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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Hardy v Sutherland (t/a David Sutherland Architects) & Anor [2001] EWCA Civ 976 (13 June 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/976.html Cite as: 83 Con LR 157, [2001] EWCA Civ 976

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BUXTON COUNTY COURT
(Mr Recorder Coates)

		Royal Courts of Justice Strand London WC2
		Wednesday, 13th June 2001

1. LORD JUSTICE LONGMORE: In February 1996 Mrs Hardy engaged Mr David Sutherland as her architect in relation to the proposed demolition and replacement of her garage and bungalow at 2 Hordens Lane, Chapel-en-le-Frith, Derbyshire. In due course, no doubt with the assistance of Mr Sutherland, she made a building contract for the works with a builder, Mr King, in the fixed sum of £72,134. There were, unfortunately, disputes that arose in the course of the performance of that contract, and on 8th July 1998 Mrs Hardy issued a claim against both Mr Sutherland and Mr King, claiming damages for breach of their respective contracts -damages which were unquantified but limited to the sum of £50,000. It is said that the initiation of that claim was somewhat precipitate because it was issued in advance of a meeting between the parties which had been arranged for discussion of the disputes that had arisen.
2. In the course of the litigation there was an application for expert reports, and an order was made for a joint report from an expert chartered surveyor, Mr Taylor, who reported on 24th February 2000. The representatives of Mrs Hardy had said, on the application, that a joint surveyor's report would be inadequate for the purpose of resolving the dispute since part of the dispute involved the alleged liability of the architect, Mr Sutherland; but at that stage no order was made in respect of any expert architect's report.
3. On 12th April 2000 Mr Sutherland made an offer, expressed to be pursuant to Part 36 of the Civil Procedure Rules, in the sum of £3,500. Twenty-one days from the date of that offer would bring one to 4th May. On 16th June the claimant renewed her application for directions to the court and asked the court to order a joint architect's report. On that day Judge Styler made an order for such a report. That was produced by Mr Miller in July 2000.
4. As far as the architect's liability was concerned, both reports came to somewhat similar conclusions. Mr Taylor had concluded that there was a potential liability on the architect in the sum of £2,184, whereas Mr Miller concluded that the potential liability of the architect, in so far as it could be assessed at the time of his report, was £1,800 or thereabouts, but there were various others matters which could not be assessed by him at that time and which might have to be assessed at a later date. It was in any event clear that the offer of 12th April of £3,500 was fairly near the mark. On 3rd August Mr Sutherland's advisers made a payment into court pursuant to Part 36 of the Civil Procedure Rules. Under those rules that payment in could have been accepted at any time up to 24th August.
5. The matter was listed for trial in October 2000, but was eventually (and no doubt sensibly) compromised by the parties, the builder agreeing to pay the sum of £14,000 and accepting at any rate an incidence of costs, and Mr Sutherland agreeing to pay £3,000 in respect of both the claim and the counterclaim.
6. However, matters of costs were left outstanding for argument. In due course that came before Mr Recorder Coates in the Buxton County Court and he made, relevantly, orders as follows:

"5.The First Defendant do pay 75% of the Claimant's costs on 4th May 2000 and thereafter the First Defendant's costs to be paid by the Claimant subject to agreement or detailed assessment if not agreed.

6.The Second Defendant do pay 75% of the Claimant's costs of the action but in my view there be no costs payable to the claimant in relation to Mr Miller's report."

