Intense Investments Ltd v Development Ventures Ltd

Costs of preliminary issues should ordinarily be reserved where the final accounting, damages or other unresolved matters may materially affect which party was successful overall. The court must consider all the circumstances, including partial success, conduct and admissible settlement offers. An offer need not comply with Part 36 to be relevant under CPR 44.3 if it is clear and capable of acceptance. Even where one party wins more preliminary issues, the court may defer costs if the eventual recovery may show that the other party was more successful in practical terms.

The claimant alleged that it was entitled to 50% of the profit from the sale of a development site. At a preliminary-issues hearing, it succeeded on the existence and continuing effect of a binding agreement and on the defendant’s liability despite the sale being arranged through another company. It failed on the treatment of tax, with the court holding that its entitlement was 50% of net profit and ordering an account.

The parties then disputed the costs of the preliminary issues. The defendant relied on an admissible offer made before the hearing which substantially offered the result ultimately achieved. The central question was whether costs should be awarded immediately by reference to the preliminary issues or reserved until the account and the claimant’s ultimate recovery were known.

1. Costs reserved. The court reserved the costs of the preliminary issues until after service of the certified account and consideration of its implications. The remaining issues, including costs, would then be determined.

2. Under CPR 44.3, the court has a wide discretion as to whether costs are payable, their amount and when they are to be paid. The general rule that the unsuccessful party pays does not prevent a different order where the circumstances justify it. Relevant matters include conduct, partial success and any admissible offer to settle.

3. The fact that the claimant succeeded on three of four preliminary issues did not determine who was successful in practical terms. The defendant’s offer of 17 October 2005 had offered 50% of the transaction profit after tax, which was the substantive entitlement ultimately identified by the court. The offer was not a Part 36 offer, but it was clear, admissible and capable of acceptance.

4. Issue-related costs orders are encouraged, as recognised in Phonographic Performance Ltd v AE Rediffusion Music Ltd [1999] 1 WLR 1507. However, cases concerning preliminary issues may justify reserving costs where later events may alter the overall assessment. The approach in Amec Process and Energy Ltd v Stork Engineers and Contractors BV [2000] B.L.R. 70, HSS Hire Services Group Plc v MBM Buildings Merchants Ltd [2005] 3 All ER 486 and David de Jongh Weill v Mean Fiddler Holdings Ltd [2003] EWCA Civ 1058 supported reserving costs where a payment, accounting exercise or assessment of damages might affect the parties’ ultimate entitlement.

5. If the account showed no recoverable profit, the defendant would probably be regarded as the more successful party and the October offer would be highly significant. If the account showed a non-negligible recovery, the claimant might be regarded as successful overall. Making an irretrievable costs order before that uncertainty was resolved would therefore be inappropriate.

Not stated in the judgment.