Introduction

The case of McKeown v Langer ([2021] EWCA Civ 1792) presents a pivotal examination of the treatment of settlement offers in the context of costs determination under the Civil Procedure Rules (CPR) in England and Wales. This case specifically addresses whether a global Calderbank offer—made on a Without Prejudice Save as to Costs (WPSATC) basis—should be equated with an offer under CPR Part 36 for the purposes of costs discretion under CPR 44.2. The parties involved include the respondent, a minority shareholder alleging unfair prejudice, and the appellant, the majority shareholder whose conduct during litigation is under scrutiny.

Summary of the Judgment

The respondent, a 25% shareholder in The Stratos Club Limited, initiated proceedings for unfair prejudice under Section 994 of the Companies Act 2006. The Court of Appeal's judgment focused on the appellant's conduct during litigation and the nature of settlement offers made by both parties. The trial judge determined that the appellant had indeed acted in a manner that unfairly prejudiced the respondent, ordering the appellant to purchase the respondent's shares and to cover significant litigation costs, including an indemnity basis assessment due to the appellant's unreasonable conduct.

Central to the costs judgment was the appellant's assertion that a global Calderbank offer should be treated as equivalent to a CPR Part 36 offer, thereby necessitating deferral of costs determination until the conclusion of the entire litigation. The Court of Appeal, however, upheld the trial judge's decision, distinguishing Calderbank offers from CPR Part 36 offers and affirming that only admissible offers under CPR 44.2 should influence costs discretion. The appeal was consequently dismissed.

Analysis

Precedents Cited

The judgment extensively references key precedents that delineate the boundaries between different types of settlement offers and their implications on costs. Notably, cases such as HSS Services Group v BMB Builders Merchants ([2005] EWCA Civ 626), Tullett Prebon v BCG Brokers LP [2010] LR Costs 891, and Interactive Technology Corporation Limited v Jonathan Ferster [2017] EWHC 1510 (Ch) were pivotal in establishing that CPR Part 36 and Calderbank offers operate under distinct frameworks. These cases supported the court's stance that Calderbank offers do not inherently carry the same costs consequences as Part 36 offers, thereby requiring different considerations under CPR 44.2.

Legal Reasoning

The core legal reasoning revolves around the interpretation of CPR Rules 44.2 and 36, and whether they can be analogously applied to different types of settlement offers. The trial judge, supported by precedent, held that Calderbank offers—a more informal and broad category—do not qualify as admissible under CPR 44.2(4)(c) unless their terms are clearly disclosed and thus subject to costs consequences akin to Part 36 offers.

The appellant's argument that global Calderbank offers should be treated with the same weight as Part 36 offers was dismissed. The Court of Appeal emphasized that CPR 44.2 provides a broader discretion that does not mandate equivalence with Part 36 offers unless explicitly stated. The judge's refusal to consider the Calderbank offer, due to its non-admissibility at the time, was upheld as consistent with both the letter and spirit of the CPR.

Impact

This judgment clarifies the distinct treatment of Calderbank and Part 36 offers within the costs determination framework. It underscores that only offers explicitly compliant with CPR Part 36 carry predefined costs consequences. Consequently, parties making settlement offers must carefully consider the framework under which they operate to ensure that they garner the desired legal protections concerning costs. This case prevents strategic misuse of different types of settlement offers to circumvent costs consequences, thereby promoting fairness and discouraging unprofessional litigation conduct.

Complex Concepts Simplified

Calderbank Offer

A Calderbank offer is a type of settlement proposal made on a "Without Prejudice Save as to Costs" basis. It aims to encourage parties to settle disputes without admitting liability, while reserving the right to discuss the offer in court if the settlement is not accepted.

CPR Part 36 Offer

CPR Part 36 provides a formal mechanism for making offers to settle disputes with specific legal consequences. If a Part 36 offer is not accepted and the final judgment is less favorable than the offer, the refusing party may be liable for certain costs, including interest on the judgment sum from the date of the offer.

CPR Rule 44.2

CPR Rule 44.2 grants courts discretion over costs in litigation, allowing them to decide whether one party should pay the other's costs, how much, and when. This rule factors in various elements, including the conduct of the parties and any settlement offers made.

Conclusion

The McKeown v Langer judgment firmly establishes that Calderbank offers do not automatically possess the same costs consequences as Part 36 offers under the CPR framework. By upholding the trial judge's discretion under CPR Rule 44.2, the Court of Appeal reinforces the necessity for clear differentiation between various types of settlement offers. This decision promotes judicial economy and fairness by ensuring that only formally recognized offers influence costs determination, thereby deterring strategic litigation practices that exploit procedural nuances to avoid cost liabilities.

Litigants and legal practitioners should take heed of this distinction, ensuring that settlement offers are structured appropriately to achieve intended legal protections. Furthermore, the judgment reinforces the courts' commitment to upholding professional standards and discouraging conduct that unnecessarily prolongs litigation or imposes undue costs on opposing parties.