Bellway Homes Ltd v Seymour (Civil Engineering Contractors) Ltd

In exercising the costs discretion after settlement, the court must assess what is just in the circumstances of the case. Relevant matters include the parties’ offers, timing, available information, negotiation conduct, the changing state of any account between them, and the litigation’s overall outcome. A Part 36 offer may validly address a claim together with a set-off or counterclaim, but its ordinary costs consequences may be unjust where its structure requires a party to surrender a fair costs position arising from an earlier period. In settled commercial litigation, the court may adopt time periods and make a proportionate costs order. A party recovering only part of an exaggerated claim need not recover the same proportion of its costs.

The claimant challenged an adjudicator’s award concerning prolongation and related costs on a civil engineering project. The defendant counterclaimed for release of retention money and made a Part 36 offer to pay £1 in full and final settlement of the claim and counterclaim, with costs consequences. The claimant later released the retention, and the parties settled the substantive claims for £146,953, leaving costs and post-settlement interest for determination.

The court had to decide the consequences of the offer under CPR Part 36.14, including whether applying the usual consequences would be unjust, how responsibility changed as defects were remedied and the retention became payable, and whether the claimant’s partial recovery justified a proportionate reduction in its costs.

1. Part 36 discretion. The £1 offer was formally valid and would have resolved the proceedings. Nevertheless, under CPR Part 36.14(2) and (4), the court had to decide whether the ordinary costs consequences would be unjust. That assessment was case-specific and included the offer’s terms, timing, available information and the parties’ conduct. A Part 36 offer could address the claim together with a set-off or counterclaim, and a properly deployed set-off remained a valid defence.
2. Time-slice analysis. Until about 30 September 2012, the evidence and eventual settlement supported the inference that the claimant had a net claim, while the defendant’s defects claim justified withholding much of the retention. By the date of the offer, most defects had been remedied and the account had probably moved fractionally in the defendant’s favour. The offer was therefore unjust in requiring the claimant, as the price of acceptance, to bear both parties’ costs despite its earlier justified conduct.
3. Proportionate costs. The settlement recovered only about 26% to 27% of the claimant’s pleaded claim, which was substantially exaggerated and necessarily speculative. That did not require a matching percentage reduction because the claimant had incurred costs to secure the amount recovered. A fair and proportionate recovery was 50% of the claimant’s costs.
4. Order. The defendant was to pay 50% of the claimant’s standard-basis costs up to and including 30 September 2012. The claimant was to pay the defendant’s standard-basis costs from 30 September 2012 to 31 January 2013. Thereafter each party was to bear its own costs.