Powles & Anor v Reeves & Ors

Where parties settle the substantive dispute but invite the court to decide costs, the court should not conduct a substitute trial. It should evaluate the settlement’s result, the parties’ conduct, reasonable offers, and any tolerably clear likely trial outcome. Actual success achieved through the settlement is a highly relevant consideration.

An appellate court will be especially reluctant to disturb a costs order made following such an agreed reference. A schedule to a Tomlin order remains contractual rather than an order of the court, but the court may consider its terms where they are relevant to the costs issue which the parties have asked it to determine.

The claimants, Mr and Mrs Powles, brought proceedings concerning the boundary between their property and a neighbouring property then owned by Mr Reeves. They sought a declaration, damages for trespass and an injunction. Mr Reeves disputed the claimed boundary and counterclaimed.

After Mr Reeves sold the neighbouring property, the claimants joined the purchasers. They settled with the purchasers on a declaration that the boundary lay along the centre line of the hedge. The remaining claims and counterclaims between the claimants and Mr Reeves settled on terms including a payment of £200 by Mr Reeves and discontinuance of his counterclaims. The parties left costs to the court.

District Judge Ellis ordered Mr Reeves to pay the claimants’ costs. He appealed, principally disputing that the claimants had been successful and the judge’s reliance on the settlement schedules.

1. Appeal dismissed. The district judge was entitled to order Mr Reeves to pay the claimants’ costs. Longmore LJ agreed.

2. When substantive claims have settled but costs remain for decision, the court should assess matters other than a trial result. Relevant matters include the settlement’s outcome, the parties’ conduct, reasonable settlement offers, and, where tolerably clear, the likely outcome at trial. That approach follows the guidelines in [2001] 4 CCLR 258, as adopted for private civil litigation in [2002] EWCA Civ 756.

3. An appellate court is even more reluctant to interfere with a costs order made at the parties’ request after settlement than with an ordinary post-trial costs order. The authorities, including [2003] EWCA Civ 539, require substantial restraint. Although [2016] EWCA Civ 158 questioned whether manifest injustice is an additional threshold, the appeal failed under any formulation because there was no relevant error in the judge’s exercise of discretion.

4. The settlement declaration vindicated the claimants’ asserted boundary and therefore made them the successful parties. It was material that Mr Reeves had voluntarily sold the property without reserving rights against the purchasers. A possible, even likely, different result at a trial against Mr Reeves could not displace the actual outcome of the litigation.

5. The schedules to the Tomlin orders did not themselves have the force of court orders and operated as contracts. Nevertheless, the court could consider them when deciding the costs issue which the parties had specifically referred to it. The judge was thus entitled to take account of Mr Reeves’s payment to settle the damages claims and his unconditional discontinuance of the counterclaims.

• Court of Appeal (Civil Division): Dismissed Mr Reeves’s appeal and upheld the costs order.
• County Court at Chichester: District Judge Ellis ordered Mr Reeves to pay the claimants’ costs after the substantive claims and counterclaims had settled.