Fulham Leisure Holdings Ltd v Nicholson Graham & Jones

Costs are determined by the substance and commercial reality of the litigation. A party recovering a small sum on a subsidiary claim may still be unsuccessful overall.

A Part 36 payment should ordinarily attract its prescribed costs consequences. The fact that an issue-based order may otherwise be appropriate does not, without more, make those consequences unjust. Where parties succeed on substantial issues, the court may require the otherwise successful party to pay the costs of an issue on which it failed and may net the resulting orders. Expert costs depend on reasonableness, not simply on whether the expert was called.

The judgment concerned costs following an earlier trial between Fulham Leisure Holdings Ltd and Nicholson Graham & Jones. The claimant had succeeded on negligence but failed to establish liability for the principal loss. It recovered £6,750 on a subsidiary professional-fees claim, while the defendants had made a £500,000 Part 36 payment and an earlier drop-hands offer.

The court determined the successful party, the effect of the Part 36 payment and settlement offer, the allocation of costs between liability and causation or quantum, the recoverability of unused expert evidence, and costs reserved following an adjournment and interlocutory applications.

1. Disposition. The defendants were treated as the successful party for the purposes of Civil Procedure Rules 44.3, notwithstanding the claimant’s success on negligence and its recovery of £6,750. That recovery was insignificant compared with the £7.75 million claim and the commercial purpose of the litigation.
2. The £500,000 Part 36 payment had not been bettered. The ordinary consequence under rule 36.20(2) therefore applied. The possibility that an issue-based order might be appropriate did not itself make application of the Part 36 rule unjust.
3. Absent the drop-hands offer, liability and causation or quantum were treated as roughly equal in importance and cost. The defendants were awarded the costs of the causation or quantum issue, while they were required to pay the claimant’s costs of the liability issue. Under rule 44.3(7), those amounts were netted, producing no order as to costs for the earlier period.
4. The drop-hands offer should have been accepted on 14 January 2005. It was, in substance, the same as the costs result otherwise reached. The defendants therefore recovered their costs from that date, subject to exclusion of the unreasonable expert costs.
5. The mere fact that an expert was not called did not justify disallowing the costs. The relevant question was whether obtaining the evidence was reasonable. Here it was not reasonable: the claimant had not advanced a valuation case, the defendants had not pleaded a positive case that the relevant shares had measurable value, and parts of the report addressed mathematical or insufficiently relevant matters.
6. The adjournment costs were shared because both parties contributed to the need for the adjournment and the claimant materially benefited from it. The defendants received the costs of the disclosure application; the claimant received the costs of the amendment application; remaining PTR costs were costs in the case.