Biffa Waste Services Ltd & Anor v Maschinenfabrik Ernst Hese GmbH & Ors

Where a claimant succeeds on liability and recovers damages, the ordinary costs rule will generally apply even if the sum recovered is substantially less than the amount claimed. A reduced award does not by itself amount to partial success by the defendant or justify an issues-based or percentage costs order. The court may take exaggeration into account, but must distinguish an honestly high claim from intentional or fraudulent exaggeration. A party seeking protection against an excessive claim should use the available offer procedures. The court should not speculate about offers which were never made. Failure to engage in the pre-action process or to make or answer effective settlement offers may materially affect costs.

The claimants pursued damages arising from a fire at a domestic waste recycling plant. Liability had previously been determined, and a quantum judgment awarded the claimants £140,249 plus interest against the second defendant. The claimants sought their costs of the action. The second defendant argued that no order for costs, or a proportionate costs order, was appropriate because the claim had initially approached £2 million while the recovery was substantially lower.

The issue was whether the circumstances justified departing from the general rule that the unsuccessful party pays the successful party’s costs, having regard to the parties’ conduct, the extent of success, exaggeration, pre-action engagement and settlement offers.

1. Costs discretion. The general rule under Civil Procedure Rules 1998, rule 44.3(2)(a), was that the unsuccessful defendant should pay the successful claimants’ costs. Rule 44.3(2)(b) permitted a different order, having regard to all the circumstances, including conduct, partial success and admissible offers.

2. Effect of the reduced award. The claimants had succeeded on both liability and quantum. The fact that they recovered less than they claimed did not, without more, make the defendant a partial winner. The claim was based on a comparison between losses and savings, and the reduction in the figure resulted from findings about the delay period and developing evidence rather than intentional exaggeration.

3. Conduct and exaggeration. The court distinguished an honestly overstated claim from intentional exaggeration which was deliberately misleading or fraudulent. The claimants’ approach was not unreasonable and did not justify depriving them of their costs. The defendant had failed to engage properly with the pre-action process, quantum issues or expert discussions until shortly before the original trial date.

4. Offers and speculation. The court should not speculate about what might have happened if an offer had been made. The defendant could have protected itself through the Part 36 procedure, but made no offer until June 2008 and did not respond to the claimants’ earlier offers. The parties’ disagreement about whether an appeal on liability should be withdrawn was not unreasonable conduct.

5. Order. It was not appropriate to make a different order under rule 44.3(2)(b). The claimants were awarded their costs of the action, to be assessed on the standard basis if not agreed. A payment on account of £300,000 was considered appropriate. Costs relating to the costs issue were proposed to follow the same order.