Martin v Randall

Costs are governed by the court’s broad discretion and the general rule that the unsuccessful party pays, but the result cannot be determined solely by asking who ultimately receives or pays money. The court must consider all the circumstances, including pre-action and litigation conduct, partial success, the issues pursued, and admissible settlement offers.

A properly made Part 36 offer is received when it reaches the offeree. Its consequences cannot begin before the expiry of the applicable 21-day period. An offer may nevertheless be relevant to the wider costs discretion even where the claimant’s recovery exceeds it. An appellate court may intervene only for an error of principle or a decision outside the generous ambit of reasonable disagreement.

The claimant and defendant were partners in a hardware and garden-centre business. After the partnership was dissolved, the claimant sought payment for his share and alleged that the defendant had understated the business’s takings by fraud. The defendant disputed the valuation and did not accept a Part 36 offer of £32,000 made on 19 May 2005.

At trial the fraud allegations failed, but judgment was entered for the claimant for £32,812.50 including interest. The county court awarded the claimant costs from the date of the offer until trial, and the claimant the defendant’s trial costs. The defendant appealed the pre-trial costs order and the refusal to award him costs before the offer. The central issues were whether the judge had erred in exercising the costs discretion and when the offer’s costs consequences began.

1. Appeal allowed in part. The county court judge’s allocation of costs was upheld in substance, but paragraph 3 of the order was amended so that the claimant’s recoverable costs began after the expiry of 21 days from receipt of the offer, not on the date it was made. The offer was received on 23 May 2005, making 13 June 2005 the relevant date, subject to confirmation of the arithmetic.
2. Under CPR 44.3(1)–(2), the court has a wide discretion, subject to the general rule that the unsuccessful party pays. In applying that discretion, it must consider all the circumstances, including conduct before and during proceedings, success on individual issues, and admissible settlement offers under CPR 44.3(4)–(6). The fact that one party ultimately pays money does not alone determine who is the successful party for costs purposes.
3. The judge was entitled to regard the claimant’s basic money claim as successful even though the fraud allegations failed. He could therefore award pre-trial costs to the claimant because the defendant had been able to avoid the litigation by accepting a properly formulated offer close to the amount ultimately due. The defendant’s incomplete earlier offer, which left payment terms for further agreement, did not have equivalent costs significance.
4. A claimant’s Part 36 offer is made when received by the offeree: CPR 36.8(1). Where the claimant’s judgment is more advantageous than the offer, the court may order the claimant’s indemnity costs after the applicable period under CPR 36.21 and CPR 36.11. Part 36 does not suspend the 21-day period while the offeree investigates. The court indicated, without deciding the point, that highly unusual withholding of vital information by the offeror might be relevant to the just costs order.
5. The appellate court’s power to interfere with a discretionary costs decision is limited. It must find an error of principle, a material failure to take account of a relevant factor, or a decision wholly outside the range of reasonable disagreement. The costs allocation fell within that range; the calculation of the Part 36 period was the sole error requiring correction.

• Court of Appeal (Civil Division): [2007] EWCA Civ 1155. Appeal allowed in part. The costs allocation was upheld except that the period for the claimant’s costs was shortened to begin after the Part 36 acceptance period.
• Southampton County Court: Order of HHJ Marston dated 5 December 2006. Judgment for the claimant for £32,812.50 including interest; costs orders were made in favour of the claimant before trial and the defendant for the trial period.