Hooper & Anor v Biddle & Co

Where substantive proceedings settle but costs remain disputed, the court may determine costs if there is a proper basis of agreed or determined facts. The court should not assume that a claimant is the effective winner merely because a payment has been made. It must assess the settlement against the pleaded claim, the risks avoided and the conduct of the litigation. Objective exaggeration of a claim is a relevant costs factor, even if unintentional. A payment made for proportionality or commercial reasons does not imply admission of liability. Where neither party can properly be treated as the winner, an order that there be no order as to costs may be appropriate.

The claim was pleaded initially at approximately £3.75 million and later at £350,000 plus interest. The parties disputed liability and quantum. A single joint expert valued the loss at £38,000. The claimants rejected or challenged that valuation but ultimately accepted the defendant’s open offer of £38,000, with no interest and with costs to be determined by the court.

The court therefore had to decide whether it could determine costs without trying the substantive claim, whether either party was the effective winner, and what order should be made under Civil Procedure Rules 1998, rule 44.3.

1. Power to determine costs. The court could determine costs after settlement because the relevant background facts were broadly agreed. The court must, however, avoid conducting a trial under the guise of deciding costs. Where there is no proper factual basis, the appropriate course may be to leave the costs issue unresolved and allow the action to proceed.
2. No effective winner. Acceptance of £38,000 did not make the claimants the effective winners. They had pleaded £350,000 plus interest, had originally claimed substantially more, and had accepted a commercial settlement which did not include costs. Their decision to settle was sensible in the circumstances, but it carried the ordinary costs consequences of that settlement.
3. Application of rule 44.3. The general starting point is that the unsuccessful party pays the successful party’s costs, but the court may make a different order after considering the specified factors. Those factors included the parties’ conduct, settlement offers, the manner in which the claim was pursued, and whether the claim had been exaggerated.
4. Exaggeration. The claim had been objectively and grossly exaggerated. The valuation relied upon did not support the pleaded figure and was obtained for a different purpose. Under rule 44.3(5)(d), exaggeration must be considered whether or not it was deliberate. The court accepted the approach in Painting (Yvonne Hazel) v University of Oxford [2005] EWCA Civ 161.
5. The defendant’s rejection of mediation at the early stage was reasonable because the claim was substantially unparticularised and unsupported by appropriate expert evidence. Later conduct showed no obstruction to settlement. The payment of £38,000 was made for proportionality and commercial reasons and did not amount to an admission of liability.
6. The appropriate order was that there be no order as to costs.