England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE ANDREW SMITH)

		A3/2003/1234 Royal Courts of Justice Strand London, WC2
		18 May 2004

1. THE VICE-CHANCELLOR: As I indicated earlier, we dismiss the appeal brought by Banco Vitalicio De Espana. In the proceedings it was the defendant and the claimant was Paul Toomey of Syndicate 2021 as a representative underwriter.
2. The representative underwriter for the reinsurers had claimed that the reinsurance contract should be set aside or avoided for various reasons. He succeeded before Mr Justice Andrew Smith. Banco Vitalicio obtained permission to appeal and appealed, but unsuccessfully. The question now is what should be the basis of the assessment of the costs which the losing appellant accepts that it must pay to the respondent.
3. On 16 January 2004 the respondent made a Part 36 offer which, it contends, was a claimant's offer and therefore attracted the benefit of Rule 36.21. This provides, in effect, that if the claimant's offer is beaten in the result that he will be entitled to costs on an indemnity basis except, as provided by sub-rule (4), where the -

"court will make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so."

Under paragraph (5) it states:

"In considering whether it would be unjust to make the orders referred to in (2) and (3) above, the court will take into account all the circumstances of the case including -

(a) the terms of any Part 36 offer."

The relevant term of this offer was one of £10,000 in addition to the amount to which the unsuccessful appellant was entitled under the order of Mr Justice Andrew Smith. It was not allocated to any particular claim or matters of that nature. It was stated to be a global sum which the offeror was prepared to pay in order to dispose of the appeal.

4. Before us there has been dispute as to whether the reinsurers - who were the original claimants but respondents to the appeal - could be classified as claimants for the purposes of the rule and in relation to the costs of the appeal. We heard interesting argument in relation to that from the respondent, but we heard no argument from the unsuccessful appellant and express no view at all. But we will assume for the purposes of what follows that the respondent can be regarded as a claimant for the purposes of Part 36.
5. In my view, it would be unjust to allow a respondent on the eve of the appeal to up-grade the costs to an indemnity basis from a standard basis by making an offer of so small an amount in relation to the amount at stake. The offer was £10,000; the amount at stake was some £2.8 million. Whether one regards that as derisory or not, it seems to me that it would be unjust to allow the offeror in those circumstances to up-grade the basis on which his costs had been assessed merely by making that offer at the time at which it has been made.
6. We have been referred to a number of cases: Huck v Robson [2002] EWCACiv 398 and Nedlloyd Lines UK Ltd v CEL Group Ltd 2003] EWCA.Civ 1871. Each case depends on its facts. I do not myself derive any help from either of them.
7. I would base my decision purely on the footing that this offer of £10,000, made when it was in relation to potential liability of £2.8 million, would make it unjust to up-grade the basis of the assessment of the costs. I would therefore order costs to be on the standard basis.
8. LORD JUSTICE DYSON: I agree.
9. LORD JUSTICE THOMAS: I also agree.

(Argument re costs of today was addressed to court)

10. THE VICE-CHANCELLOR: Mr Edwardes, you may have your costs of today. It was a hearing and attendance of counsel was required on the one point, the basis of taxation. On that point you have been successful so you should have your costs of today. You should draw up an appropriate order and agree it between you as to how you phrase that set-off and so forth. (An application for permission to appeal was refused.)