England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION
ON APPEAL FROM Plymouth County Court
His Honour Judge Salomonsen
0LV11986

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th October 2013

Lady Justice Macur DBE :

1. The Appellant (Defendant) and Respondent (Claimant) were each given permission to appeal an order for costs made by HHJ Salomonsen on 19 December, 2012 without an oral hearing. Each contends that the Judge was wrong in the exercise of his discretion or evaluation in determining that neither succeeded in securing the entirety of their costs, or more of their costs, from the other party.
2. The facts of the substantive case are of significantly less importance than the chronology of the proceedings. Neither Appellant nor Respondent seek to overturn the judge's findings leading to him awarding the Claimant in the Court below a total sum equivalent to one third of their original claim, namely £9,510 and interest in the sum of £10,086.68 and dismissing the Respondent's counter claim for compensation in accordance with regulation 17 of the Commercial Agents (Council Directive) Regulations 1993.
3. The relevant parts of the order for costs made were:

"4.1 The defendant shall pay to the claimant costs relating to the counterclaim to be subject to a detailed assessment unless agreed;

4.2 The defendant shall pay to the claimant its costs relating to the claim for the period 1 April 2010 to 19 September 2011.

4.3 The claimant shall pay to the defendant his costs relating to the period 20 September 2011 to 13 July 2012.

4.4 The defendant shall pay to the claimant 20 % of its costs relating to the claim on an indemnity basis for the period 13 July 2012 to 19 December 2012…

4.5 The defendant shall make a payment on account …..in the sum of £2000 ..

4. The Appellant appeals paragraphs 4.2, 4.4 and 4.5 of the order.

The Respondent appeals paragraphs 4.2, 4.3 and 4.4 of the order.

5. The relevant chronology which provides the context for the order is as follows:

28.8.09: Demand made of defendant for payment.

Dec – Mar: Defendant's offers of pro rata payment in various amounts of £9,000 and below refused.

1.4.10: Claim seeking £28,530.

19.5.10: Defence and Counterclaim.

20.7.10: Reply and Defence to Counterclaim.

19.8.11: Defendant's Calderbank offer open for 21 days, £9,500 plus costs on standard basis payable in thirty six instalments.

25.8.11: Bare rejection.

21.9.11: Defendant's offer, £16,000 inclusive of costs payable over 5 years

23.9.11: Bare rejection

29.6.12: Claimant's Part 36 offer: £9510, inclusive of interest.

29.6.12: Defendant's request for confirmation as to "what [Claimant's] costs are in order that we may properly consider the offer made."

10/11.12.12: Hearing of claim and counterclaim

19.12.12: Hearing of costs application.

