Coward v Phaestos Ltd & Ors

A non-Part 36 settlement offer falls within the broad costs discretion under Civil Procedure Rules 1998, Part 44. The rigid consequences governing Part 36 offers do not apply directly or by analogy.

The court must make a just costs order after considering all the circumstances. These include the offer’s terms, the result obtained, the significance of any additional non-monetary relief and whether reasonable clarification was required. A nearly sufficient offer may affect costs, but no fixed rule determines the result.

An appellate court may interfere with a trial judge’s costs discretion only for an error of principle, an irrelevant or omitted material consideration, or a plainly unsustainable decision.

The claimant and the defendants conducted substantial intellectual property litigation concerning copyright, database rights, software and confidential information used in competing quantitative trading businesses. Following a 12-day trial, Asplin J dismissed the claimant’s claims and granted the defendants substantial relief on their counterclaim.

The claimant had earlier made a Calderbank offer which he said gave the defendants substantially everything they ultimately obtained. The judge nevertheless ordered him to pay 85% of the defendants’ costs, allowing a 15% reduction for a part of the counterclaim concerning the New Venture Software which the defendants did not pursue.

Permission to appeal was confined to costs. The central questions were how the Calderbank offer should affect the discretion under Part 44 of the Civil Procedure Rules 1998, whether Part 36 supplied an analogous rigid test, and whether the 15% costs adjustment was adequate.

1. The appeal was dismissed unanimously. David Richards J delivered the judgment. Ryder LJ and Moore-Bick LJ agreed.

2. The judge was entitled to find that the defendants achieved substantially more than the Calderbank offer provided. The undertaking restraining use of the 2009 Software was significant relief. An injunction, or an undertaking in its place, is a serious remedy and will not be granted unnecessarily. Its omission from the offer was especially important because the counterclaim sought that relief, the claimant resisted it and concerns remained about possible future possession and use of copies.

3. The later undertaking to remove the Gardening Leave Code was also a substantial improvement. The Calderbank offer did not address that code. The arrangements for the Burns and Steyning materials were likewise significant because the offer omitted the Steyning material and the final regime required further resolution. Confirmatory assignments were different: applying Roache v News Group Newspapers Ltd, the court held that they would probably have been agreed as a consequential term of settlement.

4. The larger monetary offer and more favourable pre-offer costs provision had to be considered. In litigation involving non-monetary relief, however, the court must evaluate the comparative significance of the different forms of relief. The trial judge was entitled to conclude that the balance still favoured the defendants. She could also consider whether a reasonable offeree required clarification and take account of the defendants’ later settlement offer.

5. Part 36 and Part 44 are separate regimes. Part 36 is a prescriptive, self-contained code with specified consequences. Part 44 confers a broad discretion requiring consideration of all the circumstances, including admissible non-Part 36 offers. It would contradict Part 44 to import the rigid rule in CPR 36.14(1A) that any monetary improvement, however small, is decisive. A nearly sufficient Calderbank offer may affect costs, depending entirely on the case.

6. The 15% reduction was sustainable. In accordance with Medway Oil and Storage Co Ltd v Continental Contractors Ltd, costs common to the claim and counterclaim were excluded from the counterclaim calculation. The judge reasonably estimated the incremental costs attributable to the abandoned New Venture Software issue and correctly allowed for both parties’ expenditure.

1. Court of Appeal (Civil Division): The claimant’s appeal against the costs order was dismissed by [2014] EWCA Civ 1256. The judge’s order requiring him to pay 85% of the defendants’ costs was upheld.
2. High Court, Chancery Division: Asplin J dismissed the claimant’s substantive claims, granted the defendants substantial relief on their counterclaim and ordered the claimant to pay 85% of their costs. The decision was handed down on 17 May 2013; no citation is stated in the judgment.