TC Development Ltd & Anor v Investin Quay House Ltd & Anor

A settlement offer is construed objectively from its wording and the relevant factual matrix. Where an offer refers to payment of the costs of the litigation, that phrase does not necessarily include the costs of a separate non-party costs application, particularly where the offer’s indemnity-costs provision is tied to a Part 36 offer against another defendant. If an offer settling a costs application is silent about the application’s costs, the usual consequence is that each side bears its own costs. The court cannot add an interim payment term which was absent from the settlement agreement. Any interim payment must instead be sought through the costs-assessment process.

The claimants obtained judgment for unpaid fees against Investin Quay House Ltd. They then sought a non-party costs order against John Downer, the individual behind that company. Before the application was heard, the claimants offered to settle on terms that Mr Downer would pay the claimants’ costs of the litigation, with specified costs consequences arising from earlier Part 36 offers. The offer was accepted.

The parties disagreed about whether the settlement included the costs of the non-party costs application and whether the court could order an interim payment on account. The court determined the proper construction and effect of the accepted offer.

1. Objective construction. The accepted email exchange was construed objectively, taking account of the wording used and the factual matrix. The reference to settling the application for a non-party costs order did not justify importing terms that were absent from the offer.
2. Costs of the non-party application. The phrase “costs of the litigation” referred to the underlying litigation against the company. It did not include the costs of the application against Mr Downer. The indemnity-costs provision was linked to the claimants’ Part 36 offers against the company and could not sensibly apply to the separate application against Mr Downer. The application costs had nevertheless been compromised. Since the settlement was silent as to those costs, each side was to bear its own costs.
3. Interim payment. The offer contained no provision for an interim payment. The court could not import such a term merely because the claimants had expected payment or because an interim payment would be procedurally convenient. The settlement made sense without it, and the court’s function was to give effect to the agreement reached.
4. The claimants could seek an interim payment during the costs-assessment process before the costs judge. The approved costs budget provided a practical basis for that application, subject to the ordinary assessment process and any good reason for awarding a different sum.