Ali v Stagecoach

A conditional interim payment, expressly recoverable if liability fails or the award is lower, is not an offer to settle. It cannot be accepted to achieve finality and should not be treated as equivalent to an offer for costs purposes. The court may nevertheless take the payment into account when exercising its costs discretion under the Civil Procedure Rules 1998. Relevant considerations include the claimant’s ultimate financial position and the extent to which substantial parts of the claim failed. Mere exaggeration alone does not automatically deprive a claimant of costs where no proper offer has been made.

The claimant appealed against a costs order made by HHJ O’Brien in the Cambridge County Court after a road accident claim. The trial judge accepted personal injury, limited vehicle damage and three days’ loss of use, awarding £1,750, but rejected most of the repair and vehicle-hire claims.

Before proceedings, the respondent had sent a £3,200 cheque as a conditional interim payment, without admitting liability and subject to repayment. The judge treated the letter accompanying it as equivalent to an offer and ordered the claimant to pay most of the respondent’s later costs. The central issue was whether that interim payment could be treated as an offer and how it should affect the costs discretion.

1. Appeal allowed. Lord Justice Longmore delivered the judgment, with which Lord Justice Etherton agreed. The trial judge had erred by giving the conditional interim payment the weight of an offer to settle.
2. The payment was expressly made without admission of liability and was recoverable if the claimant failed to establish liability or recovered less than the payment. It therefore did not provide a basis for final settlement. Unlike an offer, it could not be accepted so as to conclude the litigation. It was not equivalent to an offer under CPR 44.3(4)(c), although the judge was entitled to consider the letter and payment in the broader costs exercise (paras [8]–[9]).
3. The court could not assume that the claimant should have cashed the cheque, refrained from issuing proceedings and waited to see whether the respondent sought repayment. The respondent’s reservations, particularly in light of the expert evidence, meant that litigation might still have been unavoidable.
4. The costs discretion nevertheless required regard to the claimant’s actual position as the party who ultimately had to repay the interim payment, and to the extent to which the repair and hire claims had failed. The absence of a proper offer did not prevent those matters from being considered. Hall v Stone [2007] EWCA Civ 1354, concerning mere exaggeration, did not require a different result on these facts (para [10]).
5. The appropriate order was no order as to the costs of the trial. The appeal was allowed to that extent (para [11]).

1. Court of Appeal (Civil Division) — Allowed the appeal to the extent of substituting an order that there be no order as to the costs of the trial.
2. Cambridge County Court — Following trial, HHJ O’Brien awarded the claimant £1,750 but treated the conditional £3,200 interim payment as equivalent to an offer and ordered the claimant to pay two-thirds of the respondent’s costs from 10 April 2008.