Newland Shipping & Forwarding Ltd v Toba Trading FZC

Where a claimant succeeds on its claim and the defendant succeeds on a counterclaim, costs are determined by considering the proceedings as a whole and identifying the overall successful party, while accounting for the issues and work undertaken.

A Part 36 offer relating to claims in separate actions cannot ordinarily be used to aggregate judgments entered at different times. If the actions later become procedurally separate, the offer may cease to govern subsequent proceedings. It may nevertheless remain relevant under the general costs discretion.

A valid Part 36 offer must be understood by a reasonable recipient, including as to whether counterclaims are included. In the absence of special circumstances, interest on US dollar judgments may be awarded at six-month LIBOR plus 2.25%.

This was a first-instance decision on consequential matters following judgment on Newland’s claim and Toba’s counterclaim. Newland had obtained judgment for US$334,967.44, while Toba had obtained judgment for US$2,495,592.60.

Newland relied on a claimant’s Part 36 offer made when this action and a related action were due to be tried together. The offer proposed payment of US$2.9 million in full and final settlement of all claims and counterclaims in both actions. The related action was later determined separately, and the default judgment in this action was set aside.

The issues were whether the offer complied with Part 36, whether its costs consequences applied, what costs order should be made, and the appropriate rate of interest.

1. Costs apart from the offer. The modern approach in commercial litigation involving monetary claims is to consider the proceedings as a whole and identify the overall successful party. Toba was overall successful because its judgment substantially exceeded the amount awarded to Newland. However, Newland’s claim occupied a significant part of the trial and preparation. In the absence of the offer, Newland was therefore ordered to pay 50% of Toba’s costs.
2. Validity of the offer. The offer complied with CPR 36.2(2)(e). Although it did not expressly state that Toba’s counterclaims were taken into account, a reasonable recipient would have understood that the reference to full and final settlement of all claims and counterclaims included them. Toba could have sought clarification if uncertain.
3. Part 36 consequences. The judgment in this action was not at least as advantageous to Newland as the offer. The sums could not properly be aggregated with the judgment in the related action, because the two judgments were given at different times in separate actions. Further, when the actions became separate, the earlier offer ceased to govern the subsequent proceedings. Alternatively, it would have been unjust to give Newland the claimed Part 36 benefits, since Toba had to continue pursuing its counterclaim.
4. General costs discretion. The offer remained relevant under CPR 44.2(4)(c). Toba would have achieved a better overall result by accepting it. Newland therefore received its costs on the indemnity basis from 29 May to 15 November 2013, while paying 50% of Toba’s costs for the remaining period. Enhanced interest and an additional amount were unavailable outside Part 36. In any event, an additional amount would not have been just because Newland’s offer did not say that it would seek one.
5. Interest. Applying Vis Trading Co Ltd v Nazarov [2013] EWHC 491, the appropriate commercial rate for US dollar judgment sums, absent special circumstances, was six-month LIBOR plus 2.25%.

This was a first-instance decision on costs and interest following the trial judgment of 12 March 2014. The judgment records that a default judgment previously entered against Toba in this action was set aside by Hamblen J on 6 February 2014, while the judgment in the related action remained in force in reduced amount.