Successful claimants could not import payment of a third-party costs order application or a payment on account of costs into a draft order where not mentioned in their offer to settle, the High Court has ruled.
In TC Development Ltd and Anor v Investin Quay House Ltd and Anor  EWHC 760 (TCC), the claimants won and began third-party costs proceedings against the man behind the defendant (John Downer).
Ahead of a hearing on this, the claimants made this offer to settle the application: “The terms of the offer are that your client pays my client their costs of the litigation, such costs to be the subject of a detailed assessment if not agreed and pursuant to 36.17.4B from the date on which the relevant period expired in relation to my client’s part 36 offers, their costs are to be assessed on the indemnity basis.”
Mr Downer accepted this and his solicitors sent through a draft order reflecting it. The claimants’ solicitors produced an amended order which clarified their view that the “costs of the litigation” should include the costs of the application for the third-party costs order, and also sought an interim payment. The defendant did not accept that.
Mr Justice Waksman found that the offer did not include the costs of the third-party costs order application. The key was the second clause of the offer, he said. “Clause 2 referring to the application of the rule that the costs should be on an indemnity basis all arises because of the claimant’s part 36 offer as against the first defendant which in fact they bettered on my judgment. That does not work in relation to an application for a third-party costs order.”
Further, the application said the claimants; costs in the litigation were £186,182, as stated in their budget, and it was common ground that they did not include the costs of the application.
“Mr McCreath [for the claimants] is saying there is not much in that because the costs of the application will not have been known at that stage because at that point it had not been finally decided. I take that point, but that is not much of an argument, because it would have been open to the claimant’s solicitors to put in a specific provision in their offer letter seeking the costs of the application or quantifying those costs.
“Mr McCreath says it was almost inevitable that, had that application run its course, the claimants would have ended up with the costs of that application in any event. I am not prepared to speculate about that.
“On the face of it, then, in my judgment it is clear that the cost of the litigation has to be regarded here as the underlying litigation and not any costs incurred in making the third-party costs application.”
Mr McCreath said he would instead apply for those costs at the hearing, but Waksman J rejected this approach.
“This was purporting to be an offer to settle everything by reference to settling their application for a non-party costs order. There was nothing else left to one side. I agree that if the offer is silent as to what happens to the costs of the application, and sometimes proposals are silent in that way, then the court inevitably takes the view that each side must bear their own costs.
“The claimant is not seeking the costs of that application, and it is certainly not offering to pay the defendant Mr Downer’s costs of that application.
“So for those reasons, in my judgment the correct interpretation is that the application costs do not form part of the costs of the litigation, but they have in fact been compromised in the way that I have suggested.”
The failure to make provision in the offer for a payment on account again doomed the claimants.
“The order must incorporate what has been agreed, and that is the end of the function of this court – i.e. me, as opposed to a costs judge – in dealing with it any further. It is simply not fair.
“Objectively, whatever subjectively the claimants or indeed the defendants might have thought about that matter, it is simply absent from the settlement agreement, and there is no basis for me to import it because the settlement agreement makes perfect sense without it.
“In particular, it makes sense because, as both counsel agree, as part of the assessment process it is open to the claimants to seek an interim payment which comes by order of the costs judge, and both sides agree that that is a course which is open to the claimant.”
James McCreath (instructed by IBB Solicitors) for the claimants and Sarah Clarke (instructed by Hamlins) for the defendants.