7. Mrs Hardy now appeals, with leave, to this court against both paragraphs of that order. In relation to the first defendant, she submits that the recorder should have given her her costs up to 21 days from the date of the payment in (viz, 24th August) rather than 21 days from the making of the offer (viz, 4th May).
8. In support of that, it is submitted to us that, when the recorder was asked for permission to appeal on that point, he indicated a wish to change his mind and make the order up to 24th August rather than 4th May, but he was prevented from giving effect to his apparent change of mind by counsel for Mr Sutherland saying that he had no power to do so.
9. The second ground of appeal is that, whatever be the right period in respect of which Mrs Hardy should recover her costs, the recorder should have awarded her 100 per cent of her costs, not 75 per cent. That second point is, in my view, not arguable. The proportion of costs which a claimant recovers is always a matter for the judge's discretion and I cannot see any ground for interfering with his exercise of discretion as to the 75 per cent proportion in this case. Indeed, although permission to appeal was granted in general terms, this was not a matter which the learned lord justice granting permission indicated was in his view properly arguable. He indicated, however, that the first ground of appeal was properly arguable and I, therefore, turn to that ground, namely that the recorder should have awarded Mrs Hardy her costs up to 24th August.
10. It is perfectly true, as Mr Boyd, for the appellant claimant points out, that, when the recorder was reminded of the terms of Part 36.3, he did indicate that he wished to change his mind. In my view, he was perfectly entitled to change his mind on this point at any time during the hearing, including during the discussion after he had given judgment. It was unfortunate that counsel for Mr Sutherland stopped him from doing so by suggesting that he was not entitled to do so. But in all the circumstances the question remains whether the learned judge exercised his discretion correctly in making the order which he finally did make, namely that the first defendant was to pay 75 per cent of the claimant's costs up to 4th May. It does not seem to me that the judge can be said to have exercised a discretion either way, in the sense that a respondent to an appeal can argue that the discretion of the judge should not be interfered with. If he had had an unfettered use of his discretion, it is not at all easy to be sure quite how he would eventually have decided the matter. It seems to me that the fair course in all the circumstances is for counsel to be entitled to argue for what was the right order, leaving the matter of discretion at large for this court.
11. The relevant provisions of Part 36 are as follows. Part 36.3, under the heading "A defendant's offer to settle a money claim requires a Part 36 payment", provides:

"(1)Subject to rules 36.5(5) and 36.23, an offer by a defendant to settle a money claim will not have the consequences set out in this Part unless it is made by way of a Part 36 payment. ..."

12. The consequences to which 36.3(1) refers are set out in 36.20, under the heading "Costs consequences where claimant fails to do better than a Part 36 offer or a Part 36 payment":

"(1)This rule applies where at trial a claimant -

(a)fails to better a Part 36 payment; or

(b)fails to obtain a judgment which is more advantageous than a Part 36 offer.

(2)Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court."

13. Thus the consequence which, according to 36.3 and 36.20, will only follow from a payment into court rather than an offer is that the court will, unless it is unjust to do so, order the claimant to pay costs incurred after the date on which any payment in could have been accepted. That is, in part, what the judge in this case did. The provisions of Part 36.20 leave untouched the question of what should happen about costs incurred before payment into court and, in particular, costs incurred between the date of any Part 36 offer and any payment into court.
14. Relevant for that purpose is Part 44.3 of the Civil Procedure Rules, which provides, as material:

"(1)The court has discretion as to -

(a)whether costs are payable by one party to another;

(b)the amount of those costs; and

(c)when they are paid. ...

(4)In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including -

(a)the conduct of all the parties;

(b)whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(c)any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36)."

15. It is thus apparent that the court does have to have appropriate regard to any admissible offer to settle. As to that, there is the guidance of this court in Amber v Stacey [2001] 2 All ER 88. In that case Simon Brown LJ said at p.96:

"39... There are to my mind compelling reasons of principle and policy why those prepared to make genuine offers of monetary settlement should do so by way of Part 36 payments. That way lies clarity and certainty, or at any rate greater clarity and certainty than in the case of written offers. ...

41Payments into court ... answer all questions as to (a) genuineness, (b) the offeror's ability to pay, (c) whether the offer is open or without prejudice, and (d) the terms on which the dispute can be settled. They are clearly to be encouraged, and written offers, although obviously relevant, should not be treated as precise equivalents."

