Whitecap Leisure Ltd v John H Rundle Ltd

This is the ruling of the court. The general rule set out in CPR 44.3(2) is that the unsuccessful party will pay the costs of the successful party. The question here is how to determine which of these parties is the successful one.

Given that the appeal has been allowed, the appellant has obviously enjoyed that success but it was not total success. The appellant sought in its notice of appeal the dismissal in the entirety of the claimant’s claim. In that regard it was not successful because although the award of damages made by Judge Foster has been set aside, we have substituted judgment for the respondent on the claim for the amount it has paid to the appellant on account of the price of the goods. For present purposes we take that sum to be the figure given in the draft order prepared by the appellant, namely £124,081 and the order is being drawn accordingly. If there is any dispute about that sum, solicitors and counsel must make it their duty to their clients and the court to agree the amount for there surely can hardly be any serious argument about how much has been paid on account of the price. It is implicit in paragraph 50 of our judgment that the £20,000 paid into the escrow account was money paid on account of the price and so it must be repaid to the respondent (with the interest accruing for which credit can be given against the Judgment Debt interest). If the parties cannot agree the figure, then we will have no option but to refer the issue of how much was paid on account of the price including the £20,000 in the escrow account to a Master and for him to report to us accordingly.

The appellant also succeeded in preserving its counterclaim for damages which are now ordered to be assessed by the High Court Judge. Furthermore its claim for payment on invoice 12116 in the sum of £12,672.56 is also remitted for determination and assessment.

Dealing first with the costs below, we deal separately with the claim and the counterclaim and the costs associated with them. So far as the claim is concerned, the successful party here is the respondent in the sense that it has judgment on the claim for £124,081 (or whatever the appropriate figure for payment on account of the price may be). In commercial litigation one usually measures success by reference to who receives the cheque. On that basis Whitecap win.

The Court need not, of course, make an order that costs follow the event. A different order can be made having regard to all the circumstances including, as provided for in CPR 44.4:

We have noted Mr Wilson Q.C.’s submissions in paragraphs 32 to 38 of his written submissions of 24th April 2008 that the respondent’s conduct should count against it but judged against the whole history of this litigation, Rundles obdurate attitude is the more striking. Taking a charitable view, each has been as bad as the other in many ways in the stance each has adopted from time to time throughout this sorry story and we do not find that the conduct of the parties weighs heavily in the balance. We certainly do not see conduct as a reason to depart from the general rule.

Mr Wilson also submits that although the claimant succeeded, it did not succeed in its claim for damages which claim consumed much of the parties’ and the Court’s time. That would ordinarily justify an issued-based assessment of the costs and hence a reduction of the claimant’s costs usually by awarding only a percentage of those costs. We bear that in mind.

On the other hand the Part 36 offers may be crucial. Such an offer was made by the respondent on 28th February 2005 before the claim was even issued. Whitecap were prepared to accept £75,000 in settlement of its claim which it then put at £321,039.64. We have awarded the claimant at least nearly £125,000 (perhaps with the escrow monies £145,000) which is much more advantageous to it than the sum it was prepared to accept. Under CPR 36.14 “The court will, unless it considers it unjust to do so, order that the claimant is entitled to its costs on an indemnity basis from the date on which the relevant period expired with interest on those costs not exceeding 10% above base rate.” Is it unjust to make that order in the circumstances of this case? In that regard we must bear in mind the fact that a large part of the costs have been incurred in the incorrect pursuit of a claim for damages. Although the claimant lost that issue, it cannot be said that it was unreasonable to pursue it not least because a judge of the High Court found for the claimant. So it was a tenable case to run. In deciding whether or not it is unjust to invoke the rule, we consider we must look at the commercial realities as they were in February 2005. Whitecap had already made the gesture of dropping hands in their letter of 10th January 2003. They had suggested mediation. Neither offer had been accepted. This was exactly the kind of case that cried out for mediation. We cannot ignore that fact. Judging the matter two years later, there was another conciliatory gesture. By 2005 Rundles had been paid most of the price. As the trial found as a fact the equipment was defective. Rundles had received most of the equipment back. If they paid the £75,000 to settle Whitecap’s claim, they would still have had at least approximately £50,000 in their pocket. Yet they chose to litigate. Anyone with any sense knows that litigation is expensive. Anyone with any sense knows that litigation is more expensive than one’s worst fears. Anyone with any sense would avoid litigation. Commercial men should look at their balance sheet rather than the pleadings. This was a very favourable deal. In our view there is nothing unjust which prevents the operation of the ordinary Part 36 rule.

It follows that in our judgment the claimant should have the costs of the claim in the court below on a standard basis to 20th March and, applying CPR 36.14, on an indemnity basis from 21st March, these costs to be assessed if not agreed. Interest on these costs should be at a modest rate above bank rate: we would assess it at 3% above bank rate from time to time applicable.

So far as the costs of the counterclaim are concerned, these costs will be reserved to the judge dealing with the counterclaim. He or she will be able then to assess the advantage of the second Part 36 offer made by the claimants on 23rd January, being an offer to take £60,000 in full and final settlement of both the claimant’s claim and the defendant’s counterclaim.

We turn then to the costs of the appeal. Pursuant to CPR 36.3(4), the Part 36 offers do not have the cost consequence set out in that Part in relation to the costs of any appeal. It may, nonetheless, be a relevant factor to bear in mind under CPR 44.3(4)(c).

The substantial victor in this appeal is the appellant because the claimant’s claim for damages has been defeated but the victory was not, of course, total since judgment remains in the claimant’s favour to the extent of at least £124,081. Moreover there was success on the counterclaim. The way to do justice between the parties in those circumstances, bearing all the factors in CPR 44 in mind, is to recognise that costs follow the event but to give some discount for the failure to secure total victory and so make an order for the payment of a proportion of the appellant’s costs. Fairness in our view demands that the appellant recover 80% of its costs. Those costs are to be assessed on the standard basis if not agreed.

The costs of the claim and the costs of the appeal should be set off against each other. Since each owes the other something in respect of costs, we make no orders for interim payments.

There are some ancillary disputes. The appellant seeks an order for payment to it of the sum of £35,000 paid into court by the respondent as security for costs. As we have directed that costs be set off, that money should remain in court to abide the result of that set off. Depending on who owes whom at that stage, then the money can be released accordingly.

Mr Rundle apparently also gave an undertaking, presumably to the High Court, on 12th December 2007 that his company would not dispose of etc its premises. We do not have a copy of that order to hand - or readily to hand. If that undertaking was to continue until the conclusion of the hearing of the appeal, then it will cease when this order is finally drawn by the court. If the undertaking survives this appeal so that, for example, it can be construed to continue until the final judgment on the counterclaim, then it will continue accordingly and any application to discharge or vary it must be made to the High Court. We shall make no order in this respect.

If and in so far as £67,561 was paid to solicitors pursuant to paragraph 8 of Judge Foster’s order of 13th June 2007, then that money should continue to be held by the solicitors pending the determination of the counterclaim and disputed invoice.

Lastly, permission to appeal to the House of Lords is refused. There is no important point of principle arising in this case. Leave will have to be sought from their Lordships.

An amended order is circulated with this ruling. We will instruct the Associate to draw the order in 7 days time, i.e. on 4 July.