the standard rather than the indemnity basis.
Having set out the relevant provisions in section 29 of the Tribunals, Courts and Enforcement Act 2007, rule 10 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 as amended by the Tribunal Procedure (Amendment No.3) Rules 2013, and paragraph 12 of the Upper Tribunal (Lands Chamber) Practice Directions, the Tribunal stated its conclusions:
“139. It is clear from the above, especially paragraph 12.4 of the Practice Directions, that indemnity costs are only awarded in exceptional circumstances.
140. Mr Burton’s submissions [for the claimants] focussed on the way in which the claimants were forced to frame their offers, but in my judgment there did not seem to be any dispute that those offers were valid, and could be taken into account when considering costs.
141. The issue to be considered stems more from the way in which the Tribunal’s discretion to award costs should be exercised.
142. I do not consider that TfL should be the subject of an order for indemnity costs simply because the successful sealed offers were framed on that basis. The offers do not override the discretion which the Tribunal should exercise. Nor do I derive any assistance from Livesey, in which the Tribunal merely declined not to disturb [sic] an agreement which the parties themselves had made.
143. In order to be successful in their claim for indemnity costs, the Claimants would need to satisfy the Tribunal that TfL had acted unreasonably in not accepting the offers. I am not satisfied that this was the case. TfL’s case was not patently hopeless, and it was argued perfectly properly by Mr Walton. There was, therefore, nothing in TfL’s general conduct of the references which should attract any sort of sanction or mark of disapproval. I accept that the making of the offers is a relevant consideration when exercising the Tribunal’s discretion. TfL was on notice of the claimants’ intention to seek costs on the indemnity basis and might be said to have taken an additional risk in refusing to accept the offers made. On the other hand, by asserting that intention the claimants were not offering any concession; on the contrary, they were purporting to introduce a sanction which the Tribunal’s rules and practice directions do not provide for. I do not accept that it is open to a party to a reference before the Tribunal unilaterally to appropriate the much more elaborate carrot and stick regime provided by CPR Part 36.
144. The parties have, correctly, agreed that the successful Claimants shall have their costs, but in my judgment these should be assessed on the standard basis.”
In granting permission, Longmore L.J. observed that:
“[the] question whether indemnity costs is an available option to the Lands Tribunal in a case where a claimant has made an offer which is rejected and then recovers a greater amount is an important point of practice which should be considered by this court”.
Two issues fell to be determined:
(1) whether the Tribunal erred in principle in its approach to the making of an award of costs where a claimant has bettered “at trial” an offer to settle made by him; and
(2) whether in any event the Tribunal was wrong to find that in this case TfL had not acted “unreasonably” in failing to accept the appellants’ offers to settle.
For the appellants, Mr Roger Mallalieu, submitted that:
The Tribunal had wrongly applied a “test” requiring the claimants to show that TfL had acted “unreasonably” in not accepting their offers, and had thus failed properly to exercise its discretion as to costs.
Whilst CPR Part 36 had not been grafted on to the procedural regime for the Tribunal, it is consistent with the “overriding objective” in rule 2, and implicit in paragraph 12 of the Practice Directions, that the making of such offers is supported in the Tribunal, as it is in civil proceedings.
Both in civil litigation and in disputes before the Tribunal there is a sound basis in “policy” for encouraging claimants to make offers of settlement, and, in appropriate cases, for costs to be awarded to them on the indemnity basis when such an offer is not accepted and is then bettered “at trial”.
To set up a test that a “defendant” must have acted “unreasonably” if a claimant is to be awarded costs on the indemnity basis would remove the incentive for claimants to make offers to settle, creating an imbalance between the parties, and contrary to the “overriding objective”.
The Tribunal had misdirected itself on the concept – in paragraph 12.4 of the Practice Directions – of costs being awarded on the indemnity basis only “exceptionally”. In Dymocks Franchise Systems (NSW) Pty. Ltd. v Todd [2004] UKPC 39 Lord Brown of Eaton-under-Heywood said (at paragraph 25(1)) that
“[although] costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense”
“[the] ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order”.
