Vector Investments v Williams

Where substantive proceedings are settled and only costs remain, the court should ordinarily avoid determining the merits. In a monetary claim, the settlement sum is the starting point for identifying the successful party and will usually also be the finishing point unless compelling circumstances require otherwise. The party receiving a substantial payment will generally be treated as successful, even if the defendant substantially reduced the amount claimed. Relevant conduct may justify a proportionate costs order, including an unreasonable failure to negotiate an admissible offer and unintentional exaggeration of the claim. The court should not speculate about settlements that were never made. In large disclosure exercises, parties should discuss scope and organisation in advance, and unnecessary duplication or irrelevant material may justify a stated payment for wasted inspection costs.

The claimant developer brought substantial contractual and construction-related claims against the defendant occupier concerning tenant fit-out works, delay, loss and expense, professional fees and a rent-free period. The substantive proceedings were compromised by a Tomlin Order under which the defendant paid £750,000 plus VAT, leaving liability for costs to be determined by the court.

The court considered which party was successful, the effect of the defendant’s earlier admissible offer of £400,000, the parties’ conduct and alleged exaggeration, and the defendant’s claim for costs caused by defects in disclosure and inspection.

1. Costs after settlement. The court had jurisdiction to determine costs after compromise. Applying Boxall v London Borough of Waltham Forest, the court should do justice without unnecessarily trying the settled merits. The starting point is generally no order where success cannot sensibly be identified, but a substantial monetary recovery will rarely justify that outcome.
2. Success. The settlement sum was the starting point under CPR 44.3. It was also, absent a compelling factor, the finishing point. The claimant, having recovered £750,000 plus VAT, was the successful party. The defendant’s reduction of the claim did not make it the successful party.
3. Conduct and offers. The defendant’s non-Part 36 offer of £400,000 was admissible under CPR 44.4(c), but it had been beaten by the settlement. The court declined to speculate that the case would have settled or at what figure. The claimant’s failure to negotiate after the offer caused a lost opportunity to avoid substantial further costs and justified a reduction. The claim was unintentionally, rather than fraudulently or deliberately, exaggerated, but that remained a relevant factor.
4. Disclosure. Standard disclosure did not require wholesale disclosure of irrelevant or duplicated documents. The approach criticised in Nichia v Argos was applicable. The parties should have discussed disclosure and applied promptly to the court if major problems arose. The claimant was ordered to pay £20,000 for unnecessary inspection costs.
5. Orders. The defendant was ordered to pay the claimant’s costs up to 19 September 2007 and 50% thereafter, subject to the £20,000 credit. The claimant was awarded 70% of the costs of the costs proceedings.