COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE BRADBURY)
B e f o r e :
(The Lord Woolf of Barnes)
LORD JUSTICE WALLER
LORD JUSTICE LAWS
|EXCELSIOR COMMERCIAL & INDUSTRIAL HOLDINGS LIMITED||Appellant/Claimant|
|(1) SALISBURY HAMMER ASPDEN & JOHNSON (A Firm)|
|(5) BETESH & COMPANY (A firm)|
|[and formerly other parties]||Respondents/Defendants|
Smith Bernal, 190 Fleet Street, London EC4A 2HD
Telephone 020 7421 4040
Official Shorthand Writers to the Court)
upon Tyne NE1 3DX) appeared on behalf of THE APPELLANT
MR ALASTAIR HAMMERTON (instructed by Messrs Beachcroft & Wansbrough Manchester M2 7LP) appeared on behalf of THE FIRST RESPONDENT
MR ROGER STEWART QC and MR GRAHAM CHAPMAN (instructed by Messrs Reynolds Porter Chamberlain, London WC1V 7HA) appeared on behalf of THE SECOND RESPONDENT
Crown Copyright ©
Wednesday 12 June 2002
The Argument on the Appeal
Partial Orders for Costs
Indemnity Orders for Costs
"44.3(1) The court has discretion as to --
(a) whether costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to be paid.
(2) If the court decides to make an order about costs --
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.
(4) In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including --
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 3).
(Part 36 contains further provisions about how the court's discretion is to be exercised where a payment into court or an offer to settle is made under that Part.)
(5) The conduct of the parties includes --
(a) conduct before, as well as during, the proceedings, and in particular the extent to which the parties followed any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.
(6) The orders which the court may make under this rule include an order that a party must pay --
(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date, including a date before judgment.
".... the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount."
"(1) This rule applies where at trial a claimant --
(a) fails to better a Part 36 payment; or
(b) fails to obtain a judgment which is more advantageous than a defendant's Part 36 offer.
(2) Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court."
"I have heard nothing in the submissions about costs to justify, in my mind, any substantial variation of the general rule, which is that the unsuccessful party will be ordered to pay the costs of the successful party.
Plainly there could be really nothing to be said in relation to the costs sought by Salisbury [the first defendant]. They are entitled to their costs on a standard basis, certainly to the 8th June, and I am satisfied in the circumstances of this case that they are justified in seeking an order for costs on an indemnity basis from the 8th June, and I make that order."
"In relation to Betesh, I am satisfied that, notwithstanding the areas of negotiation in relation to case management that have been brought to my attention, that it is still appropriate to make an order that the claimant pay the costs of Betesh on a standard basis ...."
".... I have seen and heard nothing to suggest that I should make any different order than that which I made in relation to Salisbury. So they too will be entitled to their costs on an indemnity basis from the 8th June."
"I can tell you the circumstance I had in mind is that from the 8th June the claimants were aware of the payment into court of £100,000."
Mr Davidson says that, in view of that statement, the judge was making the order on the basis of the payment into court.
"31. Thus, in my view, the letter of 3 December 1999 may be rather more persuasive than the letter of 1 September 1999 -- although I emphasise that the court has to take all relevant circumstances into account.
32. There will be many cases in which, although the defendant asserts a strong case throughout and eventually wins, the court will not regard the claimant's conduct of the litigation as unreasonable and will not be persuaded to award the defendant indemnity costs. There may be others where the conduct of a losing claimant will be regarded in all the circumstances as meriting an order in favour of the defendant of indemnity costs. Offers to settle and their terms will be relevant and, if they come within Pt 36, may, subject to the court's discretion, be determinative."
"12. I for my part, understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight. An indemnity costs order made under Pt 44 (unlike one made under Pt 36) does, I think, carry at least some stigma. It is of its nature penal rather than exhortatory. The indemnity costs order made on the principal appeal in McPhilemy's case was certainly of that character. We held ( 4 All ER 361 at ) that the appeal involved an abuse of process on the footing that 'to have permitted the defendants to argue their case on perversity must inevitably have brought the administration of justice into disrepute among right-thinking people'.
13. It follows from all this that in my judgment it will be a rare case indeed where the refusal of a settlement offer will attract under Pt 44 not merely an adverse order for costs, but an order on an indemnity rather than standard basis. Take this very case. No encouragement in the way of an expectation of indemnity costs was required for him to make his offer to accept £75,000; its object was to reduce the damages to that level. Where, as here, one member of the court considered the jury's award 'wholly excessive', and thought that £60,000 would have been the highest sustainable award, it seems to me quite impossible to regard the appellant's refusal to accept the £75,000 offer as unreasonable, let alone unreasonable to so pronounced a degree as to mention an award of indemnity costs. It is very important that the Reid Minty case should not be understood and applied for all the world as if under the CPR it is now generally appropriate to condemn in indemnity costs those who decline reasonable settlement offers."
"As the very word 'standard' implies, this will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted. But I do not think that this will necessarily be so in every case."