Factortame Ltd v Secretary of State for the Environment, Transport and the Regions

A claimant who accepts a defendant’s Part 36 payment late and fails to better it is prima facie the unsuccessful party from the date when the payment should have been accepted. The claimant will ordinarily pay the defendant’s subsequent costs.

That presumption may be displaced where special circumstances make its application unjust. A defendant’s culpable failure to provide material information, or a material amendment which prevented proper evaluation of the offer, is relevant but does not automatically entitle the claimant to costs until acceptance. The court must assess all the circumstances, including who was in reality unsuccessful and who caused unnecessary costs.

An appellate court may interfere with that costs discretion only for an error of principle, a material omission or irrelevant consideration, or a plainly wrong conclusion.

The appellants were claimants in the assessment of damages arising from the Factortame litigation. They accepted Part 36 payments concerning period 2 losses after expiry of the applicable acceptance period and near the end of a 23-day trial. Shortly before acceptance, the judge had admitted revised catch data which the respondent should have supplied earlier.

His Honour Judge Toulmin CMG QC ordered the respondent to pay the appellants’ costs until 14 February 2000, but ordered the appellants to pay the respondent’s costs thereafter. The appellants appealed from that part of the costs order.

The central issue was whether a defendant’s culpably late amendment or disclosure should generally permit a claimant promptly accepting an earlier Part 36 payment to recover costs until the date of acceptance.

1. Appeal dismissed unanimously. Waller LJ delivered the leading judgment. Sedley LJ and Simon Brown LJ agreed.

2. A claimant who fails to beat a Part 36 payment is prima facie the unsuccessful party from the date when the payment should have been accepted. The normal consequence is liability for the defendant’s costs from that date. This is only a starting point. The court retains its discretion under Parts 36 and 44 of the Civil Procedure Rules 1998 and must consider all the circumstances.

3. The presumption may be displaced where its application would be unjust. A defendant’s failure to provide material which the claimant required to evaluate the offer is a material consideration. The court may then order the defendant to bear some or all of the costs incurred after the ordinary acceptance date.

4. The court rejected a general rule that a culpably late material amendment gives a claimant a fresh opportunity to accept a Part 36 payment with costs until acceptance. The effect of an amendment depends on the circumstances. The judge should determine, so far as possible, who was in reality unsuccessful and who was responsible for costs which should not have been incurred. An amendment may place a practical burden on the defendant to justify the ordinary rule, but it may instead be merely an excuse to accept money which should have been accepted earlier.

5. The costs inquiry should avoid a full-scale examination of privileged material and ex post facto explanations. The judge may make a practical adjustment which reflects unresolved possibilities and the judge’s overall appreciation of the litigation.

6. An appellate court cannot interfere with a costs discretion merely because it would have exercised the discretion differently. Intervention requires an error of principle, reliance on an irrelevant matter, omission of a relevant matter, or a conclusion so plainly wrong as to be perverse.

7. Judge Toulmin had correctly identified both the ordinary Part 36 consequence and the possibility that the respondent’s fault could displace it. His award of one additional week’s costs to the appellants was a permissible adjustment reflecting the possibility that timely provision of the revised figures might have affected their decision. There was no error of principle, misdirection or perversity. The appeal was dismissed with agreed costs of £21,000.

1. Court of Appeal: The appeal was dismissed. The costs order made below was left undisturbed.

2. High Court, Queen’s Bench Division, Technology and Construction Court: His Honour Judge Toulmin CMG QC ordered the respondent to pay the EC claimants’ period 2 costs until 14 February 2000 and ordered those claimants to pay the respondent’s costs thereafter. The order was dated 27 July 2000; no citation is stated.