MEDWAY OIL AND STORAGE COMPANY -v- CONTINENTAL CONTRACTORS

The Court was asked to consider the effect of an Order for “costs on the counterclaim.”  The House of Lords held that the costs of the counterclaim are only those costs occasioned by reason of their being a counterclaim.  Furthermore, there should be no apportionment unless the Court orders otherwise.

BATEMAN -v- JOYCE

This case concerned the interpretation of a consent order ("the Order") agreed between the parties on 21 February 2007 and sealed by the Court on 9 March 2007 which compromised the Claimant's claim against the Defendant and the Defendant's counterclaim against the Claimant.
The material parts of the Order say:
"BY CONSENT and upon the non attendance of both parties IT IS HEREBY ORDERED as follows:
1. That all further proceedings in this action be stayed on the terms set out below, except for the purpose of carrying the terms into effect with liberty to apply for that purpose.
2. The trial date listed for 1 and 2 March 2007 be vacated.
3. The Defendant do pay the Claimant his costs of the claim on the standard basis, such costs to be subject to a detailed assessment in default of agreement.
4. The Claimant to pay the Defendant his costs of the counterclaim on the standard basis, such costs to be the subject of a detailed assessment in default of agreement.
5. Upon payment of the sum stated in the schedule of costs, both parties be discharged from any further liability in respect of the claims made herein."
The issue for decision was whether the costs payable by the Claimant to the Defendant under paragraph 4 were limited by the Medway Oil principle (see Medway Oil and Storage Company Limited v Continental Contractors Limited [1989] A.C.88), the effect of which would be to restrict the costs for which the Claimant is responsible to any extra costs generated by the counterclaim and to exclude any costs relating to the claim.

The Claimant argued that the Defendant had consented to an Order in which the words used had an established meaning, namely that the Medway Oil principle applied.
The Defendant submitted that the terms of the Order reflected the common intention of the parties that each side should receive the costs that he had incurred in respect of his claim. Furthermore, where the parties had come to terms as to costs, as they had done in the present case, the Defendant contended that they were not bound by authority or precedent in determining their respective liabilities for costs.
The Court considered the parties intentions at the time the Order was drawn, and also their knowledge of the intricacies of costs, or lack of it, and held that the Medway Oil principle did not apply. It was stated that, given the parties lack of knowledge as to costs, it could not have been intended that the Medway Oil principle would apply. The contractual agreement they had reached was that each party would bear the costs of the other’s claim and it was clear from the wording of the Order that this had been their common intention.

LAHEY -v- PIRELLI TYRES

This case considered whether the Court on Detailed Assessment had the power to order the paying party to pay only a proportion of the costs that are ultimately assessed.  The Claimant had accepted a payment into Court.  The Court held that the effect of acceptance of the payment into Court was that the Claimant was entitled to 100% of their assessed costs and the Court on detailed assessment had no power to vary the order.

AARON -v- SHELTON

This was an appeal from a ruling made by Master Simons in the course of a Detailed Assessment of costs. It concerns the extent to which a paying party under a costs Order can rely on the conduct of the receiving party as a reason for reducing the amount of costs which otherwise would have been payable under the Order, when that conduct could have been raised as an issue at the time the Order was made.

On the 4th day of the trial of the action, Mr Aaron produced a document which was crucial to the claim and which led to Mr Aaron consenting to his action being dismissed the following day. By the Order made by consent, the action was dismissed and Mr Aaron was ordered to pay Mr Shelton’s costs of the action on the indemnity basis.

Mr Aaron’s conduct was criticised and as he was a solicitor, the judge ordered that a transcript of the hearing be sent to the Office for the Supervision of Solicitors. Disciplinary proceedings followed and it would appear that at least 1 charge was upheld against Mr Aaron.

Mr Shelton subsequently served a Bill of Costs and Mr Aaron filed Points of Dispute raising the issue of Mr Shelton’s conduct throughout the action, submitting that costs should be disallowed in light of the same. Mr Aaron alleged that Mr Shelton did not have authority to act for his client during the action. Mr Shelton filed Replies stating that if Mr Aaron felt his conduct warranted sanction, this should have been raised at trial when the question of costs fell to be decided. He argued it was too late to raise conduct as an issue at this stage and that the costs involved would be disproportionate. Furthermore, he stated that by signing the Consent Order Mr Aaron had conceded the point.

The Detailed Assessment was adjourned and at the subsequent hearing Master Simons ordered that by seeking to raise issues as to Mr Shelton’s conduct, Mr Aaron was seeking to dilute the effect of the costs Order to which he consented. The issue could have been raised at the time the Order was drawn but it was not and it would be disproportionate to incur the costs that an investigation of the allegations would incur.

On appeal the Honourable Mr Justice Jack held that if a party wished to raise conduct as an issue they should do so before the judge making the costs Order. It is an abuse of the Court’s process to raise an issue before the costs judge which was not but should have been raised before the trial judge. Appeal dismissed.