Acre 1127 Ltd (Formerly known as Castle Galleries Ltd) v De Montfort Fine Art Ltd

Where an appeal reduces a damages award, a Part 36 offer must be compared with the judgment sum together with any interest properly included in the comparison. A party cannot ordinarily resile on appeal from an agreement or concession made below about interest. In commercial disputes, the starting point is compensation for being kept out of money. Under CPR 36.14(1)(b), the question is whether the outcome is at least as advantageous to the offeree as the offer. An appeal may be a substantial financial success even where the appellant’s principal arguments fail, justifying a proportionate costs order.

The appellant, Acre 1127 Ltd, formerly Castle Galleries Ltd, appealed from the Birmingham Mercantile Court’s judgment in favour of De Montfort Fine Art Ltd. After the Court of Appeal’s earlier judgments, four consequential matters remained: the amount of damages for lost profits, comparison with De Montfort’s Part 36 offer, interest and costs below, and appeal costs. The parties made further written submissions at the court’s invitation.

The court also considered Castle’s application for permission to appeal on issues concerning dishonesty, performance of a long-term contract, and intention to perform.

1. Damages. De Montfort’s lost-profit recovery for the second, third and fourth quarters was three-sevenths of the longer-period award, namely £442,442.04. Castle could not argue at this stage that De Montfort would have been unable to perform. That contention had not been advanced at trial, and Castle’s case had been that the outstanding dispute would have created no performance difficulties in the ensuing quarters. The judge’s order was varied accordingly.
2. Part 36 comparison. The offer was inclusive of interest until 3 July 2008. The correct comparison was £500,000 against the judgment sum together with appropriate discretionary interest accrued to that date. Castle could not resile from its concession below concerning the periods and rate of interest. The agreed approach produced a comparator sum of £510,113.44.
3. Interest and costs below. Under CPR 36.14(1)(b), De Montfort maintained a judgment at least as advantageous to it as its offer. The court declined to revisit the judge’s exercise of discretion on interest and costs. The comparison focused on the advantage to De Montfort, not on the reasonableness of Castle’s refusal to engage with the offer. Carver v BAA plc [2009] 1 WLR 113 was distinguishable on its circumstances.
4. Appeal costs. Although Castle failed on its principal grounds, it substantially reduced the award. In commercial litigation, the disputes are ultimately about money, as observed in A L Barnes v Timetalk (UK) Ltd [2003] EWCA Civ 402. De Montfort was ordered to pay 50% of Castle’s appeal costs on the standard basis, to be assessed if not agreed.
5. Permission to appeal. The court accepted that the usual rule after acceptance of a repudiatory breach is that the innocent party need not establish readiness and willingness to perform at the time fixed for performance as a prerequisite to recovering damages. It considered this unusual case, involving delayed acceptance, no intervening offer of performance and a settled intention not to perform predating the breach, to raise a question for the Supreme Court. The formal outcome of the permission application is not stated.

• Court of Appeal (Civil Division): [2011] EWCA Civ 130. The court reduced the judgment sum to £442,442.04, upheld the approach to the Part 36 offer and interest and costs below, and ordered De Montfort to pay 50% of Castle’s appeal costs.
• Birmingham Mercantile Court: The judgment below awarded De Montfort £1,032,364.81. The Court of Appeal varied the order of 28 April 2009.