In a claim before the Tribunal, it would be sufficiently unusual to be regarded as “exceptional” that a claimant had made an offer complying with the requirements in Trustees of Stokes Pension Fund v Western Power (South West) Plc [2005] 1 WLR 3595, stating his intention to seek indemnity costs if the offer was not accepted, and then beat it “at trial”.
This was not to say that in such circumstances costs must always be awarded on the indemnity basis. It would still be necessary for the Tribunal to take into account all the circumstances, and to satisfy itself that its decision would further the “overriding objective”.
The Tribunal’s error here was to think that in the absence of unreasonable conduct an award of costs on the indemnity basis could not be justified.
The decision in Kiam v MGN Ltd. (No.2)] [2002] EWCA Civ 66 does not support the Tribunal’s conclusion that, if costs were to be awarded on the indemnity basis, the claimant’s offer had to have been “unreasonably” refused (see the judgment of Simon Brown L.J., in particular at paragraphs 3, 5, 7, 8, 12 and 13; his judgment in McPhilemy v Times Newspapers Ltd. (No.2) [2002] 1 WLR 934, at paragraph 28; and the judgment of Sir Geoffrey Vos C. in OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465, at paragraph 18).
If a claimant does better at trial than his offer to settle, he ought generally to be awarded his costs on the indemnity basis, and that this is conducive to the making of such offers and the settlement of cases.
The court did not doubt the observation made by Kay L.J. in Reid Minty v Taylor [2001] EWCA Civ 1723 (at paragraph 37) that:
“[the] approach of the Civil Procedure Rules is a relatively simple one: namely, if one party has made a real effort to find a reasonable solution to the proceedings and the other party has resisted that sensible approach, then the latter puts himself at risk that the order for costs may be on an indemnity basis”.
As Simon Brown L.J. said in Kiam (at paragraph 8):
“8. If the claimant thought that, even if he were to make and then beat an offer, he was going to get no more than his costs on the standard basis, why would he make it? … His position is, in short, quite different from that of the defendant who plainly has every incentive to make a settlement offer … irrespective of the basis on which any costs order will be made.”
Mr Mallalieu’s essential argument was:
Where a claimant makes an admissible offer to settle and the defendant does not accept that offer, the case goes to trial and the claimant equals or betters the offer, then, absent other relevant factors, justice will commonly require that the claimant is awarded costs on the indemnity basis for the period following the expiry of the relevant offer.
For TfL, Mr Munro submitted that the Tribunal’s approach was impeccable. In most cases before the Tribunal it would only be “unreasonable” behaviour that would be so out of the norm as “exceptionally” to justify an award of costs on the indemnity basis.
In this case the well-established principles governing indemnity costs described by Coulson J., as he then was, in The Governors and Company of the Bank of Ireland v Watts Group Plc [2017] EWHC 2472 (TCC) (at paragraphs 5 to 9) applied. One of those principles is that indemnity costs are appropriate where the conduct of a paying party is “unreasonable to a high degree” and “not … merely wrong or misguided in hindsight” – as Simon Brown L.J. put it in Kiam, (in paragraph 12).
Simon Brown L.J. went on to say (at paragraph 13) that:
“[it] is very important that the Reid Minty case … should not be understood and applied for all the world as if under the Civil Procedure Rules it is now generally appropriate to condemn in indemnity costs those who decline reasonable settlement offers”
(see also the judgment of Teare J. in Shackleton and Associates Ltd. v Shamsi and others [2017] 2 Costs L.O. 169, at paragraph 27).
In this case, Mr Munro submitted, TfL’s refusal of the claimants’ offers was not unreasonable, and did not justify an order for costs on the indemnity basis.
I cannot accept Mr Mallalieu’s argument that the approach adopted by the Tribunal in determining the application for costs was wrong in principle.
