Ted Baker Plc & Ors v AXA Insurance UK Plc & Ors

In a split trial, a successful party on discrete preliminary issues is not automatically entitled to an immediate costs order. The court must exercise its discretion under CPR Part 44.3 by considering all the circumstances, including the possible effect of undisclosed settlement offers. The fact that later issues may result in no recovery does not, by itself, justify reserving the preliminary-issue costs. However, reservation may be appropriate where the court cannot exclude the possibility that a Part 36 offer would materially affect the costs decision. The court may make an immediate issue-specific order notwithstanding general reservation, including an indemnity costs order for costs wasted by a hopeless case advanced until shortly before trial.

Following an earlier judgment determining preliminary issues in insurance litigation, the claimants sought their costs of those issues, estimated at approximately £660,000, together with an interim payment.

The defendants argued that costs should be reserved until the outstanding liability and quantum issues had been resolved. They also sought a reduction for unreasonable disclosure conduct and an indemnity costs order for costs wasted because the claimants had denied until shortly before trial that the risk was co-insured. The court considered the effect of the split trial, possible Part 36 or other settlement offers, and the parties’ agreed and contested costs positions.

1. General costs discretion. The claimants were the successful parties on the preliminary issues, but that did not determine the timing or extent of the costs order. CPR Part 44.3 required regard to all the circumstances, including the possibility that an undisclosed Part 36 offer might affect the appropriate order.
2. Split trial. Weill Mean v Fiddler Holdings [2003] EWCA Civ 1058 did not establish a general rule that costs in a split trial should be reserved. Where preliminary issues are discrete, the successful party may in principle recover their costs even if it later fails on liability or obtains no damages. The court nevertheless considered that justice required reservation in this case because a relevant offer could not be excluded and might have changed the costs decision.
3. Part 36 offers. The court noted significant uncertainty in the wording of CPR Part 36.13 concerning split trials. It assumed, in the claimants’ favour, that the prohibition on communicating the fact of a Part 36 offer applied. Even so, the possibility of an offer and its potential effect were circumstances to which the court had to have regard under CPR Part 44.3.
4. Co-insurance costs. The claim that AXA was effectively the sole insurer was hopeless from the outset. The defendants were therefore entitled in principle to the costs wasted on the co-insurance issues on an indemnity basis, subject to any settlement offer. Those costs were to be assessed in detail.
5. The costs of the preliminary issues were reserved until the case was decided or further order, subject to the stated £20,000 deduction for disclosure and the indemnity costs order concerning co-insurance. The claimants were ordered, subject to any relevant offer, to pay £9,000, representing 60 per cent of the costs of the 18 and 22 June hearings. Leave to appeal was refused.

First-instance decision on the costs of preliminary issues and related hearings. Leave to appeal was refused.