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Calderbank Offers, CPR 44.2 & Deferring Rulings On Costs - Nicholas Dobbs, Temple Garden Chambers

24/12/21. In McKeown v Langer [2021] EWCA Civ 1792, the Court of Appeal considered the following issues (at [1]): “where there are split issues (such as liability preceding quantum), where no offer to settle the litigation under CPR Part 36 has been made, and where one party makes a without prejudice save as to costs offer covering the entirety of the litigation (“a Calderbank offer”) how might the discretion as to costs under CPR 44.2 be exercised? In particular, where the judge is aware of the existence of the Calderbank offer but unaware of the date it was made, or as to its terms, is the judge, in effect, bound to treat such an offer as equivalent to an offer under CPR 36 and defer a ruling on costs until the conclusion of all stages of the litigation?”

By way of summary, it was contended that the appeal raised a short but important point of principle which was whether a global Calderbank offer made in ongoing litigation was to be treated as having the same effect as an offer under CPR Part 36. It was argued that whether as a matter of case law or policy, there was no difference in substance between such a Calderbank offer and a CPR Part 36 offer; they should be treated in the same way. Accordingly, when a global Calderbank offer was made a determination on costs in such circumstances should be deferred until the end of the litigation. It was therefore contended in this case that the judge erred when, having been made aware of the existence of the Calderbank offer, he proceeded to determine costs.

The Court of Appeal rejected the appellant’s argument for a number of reasons. Firstly, it was inconsistent with the language of CPR 42.2 which by its express terms conferred a broad discretion upon a court and which made the existence, scope and effect of admissible offers to settle just one of the factors which a court was required to take into account (for the discussion on the scope and effect of CPR 44.2 and CPR 36, see [31] to [35]). Secondly, it was inconsistent with the policy considerations which underpin CPR 42.2 (for a discussion of policy considerations, see [36] to [42]). Finally, despite the arguments made, there was nothing in the relevant case law that compelled such a conclusion (for a discussion on the case law, see [43] to [47]).

CPR 44.2 conferred an express power or discretion to decide whether to make an order for costs. If a judge decided to make an immediate costs order, there is a duty to have regard to “all the circumstances” though there was no fixed list of relevant circumstances. The relevant matters that a court was required to take into consideration included those in CPR 44.2(a)–(c), including but not limited to the existence of “admissible” offers to settle. An offer to which the costs consequences under CPR 36 applied would not be an “admissible” offer under CPR 44.2(c). There was no definition of “admissible” in CPR 44.2 but on its express terms, a judge is entitled to conclude that an offer should not be taken into account and proceed to make an interim order.

It was determined that the appellant’s solution, if accepted, would represent the antithesis of good policy: it would reward bad behaviour, encourage the taking of unmeritorious points, exacerbate problems associated with the inequality of arms and accentuate the adverse litigation consequences of informational asymmetry (at [40]). The judge had adopted an approach consistent with the policy considerations underpinning the costs regime and emphasised the importance of issue-based costs determinations. The Court of Appeal held that he correctly refused to base his decision upon speculation and further correctly reflected the differences between CPR Parts 36 and 42.2 in his judgment. The appeal was dismissed.

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