Groupama Insurance Company Ltd. v Overseas Partners Re Ltd & Anor

Under Civil Procedure Rules r 44.3, the general rule that the unsuccessful party pays the successful party’s costs may be displaced only after considering all the circumstances. Relevant conduct is not confined to conduct in the proceedings. It may include conduct before proceedings, including conduct connected with the matters which triggered the litigation.

That discretion must nevertheless be exercised proportionately. A party’s antecedent fault does not justify depriving it of all costs where another party chose to pursue unsuccessful allegations which made its joinder necessary and exposed it to substantial liability. An appellate court will interfere exceptionally where the costs judge has given disproportionate weight to one factor and inadequate weight to material countervailing considerations.

Groupama sought indemnity from its retrocessionaire, OP Re, under a marine personal accident quota-share treaty. OP Re purported to avoid the treaty after Aon, the broker, had altered without authority a fax confirming that no losses had been advised. Groupama joined Aon because OP Re alleged that the altered wording carried an implication that wider inquiries had been made.

Morison J rejected OP Re’s avoidance case and dismissed Groupama’s claim against Aon. He nevertheless ordered Aon to bear its own costs because its unauthorised alteration had led to the litigation and its joinder. Aon appealed only that costs order, seeking its costs from OP Re.

1. Appeal allowed in part. Brooke LJ, with whom Latham LJ and the President agreed, substituted an order that OP Re pay 90% of Aon’s costs of the action.

2. Civil Procedure Rules r 44.3 begins with the general rule that the unsuccessful party pays the successful party’s costs. The court may make a different order, but must consider all the circumstances. Conduct under r 44.3(4)(a) includes conduct before proceedings. It can therefore include conduct in and about the matters which triggered the litigation.

3. The earlier authorities established that position, and the wording of r 44.3 did not curtail it. Hall v Rover Financial Services Ltd (GB) [2002] EWCA Civ 1514 was to be read as describing contemporary Commercial Court practice, rather than imposing a legal rule that only misconduct in the proceedings may affect costs.

4. The Court of Appeal is ordinarily slow to disturb a trial judge’s costs discretion. Applying Adamson v Halifax plc [2002] EWCA Civ 1134, intervention is justified where the judge errs in principle, takes account of an irrelevant matter, omits a relevant matter, or reaches a conclusion showing an incorrect balance of the factors.

5. Morison J was legally entitled to consider Aon’s unilateral departure from market practice. But he gave excessive weight to avoiding two sets of costs for OP Re and insufficient weight to OP Re’s decision to maintain unsuccessful allegations which caused Aon to be joined. Aon reasonably required representation while facing potential liability of about £10 million. Its prior conduct, which was not dishonest and did not affect the merits, was an insufficient basis for depriving it of all costs. A 10% reduction fairly reflected that conduct.

• Court of Appeal (Civil Division): [2003] EWCA Civ 1846. Allowed Aon’s appeal in part and substituted an order that OP Re pay 90% of Aon’s costs.
• Commercial Court (Morison J): Judgment was entered for Groupama against OP Re and the claim against Aon was dismissed. On costs, Aon was ordered to bear its own costs.