Bray (t/a the Building Company) v Bishop & Anor

When substantive issues are settled but costs remain unresolved, the court should act cautiously and avoid conducting a surrogate trial to identify the winner. The assessment may be broad-brush, and absent good reason the fallback is no order as to costs. A Civil Procedure Rules 1998 Part 36 offer cannot properly influence the result where the court cannot determine whether the eventual position was more advantageous than the offer. A party should not be criticised for failing to make a counter-offer where mediation was proposed and not taken up. A prior costs order recognising partial success requires clear justification before a later order reverses that position and includes the earlier costs.

The claimant builder appealed against a Gloucester County Court order requiring him to pay the defendants’ costs after the substantive building dispute had settled. The county court had previously determined a number of factual issues and ordered the defendants to pay £2,000 on account of the claimant’s costs, reserving the balance. The later settlement involved outstanding work, supervision by a surveyor and a payment of £5,000, but left costs unresolved. The central issues were whether the judge had properly assessed the parties’ relative success, whether an early Part 36 offer was relevant, and whether the claimant’s failure to make a counter-offer justified the order.

Appeal allowed. Lord Justice Lloyd gave the judgment and Lord Justice Longmore agreed.

1. The court endorsed the cautious approach in Brawley v Marczynski [2002] EWCA Civ 756, also reported at [2003] 1 WLR 813, and BCT Software Solutions v C Brewer & Sons [2003] EWCA Civ 939. Where substantive issues have been compromised but costs remain unresolved, a judge may decide costs on a broad-brush basis, but should avoid effectively trying the settled action. In a non-straightforward compromise, the judge may ordinarily decline to decide costs alone. Here, however, the judge had indicated that he would do so, and therefore had to engage with the issue.
2. The judge could not properly attach weight to the Part 36 offer because he could not determine whether the defendants had achieved a more advantageous position, or the claimant a less advantageous position, than under the offer. Nor was it proper to criticise the claimant for failing to make a counter-offer when his response had been to suggest mediation and neither party was criticised for its approach to mediation.
3. The earlier order paying the claimant £2,000 on account indicated that he had been at least partly successful at the 2007 trial. The later order, which included the costs of that trial, required clear justification. It did not adequately reflect the claimant’s success, including the defeat of an allegation of dishonesty. The reasoning was also internally inconsistent.
4. Those errors were errors of principle and made the order manifestly wrong. The appropriate course was to set it aside rather than remit the matter for the same exercise. No order was made as to the costs below, including the outstanding costs of the 2007 trial. The 2007 order remained in force and had been paid.

1. Court of Appeal (Civil Division) — [2009] EWCA Civ 768. Allowed the claimant’s appeal and set aside the costs order.
2. Gloucester County Court — After settlement of the substantive building dispute, ordered the claimant to pay the defendants’ costs, including the costs of the earlier trial.