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Kastor Allegation Company Limited & Another v AGF Matt & Others, Queen Bench Division Commercial Court

9 April 2003
The issues

Costs – Part 36 – split Order – party unsuccessful on major issue.

The facts

This was a claim under a Policy of Marine Insurance for indemnity for the loss of a vessel. The Claimants made a Part 36 Offer shortly before Trial. At Trial, the Claimants lost on the principle issue, but recovered damages in respect of their alternative claim. They beat their Part 36 Offer. The Defendants argued that the Costs Order should be split on the basis that the Claimants had lost the argument on a major issue.

The decision

1. The issue on which the Claimants had lost had lengthened the action and the Trial and had increased costs.

2. If the action had been pleaded solely on the basis of the second issue on which they had won, the whole history of the action would have been different.

3. It was therefore appropriate to make orders in respect of the issues and the net outcome, after weighing the costs of those issues, was an Order that the Claimants should bear their own costs and 70% of the Defendant’s costs.

4. The Claimant was awarded a further award of additional interest on damages in respect of the successful Part 36 Offer.

5. However, as to their costs, the Trial Judge noted a distinction between the drafting of Part 36.20 (the Claimant feeling to beat a Defendant’s Part 36 Offer) and Part 36.21 (Defendant failing to beat a Claimant’s Part 36 Offer). In the former, the wording is to the effect that the Court will order the Claimant to pay any costs incurred by the Defendant after the latest date on which the payment could have been accepted; under 36.21 however the reference is not to “any costs incurred” but “his costs” which the Trial Judge interpreted as being a reference to “such costs as are or would otherwise be awarded to the Claimant”, ie the latter relates not as to what proportion of costs should the Claimant recover, but the basis on which those costs are to be assessed. The Judge noted the decision in Huck -v- Robson (Part 36 Offer of 95% made which the Court of Appeal considered was a reasonable Part 36 Offer notwithstanding that no Judge would in fact make such an apportionment) but distinguished it on the basis that in Huck it had never been argued that the Claimant should not recover all her costs.

6. The only issue was the basis on which those costs should be assessed. To mechanistically interpret Part 36.21 to provide for an entitlement to Claimant’s costs in these circumstances would defeat the object of the new rules. “A Claimant with only a 50/50 case could by careful use of a Part 36 Offer produce a situation in which he had a potentially free run on any number of wholly unmeritorious bases of claim, which had no prospect of success whatsoever. A Defendant in such circumstances might be deterred from defending a 50/50 case, perhaps involving an important point of principle, by fear of the prospect of having to pay the Claimant’s costs (and on an indemnity basis) on a whole raft of wholly unmeritorious make-weight points”.

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