Neutral Citation Number: [2011] EWCA Civ 798
Case No: B2/2010/2056
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LEEDS COUNTY COURT
TECHNOLOGY AND CONSTRUCTION COURT LIST
HIS HONOUR JUDGE COCKROFT
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 08/07/2011
Before:

LORD JUSTICE RIX
LORD JUSTICE LLOYD
and
MR JUSTICE LEWISON
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Between:

	(1) KEITH LOWE
(2) ANN LOWE	Claimants
Appellants	
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	W MACHELL JOINERY LTD	Defendant
Respondent	

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Aidan Casey (instructed by Chadwick Lawrence) for the Appellants
Lisa Linklater (instructed by Lee & Priestley) for the Respondent

Hearing date: 6 April 2011
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Judgment

Lord Justice Lloyd : 
1.	The court has just handed down its judgment in this appeal.  This is a supplementary judgment of the court on consequential matters, above all on costs.
2.	The parties disagreed as to the order which should be made as to costs in the light of the appeal being allowed.  We received written submissions on the point.
3.	The court is well aware that the costs of these proceedings have come to outweigh, at least in financial terms, the matter directly in issue, namely the cost price paid for the staircase.  That was always predictable, and certainly became the reality with a four day trial in the county court.
4.	In the court below, the claimants having failed, they were ordered to pay the costs of the claim, and those costs were to be assessed on the indemnity basis.  
5.	The submissions made to us cover an even wider range of possibilities than is usually the case.  Thus the claimants argued that the costs order below should be set aside, and instead they should be awarded their costs below (or at least 2/3 of those costs), and they should also have their costs of the appeal.  For the respondent Ms Linklater submitted that the order for costs below should not be disturbed, and that the respondent, though unsuccessful on the appeal, should have its costs of the appeal.
6.	Ms Linklater’s submission as to the costs of the appeal is bold.  The fact is that the appellants have won the appeal, they are the successful party for the purposes of CPR rule 44.3(2), and at first sight they should have their costs against the unsuccessful respondent.  In support of her argument that the normal rule should not only not be followed, but rather should be reversed, Ms Linklater relied essentially on points about the conduct of the case below.  We do not find those points to be of any significance in relation to the costs of the appeal.  I will refer later to their effect in relation to the costs below.  To the contrary, Mr Casey’s argument that the respondent should pay the appellants’ costs of the appeal is supported by a history of offers made without prejudice save as to costs.  None of these on either side was a Part 36 offer as such, but they are properly to be borne in mind under CPR 44.3(4)(c).  In particular, the appellant’s solicitors made an offer on 14 December 2010 which if accepted would have left the respondent significantly better off than it is as a result of our decision on the appeal, and with no order for costs either way, below or on the appeal.
7.	Accordingly we will order that the respondent pay the appellant’s costs of the appeal, to be the subject of detailed assessment if not agreed.
8.	I come to the costs below, where the most salient facts are, first, that, for reasons we have given, the appellant ought to have won the case, but secondly, a good deal of time and effort was devoted to an issue on which the appellants lost, and lost badly, namely their allegation of express terms of the contract, and thirdly the judge took a seriously dim view of the appellants’ conduct both before and during the case, which is no doubt what led him to award indemnity costs against them when they lost the claim.
9.	One factor is whether the appellants did or did not actively run below the point on which they have won on appeal, namely the implied terms under the Sale of Goods Act.  We know that it did not feature in the final oral submissions of counsel for the claimants, because we have a transcript of those.  We know that it was pleaded, since otherwise it would not have been open to the claimants.  Mr Casey does not accept, in his submissions on costs, that it would be right to assume that the point was not live below, even though not focussed on in the concluding oral submissions.
10.	He does accept that there might be grounds, on an issue-based approach, for depriving the appellants of some of their costs, because they lost on the express terms argument.  He suggests a discount to 2/3 of the appellant’s costs below, to be paid by the respondent.  He also seeks to rebut the argument that the critical issue only became part of the particulars of claim at a very late stage.  He points out that the issue was there on the pleadings, albeit in the reply, from a quite early stage, and the amendment to the particulars of claim did no more than regularise the presentation of an issue which had been apparent to both sides from some time before.
11.	Ms Linklater, for her part, took the points which Mr Casey had anticipated, and also relied on the judge’s criticisms of the claimants’ conduct and attitude.  To the extent that she relies on the claimants being said to have been intransigent, that appears to be in part a good point, but it is somewhat undermined by what we now know of the respondent’s attitude to the claimant’s offers during the appeal.
12.	This is a case in which the legitimate ambit of the discretion afforded by the rules to the court determining the question of costs is unusually wide.  A reasonable court could come to the conclusion that the claimant ought to recover most of his costs below, though subject to a discount for the time and money devoted to the issues on which it lost decisively and which took up a lot of court time.  Equally a reasonable court could conclude that the claimant should recover little or no costs, and should even have to pay costs to the unsuccessful defendant, because of the manner in which the case was conducted, because of the costs absorbed by the unsuccessful pursuit of the case on express terms, and because the critical issue only arrived very late in the claimant’s particulars of claim.
13.	On balance, it seems to us that the appropriate order to make is that there should be no order as to the costs below.  In one sense that is hard on the claimants who brought the case and have, in the end, proved successful.   However, we cannot ignore the judge’s comments on the claimants’ conduct nor the fact that a lot of court time and the parties’ money must have been taken up with the wild goose chase of the express terms.  On an issue-based approach, arguably the claimants should not only bear their own costs of that aspect of the case but they should also pay those of the respondent.  All in all it seems to us that this is the appropriate order in the circumstances.  That order balances on the one hand the claimants’ entitlement, at first sight, to their costs having succeeded, in the end, and on the other the allowance in favour of the defendant of the costs of the major and time-consuming issues on which the claimants lost. The latter would not be properly reflected in an order which only disallowed part of the claimant’s costs. It also takes into account, on the one hand, the claimants’ conduct and attitude to the proceedings and, on the other, the defendant’s failure to take up an offer by the claimants, admittedly made during the appeal, but which would have led to a beneficial order for costs as regards both levels of the proceedings.
14.	Accordingly, our order will be as follows:
(1)	The appeal is allowed, and the judge’s order is set aside.
(2)	The Respondent shall pay to the appellant by 22 July 2011 the sum of £18,400 plus interest of £1,104.
(3)	The respondent shall pay the appellant’s costs of the appeal to be assessed in detail if not agreed.  That assessment is to take place in the Senior Courts Costs Office under CPR 47.4 and the Costs PD para 31.1(2).
(4)	There is to be no order as to the costs below.
15.	The respondent sought a stay and set-off of sums payable either way, but that does not arise since there is nothing payable under our order by the appellant to the respondent.