6. The practice in relation to determination of costs in this case is covered by Parts 36 and 44 of the Civil Procedure Rules 1998.
7. Patently, the judge utilises the chronology in consideration of his discretion pursuant to CPR 44.3 and evaluation in consideration of just outcome pursuant to CPR 36.14 This is apparent from the judgment given and order made. Patently, he directs himself to the relevant civil procedure rules and had regard to the arguments of the parties.
8. Each side claims to be the "successful party" on the claim. The claimant because it recovered part restitution of a "disturbance payment" made to the defendant. The defendant because he had attempted throughout to negotiate a pro rata settlement as was ultimately upheld to be the correct approach in judgment. In this way both criticise paragraph 4.2 of the order. The claimant because it is restricted in time; the defendant because it is made at all.
9. Further, and in broad terms, the Appellant argues that the judge was "illogical" in his approach and the Respondent argues that he was unduly influenced by one feature to the exclusion of other relevant considerations. In this fashion they seek to surmount the hurdle of CPR 52.11(3) (a) - that is, to satisfy this court that "the decision of the lower court was wrong".
10. The judge clearly found the claimant "on the face of it" to be the successful party. In that the defendant had failed to offer a sufficient amount prior to proceedings to meet the contractual demand and necessitated the claimant to issue a claim, he cannot reasonably be criticised in so doing. In these circumstances it is difficult for the Appellant to argue against paragraph 4.2.
11. However, quite apart from any procedural irregularity in doing so, bearing in mind the directive in CPR 44.3 (4), I regard it to be entirely unrealistic in the context of the circumstances of this case as illustrated by the chronology that the Respondent should expect the court to adopt a blunt approach of "winner [successful party] takes all" in regard to the costs.
12. The judge identified the "Calderbank offer" as a significant event and consequently a relevant date in the proceedings. It is hardly surprising he did so in the circumstances of the outcome of this case. In my view he was entitled to give considerable weight to the fact of an entirely realistic offer in monetary terms.
13. Accepting Ms Muth's reasons to distinguish the "Calderbank" and Part 36 offer on the basis of instalment payments over a significant period, it is the claimant's "robust" approach to this offer and also the subsequent offer of £16,000 made on 21 September 2011, which I interpret from the context to mean peremptory, dismissive and un co-operative, that is deserving of opprobrium in the assessment of "conduct". The claimant did not indicate the reason why the offers were not acceptable. Ms Muth's argument that it is implicit in the one sentence letters of rejection is an unsatisfactory solution.
14. Ms Muth did not claim that the judge had fallen into error of law or had applied wrong principle in this exercise of cost adjudication but argued that he "failed to take into account all factors relevant to his discretion and accorded insufficient weight" to those in favour of the Respondent. I consider this submission is absent detail or reason. She was unable to identify that factor which the judge had omitted or to justify why he was obliged to accord greater weight to those which he had included save to aver that he had placed too much emphasis upon the monetary value of the Calderbank offer . She attempted to make good this lacuna by reference to paragraphs of fact specific authorities where greater weight had been placed on one factor or another. However, this will not and did not supply the basis of her argument that the judge "had exceeded the generous ambit within which a reasonable disagreement is possible".
15. The judge obviously considered the close proximity of the monetary value of the Calderbank offer, and others made by the Appellant in an attempt to negotiate settlement of the claim in accordance with Part 44.3(4). He was fully entitled to do so. In doing so and having regard to outcome, he would implicitly have regard to the extent that the Appellant had been reasonable in the manner of his defence of the whole claim and explicitly referred to the obdurate response of the Respondent. His award of costs to the Appellant for the period September 2011 to July 2012 underlines the positive evaluation he made of the balance he had to draw. In my view it is unassailable on appeal.
16. My Dyson, on behalf of the Appellant, latches on to the significance accorded to the "Calderbank offer" to argue that it is illogical for the judge to have made any adverse costs order against him subsequent to that date, whatever the status of the Part 36 offer. This argument depends upon Mr Dyson's interpretation of the judgment to the effect that the Claimant should have accepted the "Calderbank" offer and settled the case in August 2011.
17. Unfortunately for him, the force of this argument is depleted by the actual words of the judgment and the outcome of the case. The judge finds, rightly in my opinion, that "the action could and should have settled at a much earlier stage for one third of the claim namely for the amount which was the award following the three day trial". He does not say, contrary to Mr Dyson's assertion that the claimant should have accepted the Calderbank offer in August 2011. He may have thought it on a personal level, but it would be impossible for him to have said so other than as an aside, since the Calderbank offer was exceeded, and the damages and interest awarded bettered the claimant's Part 36 offer.
