Summit Property Limited v Pitmans (a firm)

Under Civil Procedure Rules Part 44.3, costs following the event is a starting point, not an inflexible rule. In an exceptional case, the court may make issue-based costs orders which reflect success and failure on discrete issues.

A party which succeeds overall may be ordered to pay its opponent’s costs of an issue on which it failed. Such an order does not depend on a finding that the unsuccessful issue was pursued improperly or unreasonably. An appellate court will not interfere with a trial judge’s costs discretion unless it was exercised on a flawed basis, by an error of principle, an improper omission or consideration, or a plainly wrong and perverse conclusion.

Summit Property Limited had brought a claim in contract and negligence against its former solicitors, Pitmans, arising from the solicitors’ conduct of a proposed property purchase. Park J held that Pitmans had breached their retainer, but dismissed the damages claim because Summit would have had to account to a third party for any profit obtained through confidential information.

Although Pitmans succeeded in the action, Park J made an issue-based costs order. Summit was to pay 30 per cent of Pitmans’ costs on the confidentiality issue, while Pitmans were to pay 65 per cent of Summit’s costs on the breach-of-duty issues. Pitmans appealed against that costs order.

The central issue was whether the judge had erred in making a generally successful party pay the other party’s costs of issues on which it had failed.

1. Appeal dismissed. Longmore LJ gave the principal judgment, with Tuckey LJ agreeing. Chadwick LJ also agreed and gave additional reasons. Park J’s issue-based costs order disclosed no error of principle and was not perverse.

2. Civil Procedure Rules Part 44.3 gave the judge a wide discretion. The usual order that costs follow the event remained the starting point, but the rules positively permitted separate orders reflecting success on different discrete issues. In a special and particularly strong case, that discretion could require a party successful in the litigation overall to pay its opponent’s costs of an issue on which it had failed.

3. Neither an order depriving a party of its own costs on a failed issue nor an order requiring it to pay the opponent’s costs on that issue required a finding of improper or unreasonable conduct. Any earlier requirement to that effect under Re Elgindata Ltd (No 2) was no longer applicable after the procedural rules. The court followed the approach in Phonographic Performance Ltd v AIE Rediffusion Music Ltd [1999] 1 WLR 1507 and was bound by Johnsey Estates (1990) Ltd v Secretary of State for the Environment [2001] EWCA Civ 6535.

4. The judge had considered the overlap between the issues and had allowed for general costs which assisted the successful confidentiality defence. His conclusion that neither side was clearly successful on the loss-of-a-chance issue was also open to him.

5. An appellate court must first establish that the exercise of discretion was flawed. It cannot intervene merely because it would have made a different costs order. The order dismissing the appeal included costs, to be assessed if not agreed.

• Court of Appeal (Civil Division): Pitmans’ appeal against the costs order was dismissed: [2001] EWCA Civ 2020.

• High Court of Justice, Chancery Division (Park J): The substantive claim was dismissed, notwithstanding a finding that Pitmans had breached its retainer. The judge made an issue-based costs order. No citation for that decision was stated in the judgment.