Ali Reza-Delta Transport Company Ltd v United Arab Shipping Company SAG (No 2)
| Jurisdiction | England & Wales |
| Judgment Date | 17 June 2003 |
| Neutral Citation | [2003] EWCA Civ 811 |
| Docket Number | Case No: B2/2003/0120 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 June 2003 |
[2003] EWCA Civ 811
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CENTRAL LONDON
CIVIL JUSTICE CENTRE (MERCANTILE LIST)
HIS HONOUR JUDGE BRIAN KNIGHT QC
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Peter Gibson
Lord Justice Tuckey and
Mr. Justice Nelson
Case No: B2/2003/0120
Mr. Chirag Karia (instructed by Messrs Jackson Parton, London E1 8AA) for the Appellants
Mr. Ricky Diwan (instructed by Messrs Hill Taylor Dickinson, London, EC3A 7HX) for the Respondents
Peter Gibson L.J. (giving the judgment of the court):
When judgment was given in this court on 2 May 2003 awarding the successful Appellants US$227,400 in place of the Judge's award of US$115,800, we were informed by Mr. Karia for the Appellants that they had made three Part 36 offers. It is common ground that in the light of this court's judgment the Appellants did better than both their first two offers made before trial, and accordingly this court awarded the Appellants their costs of the trial on the indemnity basis and interest at 3% over the prime rate. The third offer was made on 10 March 2003, when the Appellants offered to accept US$227,400 plus the costs of the trial on the indemnity basis but waiving any interest uplift on both the damages and the costs awarded.
The only question outstanding is whether this court should accede to the Appellants' submission that it is on the indemnity basis that they should be awarded their costs of the appeal pursuant to CPR 36.21, or, if that is inapplicable, pursuant to r. 44.3. That submission is opposed by the Respondents. They say that this court should award the Appellants their costs of the appeal only on the standard basis.
We drew the attention of Counsel to the decision of this court in Mitchell v James [2002] EWCA Civ 997 and allowed them to make submissions in writing on the applicability, if any, of what was said in that case to the present case. This judgment is written in the light of the helpful written submissions which we have received from each side.
R. 36.21 is in this form:
"Costs and other consequences where claimant does better than he proposed in his Part 36 offer
36.21 – (1) This rule applies where at trial –
(a) a defendant is held liable for more; or
(b) the judgment against a defendant is more advantageous to the claimant,
than the proposals contained in a claimant's Part 36 offer.
(2) The court may order interest on the whole or part of any sum of money (excluding interest) awarded to the claimant at a rate not exceeding 10% above base rate for some or all of the period starting with the latest date on which the defendant could have accepted the offer without needing the permission of the court.
(3) The court may also order that the claimant is entitled to –
(a) his costs on the indemnity basis from the latest date when the defendant could have accepted the offer without needing the permission of the court; and
(b) interest on those costs at a rate not exceeding 10% above base rate.
(4) Where this rule applies, the court will make the orders referred to in paragraphs (2) and (3) unless it considers it unjust to do so."
In Mitchell v James the relevant offer was one whereby the claimants offered to accept payment of a specified sum and, amongst other terms, each party was to bear his own costs. Park J. had held at the end of the trial that the Claimants' case succeeded and that the defendants should pay the Claimants' costs. He further held that the requirements of r. 36.21 (1) were not satisfied and so he ordered costs to be paid on the standard basis. On appeal this court concluded that terms as to costs were not intended to be included in Part 36 offers. In a judgment with which Potter L.J. and Sir Murray Stuart-Smith agreed, Peter Gibson L.J. gave the following reasons for that conclusion:
"30. First, r.36.14 is worded as applicable whenever a claimant's Part 36 offer is accepted without needing the permission of the court. It does not say "unless a claimant's Part 36 offer indicates to the contrary" (cp. r.36.22(1)) or other wording to indicate that the parties can agree otherwise. Similarly, para. 7.2 of the Practice Direction indicates that on acceptance of the Part 36 offer "the costs consequences set out in rule …. 36.14 will then come into effect." So too in a case where the court's permission is needed for the defendants to accept a Part 36 offer, if permission is given, para. 7.5 envisages that the court may order that the costs consequences set out in r. 36.14 will apply. These provisions are inconsistent with a term as to costs being part of the Part 36 offer.
31. Second, r.36.21 is applicable where at trial either a defendant is "held liable" for more, or "the judgment" against a defendant is more advantageous to the claimant, than the offer. The words "held liable" and "the judgment" both appear to me to connote what the trial judge holds or decides on the substantive issues in the case as distinct from the ancillary issue of costs to be determined after the substantive issues are decided. Mr. Brunner accepted that that was so in relation to "held liable", though not in relation to "judgment". For my part, I cannot see why there should be such a difference.
32. Third, the rule is intended to apply universally at the end of the trial when the judge is required to make an order for costs. Save in a case where the judge can make a summary assessment or the rare case where the costs at that point are agreed, there will have been no assessment of the costs, the figure for which would therefore be uncertain. Yet the rule contemplates that merely by reference to that for which the defendant is held liable or by reference to the judgment the judge will be able to decide whether r.36.21 applies because the defendant has been held liable for more, or the judgment against a defendant is more advantageous, than the offer. I find it hard to believe that the draftsman contemplated that a Part 36 offer is one which includes a term as to costs, so that the judge might have to evaluate the quantum of his costs order. That is normally the function of a costs judge, not the trial judge.
33. Fourth, there would be a real risk of abuse if a term as to costs could be included in a Part 36 order. Every well-advised claimant...
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