Kings Security Systems Ltd v King & Anor

Costs are determined by the court’s broad discretion, having regard to all the circumstances, including party conduct, partial success and settlement offers. A claimant’s choice to pursue one wrongdoer rather than accept compensation from another may be unreasonable for costs purposes, even where the claimant is legally entitled to sue. A Part 36 offer remains effective where a reasonable recipient would recognise and correct an evident date error, and acceptance need not be time-limited. The enhanced Part 36 consequences follow unless unjust. Departure requires conduct outside the norm. Enhanced interest is discretionary and must remain proportionate. Impecuniosity is not, without more, a good reason to refuse a payment on account of costs.

The claimant succeeded against the first defendant in the underlying proceedings, obtaining damages and rescission of a settlement agreement. The hearing addressed consequential matters, principally costs, the validity and consequences of the claimant’s Part 36 offer, interest, payment on account and payment out of court.

The first defendant argued that counter-restitution, alleged unreasonable conduct, defects in the Part 36 offer and impecuniosity should prevent or reduce the claimant’s costs recovery. The court also considered the appropriate interest rates and the timing of interest.

1. Counter-restitution. The argument that unpaid salary had to be restored following rescission was raised too late. It should have been pleaded by way of set-off or defence, with the factual issues addressed by disclosure and evidence. The court therefore refused to defer costs determination.
2. General costs discretion. The claimant was the successful party and was entitled to a costs order under CPR 44.2. Its failure to accept compensation from another joint wrongdoer did not, on the facts, amount to unreasonable conduct. The principle in The Liverpool (No 2) [1963] P 64 did not determine the costs issue. The claimant’s failure to set off the damages claim against the settlement payment was misconceived because the settlement agreement had been rescinded.
3. Part 36 offer. The offer was valid. A reasonable recipient would have understood that the stated date was an error and that the intended 21-day period ran to 22 July 2019. The words extending acceptance beyond that date did not invalidate the offer. There is no requirement that acceptance of a Part 36 offer be time-limited. The reasoning in Essex County Council v UBB Waste (Essex) Ltd [2020] EWHC 2387 (TCC), applying C v D [2011] EWCA Civ 646, supported that construction.
4. Costs consequences. The judgment was at least as advantageous as the offer. The claimant therefore obtained the usual CPR 36.17(4) consequences, including indemnity costs from 22 July 2019, enhanced interest and an additional 10% award. The conduct relied upon did not make it unjust to impose those consequences. Conduct must be outside the norm before the court departs from them, applying Downing v Peterborough & Stanford Hospitals NHS Foundation Trust [2014] EWHC 4216.
5. Interest and payment on account. Applying OMV Petrom SA v Glencore International AG [2017] 1 WLR 3465, the court awarded 2% above base rate before 22 July 2019 and 10% above base rate thereafter on damages, with 10% above base rate on costs. A payment on account of £1 million was ordered; impecuniosity was not a sufficient reason to refuse it.

This was a consequential-matters hearing following the court’s judgment dated 18 February 2021. No appellate stage is stated.