Nash (t/a Elite Carcraft) v Daniel & Anor

The usual costs order is assessment on the standard basis. Indemnity costs require circumstances taking the case outside the norm, including conduct warranting disapproval, and the court must consider all the circumstances and proportionality. A Part 36 sanction depends on a compliant offer. Where interest is not included, the offer must state whether interest is offered, its amount, rate and relevant period under the Civil Procedure Rules. An ambiguous or non-compliant offer cannot found the sanction, and a settlement which does not beat the offer cannot trigger it. Where a costs judge has been seriously misled on material matters, the appellate court may extend time, grant permission, set aside the exercise of discretion and exercise the discretion afresh.

A contractual claim concerning the construction of a car was settled after the county court had determined liability and breach. The settlement comprised an additional payment of £6,000, including interest, on top of £2,500 already paid, with the defendant agreeing to pay the costs. The remaining issue was whether those costs should be assessed on the standard or indemnity basis.

His Honour Judge J Hodson ordered indemnity costs, relying partly on an alleged Part 36 offer and the defendants’ conduct. The first defendant sought permission to appeal out of time, arguing that the judge had been materially misled about the offer’s terms and effect. The central issues were whether permission and an extension should be granted, whether the Part 36 sanction applied, and what costs order should be made.

Appeal allowed. Lord Justice Waller gave the leading judgment, with Lady Justice Hale agreeing.

1. Permission and extension of time. The lower court had been seriously misled about material matters on which it was asked to exercise its costs discretion, particularly the validity and effect of the alleged Part 36 offer. The defendant’s solicitors had been at fault in failing earlier to appreciate the significance of an indemnity costs order, but that fault was comparatively insignificant. The claimant could not show prejudice from the delay. Permission to appeal was therefore granted and time extended.
2. Part 36 offer. Under Part 36 of the Civil Procedure Rules, an offer which is not inclusive of interest must state whether interest is offered and, if so, the amount, rate and period. The offer of 8 November 1999 was ambiguous as to whether interest was included and did not comply with the applicable requirements. In any event, the agreed inclusive total of £8,500 did not beat an offer for an additional £8,000, together with the £2,500 already paid. The Part 36 indemnity-costs sanction was therefore unavailable.
3. Indemnity costs. Standard-basis costs are the norm. Indemnity costs require circumstances taking the case outside the norm, including conduct deserving a mark of disapproval. The court must consider all the circumstances, including the conduct of all parties, partial success, admissible offers and proportionality. Proportionality is disregarded on the indemnity basis, making it particularly important in a case where standard-basis costs are appropriate.
4. Fresh discretion. Since the original order was founded on a materially misleading presentation, it could not stand. Exercising the discretion afresh, the Court of Appeal was not sufficiently persuaded that the case justified indemnity costs. Costs below were ordered to be assessed on the standard basis.

The claimant was ordered to pay the first defendant’s costs of the appeal, subject to detailed assessment and the applicable community legal service costs provisions.

• Court of Appeal (Civil Division): On 9 July 2002, the appeal was allowed. The indemnity costs order was replaced by an order for assessment on the standard basis. The claimant was ordered to pay the first defendant’s appeal costs. [2002] EWCA Civ 1146
• Wolverhampton County Court: His Honour Judge J Hodson ordered the defendants’ costs to be assessed on the indemnity basis following settlement. No separate citation is stated in the judgment.