In an appeal such as this, where the Tribunal’s exercise of its discretion in making an award of costs under the Rules and the Practice Directions is challenged, the court should not interfere with the Tribunal’s decision unless the approach it has adopted was wrong in some obvious respect. Here it was not.
The Tribunal’s discretion as to costs is a deliberately broad discretion, exercisable in a wide variety of proceedings. The Rules do not contain provisions corresponding to those in the self-contained procedure in CPR Part 36, “Offers to Settle”, including the provisions for “Costs consequences following judgment” in CPR 36.17. If it had been thought necessary or desirable to import the provisions of CPR Part 36 into the Rules, or to insert into the procedural framework of the Tribunal a more refined code for determining applications for costs where offers to settle have been made by one party or the other before the hearing, this could easily have been done. It was not done – either when the Rules were originally made or when they were amended in 2013.
Rule 10 indicates the circumstances in which the Tribunal “may make an order for costs …” (rule 10(1)). Paragraph 12.2 of the Practice Directions emphasizes that “[costs] are in the discretion of the Tribunal”. Although it says that “… the discretion will usually be exercised in accordance with the principles applied in the High Court and county courts”, and is framed in terms similar to those of CPR 44.2, “Court’s discretion as to costs”, it does not incorporate into the regime for awards of costs in the Tribunal the entire procedural scheme for awards of costs in civil proceedings. It confirms that “the Tribunal will have regard to all the circumstances, including the conduct of the parties … and admissible offers to settle”, and that a party’s conduct will include “conduct during and before the proceedings” and “whether a party has acted reasonably in pursuing or contesting an issue” and “the manner in which a party has conducted their case”. Paragraph 12.4, which deals specifically with awards of costs being made either on the standard basis or on the indemnity basis, is also in very general terms. It does not lay down any fixed principles for making an award of costs on one basis or the other, beyond stating the Tribunal will “normally award costs on the standard basis” but that “[exceptionally] the Tribunal may award costs on the indemnity basis”. It thus accepts that an award of costs on the indemnity basis is an available option. But it does not set criteria to distinguish the normal case from the exceptional. This is left for the Tribunal to judge, in the light of the particular circumstances of the case before it. Paragraph 12.7, which deals specifically with offers to settle, while stating that “[if] requested by a party to do so, the Judge or Member may … consider the offer, when considering the question of the costs of the proceedings”, does not prescribe any particular approach to that task.
The essential complaint here is that the Tribunal misdirected itself by adopting a “test” of “unreasonableness”, or “unreasonable conduct”, in determining whether, “exceptionally”, it should make an award of costs on the indemnity basis. The complaint is not, and could not be, that the Tribunal was wrong to ask itself whether there was some exceptional feature in the case that would justify such a decision. It directed itself appropriately, in the light of the guidance in paragraph 12.4 of the Practice Directions, that “indemnity costs are only awarded in exceptional circumstances” (paragraph 139 of the “Costs Addendum”). It plainly understood that a decision to award costs on the indemnity basis lay within its discretion, but that for such a decision to be made there would generally have to be something “exceptional” to warrant it. The question for us, therefore, is whether it fell into error in the approach it took when considering whether the circumstances in this case were “exceptional”, such as justify costs being awarded on the indemnity basis.
I cannot accept that the Tribunal erred in that way. It rightly put to one side the submission made on behalf of the claimants that they had been “forced” to put their offers in the way they did (paragraph 140). And it rightly rejected the suggestion that the claimants could oblige it to award costs on the indemnity basis by stating in those offers their intention to apply for costs on that basis. As it understood, the offers made by the claimants did not override its discretion as to costs (paragraph 142). It had regard to the particular circumstances of this case, and it concentrated on the conduct of the parties. It was entitled to do this. Indeed, if it had not done so it would have been departing from the guidance in paragraph 12.2 of the Practice Directions.
