Capita (Banstead 2011) Ltd & Anor v RFIB Group Ltd

A trial judge may make an issues-based costs order where the successful party lost an issue responsible for most of the parties’ costs. Unreasonable conduct is not a precondition to such an order. Although the identity of the overall winner remains the starting point, the weight given to that consideration lies within the judge’s discretion.

An appellate court will interfere with a costs order only where it is wrong in principle, takes account of an irrelevant matter, omits a relevant matter, or is plainly unsustainable. A Calderbank offer may, in an appropriate case, receive the same costs effect as an offer under Civil Procedure Rules 1998 Part 36.

The appellants recovered part of an indemnity claimed under a share purchase agreement. Popplewell J held that only part of the underlying settlement fell within the indemnity. He subsequently ordered no costs for the period before the expiry of a Calderbank offer and ordered the appellants to pay 80% of the respondent’s later costs.

The substantive judgment was partly varied on an earlier appeal, increasing the recoverable proportion from 50% to 58%, but the costs order remained unchanged. The appellants appealed against the costs order in [2014] EWHC 3727 (Comm). They argued that their overall success required an order for their pre-offer costs and that the Calderbank offer should not have received the same effect as the later Part 36 offer.

1. Appeal dismissed. The judge was entitled to find that most costs incurred before the Calderbank offer expired related to the transfer-date issue on which the appellants had lost. That finding established the necessary causal connection between the unsuccessful issue and the costs incurred. An issues-based order was therefore available even though the appellants had succeeded overall and their pursuit of the issue was not unreasonable. Unreasonableness is not a precondition to such an order: Summit Property Ltd v Pitmans [2001] EWCA Civ 2020 and R (Viridor Waste Management Ltd) v HMRC [2016] EWHC 2502 (Admin) applied.
2. The judge did not overlook the appellants’ status as the successful parties. He treated that status as his starting point and included it in the ultimate balancing exercise. The appellants’ complaint concerned the weight assigned to that consideration, which was a matter for the trial judge. The possibility that another judge might have exercised the discretion differently disclosed no error of principle.
3. An appellate court may interfere with a costs decision only if it is wrong in principle, rests on an irrelevant consideration, omits a relevant consideration, or is plainly unsustainable. The trial judge’s knowledge and feel for the litigation are especially important. None of the recognised grounds for appellate intervention was established.
4. A court may, in an appropriate case, give a Calderbank offer the same costs effect as an offer under Civil Procedure Rules 1998 Part 36. Whether to do so is quintessentially discretionary. Popplewell J committed no error of principle in treating the respondent’s Calderbank offer in that way. Any difference between its expiry and the later Part 36 offer was academic because practically no costs were incurred during the intervening period.

Flaux LJ delivered the judgment. Henderson and Longmore LJJ agreed.

1. Court of Appeal (Civil Division): The appeal against the costs order was dismissed by [2017] EWCA Civ 1032.
2. Court of Appeal (Civil Division): On the earlier substantive appeal, the appellants failed on their principal construction ground but succeeded by a majority on a continuing-duty issue: [2015] EWCA Civ 1310, reported at [2016] QB 835. On remission, the recoverable proportion was increased from 50% to 58%.
3. High Court, Commercial Court: Popplewell J determined the merits in [2014] EWHC 2197 (Comm). His subsequent costs judgment, [2014] EWHC 3727 (Comm), made no order for costs before expiry of the Calderbank offer and awarded the respondent 80% of its costs thereafter.