Gould v Armstrong & Anor

Under the Civil Procedure Rules, the rule that the unsuccessful party pays the successful party’s costs is a starting point, not an overriding principle. The court must consider all the circumstances, including conduct, partial success, the reasonableness of pursuing issues and admissible settlement offers. A party who obtains the net balance may nevertheless receive no costs, or may be ordered to contribute to the other side’s costs, where the circumstances justify that result. An appellate court should not substitute its own discretion for that of the first-instance judge merely because it would have made a different order. If reasons appear inadequate, it should ordinarily seek further explanation.

The claimant brought a building contract claim for £5,575. The defendants counterclaimed £7,891. At trial, the claimant recovered £4,500 and the defendants recovered £3,715.90. The District Judge awarded the claimant £2,000 towards the claim costs and ordered the claimant to pay £5,000 towards the defendants’ counterclaim costs.

On appeal, Judge Overend treated the claimant as the successful party, allowed the appeal and substituted an order that the defendants pay half the assessed costs. The defendants appealed to the Court of Appeal. The central issues were whether Judge Overend was entitled to substitute his own discretion and whether the District Judge’s order was one properly open under the Civil Procedure Rules.

1. Appeal allowed. The costs order made by the District Judge was reinstated. The defendants received their costs of the appeal, summarily assessed at £14,000, and the claimant was ordered to pay the costs of the hearing before Judge Overend, assessed at £3,189.54.
2. The general rule in CPR 44.3 that the unsuccessful party pays the successful party’s costs is not an overriding approach. It is a starting point. CPR 44.3 requires the court to consider all the circumstances, including the parties’ conduct, whether a party succeeded on part of its case, whether it was reasonable to pursue or contest particular issues, and any admissible offer to settle.
3. The District Judge was entitled to treat the litigation as involving special factors. The claim was virtually admitted, most of the preparation concerned the counterclaim, the defendants had succeeded on the principal disputed issues, the claimant had pursued matters that it was open to the judge to regard as unreasonable, and the claimant had advanced an unsupported item for materials. Those matters justified a lump-sum contribution order, rather than a detailed assessment or an order following the net result alone.
4. Judge Overend had been wrong to treat the claimant as the successful party without addressing the special circumstances identified by the District Judge. An appellate court should not replace the first-instance discretion merely because it would have reached a different conclusion. Where reasons appear insufficient, the proper course may be to invite the first-instance judge to provide further explanation, as indicated in English v Emery Reinbold & Strick Ltd [2002] EWCA Civ 605.
5. The court declined to formulate an inflexible general rule for cases where a set-off or counterclaim does not extinguish the claim. The correct approach remains an evaluation of all the circumstances under the Rules.

• Court of Appeal (Civil Division): Gould v Armstrong & Anor [2002] EWCA Civ 1159 allowed the defendants’ appeal and reinstated the District Judge’s costs order.
• County Court: District Judge Turner awarded the claimant £2,000 towards the claim costs and ordered the claimant to pay £5,000 towards the defendants’ counterclaim costs.
• County Court appeal: Judge Overend allowed the claimant’s appeal and substituted an order requiring the defendants to pay half the total assessed costs.