When the Tribunal said that, to succeed in their application for indemnity costs, the claimants “would need to satisfy [it] that TfL had acted unreasonably in not accepting the offers” (paragraph 143), it was not seeking to formulate a “test” to be applied in determining such applications. It was simply asking itself whether TfL’s conduct in these proceedings – in particular, its conduct in not accepting the claimants’ offers to settle – was, in all the circumstances, such as to take the case out of the normal and into the exceptional, and to justify costs being awarded “exceptionally” on the indemnity basis. Had TfL’s conduct been so lacking in reasonable good sense as to have that result? The Tribunal’s answer was that it had not. It followed that this was not a case that fell into the category of the exceptional, and not a case, therefore, in which an award of costs on the indemnity basis would generally be justified. As an approach to determining the basis upon which costs should be awarded, this, in my view, was sound. It was not wrong in principle.
The Tribunal was right to conclude that the claimants were attempting, in effect, to introduce into the procedural regime of the Tribunal a procedure equivalent to that in CPR Part 36. The significant point here was not whether the claimants were “offering any concession”. It was whether they were, as the Tribunal said, “purporting to introduce a sanction which the Tribunal’s rules and practice directions do not provide for”.
The Tribunal clearly had in mind that the procedure in CPR Part 36 had not been replicated in the Rules or in the Practice Directions. As it said, parties to a reference are not free “unilaterally to appropriate the much more elaborate carrot and stick regime provided by CPR Part 36”. This does not betray a flawed approach. The fact that the claimants’ offers were made, on both occasions, in a form modelled on a Part 36 offer in civil proceedings did not constrain the Tribunal to adopt the Part 36 procedure in determining the basis upon which costs should be awarded.
As Mr Munro submitted, however, the absence in the Rules and the Practice Directions of a procedure for making offers to settle under a scheme equivalent to CPR Part 36 does not render a claimant’s offer futile. A timely and realistic offer by a claimant can bring about a sensible settlement, with – potentially – considerable saving in costs on both sides. For the claimant, the making of such an offer, if it is accepted, can lead to a successful outcome for him, which avoids the risk, uncertainty and delay entailed in pursuing his claim to a hearing. This will still be so in spite of there being no presumption that his costs will be awarded on an indemnity basis if his offer is not accepted and he succeeds in bettering it after the hearing.
Finally here, I do not think that the authorities to which counsel referred, though they illustrate principles that apply in civil litigation, cast any doubt on the lawfulness of the approach adopted by the Tribunal in this case, under the Rules and the Practice Directions. The Tribunal’s approach, in the procedural context relevant to the costs decision that it was required to make, was, in my view, appropriate and lawful.
Was the Tribunal wrong to find that TfL had not acted “unreasonably”?
Mr Mallalieu’s second and alternative argument was that in any event the circumstances of this case made it necessary for the Tribunal to award costs on the indemnity basis. Even if it could only make an award of costs on the indemnity basis if TfL had acted “unreasonably” in not accepting the claimants’ offers, it had not exercised its discretion as to costs as it should – because TfL plainly had indeed acted unreasonably (see, for example, the judgment of Nugee J. in Bastionspark LLP v Commissioners for HMRC [2016] UKUT 425 (TCC), (at paragraph 20).
Mr Mallalieu submitted that the Tribunal had wrongly equated unreasonableness with the pursuit of a case that was “patently hopeless” and had not been “argued perfectly properly” (paragraph 143 of the “Costs Addendum”). The nature of the unreasonableness here was different. The claimants’ offers were indeed a “concession” – for they represented a lower level of compensation than had been claimed. As for the “sanction”, the claimants were merely asserting their right to seek indemnity costs under the Rules and the Practice Directions. TfL had not accepted reasonable offers, which would have required only modest compensation to be paid to the claimants. The consequence was that the claims went to a hearing, with a far greater burden in costs on both sides. The offers had been made well before the hearing, and were not accepted at that stage. They had been repeated several months later, but once again not accepted. The fact that TfL had been given a second chance to accept them only reinforced the conclusion that an award of costs on the indemnity basis was justified (see the judgment of David Richards J., as he then was, in Franks v Sinclair [2006] EWHC 3656 (Ch), at paragraph 28). The Tribunal saw nothing in TfL’s conduct “to attract any sort of sanction or mark of disapproval”. But this, Mr Mallalieu submitted, was not a prerequisite for an award of costs on the indemnity basis (see the judgment of May L.J. in Reid Minty, at paragraphs 9 and 27 to 32). The Tribunal had also overlooked points made in the claimants’ written submissions dated 20 April 2016 and 4 May 2016 – in particular, TfL’s refusal to make offers of its own and its reliance on a noise assessment prepared in 2010, which had contained many mistakes.
