Langer v McKeown

The Court of Appeal held that a judge exercising the broad discretion conferred by CPR 44.2 is not compelled to treat an undisclosed without prejudice save as to costs (Calderbank) offer as equivalent to a CPR Part 36 offer and defer deciding interim costs. CPR 44.2 requires the court to have regard to "all the circumstances" and explicitly to any "admissible" offer; an offer the terms and date of which are not placed before the court may be treated as inadmissible for the purposes of that rule.

The court endorsed the deputy judge's approach that weighing conduct, the merits at the interim stage, and policy considerations (including discouraging unmeritorious points, professionalism and equality of arms) are legitimate bases for making an immediate costs order after a split trial. The judge was entitled to refuse to speculate about undisclosed terms and to distinguish the special, self-contained regime of Part 36 from the broader discretion under CPR 44.2.

Background and procedural posture:

• The respondent petitioned under section 994 of the Companies Act 2006 for unfair prejudice. The trial was case-managed as a split trial with liability to precede valuation. After a nine-day liability trial the High Court found that the appellant (majority shareholder) had unfairly prejudiced the respondent (minority shareholder) and ordered a share purchase remedy and other relief. The Deputy Judge subsequently made an order for the appellant to pay the respondent's costs of the liability trial and ordered an interim payment on account.
• The costs hearing disclosed an undisclosed global Calderbank (without prejudice save as to costs) offer; the deputy judge knew of its existence but not its date or terms. He excluded consideration of that offer and made an immediate costs order. The appellant sought and was refused permission to appeal; permission was later granted to the Court of Appeal on a single ground challenging the exclusion of the Calderbank offer.

Nature of the claim / relief sought:

• The underlying claim was a petition for unfair prejudice under s.994 Companies Act 2006. The immediate application concerned the judge's exercise of his costs discretion under CPR 44.2 following a split liability/valuation trial.

Issues framed by the court:

• Whether an undisclosed Calderbank offer must be treated as equivalent to a CPR Part 36 offer for the purpose of CPR r.36.16(3)(d), (4) and CPR 44.2 and thus require deferral of any interim costs determination;
• How CPR 44.2 should be applied where a judge is aware of an offer but not its date or terms; and
• Whether the deputy judge misapplied the costs rules in making an immediate costs order in the circumstances.

Court’s reasoning and outcome:

• The Court of Appeal rejected the appellant's argument. CPR 44.2 confers a broad discretion and requires regard to "all the circumstances", including only admissible offers. A Calderbank offer that the judge is not permitted to inspect may be treated as inadmissible; it would be speculative and improper for a judge to determine a significant costs question on the basis of undisclosed terms.
• The court distinguished the special, self-contained consequences that Part 36 creates from the broader discretionary inquiry under CPR 44.2. It endorsed the deputy judge's attention to policy considerations: discouraging unmeritorious points, encouraging professional conduct, and guarding against informational asymmetry between parties.
• The court noted that exceptional circumstances can justify an immediate costs order even where a Part 36 offer has been made, but found none here; the deputy judge's reasons for awarding costs immediately were lawful and well-founded.

Appeal dismissed. The Court of Appeal concluded that the deputy judge did not err in refusing to treat an undisclosed Calderbank offer as equivalent to a Part 36 offer for the purposes of CPR 44.2; the judge lawfully exercised his broad discretion, legitimately declined to speculate about undisclosed terms, and correctly applied policy considerations including conduct, merits and informational asymmetry when ordering interim costs.

Appeal from the High Court of Justice, Business & Property Courts (Insolvency & Companies List (ChD)), Deputy Judge Nicholas Thompsell: liability judgment [2020] EWHC 3485 (Ch) and costs judgment [2021] EWHC 451 (Ch). Permission to appeal was initially refused by Newey LJ (3 May 2021) and the matter proceeded to the Court of Appeal under [2021] EWCA Civ 1792.