SCT Finance Ltd v Bolton

A court has a broad discretion to make costs orders, including an order imposing a quantified cap. It must nevertheless consider all relevant circumstances, including conduct and admissible settlement offers.

Where costs are ordered to be assessed on the standard basis, the assessment itself excludes costs that are unreasonable or disproportionate to the matters in issue. A separate cap intended merely to address disproportionate costs is therefore unprincipled: it can operate only to deny recovery of costs already found proportionate. The proportionality assessment is holistic and includes the amount involved, importance, complexity and the parties’ financial positions.

SCT Finance Ltd recovered a small hire-purchase debt from Mr Bolton. His counterclaim concerning the specification and quality of a car was dismissed. Successive Part 20 claims against the supplying dealer and distributor were also dismissed.

His Honour Judge Elly ordered costs to pass up the Part 20 chain, ultimately to be recovered from Mr Bolton, subject to detailed assessment on the standard basis. He imposed a ceiling of £15,000 on the finance company’s recovery from Mr Bolton, although no equivalent cap applied to the dealer’s or distributor’s costs.

The finance company appealed against that ceiling. The central issue was whether the judge had properly exercised the costs discretion under the Civil Procedure Rules 1998.

1. Appeal allowed unanimously. The £15,000 ceiling on Mr Bolton’s liability for the finance company’s costs was set aside. The finance company was awarded the costs of the appeal, assessed at £3,000.

2. The judge had power under rule 44.3 to impose a quantified cap. The costs discretion was, however, subject to the requirement to consider all the circumstances. The judge did not properly address the finance company’s early Part 36 offer to discontinue on a no-costs basis, Mr Bolton’s refusal of it, or the anomalous effect of exposing the finance company to the dealer’s and distributor’s uncapped costs while restricting its recovery from Mr Bolton.

3. The court upheld the ordinary position that costs of successful Part 20 defendants pass up the chain to the principal defendant: Johnson v Ribbins [1977] 1 WLR 1458. That arrangement did not justify placing the financial consequence of a cap solely on the finance company.

4. More fundamentally, standard-basis assessment under the Civil Procedure Rules 1998 already required the costs judge to disallow costs that were unreasonable or disproportionate. Proportionality required an overall assessment, not a mechanical comparison with the monetary value of the claim. A cap imposed because the costs appeared disproportionate could take effect only after proportionate costs had been assessed above the cap. It therefore contradicted the stated reason for imposing it.

5. Wilson J added that the ultimate payer of costs passing up a Part 20 chain should be notified of detailed assessment and treated as a relevant person. The costs should ordinarily be assessed together. Waller LJ further observed that, where the ultimate payer had not been notified, rule 3.1(7) might permit the final costs certificate to be varied or revoked; otherwise an appeal, with an extension of time if appropriate, might be available.

• Court of Appeal (Civil Division): Allowed the appeal and set aside the £15,000 cap on the respondent’s liability for the appellant’s costs.
• Reading County Court: His Honour Judge Elly dismissed Mr Bolton’s counterclaim and the successive Part 20 claims. He made costs orders up the chain, subject to detailed assessment on the standard basis, and capped the finance company’s recovery from Mr Bolton at £15,000.