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1

COSTS: Do I really need to worry about them?McGlinn v Waltham Contractors (No 5) [2007] EWHC 1419 (TCC)

Claim for £3.65m against 3Ds
C awarded:
£0 D1
Just under £440,000 D2 (architects)
Just under £135,000 D3
£575,000 = less than 1/6th of his claim
Costs incurred: C: £2.2m; D1 £880K; D2 £1.2m (D3’s costs were put over to another hearing) Total costs £4m+
D1 had made a Part 36 offer of £300K
 

2

Costs decision in McGlinn

Issue based costs order with percentages ordered between C and D2 in relation to liability and quantum
C ordered to pay D1’s costs
C had to pay his own costs of claim v D1
= C already out of pocket
Since D 1’s costs were £880K and C received £575K

3

Question 4: Part 36 offers to settleAdvice to Brian on the likely costs orders if:

the judge dismisses Colin’s claim outright

the judge dismisses Colin’s claim outright
Colin has lost and Brian has successfully defended
Normal principle of unsuccessful party paying successful party’s costs will apply: r 44.2(2)
Only further issue is whether Brian should seek costs on an indemnity basis: r 44.3(3)
Test: has the conduct of the party taken the case away from the norm
Unreasonableness to a high degree would be enough
BUT, Colin has QOCS protection: r 44.13(1)
There is nothing against which Brian can enforce his costs: r44.14(1)
FYI, not on the syllabus

4

Question 4: (b) the judge awarded Colin £ 400

Colin obtains judgment for less than either of Brian’s Part 36 offers
Colin has failed to obtain a judgment more advantageous than the Part 36 offer: r 36.17
a split order for costs under CPR r. 36.17(3) is probable (subject to “unjust” proviso)
Brian has to pay Colin’s costs to the end of the relevant period, but Colin will have to pay Brian’s costs after that
Relevant offer is first offer (£600)

5

Question 4: (d) Colin made a Part 36 offer for £2,000 and the judge had awarded him £2,000

Costs Payable by Defendant for losing
As Colin is awarded £2,000, the judgment is more advantageous than either of Brian’s offers – as in part (c)
Brian will be ordered to pay Colin’s costs
Part 36 Benefits flowing from Claimant’s Part 36 offer
Applies if Colin shows the judgment is “at least as advantageous” to him as the proposal contained in the Claimant’s Part 36 offer: see CPR r. 36.17(1)(b)
r. 36.17(2) provides that this means “at least as advantageous in money terms”
This is the position here, as Colin has judgment for the same amount as his Part 36 offer

6

4(d) continued..

So, in addition, from the end of the relevant period of his Part 36 offer, Colin is likely to get:
Enhanced interest: at a rate up to 10% above the base rate;
Indemnity costs;
Interest on those indemnity costs, at a rate up to 10% above the base rate; and
An additional amount of £200 (10% of the damages awarded)
r. 36.17(4)
Nb: the correct provision is at p 58 of the WB supplement

7

Question 4 (e): Colin referred to his Part 36 offer whilst being XX

Part 36 offers must not be disclosed to the trial (or appeal) judge
Until all liability and quantum issues are resolved
Or until the part of the trial relevant to the Part 36 offer has been determined
Unless parties have agreed in writing that r. 36.16(2) should not apply
Judge has discretion to continue hearing the case
But only if no injustice has occurred
Otherwise, the judge will recuse himself and there will have to be a new trial
And the costs thrown away will have to be dealt with
r. 36.16

8

Departing from the usual cost consequences of Part 36

Where it is unjust to follow the usual rule: r 36.17(5)
Consider all the circumstances of the case, including:
Terms of any Part 36 offer
Stage when any Part 36 offer was made
Information available to the parties at that time
Parties’ conduct in giving or refusing to give information to enable an evaluation of the offer
Whether the offer was a genuine attempt to settle the proceedings

9

Security for Costs: Question 1

Is SPL the correct type of party to make an application for security for costs (and why)?
Yes r 25.12
Because security for costs can only be applied for by someone in the position of a defendant
SPL is the D

10

Question 1(b): Basis for an application for security for costs?

Is it just to make an order in all the circumstances r.25.13(1)(a) AND
SPL must show one or more of the conditions in r.25.13(2) apply
It is a 2 stage test

11

(c) How will SPL show they are entitled to security for costs here

r 25.13(2)(c) is the relevant condition:
C is a company and there is reason to believe that it will be unable to pay the D’s costs if ordered to do so
Show C will not be able to meet its debts when an order for costs is made
AND consider the other factors relevant to the exercise of the court’s discretion

12

What other factors will the court take into account when exercising its discretion?

