30 October, 2014
The case of Coward v Phaestos concerned the order for costs at the conclusion of a hard fought intellectual property litigation between a husband and wife. In what is thought to be the most expensive legal bill ever in a British divorce case, a staggering costs bill of £19 million had been incurred by the parties.
The central issue was the effect of a Calderbank offer, that is, an offer made without prejudice to costs. The appellant, Coward appealed the order for costs made at the conclusion of the action. Coward argued, amongst other things, that the judge had been wrong not to order either:
Phaestos argued that the effect of a Calderbank offer was to be assessed by analogy with the terms of the CPR r.36.14(1A), which defined a "more advantageous" judgment as one that was "better in money terms by any amount" than the relevant offer.
The Court of Appeal held that the judge had carefully considered the offer but, by reason of the differences identified, she concluded that it would not justify a departure from the usual rule that, if there was to be any order as to costs, the costs should be paid by the unsuccessful party.
The starting point was to recognise that Part 36 and Part 44 of the CPR were separate regimes with separate purposes. Part 36 was a self-contained code dealing with offers of settlement made in accordance with and subject to the terms of Part 36, which specified particular consequences in the event that such offers were not accepted. On the other hand, Part 44 conferred on the court a discretion in almost the widest possible terms. Part 44 contained no rules as to the way in which the court was to have regard to offers. In particular, there was no provision equivalent to r.36.14(1A).
The broad terms in which the discretion conferred by Part 44 allows comes at the price of some uncertainty and scope for argument as to costs. When making an offer to settle, it is vital that both Calderbank and Part 36 offers are considered, so that the most suitable type of offer is utilised to protect the Defendant's position.