Walsh v Shanahan & Ors

A costs order is discretionary. The Court of Appeal will interfere only for an error of principle, reliance on an irrelevant consideration, failure to consider a relevant consideration, or a decision that is plainly wrong. Where a claimant rejects a Part 36 offer and does not better it at trial, the judge may first decide the fair costs allocation without the offer, including an issue-based assessment, and then apply that approach to the period governed by the offer. Success on a limited damages issue does not prevent the opposing party being substantially successful overall where the claim was principally for an account of profits. A broad-brush percentage order is permissible where it rationally reflects the issues won and lost.

Mr Walsh appealed from the High Court’s costs ruling in proceedings in which he recovered damages for breach of confidence but failed to obtain an account of the respondents’ profits. His Honour Judge Pelling QC awarded him damages and interest, but ordered him to pay 90% of the respondents’ costs up to 13 October 2010 and all their costs thereafter. The respondents had made a Part 36 offer which Mr Walsh rejected and did not better at trial.

The Court of Appeal had already dismissed the substantive appeal in [2013] EWCA Civ 411. The issue on this appeal was whether the judge had erred by applying the 90% allocation to the period before the offer’s acceptance deadline without separately reassessing the costs attributable to the damages issue.

Lord Justice Rimer gave the judgment, with Lady Justice Hallett and Lord Justice Laws agreeing.

1. Disposition. The appeal against the costs order was dismissed.
2. Appellate restraint. A costs order is a matter for the first-instance judge’s discretion. The Court of Appeal may intervene only where the judge erred in principle, took account of an irrelevant consideration, failed to take account of a relevant consideration, or reached a decision that was plainly wrong. The judge’s approach in this case was orthodox and rational (para [14]).
3. Effect of the rejected offer. Because Mr Walsh rejected the Part 36 offer, the only costs in issue were those incurred up to 13 October 2010. It was appropriate first to determine what costs order would have been fair if no offer had been made, and then to apply that assessment to the relevant period. The hypothetical costs position had Mr Walsh accepted the offer was irrelevant because he did not accept it (paras [14]-[16]).
4. Issue-based assessment. Applying Civil Procedure Rules 1998 Part 44.3(4), the judge was entitled to regard the respondents as substantially successful overall. The principal claim was for an account of profits, while the damages issue represented only a limited part of the litigation. The respondents’ unsuccessful resistance to that issue justified reducing their costs recovery, but did not make Mr Walsh the successful party overall. A broad-brush percentage allocation was permissible where a detailed assessment would cause avoidable delay and expense (paras [6]-[8], [14]).
5. Application to the facts. The parties’ expenditure showed that the claim was pursued principally to obtain an account of profits, not the relatively small damages award. The 90% order therefore involved no error of principle and provided no basis for appellate interference (paras [17]-[18]).

• Court of Appeal (Civil Division). The substantive appeal was dismissed in [2013] EWCA Civ 411. The present costs appeal was dismissed in [2013] EWCA Civ 675.
• High Court of Justice, Chancery Division. His Honour Judge Pelling QC, sitting as a Judge of the High Court, awarded damages and interest but refused an account of profits and ordered Mr Walsh to pay 90% of the respondents’ costs up to 13 October 2010 and all their costs thereafter: [2012] EWHC 462.