Interactive Technology Corporation Ltd v Ferster & Ors

The court refused an order awarding part of the claimant's costs in respect of issues of liability and instead reserved the costs. The principal legal principle applied was the restriction in CPR 36.16 on disclosing the terms of Part 36 offers to a judge where the case has not been finally decided, coupled with the guidance in HSS Group plc v BMB Ltd that, where damages remain to be quantified, the court will ordinarily reserve the question of costs. The judge held that because three Part 36 offers existed and their terms were unknown and might relate to issues already decided, it was not appropriate to determine costs of the Liability Issues at that stage.

Background and parties: The claimant, Interactive Technology Corporation Ltd (ITC), owned equally by three brothers Warren, Stuart and Jonathan Ferster, brought claims against Jonathan Ferster and a number of associated defendants. The litigation included ITC's claim and a separate section 994 Companies Act 2006 petition presented by Jonathan Ferster against Warren, Stuart and ITC (as nominal defendant). The judge had delivered a reserved judgment on 15 November 2016 ([2016] EWHC 2896 (Ch)) determining a number of liability issues.

Nature of the application: At a consequential hearing (19 June 2017) ITC sought an order that the defendants pay part of ITC's costs incurred in relation to the Liability Issues determined in the earlier judgment, while leaving other costs reserved.

Issues framed: (i) Whether the court could determine and award costs for the Liability Issues at that stage, given the existence of three Part 36 offers made by the defendants; (ii) the effect of CPR 36.16 and, to a lesser extent, CPR 36.17; (iii) whether authorities (notably HSS Group plc v BMB Ltd and Beasley v Alexander) and the circumstances of the separate petition affected the approach to costs.

Reasoning and disposition: The judge analysed CPR 36.16 and concluded the case had not been finally decided because issues of quantification remained. CPR 36.16 permitted disclosure only that offers existed but not their terms, and did not permit disclosure because the offers did not relate solely to the decided issues. On that basis the court could not know whether the Part 36 offers were relevant to the Liability Issues. Reliance was placed on the reasoning in HSS Group plc v BMB Ltd that where damages remain to be assessed it will ordinarily be inappropriate to decide costs of liability without regard to Part 36 offers. The claimant's arguments to the contrary (including that the defendants could have confined offers to decided issues, overlap with the petition, and that rule 36.17 might operate unfairly) were rejected or left open for later fuller argument. The judge therefore reserved ITC's costs in relation to the Liability Issues.

This was a first-instance application concerning costs. The court declined to award costs to ITC in respect of the Liability Issues and ordered that those costs be reserved. The rationale was that CPR 36.16 restricts disclosure of Part 36 offer terms where the case has not been finally decided; three Part 36 offers existed and their terms were unknown and might relate to issues already decided, so it was not appropriate to determine costs at that stage. The judge relied on the principle in HSS Group plc v BMB Ltd that costs should ordinarily be reserved where quantum remains to be determined.