Hay v Szterbin & Ors

A consent order in Tomlin form is construed objectively as a commercial instrument. The court asks what a reasonable person, in the parties’ circumstances, would have understood the language to mean, having regard to the text and its commercial context.

Where an order awards costs relating exclusively to one claim, ordinary apportionment of common costs between claims is excluded by that language. However, a single common item may be divided notionally between the claims where the nature of the work permits that division. The receiving party may recover only the part attributed to the relevant claim.

The claimant appealed against a decision of Master Haworth, Costs Judge, concerning the construction of paragraph 3 of a consent order compromising proceedings about overage provisions and a professional-negligence claim against the claimant’s solicitors.

The order required the third defendant to pay the claimant’s costs of the action against it, but stated that those costs related exclusively to the professional-negligence claim and excluded costs incurred in any dispute with the first and second defendants. The issue was whether common costs could be apportioned between the claims, and whether they could instead be divided between them.

1. Appeal allowed in part. The words of the consent order were construed in accordance with the objective principles applicable to commercial instruments, as described in Sirius International Insurance Co v FAI General Insurance Ltd [2004] 1 WLR 3251.
2. Paragraph 3 covered costs wholly attributable to the professional-negligence claim. It imposed no liability on the third defendant for costs attributable only to the claim against the first and second defendants.
3. The distinction between apportionment and division was material. Under Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] AC 88, common costs are not ordinarily apportioned between a claim and counterclaim, but individual items may be split into notional parts attributable to each proceeding. That distinction, reflected in the discussion of Wilson v Walters and Christie v Platt, applied equally here.
4. Common costs could therefore be recovered from the third defendant only to the extent that they were attributable to its claim by division. An item incapable of division remained common and did not relate exclusively to that claim. The words “relate exclusively” excluded ordinary apportionment.
5. Master Haworth’s order was set aside because it could be read as excluding both apportionment and division. A replacement order was to provide that the third defendant was not liable for common costs except to the extent attributed to the professional-negligence claim by division.

• High Court (Chancery Division): Master Haworth, Costs Judge, ordered that the third defendant pay only costs incurred exclusively against it and excluded costs incurred in common with the other defendants. On appeal, paragraph 2 of that order was set aside and replaced to permit recovery of common costs attributable by division.