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Ali Reza-Delta Transport Company Ltd v United Arab Shipping Company SAG, Court of Appeal, 17 June 2003

25 June 2003
The issues

Costs – Indemnity Costs – Part 36 Offer – Part 44 – unreasonable conduct.

The facts

On the 2nd May 2003, the Appellants had succeeded before the Court of Appeal against an award by the Judge below of $115,800.00. The Court of Appeal awarded $227,400.00. The Court of Appeal awarded the Appellants their costs of the Trial on the indemnity basis and interest at 3% over the prime rate on the basis that the Appellants had done better than both the first two offers made before Trial. The Court of Appeal gave Judgment on the 2nd May 2003. On the 10th March 2003 a third offer was made when the Appellants offered to accept $227,400.00 plus costs of the Trial on an indemnity basis and waiving any interest uplift on both damages and costs awarded. The question was whether the Court of Appeal should award the costs of Appeal on an indemnity basis.

The decision

1. Mitchell -v- James, a decision of the Court of Appeal, had decided that terms as to costs were not intended to be included in Part 36 Offers.

2. The Respondents had argued that the offer did not satisfy the requirements for Part 36 because the Appellants had only offered to accept what they were claiming and the offer of a concession on the interest uplift was irrelevant. They argued that just as concessions as to costs were not to be taken into account in assessing whether or not a Claimant had done better than his Part 36 Offer, so concessions as to uplift interest should not be taken into account. Following Mitchell -v- James, this was the preferred view.

3. The Appellants had raised an alternative argument that if they failed on the Part 36 point they should be awarded indemnity costs under Part 44 for unreasonable conduct. The resistance of an Appeal in this case was not unreasonable. An Indemnity Costs.
Order made under Part 44 would reflect conduct, which was unreasonable to a high degree and not merely wrong or mis-guided in hindsight. It would be rare that the refusal of a settlement offer would attract under Part 44, not merely an adverse Order for Costs but an Order on an indemnity basis.

Order therefore that the Respondents pay the Appellants costs on the standard basis.

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