Whitecap Leisure Ltd v John H Rundle Ltd

The general rule under Civil Procedure Rules 1998 44.3(2) is that the unsuccessful party pays the successful party, but success is assessed by the judgment actually obtained and costs remain discretionary. The court may consider conduct, partial success, payments into court and settlement offers. In commercial litigation, the party receiving the substantive payment will ordinarily be successful on that claim, even if it fails on another head. A Part 36 offer may justify indemnity costs after the relevant period where the judgment is more advantageous, unless that would be unjust. Part 36 cost consequences do not apply automatically to appeal costs, although the offer may inform the general discretion. Substantial but incomplete appellate success may justify a proportionate costs award.

Whitecap Leisure Ltd brought a claim against John H. Rundle Ltd. The High Court, on the judgment of His Honour Judge Richard Foster, found in favour of Whitecap and awarded damages. Rundle appealed, seeking dismissal of the claim, while pursuing its counterclaim and a claim relating to invoice 12116.

The Court of Appeal set aside the damages award, substituted judgment for Whitecap for the amount paid on account of the price of the goods, and entered judgment for Rundle on its counterclaim. The central issues included the parties’ relative success, the effect of Part 36 offers on costs, and the appropriate costs orders where the appeal produced substantial but incomplete success.

Disposition and substantive orders

1. The Court of Appeal allowed the appeal. The High Court judgment was set aside. Judgment was substituted for Whitecap on the claim for £124,081, representing the amount paid to Rundle on account of the price of the goods. Judgment was entered for Rundle on its counterclaim, which was remitted to the High Court for assessment of damages. Rundle’s claim concerning invoice 12116 was also remitted for determination and assessment.

2. Under Civil Procedure Rules 1998 44.3(2), the starting point is that the unsuccessful party pays the successful party. In commercial litigation, success is ordinarily measured by who receives the substantive payment. The court nevertheless retains a discretion to make a different order, considering conduct, partial success, payments into court and admissible offers under CPR 44.4.

3. Whitecap was entitled to the costs of the claim below. Its Part 36 offer of £75,000 was less advantageous than the judgment obtained. Although substantial costs had been incurred on the unsuccessful damages issue, that issue had been reasonably tenable. The court found no injustice in applying CPR 36.14. Whitecap therefore received its costs on the standard basis to 20 March 2005 and on the indemnity basis from 21 March, with interest on those costs at 3 per cent above the applicable bank rate.

4. Part 36 did not impose its specified cost consequences on the costs of the appeal under CPR 36.3(4). The offer remained relevant under CPR 44.3(4)(c). Rundle was the substantial victor on the appeal because the damages claim was defeated, but its success was incomplete because judgment remained for Whitecap and the counterclaim required further assessment. Rundle was accordingly awarded 80 per cent of its appeal costs on the standard basis.

5. The costs orders were set off. The £35,000 security for costs remained in court pending the set-off, and £67,561 held by solicitors remained there pending determination of the counterclaim and disputed invoice. No order was made concerning the undertaking. Permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Appeal allowed. The judgment below was set aside, substituted judgment was entered on the claim, and the counterclaim and invoice claim were remitted for further determination.
• High Court of Justice, Queen’s Bench Division: Judgment in favour of the claimant/respondent, given by His Honour Judge Richard Foster, [2007] EWHC 1352 (QB).