Walton v Gardner & Anor

A costs order is discretionary. The Court of Appeal should intervene only for an error of principle, reliance on an irrelevant matter, failure to consider a relevant matter, or plain wrongness. The discretion must reflect the parties’ substantive success, the cases they advanced, and their conduct. A vague or abandoned proposal, materially different from the case at trial, may carry little or no weight. A proposed security arrangement that could not lawfully be implemented cannot be treated as a relevant offer. Late disclosure and inadequate cooperation may justify disallowing the disclosing party’s attributable costs, without requiring a positive costs award to the other side.

The proceedings concerned disputed share transfers, a share allotment, directorships in Mountrail Limited, and a loan said to be secured over the company’s shares and property. The deputy judge rejected substantial parts of the parties’ evidence, but held that Mr Gardner had obtained security for the loan and made a costs order in his favour.

Edward Walton appealed the costs of the action, while Eric Walton and Stephen Greene challenged the allocation of costs on the counterclaim. Permission to appeal was limited to costs. The central issue was whether the deputy judge had exercised his discretion on proper principles.

1. Appellate approach. The Court of Appeal, in a unanimous judgment delivered principally by Lady Justice Arden, held that costs are discretionary and that appellate intervention requires an error of principle, consideration of an irrelevant matter, failure to consider a relevant matter, or a decision that is plainly wrong. The threshold is high.
2. Costs of the action. The deputy judge was entitled to reject the proposed security offer. The offer to procure a charge over Thames House could not lawfully have been implemented under section 330 of the Companies Act 1985. The postscript was not clearly an offer to repay £100,000. It was vague, short-lived, and materially different from the case advanced at trial. The deputy judge therefore was not wrong to give it no costs effect, notwithstanding the general requirement to consider admissible offers outside Part 36.
3. The deputy judge did, however, fail to give proper weight to Mr Gardner’s unsuccessful claim to beneficial ownership of the shares and to his conduct. The court consequently exercised the discretion afresh and reduced his recovery of the action costs to 50 per cent.
4. Counterclaim. Mr Greene had defeated the distinct claims brought against him, but his conduct was not wholly unblemished. He was therefore awarded 50 per cent of his counterclaim costs. The order requiring Edward and Eric Walton to pay 75 per cent of Mr Gardner’s counterclaim costs was upheld because the deputy judge had considered the relevant factors.
5. Tapes and transcripts. Late disclosure and inadequate cooperation justified disallowing Mr Gardner’s costs attributable to the tapes and transcripts. The court declined to award those costs to the Waltons because some work would have been necessary even with timely disclosure. The appeal was allowed and the costs order varied accordingly.

1. Court of Appeal (Civil Division): In [2001] EWCA Civ 1788, the appeal was allowed to the stated extent and the costs order varied.
2. High Court of Justice, Chancery Division: Peter Smith QC, sitting as a deputy judge, ordered Edward Walton to pay Mr Gardner’s costs of the action and ordered the defendants by counterclaim to pay 75 per cent of Mr Gardner’s counterclaim costs.