The court needs to be satisfied that it is just to make an order having regard to all the circumstances r.25.13(1)(a)
Apply the overriding objective
It needs to be proportionate protection against the risk posed by the ground relied upon
Here: the risk is that an impecunious corporation will become insolvent before paying the D’s costs
Relevant Qs: what is the risk of this happening? How much are the costs? What effect will the order have on C’s ability to pursue the claim?
Also consider:
Whether C’s claim is a bona fide claim or a sham;
Whether the order would stifle a genuine claim: dealing with the case justly
Any delay in making the application (expeditious)


13

Question 1(d) : What is the procedure for making such an application?

r 25.12(2)
Interim application on notice, supported by written evidence
Application notice (N244), which should specify ground relied on
Witness statement
Draft bill of costs for defending the whole claim
Statement of costs of this application

14

Procedure …/

Timing:
application should be made as soon as it becomes apparent that it is necessary or desirable to make it (PD 23, para 2.7)
Delay is a factor on discretion: WB 25.12.6
 

15

Question 1(e): How much security should be given and by what means should it be given?

Amount must be just in all the circumstances
Security must be neither illusory or oppressive
Court will look at D’s assessment of costs to date and future costs, which is usually exhibited in evidence
Could be for the entire costs or up to a future point
Usual for the court to make an arbitrary discount in respect of future costs
Security usually given by payment in to court
Alternatively, can be by payment into joint account in the names of both solicitors
or bank guarantee

16

Security for costs: C is resident outside the jurisdiction

Against a C who is resident outside the jurisdiction,
But not resident in a country bound by the Brussels and Lugano Conventions
r 25.13(2)(a)
See WB 25.13.3 for the list

17

Costs: General principles -

Q: what power does the court have in relation to costs?

Q: what is the usual starting point?

Q: what power does the court have in relation to costs?
A: costs are wholly discretionary – whether they are payable by one party to another, the amount payable and when: r 44.2(1)
Q: what is the usual starting point?
A: the unsuccessful party pays the successful party’s costs: r 44.2(2)

18

General principles 2

Q: What factors other than outcome will the court consider?

Q: What costs will be allowed on the standard basis?

Q: What factors other than outcome will the court consider?
A: conduct, partial success, a payment into court or admissible offer which is not a Part 36 offer: r 44.2(4)
Q: What costs will be allowed on the standard basis?
A: costs reasonably or necessarily incurred, of a reasonable amount, which are proportionate overall; disproportionate costs can be disallowed, even if they were reasonably and/or necessarily incurred: r 44.3(1) and (2), PD44 para 6.2

19

General principles 3: proportionality5 factors

They must bear a reasonable relationship to:
the sums in issue in the claim
the complexity of the litigation
the value of non monetary relief in issue in the claim
any wider factors involved in the proceedings such as reputation or public importance
any additional work generated by the conduct of the paying party
r 44.3(5)

20

Q: How is the amount payable worked out?


Q: How long do you have to pay a costs order?

Q: How is the amount payable worked out?
A: either on a summary assessment or a detailed assessment
Summary assessment: decided then and there by the judge, cases, including appeals

21

Where do I find the factors to be taken into account when deciding the amount of costs ordered?

Where do I find the factors to be taken into account when deciding the amount of costs ordered?
r 44.4 (on the syllabus)
Court’s power to make wasted costs orders in relation to assessment of costs: r 44.11

22

Possible range of costs orders: Qu 2

Ds Costs

Ds costs in case of application

% of Ds costs

Costs in the case of application

Cs costs

1. Immediate costs order in favour of d's app

2. D gets costs of int app if D wins overall but does not have to pay Cs costs if loses overall

3. C pays % of Ds costs in int app

4.Whoever wins overall case gets their costs of the int application

5. immediate costs order in Cs favour for int application

23

Bullock order?

Sanderson order?

BULLOCK ORDER:
Judgment for Richard against Stephen (car driver) with costs
Claim against Thomas (lorry driver) dismissed; Richard to pay Thomas’ costs
Stephen to pay to Richard the costs so paid by Richard to Thomas.
SANDERSON ORDER:
Judgment for Richard against Stephen with costs
Claim against Thomas dismissed; Stephen to pay Thomas’ costs.
See: WB commentary 44.2.8

24

When are Bullock and Sanderson orders used?

When reasonable for C to join both Ds
What determines this?
Whether the claims are made in the alternative
Nature of the evidence/allegations against Ds who were successful
Whether causes of action were connected
Whether unsuccessful D blamed other Ds
See: APA Civil 46.16 - 46.20