Moy v Pettman Smith (a Firm) & Anor

Costs between co-defendants are not determined solely by the proportions in which liability or damages are ultimately divided. The court must consider the parties’ conduct, the procedural history and the reasonableness of settlement decisions. A defendant who should have settled the claimant’s claim promptly may remain liable for the claimant’s costs, leaving contribution issues to be resolved separately. An inadequate Part 36 offer may not justify avoiding an inter-defendant costs order. On an appeal, the court may also take account of preparatory work required by grounds abandoned at the hearing.

David Leslie Moy brought professional negligence proceedings against Pettman Smith, solicitors, and Jacqueline Perry, counsel, arising from earlier proceedings settled in April 1998. Liability was ultimately clear, but proceedings issued in April 1999 continued until settlement immediately before trial. The High Court ordered the first defendants to pay the claimant’s costs.

The first defendants appealed in relation to costs and their entitlement to recover costs from the second defendant. The claimant was not represented. The central issues were whether costs should follow the ultimate division of damages, what significance should be given to the parties’ settlement conduct and a Part 36 offer, and how the appeal costs should reflect grounds abandoned at the hearing.

Lord Justice Latham gave the first judgment. Mr Justice Hart and Lord Justice Brooke agreed.

1. Overall approach. The court concluded that the claim should have been settled promptly, at the latest in 1999. The parties’ conduct and the resulting delay were therefore material to the costs order. The proportion of damages for which each defendant was liable was not, by itself, an adequate yardstick.
2. Claimant’s costs. The order requiring the first defendants to pay the claimant’s costs was left undisturbed. They should have dealt with the claimant’s claim promptly and resolved any contribution or responsibility issues with the second defendant afterwards.
3. Costs below between the defendants. The dispute between the first and second defendants inevitably had to be resolved through litigation or alternative dispute resolution. Although a Part 36 offer had been made, it was inadequate to meet the liability which the court considered appropriate. The second defendant was therefore ordered to pay 20 per cent of the first defendants’ costs of the Part 20 proceedings and the action below.
4. Appeal costs. The original grounds included a root-and-branch challenge, part of which was abandoned at the beginning of the hearing. The court held that the necessary preparatory work had to be reflected in the order. The second defendant was ordered to pay two-thirds of the first defendants’ costs of the appeal, including costs incurred since June 2002.
5. Orders. The proposed order was amended, including the division of the £210,000 liability into £166,500 payable by the first defendants and £43,500 by the second defendant. The interim costs payment was deleted, and costs and interest were to be repaid within 14 days. The second defendant’s application for permission to appeal was refused.

• Court of Appeal (Civil Division): in [2003] EWCA Civ 467, varied the costs arrangements, ordered the second defendant to pay specified proportions of the first defendants’ costs, and refused permission to appeal.
• High Court of Justice, Queen’s Bench Division: ordered the first defendants to pay the claimant’s costs; no citation for that decision was stated in the judgment.