Haynes v Department for Business Innovation and Skills

The High Court has allowed an appeal against a decision on the eighth defendant’s liability for  costs following its acceptance of the claimant’s offer under part 36 of the CPR. This decision  confirms that in cases including multiple defendants, an individual defendant may, on acceptance of  a part 36 offer, be liable for non-specific common costs in addition to the costs attributable to  the proceedings against it.1

Background

Proceedings had been issued against 10 defendants in relation to an asbestosis claim; the total value of the claim was placed at £195k.  The claimant made a part 36 offer to accept £18k plus costs.

The eighth defendant accepted the offer within the 21 day period specified in the rule stating this  was “in full and final settlement of the claim against my client. I note that this offer is net of  benefits and confirm that my client will pay your client’s costs in pursuing my client to date to be subject to assessment if not agreed.”

The claims against the other nine defendants were then abandoned, proceedings having been issued  but never served. The claimant lodged a bill of costs in the sum of £58,097.31. T

hat amount was disputed by the eighth defendant. Pursuant to CPR36.10, the claimant submitted that she was entitled to all reasonable  costs incurred in the proceedings; they should not be disaggregated, apportioned, or divided. The eighth defendant in  turn contended that it should only be paying those costs incurred by the claimant in pursuing the  claim against the eighth defendant given that liability for the injury was several.2

The defendant argued successfully before a costs officer, and later before the costs judge, that as  its liability for the injury was several, rather than joint and several, that principle should  apply to the costs it was to pay. The court found the eighth defendant was liable for the costs specifically relating to the claim  against it and a divisible proportion of the common costs of the proceedings. The claimant appealed this decision.

Decision

The claimant argued that in the particular circumstances of this case, the part 36 offer should be  construed as an offer to settle the whole claim, (ie the claim against all 10 defendants). Or alternatively, the term, “the costs of the proceedings” in CPR.36.10(1) should  be interpreted as embracing the costs of proceeding against all 10 defendants.

In a second alternative argument, the claimant sought to persuade the court that the effect  of a  deemed order, as generated by CPR.44.9, was to entitle it to an assessment in terms of reasonableness, ie if the claimant could show that it was reasonable to have issued proceedings  against any of the other defendants then, as a matter of principle, the eighth defendant should  have to pay the costs.

As regards the common costs, the claimant submitted that it was entirely arbitrary to apportion or  divide these on the basis of a denominator equivalent to the number of defendants; the court should  have arrived at a conclusion on apportionment which was evidence based and not mechanistic.

The eighth defendant argued that the claimant’s offer did not comply with part 36 and in any event,  “the costs of the proceedings”, meant, and could only mean, the costs of proceeding against this eighth  defendant. The eighth defendant suggested that to contend otherwise  would create unfair and  unworkable results. As regards common or generic costs, the general rule was that they fall to be divided on a straightforward arithmetical basis. Further,  the claimant had failed to file evidence which might have supported a different conclusion.

The court considered there were three distinct issues to be determined. These were:

  1. Was there anything special or particular about the contractual documentation in this case which  should disapply the ordinary rules regarding deemed costs orders under CPR36?;
  2. Was the lower court wrong to order that the eighth defendant was only liable for costs directly  attributable to the action against it?; and
  3. Was it wrong to order that the eighth defendant pay one-tenth of the common costs?

Ordinary Costs Rules

The claimant’s part 36 offer probably did  not comply with the wording of CPR part 36, but the  eighth defendant did not take that point when accepting it. Non-compliance was, therefore, waived. Further the eighth defendant had  not filed a Respondent’s Notice and so the point could not be considered in this appeal in any  event.

The claimant also submitted that she had made an offer to settle “all the costs” of the  proceedings. However, the court considered that it was clear from the correspondence which made “an  offer to settle this claim against your client” that the claimant was only ever intending to offer to settle  the claim against the eighth defendant, leaving open the possibility of pursuing other defendants for the balance of financial loss, and the eighth defendant was only  ever  intending to settle it on that basis. Accordingly there was no reason not to apply the usual costs rules under CPR36.10(1). The court had  to consider the language the parties had used against the known factual matrix of the case, applying ordinary objective contractual principles.

Directly attributable costs

The second issue turned on what was meant by the term “the costs of the proceedings” in  CPR.36.10(1). The court had no hesitation in concluding that the term meant, in this context, “the costs of proceeding against the defendant against whom the deemed order has  been made”. Any broader definition would achieve obvious injustice and violate the language of the  rule as seen in its proper contextual setting.

The Master had therefore been correct to find that the eighth defendant was only liable for the costs directly attributable to the action against  it.

Common costs

The court’s starting point was that this question did not depend on the meaning of “the costs of  the proceedings” in CPR.36.10(1); the court was now only concerned with common (or generic) costs.

Common costs effectively fell into two categories. First, there were the non-specific common costs such as court fees, medical reports and travel expenses that would have  been incurred in any event, regardless of the number of other defendants. Secondly, there were the specific common costs which  would, in principle, be capable of identification and division (see Dyson3), these should not be included in the “general costs” of  proceedings.

The claimant submitted that the non-specific common costs, which would have been incurred  regardless of the other defendants, should be paid in their entirety by the eighth defendant in addition to any specific common costs.

Relying on Dyson the court found that the claimant would be entitled to orders against each  defendant on a 100% basis, leaving it to those defendants to contest issues of apportionment.  Whilst it was true that as a matter of convenience or pragmatism the costs judge would in most  cases choose to divide those costs according to the number of defendants, on the assumption that  all of them are solvent, this did not affect the correct legal analysis.

It therefore followed that the lower court’s conclusion in relation to the non-specific common  costs, which it did not treat as a separate category, could not be upheld. It was wrong in  principle. The claimant was entitled to these costs on a 100% basis. As regards the issue of the specific common costs, which also form part – on an undifferentiated basis – of the costs order made by the lower  court the claimant’s submission that the decision of the previous decision was somewhat arbitrary  was accepted, albeit on a principle rather than case specific basis given the lack of evidence  submitted by the claimant on this point.

The “rough and ready” approach taken by the lower court, although favoured in at least two first  instance decisions and in Fourie4, was deprecated by Justice Patten in Dyson, precisely for the reason that it was  unscientific and impressionistic. The general rule was therefore that evidence-based decisions are  required (for example, time spent), rather than an approach which simply identifies the number of defendants, although it  was noted that this rule had to give way in circumstances where it would be disproportionate to  conduct such a detailed  analysis.

Comment

This decision confirms that where a part 36 offer is accepted by one of multiple defendants that defendant’s individual liability for  costs will likely only extend to  the costs of the proceedings against it. However, if the claimant  is able to provide evidence of non-specific common costs incurred in the proceedings these may also  be recoverable at a rate up to 100% from the individual defendant.

In higher value disputes defendants should also consider the evidence based approach on specific  common costs now advocated by the court. This will be of relevance when considering potential costs  exposure of accepting a part 36 offers in cases where significant levels of costs have been incurred.