Car Giant Ltd & Anor v London Borough of Hammersmith

Where a claimant fails to beat a defendant’s Part 36 offer, the ordinary costs consequences do not automatically justify indemnity costs. The court must exercise its discretion under CPR Part 44, considering all the circumstances.

A delay in agreeing to mediation will justify indemnity costs only exceptionally. The court should be slow to criticise tactical decisions about the timing of mediation, particularly where there is no evidence that earlier mediation would have reduced costs or succeeded.

A trial judge should also be cautious about giving indications on whether costs exceeding an approved budget were reasonably incurred. That assessment ordinarily belongs to the Costs Judge under CPR Part 3.18.

The judgment concerned costs following judgment for the claimants in a dilapidations action concerning the expiry of the defendant’s lease. The claimants recovered £179,125 plus interest, but failed to beat a defendant’s offer of £250,000 made under CPR Part 36.

The defendant sought its pre-offer costs, indemnity costs after expiry of the relevant period, amendment of its costs budget, guidance on excess costs, interest and payment on account. The central issues were the appropriate allocation and basis of assessment of costs, the effect of alleged delays in mediation, and the proper role of the trial judge in relation to costs budgeting.

1. Costs before 7 May 2014. The claimants remained the successful party for this period because they brought a claim for damages and obtained judgment. The earlier alleged settlement offer was conditional on council approval, which was never shown to have been given. Nevertheless, the defendant’s general valuation approach had been more successful. The claimants were therefore awarded 50% of their costs to 7 May 2014, assessed on the standard basis.
2. Indemnity costs. The defendant’s costs after 7 May 2014 were also to be assessed on the standard basis. Although the court has power under CPR Parts 36.17 and 44.3 to order indemnity costs following a claimant’s failure to beat a defendant’s offer, that failure alone is insufficient. The court should be slow to treat delayed mediation as unreasonable or as causative of additional costs where mediation ultimately occurred and there was no evidence that earlier mediation would have succeeded or reduced costs.
3. Costs budgeting. The court declined to indicate whether expenditure above the approved budget was reasonably incurred. The application could be explained to the Costs Judge, whose jurisdiction under CPR Part 3.18 should not be constrained by a trial judge’s observations.
4. Interest and payment on account. Interest on each party’s awarded costs was ordered at 1% above base rate from the date of payment of the relevant invoice or disbursement. The claimants were ordered to pay £68,000 on account of the defendant’s costs within 14 days. The defendant was ordered to pay the costs of the costs applications on the standard basis.

Not stated in the judgment.