Mr Munro submitted that the Tribunal’s conclusions were unimpeachable. TfL’s conduct in the proceedings had been reasonable throughout. In each of these claims the diminution in value contended for had been modest – no more than 5% – which could have been regarded as “de minimis”. The compensation obtained was only about £200,000. The claims had all been funded by conditional fee agreements with a 100% success fee. The total costs claimed by the claimants was £1,350,000. The argument for indemnity costs was, in truth, an attempt to preclude those costs being reduced as disproportionate – which plainly they were.
Again, I cannot accept Mallalieu’s submissions. It is not for this court to revisit the Tribunal’s exercise of its discretion as to costs by going behind the conclusions it reached, unless those conclusions are demonstrably unsound. In this case they are not demonstrably unsound. Once it is accepted that the Tribunal’s approach was, in principle, appropriate and lawful, as in my view it was, I cannot see how it can be suggested that the outcome should have been different.
Having heard the claims and formed its view on the strength of the evidence and submissions on either side, the Tribunal was in the best position to judge whether TfL had conducted itself unreasonably. None of its conclusions on TfL’s case and conduct can be criticized. They were all within the scope of conclusions it could properly reach. It was entitled to conclude, as it did, that TfL’s case was “not patently hopeless”, and that the case had been “argued perfectly properly” – relevant considerations in judging whether TfL had behaved unreasonably. It was also entitled to conclude that “TfL’s general conduct of the references” was not such as to “attract any sort of sanction or mark of disapproval” (paragraph 143 of the “Costs Addendum”). It did not accept the contention that TfL’s conduct had been unreasonable, or that it had acted unreasonably in not accepting the claimants’ offers. It acknowledged that TfL “might be said to have taken an additional risk in refusing to accept the offers …”. But to take such a risk was not, in the circumstances, unreasonable. Given the scale of these claims and the nature of the matters in dispute, one can well see why the Tribunal took that view. Nor did it accept that TfL should have made offers of its own. It obviously rejected the contention that TfL could not reasonably contest the claims with the evidence it had produced and its counsel’s submissions at the hearing. When dealing with the claimants’ application for costs, it will have had well in mind the strength and content of the evidence on either side, including the expert evidence on noise – which is not a matter for this court to consider afresh.
I therefore reject the argument that the Tribunal was wrong to conclude as it did.
Part 36 PD47 Requests for a detailed assessment hearing Costs budgeting Legal aid cases Court of Protection Costs orders against legally aided parties and/or the Lord Chancellor CPR 36.17 Success fees Criminal proceedings Misconduct Interim payments QOCS Indemnity basis costs Criminal fees appeals CFA Special circumstances Good reason to depart Final costs certificates Indemnity Costs CPR 38.6 CPR 44.11 CPR 44.2(8) Solicitor and client assessments Solicitor and client CPR 36.17(4) Qualified one way costs shifting Court of Protection cases CPR 36 Legal aid Interest Hourly rates Detailed assessment Applications in detailed assessment proceedings Standard basis Form and layout of paper bills Claimant's Part 36 Offer Interest on costs Payments on account Relief from sanctions Part 36 offer Costs of detailed assessment proceedings Fixed costs Proportionality Issue based costs order
Beaten offers, Indemnity basis costs, Part 36, Upper tribunal
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