16. The judge's approach to the matter in his judgment was as follows:
17. "Quantification of the claim by the chartered surveyor Mr Taylor was available by February 2000, and in his report the share of liability attributable to the first defendant was, I believe, in the region of £2,000, something of that order. Therefore it seems to me that in April the claimant was unreasonable in refusing the first defendant's Part 36 offer, which was in a sum considerably in excess of the figure put forward by Mr Taylor as being the first defendant's financial share of liability."
18. For my part, I consider that that is a valid and correct exercise of discretion as far as it goes. But I also consider that, in the light of Amber v Stacey, it gives insufficient recognition to the fact that an offer to settle does not have that clarity and certainty that is achieved by a payment into court. Accordingly, in my view the terms of the judge's order should be altered so that between the date of 4th May and 24th August the first defendant recovers only 50 per cent of his costs as against the claimant. I say that notwithstanding the factual differences that undoubtedly exist between the facts of this case and the facts of Amber v Stacey, which have naturally been relied on by Mr Smith on behalf of the first defendant. But for my part, I do not consider that those factual differences are sufficiently decisive to encourage the court to make any order different in substance from that achieved by this court in Amber v Stacey.
19. That deals with the appeal against the first defendant and, to the extent indicated, it will be allowed.
20. As against the second defendant, Mrs Hardy submits that there had been an agreement as part of the compromise that Mr King should pay the costs of the claim against him, to be assessed, and therefore that the recorder should not have decided that Mrs Hardy was only entitled to 75 per cent of her costs as against the builder. Secondly, it is said that the recorder should not have excepted from the provision of that order the costs payable in relation to Mr Miller's report, which he considered ought to be paid by the claimant.
21. As far as that second ground is concerned, that again seems to me very much a matter for the judge's discretion. There were grounds on which it would be fair to say that Mr Miller's report, which came to much the same conclusion as the earlier Taylor report, did not advance the claimant's case. Moreover and perhaps more importantly, as the recorder said, Mr Miller's report was wanted by the claimant for the purposes of her claim against the first defendant, the architect, and therefore one understands why the recorder did not think it right that the builder, Mr King, should have to pay any part of the costs of that report. The provision in relation to Mr Miller's report in the order of the recorder will therefore remain.
22. As for the point that, according to Mr Boyd, there was agreement that Mr King would pay 100 per cent of the costs, to be assessed in the ordinary way if the amount thereof could not be agreed, Mr Groom, for the second defendant, says that the agreement reached was merely that, while Mr King accepted that he would be liable for costs, the right proportion of those costs was still a matter for argument. It is unfortunate that we have to deal in this court with a point such as that. Neither party urged us to direct an issue to be tried on the existence of such an agreement, which would clearly be a disproportionate way of proceeding in this modest case.
23. According to the transcript of the proceedings that we have seen, there was before lunch on 20th October 2000 a discussion before the recorder, in the context of the timing of the order of submissions, from which it might be thought that there had been some such agreement as Mr Boyd contends for, since in the course of his submission Mr Boyd said in terms:

"... first of all it has been agreed the second defendant will pay the claimant's costs ..."

24. But Mr Groom points out that later on the same page he himself reserves, as he would say, the point about the amount of the costs, because Mr Groom says, again in the context of timing:

"I think it may well assist if the first defendant's submissions are made first of all and then, in the light of resolving the question of costs that the claimant will be entitled to as against both defendants, I would then seek, after your Honour has settled that issue, to have the issue as to the burden of those costs orders between the defendants to be clarified."

25. For my own part, I consider that the matter is left somewhat opaque by the pre-lunch discussion, which, as I say, was mainly about timing. What is clear is that after lunch there was argument on the question of the appropriate proportion of costs that should be paid, not merely by the first defendant, but also by the second defendant. No doubt the second defendant rode to a large extent on the back of the first defendant's arguments, which were, as indicated, sufficiently compelling to persuade the recorder to grant the claimant only 75 per cent of the costs to which she was entitled. But there was at that stage no submission from Mr Boyd that the argument for the second defendant was inappropriate in the light of any previous agreement which had been reached, and the recorder did not in his judgment address himself to that question. Indeed, he clearly regarded the proportion of the costs as being in dispute between the claimant and the second defendant, because he recorded that fact when he filled in the document which is now required to be filled in in relation to permission to appeal. Under the heading "Result of hearing", he has written:

"Judgment by consent in claimant's favour: £3,000 against first defendant and £14,000 against second defendant. Costs disputed."

26. Then he sets out the effect of his order.
27. In the light of that, it does not seem to me to be right for the claimant now to argue what does not appear to have been argued out before the recorder, namely that there was a prior agreement as to the full incidence of costs against the second defendant, since the recorder clearly thought that no such agreement had existed. In those circumstances, for my part, I would decide that this part of the appeal against the second defendant must also fail and be dismissed.
28. LORD JUSTICE CARNWATH: I agree on both appeals.
29. I would only add, in fairness to the recorder, that he had to deal with the matter on 20th October 2000. The judgment in Amber v Stacey, from which we have found guidance on the interaction of the provisions of Part 36, was given on 15th November, some three weeks later, and so he did not have the benefit of that.
Order: appeal against first defendant allowed in part; appeal against second defendant dismissed; as between the appellant and second defendant, the appellant to pay the second defendant's costs of the appeal summarily assessed in the sum of £2,145.68, such sum to be set off against the costs payable to the claimant; as between the appellant and the first defendant, no order as to the costs of the appeal. [DOES NOT FORM PART OF APPROVED JUDGMENT]