Begum v Birmingham City Council

A successful claimant’s costs should ordinarily be awarded in her favour. Failure on alternative causes of action may justify a proportionate discount, but the court must consider the practical effect of those issues on the litigation.

Where several causes of action are merely different legal labels for the same factual case, and substantially the same factual and expert evidence would have been required in any event, failure on some labels does not justify treating the claimant as the losing party during the period before the successful claim was pleaded. A late amendment which makes the difference between success and failure does not automatically require the claimant to pay the defendant’s earlier costs. The appropriate order depends on the circumstances, including whether the amendment introduced a new factual case or caused settlement prejudice.

The claimant purchased a council house under the right-to-buy scheme. The Council’s inspection report failed to disclose a structural defect known from its maintenance records. The claimant initially pleaded negligence and misrepresentation, and later added breach of statutory duty under section 125(4A) of the Housing Act 1985.

In the Birmingham County Court’s Technology and Construction Court, His Honour Judge Grant dismissed the negligence and misrepresentation claims but awarded £74,876 for breach of statutory duty. He nevertheless ordered the claimant to pay the Council’s costs for one period and allowed her only 40% of her costs for another. His order reflected the late pleading of the successful cause of action and the need for two hearings.

The claimant appealed against the costs orders for the pre-issue period and the first two periods of the proceedings. The central issue was whether applying the wrong legal labels to an otherwise substantially unchanged factual case justified those substantial costs penalties.

1. Appeal allowed. The claimant was the successful party because she recovered £74,876. The proper starting point was therefore an award of costs in her favour. Naming her husband initially as claimant was a technical error which had no effect on costs and could be disregarded: per Jackson LJ, Bean and Sales LJJ agreeing.

2. The court had to consider appropriate departures from that starting point. Two matters justified some departure: the claimant failed on negligence and misrepresentation, and deficient pleading caused the dispute to require two hearings. The judge’s 20% reduction of the costs for the final period fairly reflected the second matter and remained undisturbed.

3. The failure of the negligence and misrepresentation claims could not justify requiring the claimant to pay the Council’s costs for the first period or forfeiting 60% of her costs for the second. Throughout the litigation, the essential factual case was that the Council knew of serious structural defects but failed to disclose them before sale. Negligence, misrepresentation and breach of statutory duty were different legal labels applied to those facts. The parties would have prepared and adduced substantially the same factual and expert evidence had breach of statutory duty been the only cause of action pleaded. A modest amount of trial time was spent on the unsuccessful legal claims, so a 15% discount was appropriate: paras 26–33.

4. Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 was materially different. Its late amendment introduced a new factual case, deprived the defendant of an opportunity to make a payment into court and concerned a small recovery relative to the litigation as a whole. Here the factual dispute remained unchanged and the Council retained an opportunity to make a Part 36 offer. Beoco did not establish that every amendment which converts failure into success requires the claimant to pay the defendant’s costs up to the amendment: paras 31, 35–36.

5. The claimant was awarded 85% of her pre-issue costs and 85% of her costs for periods 1 and 2. The existing order allowing her 80% of her costs for period 3 remained in force: para 34.

1. Court of Appeal (Civil Division): The appeal was allowed. The claimant was awarded 85% of her pre-issue costs and 85% of her costs for periods 1 and 2. The order for period 3 remained unchanged: [2015] EWCA Civ 386.

2. Birmingham County Court, Technology and Construction Court: His Honour Judge Grant awarded the claimant £74,876 for breach of statutory duty under section 125(4A) of the Housing Act 1985, but dismissed her negligence and misrepresentation claims. His subsequent costs order denied pre-issue costs, required the claimant to pay the Council’s costs for period 1 subject to an expert-evidence proviso, and allowed her 40% and 80% of her costs for periods 2 and 3 respectively.