Lyons v Fox Williams LLP

Under Civil Procedure Rules 1998, the unsuccessful party normally pays the successful party’s costs, but the court retains a broad discretion to make a different order. Partial success on subsidiary issues does not automatically justify an issue-based costs order. Departure from the general rule requires a reason based on justice, assessed in the context of the litigation as a whole. A settlement offer justifies indemnity costs only where refusal was unreasonable to a high degree. The court may order a reasonable payment on account where there is sufficient confidence in the likely assessed costs, allowing for residual uncertainty and a margin of error.

The claimant’s substantive claim against the defendant solicitors was dismissed after a trial concerning alleged negligent advice about insurance policies and the termination of his employment. The merits judgment was handed down on 11 October 2016: [2016] EWHC 2427. The claimant recovered no damages, although the defendant failed on some alternative arguments. This judgment determined the consequential costs issues, including whether costs should be apportioned by issue, whether a rejected Calderbank offer justified indemnity costs, the effect of accepted Part 36 offers, the amount payable on account, and the costs of a set-aside application.

1. The claimant was the unsuccessful party because he recovered nothing. The starting point under CPR 44.2 was therefore that he should pay the defendant’s costs, subject to the court’s discretion to make a different order.
2. An issue-based order is not automatic merely because the successful party lost on some issues. The court must consider whether justice requires departure from the general rule, including the overall result, the relative importance of the issues, the reasonableness of pursuing failed points, the costs attributable to particular issues, and the common costs of the litigation. The defendant’s complete success on the principal issues, the complexity of the commercial case and the absence of a general “kitchen sink” approach justified allowing the general rule to stand.
3. The claimant’s refusal of the defendant’s £500,000 Calderbank offer was unwise, particularly with hindsight, but was not unreasonable to the high degree required for indemnity costs. The application for indemnity costs was refused.
4. The accepted Part 36 offers carried their deemed costs consequences under CPR 44.9. No additional order was required.
5. Under CPR 44.2(8), the court ordered the claimant to pay £500,000 on account of the defendant’s costs. There was sufficient confidence in the likely result of detailed assessment, while the sum allowed an appropriate margin for uncertainty.
6. The claimant’s set-aside application was necessitated primarily by failures in communication within his legal team. Although fairness justified setting aside the earlier order to permit representations, the defendant’s resistance was not improper. The defendant was awarded £10,000, summarily assessed, for that application.

• High Court (Queen’s Bench Division): Following the trial judgment dismissing the claimant’s substantive claim, reported at [2016] EWHC 2427, the court determined the consequential costs issues and ordered the claimant to pay the defendant’s costs.