18. Even if the judge had made such an observation explicitly in his judgment the Appellant would not have been relieved of his obligation to consider the Part 36 offer made in the course of the proceedings. A Part 36 offer is a significant factor in any action, requiring the parties to focus upon the issues, appraise expectations and draw back from the fray in order to avoid adverse cost and interest implications and, in so doing, to give due regard to CPR 1.3 and 1.4. It is particularly important in an action of relatively low monetary worth and will require careful scrutiny.
19. Obviously a 'successful' Part 36 offer in terms of CPR 36.14(1) should be accorded all due weight by the courts and in many cases will be decisive on the question of costs. That said, the court is obliged to consider whether the costs consequences provided by 36.14 (2) or (3) – as applicable – should follow or would be "unjust".
20. There is no doubt that the Part 36 offer made by the claimant was "at least as advantageous" as the judgment handed down. The judge found that "the action should have settled at this stage". The Appellant's personal circumstances at that time are prayed in aid by Mr Dyson but do not mitigate the effect of the Part 36 offer. What was a relevant consideration however, pursuant to CPR 36.14. (4) (c) and (d) was "a lack of clarification of costs". On the same day as receiving the Part 36 offer the Appellant's solicitors reasonably requested the claimant "please confirm what your costs are in order that we may properly consider the offer made." No response was made at any time prior to trial. Ms Muth's suggestion that the Appellant could have repeated his request is a poor attempt to shift responsibility from where it lies.
21. The judge in the concluding paragraph of his judgment is obviously alive to the significance of the Part 36 offer but expresses his "worries about the position which appertained at that stage." He had regard to the whole of the litigation history and "for the reasons [he had] already identified (found) it would be unjust for the claimant to recover all of its costs thereafter."
22. There is no merit in Mr Dyson's argument that the judge should have regarded the terms of CPR 36.14 (2) and (3) to mean that he must consider that his discretion as to costs at this stage was fettered by a bi-polar evaluation of "unjust" to mean that the successful party receives their costs on an indemnity basis or not and thereby fell into error by apportioning costs in percentage terms and on an indemnity basis for the relevant period. The phrase "unless it considers it unjust to do so" in CPR 36.14 (2) and (3) bear the obvious interpretation of "unless and to the extent of". The imposition of an indemnity basis to the award of costs gives credence to the significance of the effect of the Part 36 offer and is not a value judgment of the whole of the Appellant's litigation conduct in the lower court.
23. Equally, Ms Muth's attempt to criticise the judge's renewed reliance upon the claimant's questionable litigation conduct, including in relation to the "Calderbank offer", to mitigate the effect of the cost consequences of a successful Part 36 offer , fails to recognise those unfortunate features of the claimant's litigation conduct that endured throughout that amount to brinkmanship , professional discourtesy or a failure to appreciate the duty of each party to help the court to further the overriding objective of the procedural code . It was inevitable that the judge should have regard to the whole litigation history in considering CPR 36.14 (4) (a) and (b) -the terms and stage in the proceedings when the Part 36 offer was made- and place the offer in the context of those previously made. He was not obliged to isolate his consideration to events from the time of the making of the offer.
24. Both Appellant and Respondent have attempted to mount their appeal and cross appeal upon their analysis and interpretation of each part of paragraph 4 of the order, which relate to different periods of the proceedings. They would have had greater difficulty in attacking a proportionate award of costs on a percentage basis. In this regard I note Ms Muth's concession in oral argument in the lower court that the claimant should have one third of its costs up to the date of Part 36 offer, and the whole thereafter. However, the judge felt himself prevented from doing so since he had "no knowledge of the amount of costs involved on either part."
25. For myself, I do not see lack of costs schedules to be a barrier to a proportionate and/or percentage order for costs per se, since an order for detailed assessment in the absence of agreement would provide further overview. Nevertheless, an alternative and more "attractive" type of order for costs does not undermine the order made. The judge's reasoning is clear. His judgment is not appealable. I would dismiss both appeal and cross appeal.
26. I do not conclude without expressing regret that neither party appears to have observed the single judge's written comments on 13 February 2013 to the effect that "Although this case does not fall within the automatic mediation scheme, the dispute is suitable for mediation and the parties are urged to mediate". On the contrary, rather than the Respondent "taking [the order for costs] on the chin" as Ms Muth said originally it was disposed to do, it launched a cross appeal. The additional costs incurred will be the easier to assimilate by the Respondent than the Appellant but were, if my Lady and my Lord agree that the appeal and cross appeal should be dismissed, unnecessary and, no doubt, unwelcome expenditure for both.

Lord Justice Ryder:

27. I agree.

Lady Justice Arden:

28. I agree.