While the general rule under CPR 44.2 is that the unsuccessful party should pay the successful party’s costs, the court may make a different order. Further, the consequences of CPR 38.6 may lead to a departure from this general rule. Sometimes it is difficult to establish whether there has been a successful or unsuccessful party, especially in cases where there are multiple parties, and the possibility of a ‘Sanderson’ order or ‘Bullock’ order (see later) may arise. This was recently illustrated in the case of Oberholster v Little and another.
The claimant, Miss Little, elected to undergo ophthalmic surgery offered by Optical Express (D2) which was to be carried out by Dr Oberholster (D8). The claimant brought a claim against Optical Express, along with six other Optical Express companies who were included due to the uncertainty about which company contracted with the claimant. Both Optical Express and Dr Oberholster denied liability.
36 days prior to the trial, the claimant submitted a Part 36 offer to all defendants to accept the sum of £105,000 in full and final settlement of the claimant’s claim, net of any payments due to the Compensation Recovery Unit, plus payment of her legal costs, to be assessed if not agreed.
This was accepted by Optical Express and agreement was reached with D1 and D3 to D7 for the claims against them to be discontinued, with no order as to costs. No agreement was reached with D8, who continued to deny liability.
While the claimant was not seeking any additional damages, she did require payment of the costs of the claim against D8, which would not be recoverable from D2 (see Haynes v Department for Business Innovation and Skills). The claimant and D8 did not agree an order but did agree for the court to deal with the issue of liability for costs on a summary basis, rather than seek directions for trial on the issue of costs.
HHJ Roberts, sitting at Central London County Court, determined the applications for:
- Costs between the claimant and D8 to be determined by the court.
- Costs of D8 in defending the claim, to be paid by the claimant or D2.
- The claim against D8 to be struck out, and for the claimant to pay the costs of D8.
He refused to strike out the claim and proceeded to determine the issue of costs, holding that D8 should pay the claimant’s costs of the proceedings against D8.
There was no appeal against the decision to strike out the claim, but D8 appealed the decision on costs. D8 asserted that the claimant should pay the costs of D8, who could then seek them from D2 as part of the claimant’s costs (a ‘Bullock’ order) or, alternatively, that there should be an order requiring D2 to pay the costs of D8 (a ‘Sanderson’ order). If neither of these were acceptable to make no order as to costs between C and D8.
Freedman J dismissed the appeal, and in doing so highlighted the following specific matters:
- It was permissible for the judge to adopt a broad-brush approach, and the judge was not required to determine who had won or lost or any issue relating to disputed facts. This was a summary process and not a trial, but there was material before the court that enabled the judge to hold that the claims against D2 and D8 were inextricably linked or bound up, and it was difficult to see how the two could not stand or fail together.
- The acceptance of the Part 36 offer by D2 (while without an admission of liability was enough in a summary process to indicate that D2’s case, if it went to trial, was likely to fail, in which case without convincing evidence that D8 procured the consent himself) indicated that D8 would also fail.
- There were a number of responses to the applications available to the judge, but his approach was tenable and within the broad range of reasonable responses available to him.
- Whilst there may have been alternative ways of looking at the matter available to the judge, choosing one way against another is not a sufficient basis to overturn the decision and was well within the generous ambit of discretion where the decision is about broad-brush costs issues which the parties have entrusted to the court without requiring a trial.
Freedman J also highlighted the principles for the summary determination of costs between the parties following a compromise of the substantive claim. In particular, he referred to the authorities which either highlighted approaches taken, or principles laid down (Hanspaul and another v Ward and others, Brawley v Marczynski and another (No. 1), and R (Boxall) v Waltham Forest LBC (unreported) (21 December 2000)). Additional reference was made to BCT Software Solutions Ltd v C. Brewer & Sons Ltd (paragraphs 8, 15 and 27).
The summarised points are that:
- The court has the power to make an order in cases such as this.
- Regard should be paid to the overriding objective.
- Whether the court will look into unresolved issues will depend upon the circumstances of the case.
- If there is no good reason to make any other order, the fall-back outcome will be no order as to costs.
- If parties agree to a summary determination, it is reasonable to think that parties will accept the decision, unless it is manifestly unjust.
- The appellant court should not interfere with a discretion exercised by the judge with the agreement of the parties.
- The appellant should not complain if the judge adopts a broad-brush approach to determine the matter.
The court did not establish who was the successful or unsuccessful party. There was no trial and the case was settled upon acceptance of a Part 36 offer, without admission of liability and without the involvement of D8.
The case highlights the need to understand the concept of potential liability for co-defendants’ costs. When entering into negotiations for settlement of a claim against multiple defendants, it is necessary to know that if settlement is achieved with one defendant, it does not give rise to the incurring of a liability for costs of the other parties. Where this is not possible, consideration has to be given to discontinuance and whether it can be shown that a good reason exists for why an order for payment of defendants’ costs should not be made. If possible, encourage defendants to work together to resolve the claim and agree an apportionment between themselves. If this is not possible, ensure that the structure is in place to provide for further determination of costs.
Electing to have the matter dealt with by way of summary determination, rather than a trial, does open up the possibility of the matter being dealt with on a broad-brush approach.
Consider carefully whether there is merit in pursuing the case to the stage where the court is requested to determine the issues at trial, in particular for the purpose of establishing liability for costs, and whether it is reasonable and proportionate for additional costs for that process to be incurred in the particular matter.
Furthermore, carefully review the pleadings and the expert evidence to ensure that material that will be available to the judge upon the summary determination of the issue of costs does not prejudice the arguments being presented.
Finally, remind yourself of the requirements that must be satisfied in order to secure a decision on costs, whether at first instance or an appeal. Keep in mind the extent of discretion available to the court in this regard.