Day v Day

Success for costs purposes is assessed by the practical result. A claimant who obtains a money judgment which the defendant had refused to pay is the successful party, even where neither party establishes its primary case and the judgment reflects a fallback position.

Under CPR Part 44, an appellate court may interfere with a costs order where the judge has erred in principle. A claimant is not to be deprived of costs merely for failing to make a Part 36 offer which might have improved the claimant’s costs position. A defendant may instead protect its position by making an appropriate payment into court or offer to settle.

Day v Day concerned the beneficial ownership of the proceeds of sale of a house formerly owned by the appellant’s mother-in-law. At trial, the claimant failed to establish her primary case that the property was held for the mother-in-law for life and then for the claimant’s late husband. The defendant likewise failed to establish that the husband’s contribution was a gift.

The deputy judge held that the property was held in 60:40 shares, resulting in a substantial judgment for the claimant. He nevertheless awarded her costs only to 14 February 2005, making no order as to later costs because he treated the hearing as a draw. The claimant appealed that costs order. The central issue was whether the result was a draw and whether her failure to offer to accept 40 per cent justified withholding the costs of the hearing.

1. Appeal allowed. The deputy judge erred in principle by treating the trial as a draw and by withholding the claimant’s costs after 14 February 2005.
2. Per Ward LJ, with whom Sir Martin Nourse agreed, success for costs purposes must be assessed in practical terms. The claimant obtained a substantial judgment which the defendant had persistently refused to pay. The proceedings, including the hearing, were necessary to secure that recovery. The fact that the result reflected each side’s fallback case did not make it a draw.
3. CPR Part 44 provides that costs ordinarily follow the event, subject to all the circumstances. The trial judge’s discretion was flawed because he misidentified the successful party. This entitled the Court of Appeal to exercise the discretion afresh.
4. The judge also erred by treating the absence of an offer by the claimant to accept 40 per cent as adverse to her. A claimant may make a Part 36 offer to obtain possible costs advantages, but is not obliged to do so. The defendant could have protected his position by paying the fallback sum into court or making a proper offer. He did neither, and his late Calderbank offer of £25,000 inclusive of costs and interest was substantially beaten.
5. The Court substituted an order that the claimant recover all her costs of the claim on the standard basis, to be assessed if not agreed.

• Court of Appeal (Civil Division): allowed the claimant’s appeal and substituted an order for all her costs of the claim on the standard basis: [2006] EWCA Civ 415.
• High Court, Chancery Division (Deputy Judge): awarded the claimant costs only to 14 February 2005 and made no order as to later costs. That costs order was varied on appeal.