Challenger & Anor v Watkins & Anor

In deciding costs, the court must identify which party succeeded on the issues actually determined. A party that establishes a right of way and successfully resists an alleged obligation to contribute to its repair has succeeded, even if the practical value of the victory may be limited. The court should not speculate about future conduct or practical consequences. An unsuccessful party’s refusal to concede an issue on which it was legally correct is not unreasonable conduct justifying an adverse costs order. Where a claimant improves upon a Part 36 offer, the offer does not justify depriving the claimant of costs.

The claimants appealed against the order of His Honour Judge Moseley QC dated 19 September 2001 concerning the costs of proceedings about a right of way. The defendants initially disputed the existence of the right of way but later conceded it. The remaining issue was whether the claimants had to contribute towards repairing the lane. The claimants succeeded on that issue. The judge ordered no order as to costs up to 3 May 2001 and required the claimants to pay the defendants’ costs thereafter, relying on the early commencement of proceedings and a Part 36 offer. The appeal concerned whether that costs order involved an error of principle.

1. Appeal allowed. The judge’s costs order involved errors of principle and was set aside. The claimants were entitled to the costs of the appeal and of the action, subject to detailed assessment.

2. The division between costs incurred before and after 3 May 2001 was appropriate because that was the final date for accepting the defendants’ Part 36 offer. The court should not interfere with a costs discretion unless the decision was perverse, wrong in principle, based on irrelevant matters, or failed to take relevant matters into account.

3. Before 3 May 2001, the proceedings were not shown to have been unnecessary. The defence contained material non-admissions, so the existence of the right of way remained in issue. The defendants could have sought more time, requested further information, or applied for a stay under Civil Procedure Rules 1998, rule 26.4, but did not do so. The claimants were therefore the successful party on that issue by the date of the offer.

4. After 3 May 2001, the claimants also succeeded on the only remaining issue: whether they were legally obliged to contribute to repair costs. They had improved upon the defendants’ offer, which would have required a 50 per cent contribution, whereas the agreed position if the claimants had lost would have required only 45 per cent.

5. The court could not speculate that the claimants might in practice have to pay for repairs to use the right of way. Nor could the claimants’ failure to concede an issue on which they were correct in law be treated as unreasonable conduct. A party choosing to litigate an issue must bear the consequences of losing it.

6. Lord Justice Judge agreed that the claimants had won on both issues and that the judge had failed to give those matters their proper weight.

• Court of Appeal (Civil Division): allowed the appeal against the costs order of His Honour Judge Moseley QC dated 19 September 2001.
• High Court, Chancery Division, Administrative Court List: declared that the claimants had a right of way and determined that they were not obliged to contribute to repair costs, but made an adverse costs order against them in part.