Kastor Navigation Co Ltd. & Anor v AGF M.A.T & Ors

Under CPR 44.3, costs remain subject to the general rule that they follow the event, but the court should be ready to make issue-based orders where a party has lost on a discrete issue that significantly increased the length or cost of the proceedings. Unreasonable or improper conduct is not a prerequisite.

A claimant’s success in beating a Part 36 offer does not automatically secure all post-offer costs. Under CPR 36.21, “his costs” refers to costs otherwise awarded under the ordinary costs discretion. The court may therefore adjust the award to reflect success on separate issues, while applying the Part 36 consequences to the costs properly attributable to the successful issue.

The claimants recovered US$3 million under a valued marine insurance policy following the total loss of the vessel Kastor Too. They had pursued alternative claims for an actual total loss caused by fire and a constructive total loss caused by fire.

The constructive total loss claim succeeded. The actual total loss claim failed and had generated most of the factual and expert evidence, including extensive investigation of whether fire and explosions had caused sufficient seawater ingress to sink the vessel.

The court determined the consequential costs issues, including the effect of the claimants’ Part 36 offer to accept US$2.8 million and the proper interaction between CPR 36.21 and the issue-based costs discretion under CPR 44.3.

1. Issue-based costs. The court applied CPR 44.3 and the guidance in Johnsey Estates Ltd v Secretary of State for the Environment, Transport and the Regions 2001 EWCA 535, Summit Property Ltd v Pitmans 2001 EWCA Civ 2020 and Stena Rederiaktiebolag v Irish Ferries Ltd 2003 EWCA Civ 214. The starting point remained that costs follow the event, but the court should consider separate orders for discrete issues. It was unnecessary to find unreasonable or improper conduct before depriving the generally successful party of the costs of an issue on which it lost.
2. The actual-total-loss claim substantially lengthened and increased the cost of the action. The constructive-total-loss issue required little factual or expert evidence, whereas most of the trial concerned causation of the sinking. The claimants should therefore bear the costs attributable to the unsuccessful actual-total-loss issue.
3. Part 36. On the proper construction of CPR 36.21(3)(a), “his costs” meant the costs otherwise awarded to the claimant, rather than every cost incurred after the relevant date irrespective of the issue on which it was spent. The rule concerned the basis of assessment of costs ordered to be paid, not the basic incidence of costs.
4. The Part 36 offer did not require a wholly mechanistic award of all post-offer costs. It would be unjust to award the claimants all their trial costs when the defendants had successfully resisted the actual-total-loss claim. Huck v Robson 2002 3 All ER 263 did not compel a different result.
5. The claimants were awarded 15% of their costs, reflecting the constructive-total-loss issue, with the relevant post-offer costs assessed on the indemnity basis. The defendants were awarded 85% of their costs, reflecting the actual-total-loss issue. The court declined to order automatic netting-off without further evidence.