HSS Hire Services Group Plc v BMB Builders Merchants Ltd and Another: CA 24 May 2005

The claimant licensee alleged that the license contract had been repudiated by the defendant licensor. The claimant succeeded at the trial of liability. The defendant had made a payment into court. The judge was told of the payment but not of the amount. He ordered the defendant to pay the costs of the liability trial because they had spent money on the issue and had won.
Held: The appeal succeeded.
Waller LJ said: ‘In defending the judge’s approach and in answer to the question as to what apart from paying into court the defendants could do to protect themselves against an order for costs on the liability issue, Mr Dunning QC robustly argued, it was open to them to concede liability, and if they chose not to do so then liability for costs followed if they lost the issue. If that approach is right it seems to discourage the arguing of preliminary points.
The contrary approach is that parties should be encouraged to make Part 36 payments in and/or offers; they should also be encouraged to try preliminary points if that could lead to the saving of costs overall. If payments in are to be totally ignored at the conclusion of the trial of a preliminary issue, that will discourage applying for the trial of the same, and may even discourage Part 36 offers where preliminary issues have been ordered. The proper approach at the conclusion of a trial of a preliminary issue where there has been a Part 36 payment in or a Part 36 offer, should therefore normally be to adjourn the question of costs pending the resolution of all the issues including damages, at which stage the quantum of the Part 36 offer can be revealed and the discretion in relation to costs exercised in the knowledge of it.
I have no doubt that the provisions of Part 36 and of Part 44 encourage the latter approach. Mr Dunning strove manfully to argue that the provisions allowed the judge to take the view he did. He argued (1) even where there had been a payment in, there was no rule which expressly prevented the judge dealing with the costs of the trial of the issue of liability or which required him to reserve the question of costs until after the issue of damages had been resolved; (2) the modern approach was to encourage stage based orders; (3) it was the defendants who wanted a split trial and the claimants resisted it; (4) the defendants could have admitted liability but chose to fight it; (5) the claimants were entirely successful; (6) it was a case where the dispute was about what was said, and the evidence of HSS had been entirely accepted, and the witnesses of the defendants had been severely criticised – Mr Harrison was described as ‘disingenuous’ and Mr Sowton as ‘totally unreliable’, and reference was made to CPR 44.3 (4) under which it was material to take into account the conduct of the parties; (7) it is the judge who has heard the issue who is based placed to deal with the costs. Thus he argued that the judge having been correctly informed of the fact that there had been a payment in as he was entitled to be under CPR 36.19 (3)(c), was equally entitled to hold that it was immaterial.
CPR 36.19 is an important provision and some time was spent debating precisely what it meant. It provides as follows:- . .
The following points need consideration. Why is it provided that the fact that there has been a Part 36 payment is something that 36.19(3)(c) allows to be revealed to the trial judge where the issue of liability has been determined before the assessment of the money claimed? Why does (c)(ii) contemplate both that the fact that a payment has been made or the fact that one has not been made may be relevant to costs? Is what is contemplated as being disclosable to the trial judge simply the fact of payment in or would it be proper to disclose the actual amount? How does the provision fit with the obligation (the word in CPR 44.3 (4) is ‘must’) to take into account any payment into court or an admissible offer to settle?
At one moment it was being suggested in argument that at the end of a trial on liability it would be appropriate under Part 36.19(3)(c) to disclose both the fact of a payment in and the quantum thereof so that a judge could exercise his discretion in relation to the award of costs on the preliminary issue taking the view, for example, that the amount paid in was on any view too low. In that way it could be argued he could properly fulfil his obligation under 44.3(4) at that stage. Indeed Mr Dunning went so far as to offer to show us the terms of the payment in so that if we took the view the judge had erred we could exercise the discretion afresh.
In my view Part 36.19 does not allow for the disclosure of the amount of a payment in. On its language it allows simply the disclosure of the fact that there has been one or the fact that there has not. The consequences of that being the correct interpretation of Part 36.19 seem to me to be as follows. If the court is told that there has been no payment in, then the court is free to exercise its discretion to award costs in relation to the preliminary issue and there is no difficulty with Part 44.3(4)(c). If however it is told that there has been a payment in, then, in any but perhaps the most exceptional case, I find it very difficult to think that there could be circumstances where if the issue of damages remains to be decided, the judge can do otherwise than to reserve the question of costs until after the determination of that issue.
The points that Mr Dunning makes, for example in relation to the conduct of the witnesses, can be made at the later stage but until the court knows how generous or otherwise the payment in was, it would not, as I see it, normally be fair to exercise a discretion in relation to costs. In any event because the court was not allowed to know the quantum, it could not act as required under Part 44.3(4), at that stage.
In my view, accordingly, the judge was not entitled to deal with costs in the way he did. He should have reserved the same, pending determination of quantum, and his order should be reversed to reflect that finding.’


Waller, Mance LJJ, Sir William Aldous


[2005] EWCA Civ 626, [2006] 2 Costs LR 213, [2005] 1 WLR 3158, [2005] 3 All ER 486




Civil Procedure Rules 36


England and Wales

Cited by:

AppliedBeasley v Alexander QBD 9-Oct-2012
The parties had disputed liability for personal injuries in a road traffic accident. The court had held the defendant liable, but held over the assessment of damages. The defendant sought to refer to the fact of his offer of settlement when . .
Lists of cited by and citing cases may be incomplete.

Costs, Civil Procedure Rules, Litigation Practice

Updated: 30 June 2022; Ref: scu.225229