Brit Inns Ltd & Anor v BDW Trading Ltd (No 2)

In exercising its discretion on costs, the court must begin with the structured consequences of a valid CPR Part 36 offer. If those consequences do not apply, the court must exercise the broader discretion under CPR Part 44.3, considering success, conduct, exaggeration, offers and the costs attributable to particular issues.

A claimant who recovers money will ordinarily be treated as the successful party in commercial litigation, but success is only the starting point. An exaggerated and inadequately supported claim may justify a substantial reduction in recovery of costs. A realistic non-Part 36 offer may justify shifting costs from the date of its rejection, particularly where the claimant would have been better off accepting it. Separate proceedings which unnecessarily duplicate costs may justify an order that the claimant pay most of those costs.

This was a costs judgment following the trial of two related actions. In the main subrogated action, the claimants recovered damages of £157,467.89 on a pleaded claim of about £660,000. In the separate uninsured action, they recovered £16,403.24 on a pleaded claim of about £522,000.

The defendant had made one valid Part 36 offer, which the claimants marginally bettered at trial, and later made offers under Part 44 which exceeded the value of the claims and included substantial contributions towards costs. The issues were the effect of those offers, the claimants’ conduct and exaggeration, the parties’ relative success, and the unnecessary separation of the uninsured claim.

1. Main action: costs to 30 May 2012. The claimants were the successful party for the purposes of CPR 44.3(2) because they recovered substantial damages under both principal heads of claim. That was only the starting point. Their exaggerated claims, inadequate supporting material, slow disclosure, unhelpful correspondence and fundamentally defective expert evidence justified a substantial reduction.

2. The defendant’s Part 36 offer did not attract the automatic costs consequences of CPR 36.14, because the claimants recovered more than the offer. The defendant’s inability to make a better offer was not caused by the claimants’ late information, since the defendant had been able to value the claim and make its offer in May 2011.

3. The defendant was therefore ordered to pay 60% of the claimants’ reasonable and proportionate costs to 30 May 2012, excluding all costs connected with the claimants’ experts. The claimants were also to bear the costs of their late supplementary statements.

4. Costs after 30 May 2012. The defendant’s Part 44 offer of 16 May 2012, open until 30 May, was worth more than the claim and included £85,000 for costs. On the balance of probabilities, the claimants would have been better off accepting it. Its rejection marked the point at which their unreasonable conduct and unrealistic expectations justified liability for the defendant’s subsequent costs. The same reasoning applied to the later offer of 11 June 2012.

5. Uninsured action. The claimants should have advanced the uninsured losses within the subrogated action. Maintaining separate proceedings and separate legal teams unnecessarily duplicated costs. Their recovery was about 3% of the amount claimed and the defendant had bettered its Part 44 offer. The claimants were ordered to pay 90% of the defendant’s costs of that action.

6. Indemnity costs were refused. The claims had not been found deliberately exaggerated and the conduct was not sufficiently exceptional to warrant that order. No interim payment was ordered because the overall successful party on costs could not yet be identified. Costs were to be assessed on the standard basis if not agreed.