Toomey Of Syndicate 2021 v Banco Vitalicio De Espana SA De Seguros Y Reasseguros

When Rule 36.21 applies, indemnity-costs consequences are subject to the court’s power to withhold them where it would be unjust. The court must consider all the circumstances, including the terms of the offer. A late global offer may be insufficient where its value bears little relation to the liability at stake. In those circumstances, the court may retain costs on the standard basis. The assessment is fact-sensitive.

A representative underwriter for reinsurers succeeded before Mr Justice Andrew Smith in a claim seeking to set aside or avoid a reinsurance contract. Banco Vitalicio appealed, but the appeal was dismissed. The remaining issue concerned the basis on which the respondent’s costs should be assessed.

The respondent had made a Part 36 offer of £10,000 in addition to the amount payable under the High Court order. The offer was global and was made to dispose of the appeal. The amount at stake was approximately £2.8 million. The central issue was whether it would be unjust to make the indemnity-costs orders contemplated by Rule 36.21.

The appeal against liability was dismissed. The Vice-Chancellor gave the judgment, and Lord Justice Dyson and Lord Justice Thomas agreed.

1. The court assumed, without deciding, that the respondent could be treated as a claimant for the purposes of Part 36 and the appeal costs. It expressed no view on that classification issue.

2. Where a claimant’s Part 36 offer is beaten, Rule 36.21 ordinarily produces the specified indemnity-costs consequences. The court retains a qualification where making those orders would be unjust. In deciding that question, it must consider all the circumstances, including the terms of the offer.

3. The relevant circumstances included the offer’s amount compared with the sum at stake, the timing of the offer, and its global and unallocated character. A £10,000 offer made on the eve of the appeal, when potential liability was about £2.8 million, was too small in relation to the amount at stake. It would therefore be unjust to upgrade the costs from the standard basis to the indemnity basis.

4. The Vice-Chancellor said that the decision was based on the particular offer and circumstances. The court derived no assistance from Huck v Robson [2002] EWCA Civ 398 or Nedlloyd Lines UK Ltd v CEL Group Ltd [2003] EWCA Civ 1871, observing that each case depended on its facts.

5. Costs were ordered on the standard basis. The appellant was awarded its costs of the costs hearing, on which it had succeeded. Permission to appeal was refused.

1. Court of Appeal (Civil Division): The appeal was dismissed. The respondent’s costs were ordered to be assessed on the standard basis.

2. High Court, Queen’s Bench Division: Mr Justice Andrew Smith found for the representative underwriter in the claim seeking to set aside or avoid the reinsurance contract.