Ma'har v O'Keefe & Anor

In a partnership dissolution account, the usual starting point is that there is no order for costs, unless a party’s misconduct makes an adverse order appropriate. Costs remain a discretionary matter requiring regard to all the circumstances, including relative success, conduct and admissible non-Part 36 offers under CPR.

An appellate court will not substitute its own view merely because it might have made a different costs order. Intervention requires an error of principle, a material error of law, or an omission or inclusion of relevant considerations that takes the order outside the broad ambit of the trial judge’s discretion. A conditional settlement offer may still be relevant to costs as evidence of reasonable conduct and a wish to settle. An offer is beaten only if the offeree achieves its material terms, including its costs component.

Mrs Ma'har sought an account following the dissolution of a partnership which had operated a country hotel owned by Mr and Mrs O'Keefe. Earlier orders had provided for sale of the hotel and determined the parties’ beneficial interests. Following an interim payment, Recorder Klein decided disputed issues in the account and awarded Mrs Ma'har a further £8,989.80.

The Recorder then made costs orders for the period after the interim payment. He applied the starting point of no order as to costs in a partnership dissolution account, considered the parties’ relative success, conduct and settlement offers, and ordered Mrs Ma'har to contribute 35% of Mr O'Keefe’s costs for a defined period. Mrs Ma'har appealed, challenging the treatment of Mr O'Keefe’s conditional offer, the alleged compromise, the apportionment of costs, and the consequences of her later offer.

1. Appeal dismissed unanimously. Lord Justice Lewison, with whom Lord Justice Burnett and Lord Justice Longmore agreed, held that the Recorder’s costs order was within the broad ambit of his discretion.

2. The relevant starting point in a partnership dissolution account was no order as to costs. As explained in Hamer v Giles (1879) 11 Ch D 942 and Sahota v Sohi [2006] EWHC 344 (Ch), where no party is at fault, the costs of necessary administration ordinarily reduce the partnership fund or are shared between the partners. This setting differed from ordinary adversarial litigation, where success and failure are more readily identified.

3. Under CPR Part 44.2, the Recorder was required to consider all the circumstances, including the parties’ conduct, relative success and admissible non-Part 36 offers. The conditional offer by Mr O'Keefe could not itself have produced a binding settlement because it required Mrs O'Keefe’s agreement. It was nevertheless an admissible offer to settle and evidence of reasonable conduct and a desire to settle. The weight to give it was for the Recorder.

4. The asserted compromise at £20,000 did not assist Mrs Ma'har. Her continued pursuit of a substantially larger claim was inconsistent with a concluded compromise, and in any event could not justify requiring Mr O'Keefe to pay her costs.

5. The Recorder was entitled to give weight to Mr O'Keefe’s greater success on the contested issues, his attempt to settle at more than Mrs Ma'har’s ultimate entitlement, her earlier unwillingness to settle for less than that entitlement, and the limited percentage order made against her. His assessment of the late-raised vehicle issue also showed that he had considered the relevant conduct.

6. Mrs Ma'har had not beaten her March 2013 offer. Although she recovered more than its monetary element, the offer also required payment of costs back to August 2011, which she did not obtain. The appeal test restated in F & C Alternative Investments (Holdings) Ltd v Barthelemy [2012] EWCA Civ 843 was not met: the Recorder had considered relevant matters, excluded irrelevant matters, and made no error of principle.

• Court of Appeal (Civil Division): Dismissed Mrs Ma'har’s appeal and upheld Recorder Klein’s discretionary costs order.
• Leeds County Court (Chancery Division): Recorder Klein determined points of principle in the partnership account on 25 February 2013 and subsequently made the costs order appealed from on 14 February 2014.