The claimant, Mr Dearling, had alleged that the house that the defendant had contracted to build for him had not been constructed in accordance with their contract. An initial application to court was settled on the basis that an expert be appointed to determine the dispute ("the ADR proceedings"). The expert allowed some, but not all, of the claimant's claims, and decided that the cost of the ADR proceedings should be split 50/50 between the parties. The claimant subsequently issued further proceedings claiming damages for breach of contract, but when the matter came to trial, the judge again encouraged the parties to attempt to settle the matter. The parties duly settled, but left the matter of costs to the judge, who ordered that the defendant should pay all the claimant's costs apart from its half share of the costs of the ADR proceedings.
The defendant appealed on the basis that the judge should not have allowed the claimant its costs after the last date on which the defendant's final Part 36 offer could have been accepted, and the claimant cross-appealed on the basis that the judge should have awarded him his costs of the ADR proceedings.

Reference

The Court of Appeal allowed the appeal and dismissed the cross-appeal. The court affirmed previous authorities to the effect that in the absence of a good reason to make any other order, the fallback was to make no order as to costs. The parties had reached a commercial settlement, which did not reflect the merits of the case, and the judge had not looked into these. The costs of the ADR proceedings awarded by the expert reflected the defendant's success in reducing an initially exaggerated claim and were upheld.

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Postscript

It is not in doubt that under the Civil Procedure Rules the court has the power to make awards of costs where parties have settled without a trial. In two previous cases considered and approved by the Court of Appeal, Brawley vs Marczynski (2002) and Boxall vs Waltham Forest LDC (2001), costs orders were made because the judge concluded that it was obvious which side would have won had the substantive issues been brought to trial. The case therefore offers no encouragement to litigants to defend a hopeless case up to the door of the court in the expectation of no order being made as to costs by the court if a commercial settlement is reached then. The amounts in issue in this case were small, and the conduct of the parties reasonable in attempting ADR and making Part 36 offers, so the judge had been justified in not looking into the substantive issues. In different circumstances, it would have been proper for him to do so and then an award of costs could have been made. As there had been an award of costs in the ADR proceedings and not an agreement between the parties to split them or bear their own costs, the court had the discretion to review the award, but in upholding the expert's award of costs, the court bore in mind the principle of proportionality and penalised the claimant as the expert had done for bringing an exaggerated claim.