Montlake & Ors (As Trustees of Wasps Football Club) v Lambert Smith Hampton Group Ltd

In commercial litigation, the general rule remains that the loser pays the winner. A court may depart from that rule only after considering the factors in CPR 44.3 and the parties’ conduct and success on the issues. A claimant who beats its Part 36 offer will ordinarily receive the enhanced consequences under CPR 36.21 unless that would be unjust. Those consequences may include enhanced interest and indemnity costs, although interest on costs depends on whether the costs have been paid or otherwise exposed to interest. Procedural breaches concerning funding information may be relieved where the opposing party had the relevant information and suffered no prejudice. A stay of costs pending appeal may be appropriate where payment creates a real risk of unfairness and an interim payment would provide only limited benefit.

The judgment concerned disputes about costs following the claimant trustees’ successful claim against the defendant valuation company. In an earlier judgment dated 6 May 2004, supplemented by a ruling on 28 May, the claimants recovered £2,417,500 as the difference between the defendant’s valuation of the Sudbury ground and the court’s proper valuation.

The court determined the recoverability of a 100 per cent success fee under a conditional fee agreement, the effect of amendments to the claim, the parties’ settlement offers, entitlement to costs, enhanced interest, indemnity costs, and whether costs should be stayed pending an intended appeal.

1. The claimants were entitled to their costs without deduction. The general rule under CPR 44.3 is that the loser pays the winner. In commercial litigation the winner is ordinarily the payee. The claimants had succeeded on the principal issues, including scope of duty, valuation, reliance, causation, accounting, mitigation and contributory negligence. The changes to the case and the failure of the primary damages claim did not justify departing from that rule, particularly because the delay in advancing the alternative valuation had already attracted a costs order.

2. The claimants had breached the funding-information requirements in paragraph 4A-1 of the Protocols Practice Direction and paragraph 19.2 of the Costs Practice Direction. Nevertheless, relief from the sanction in CPR 44.3B(1)(c) was granted under paragraph 10.1 of the Costs Practice Direction. The defendant had known from the outset that the claim was funded by a conditional fee agreement carrying a success fee, and no prejudice resulted from the formal failures. The claimants therefore remained entitled in principle to recover the success fee.

3. The claimants had beaten their Part 36 offer. Under CPR 36.21, the enhanced consequences should be ordered unless unjust. The claimants were awarded 6 per cent interest on the principal damages from 13 January 2004 to 28 May 2004. Their costs were ordered to be assessed on the indemnity basis from 13 January 2004.

4. No interest was awarded on the costs. The court treated McPhilemy v Times Newspapers (No 2) [2002] 1 WLR 934 as indicating that the provision principally compensates a party for costs already paid or for liabilities carrying an exposure to interest. The evidence did not establish that basis here, and the recoverable success fee was 100 per cent.

5. A stay of the costs orders was granted pending an expeditiously pursued appeal. The risks of ultimate unfairness to the defendant outweighed the limited benefit of an interim payment towards disbursements. The claimants were given liberty to apply to lift the stay and seek an interim payment if the appeal was not pursued expeditiously.

The judgment records an earlier judgment dated 6 May 2004 and a further ruling dated 28 May 2004 in the same proceedings. It does not state the citation of any lower-court decision. This judgment determined consequential costs issues at first instance.