Summary

Where a claimant and defendant both succeeded on their claim and counterclaim though the claimant was the overall winner, a judge could award the successful claimant his costs or a proportion thereof to reflect the issues which had been involved, but it was quite another thing for the claimant to be ordered to pay a proportion of the defendant's costs.

Facts

Claimant's appeal from the order of HH Judge Charles Harris QC sitting as a Judge of the High Court made on 7 April 1998 that the claimant pay one half of the defendant's costs save that the claimant's costs incurred prior to service by the defendant of its defence and counterclaim be paid by the defendant to the claimant. The claimant commenced proceedings seeking payment of the balance owing from the defendant for bicycles sold and delivered. The defendant contended that the bicycles were not of satisfactory quality or not fit for purpose and issued a counterclaim seeking damages which it was alleged extinguished the claimant's claim. The judge gave judgment for the claimant on its claim in the sum of £109,223 and judgment for the defendant on its counterclaim in the sum of £25,041. The judge then turned to consider the issue of costs. Neither party wanted an order that the claimant have the costs of the claim and the defendant the costs of the counterclaim and the judge made the order set out above. He held that the substance of the case had revolved around liability for the defective bicycles but recognised that the defendant had not succeeded on its counterclaim to the extent claimed. The claimant appealed contending that the judge had erred in failing to have had regard to the fact that the defendant had disputed the whole of the claimant's claim and that overall the claimant had been successful.

Held

(1) The issue of costs was a matter of discretion for the trial judge and the Court of Appeal would only interfere in certain circumstances. (2) The general rule in CPR 44.3(2)(a) was that costs followed the event. (3) Where a claimant was successful on the claim and a defendant successful on a counterclaim it was usual for the claimant and defendant to be awarded the costs of their respective claims (see Chell Engineering v Unit Tool & Engineering Co (1950) 1 All ER 378) but in the present case neither party wanted an order in that form. If there could be a legal or equitable set-off then in a situation where the claimant had been the overall winner he would be entitled to his costs or a proportion thereof (see Hanak v Green (1958) 2 QB 9, Baylis Baxter Ltd v Sabath (1958) 1 WLR 529 and M B Building Contractors Ltd v Ahmed (1998) Independent, November 23, 1998). (4) Costs could also be awarded on the basis of the issues actually involved (see CPR 44.3(4)) so as to encourage good litigation practice. (5) This seemed to have been the basis on which the judge had made the costs order in the present case, having sought to reflect the amount of time spent on the substantive issues. But such an approach could go too far (see In Re Elgindata (No.2) (1992) 1 WLR 1207). It was one thing to award a successful claimant a proportion of his costs, it was another to order him to pay the defendant's costs. (6) It was relevant to good litigation practice to consider the ways in which both sides could have protected themselves as to costs. The defendant could have made a payment in, but chose instead to issue a vastly inflated counterclaim. The claimant could have made a Calderbank offer but owing to the late filing of the defendant's schedule of loss this would have been difficult. (7) In the present case the judge had erred in principle in adopting the modern approach without giving weight to the countervailing factors. (8) In deciding what costs order to make it was noted that the judge had taken an adverse view to the fact that a great part of the trial itself resulted from the claimant's denial of the defendant's counterclaim. In those circumstances the claimant was entitled to costs save for the costs of the hearing itself.

Appeal allowed.