The Square Mile Partnership Ltd v Fitzmaurice McCall Ltd

In a claim involving an admitted debt and a substantial counterclaim, costs cannot be determined mechanically by identifying a single successful party. The court must exercise its discretion having regard to all the circumstances, including success on individual issues, the conduct of the parties, offers or payments into court, and the costs attributable to particular issues. Both parties may properly be regarded as successful where the claimant recovers a substantial balance but the defendant defeats most of the claim through its counterclaim. The court may make issue-based or proportionate orders, but a rough and ready overall order may be appropriate where detailed apportionment would be impracticable. The general rule that costs follow the event remains a starting point, not an inflexible rule.

The claimant brought proceedings for approximately £583,000. Liability for the claim was admitted, but the defendant advanced a counterclaim and set-off in an equivalent amount. The defendant succeeded on the principal construction issue and defeated most of the claimed sum. The claimant nevertheless obtained judgment for more than £100,000 and had received a further payment during the proceedings.

The judgment dealt with costs, interest and an appeal from a master’s refusal of summary judgment. The central costs question was how the court should identify success and allocate costs where the claim was admitted, the counterclaim substantially succeeded, and both parties achieved significant results.

1. Costs discretion. The court’s discretion under Civil Procedure Rules 1998, r 44.3 was broad. The general rule that the unsuccessful party pays the successful party’s costs remained only a starting point. The court had to consider all the circumstances, including partial success, conduct, payments into court and the costs of particular issues.
2. Identifying success. Where a claim was admitted but a substantial counterclaim defeated most of the amount sought, it was appropriate to regard both parties as successful. The claimant had obtained a substantial judgment, while the defendant had succeeded on the principal issue and substantially reduced the liability.
3. Authorities. Nicholson v Little [1956] 1 WLR 829 and MB Building Contractors Ltd v Ahmed were examples of discretionary costs decisions, rather than authorities establishing an inflexible rule that a claimant recovering any sum was the successful party. Universal Cycles plc v Grangebriar Ltd was consistent with the CPR and illustrated the relevance of issue-based costs, admissions, payments into court and inflated counterclaims. The post-CPR approach described in Summit Property Ltd v Pitmans (A Firm) reinforced the need to make orders reflecting the outcome of different issues.
4. Order made. A detailed allocation between the claim and counterclaim would be impracticable and would not fairly reflect the claimant’s success on particular deductions or the defendant’s success on the main issue. After weighing the competing factors, the court made no order as to costs, leaving each party to bear its own costs. Interest was to be recorded in an agreed minute of order.
5. The appeal from the master’s refusal of summary judgment was adjourned generally with liberty to restore if the claimant appealed the substantive judgment; otherwise it would stand dismissed after the specified period.

This was a first-instance judgment concerning post-judgment costs, interest and an appeal from a master’s summary judgment decision. The claimant had permission to appeal from the master. The appeal was not finally dismissed immediately; it was to stand adjourned generally with liberty to restore if the claimant appealed the substantive judgment.