Alpha Chauffeurs Ltd. v Citygate Dealership Ltd. (t/a HR Owen) & Anor

Costs are discretionary, but the discretion must be exercised on principled grounds. An appellate court should not substitute its own view unless the lower court erred in principle, considered irrelevant matters, omitted relevant matters, or made an order so plainly wrong that the discretion was flawed. Where co-defendants share a common defence and one is ultimately responsible for the claimant’s recovery, the general rule normally places the litigation burden on that party. A Part 36 payment relating to failed claims, or persistence in a common defence, does not justify shifting that burden. Costs attributable solely to a misconceived direct claim may be excluded.

Alpha brought proceedings arising from the sale of a defective vehicle and its acquisition under a hire purchase agreement. At trial, Alpha obtained rescission and restitution against Lombard North Central. It established breaches of implied terms against H R Owen but recovered only nominal damages. Lombard’s counterclaim failed, while its Part 20 claim against H R Owen succeeded.

The deputy judge ordered Lombard to pay 80% of Alpha’s action costs and all counterclaim costs. H R Owen was ordered to bear Lombard’s Part 20 costs, but not Lombard’s costs of defending Alpha’s claim. Lombard appealed against the principal costs provisions, and Alpha cross-appealed against its own costs liability to H R Owen. The central issue was whether the costs orders were within the deputy judge’s discretion.

Lord Justice Chadwick gave the judgment of the court. The appeal was allowed on the principal costs provisions, while the order concerning Alpha’s direct claim against H R Owen was left unchanged.

1. Appellate restraint. Under sections 51(1) and 51(3) of the Supreme Court Act 1981 and CPR 44.3, costs are discretionary. An appellate court must respect the lower court’s decision and must not substitute its own preferred order. Intervention is justified where there is an error of principle, reliance on irrelevant matters, failure to consider relevant matters, or an order so plainly wrong that the discretion was flawed.
2. General rule. The litigation, viewed as a whole, had resulted in Alpha succeeding and H R Owen bearing the substantive burden of the claim. The general rule that the unsuccessful party pays the successful party’s costs therefore pointed towards H R Owen bearing the relevant burden, absent a proper reason to depart from it.
3. Part 36. H R Owen’s payment related to claims on which Alpha failed or recovered only nominal damages. It was irrelevant to the allocation of costs between H R Owen and Lombard. The absence of a Part 36 payment by Lombard justified costs in Alpha’s favour, but did not justify denying Lombard recovery from H R Owen.
4. Part 20 proceedings. The main claim and the Part 20 claim should plainly have been heard together. Lombard had no independent knowledge of the vehicle’s condition and could not sensibly abandon its defence while H R Owen denied liability. Its persistence in defending the claim was therefore no ground for departing from the general rule.
5. Revised order. Lombard remained liable for 80% of Alpha’s action costs, excluding costs attributable solely to Alpha’s misconceived direct claim against H R Owen, and for the counterclaim costs. H R Owen was ordered to pay Lombard’s costs of the action and the Part 20 proceedings, including the costs Lombard had to pay Alpha under the revised order, but excluding counterclaim costs.

• Court of Appeal (Civil Division): allowed Lombard’s appeal against the costs provisions and substituted new paragraphs 6 and 7; the respondent was ordered to pay the appellant’s costs, subject to detailed assessment.
• Queen’s Bench Division: after trial, made costs orders requiring Lombard to pay 80% of Alpha’s action costs and all counterclaim costs, while H R Owen was ordered to pay Lombard’s Part 20 costs.