Crestfort Ltd & Ors v Tesco Stores Ltd & Anor

Costs ordinarily follow the event. A successful claimant should not suffer a reduction merely because subsidiary issues were unsuccessful where the litigation was substantially successful and the unsuccessful issues were reasonably raised. The court may take the opposing party’s conduct and rejected settlement offers into account. Where a claimant obtains a judgment more advantageous than a valid offer, indemnity costs and enhanced interest may be ordered under the applicable provisions of the Civil Procedure Rules 1998. The court may also require an immediate payment on account where the assessed costs will plainly exceed the proposed sum.

The claimants, landlords, succeeded in obtaining judgment requiring the surrender of a sublease granted by Tesco to Magspeed in breach of covenant, together with an inquiry as to damages. Tesco’s counterclaim for a declaration that the covenant was conditional was dismissed. Damages and other outstanding issues were subsequently settled, leaving costs as the only live issue.

The court considered whether costs should be deferred, whether the claimants’ costs should be reduced because they failed on subsidiary issues, whether interest and indemnity costs should be ordered, and whether an immediate payment on account was appropriate.

1. Costs and deferment. The issue of costs should not be deferred until determination of the separate issue concerning the effect of the injunction on future occupation arrangements. That issue could not alter the incidence of costs arising from the trial of the legality of the actual arrangement.
2. Costs following the event. The claimants had entirely succeeded on their claim and Tesco’s counterclaim had been dismissed. Although the claimants had failed on some issues, those issues were subsidiary, had been reasonably raised, and did not justify departing from the general rule that costs follow the event. The claimants were therefore entitled to all their costs.
3. Conduct and offers. The defendants’ conduct, including deliberate and persistent breaches of covenant, and their rejection of the claimants’ settlement offers, supported the order for the claimants’ costs in full.
4. Indemnity costs and interest. Under CPR 36.21(3), the claimants were entitled, as against Tesco, to assessment of their costs on an indemnity basis from 5 October 2004 because the judgment was more advantageous than the offer made on 14 September 2004. Under CPR 36.21(4), Tesco was also ordered to pay interest on those costs at 4 per cent above base rate. Interest on costs payable under CPR 44.3(6)(g) was ordered at 1 per cent above base rate.
5. Payment on account. The defendants were ordered to make an immediate payment on account of £100,000, since there was no realistic possibility that the assessed costs would not substantially exceed that sum.

The judgment records that the court had previously given judgment for the claimants on 25 May 2005. The parties then settled the damages claim and agreed not to appeal that judgment. The present judgment determined the outstanding costs issues.