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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Southampton Container Terminals Ltd v Schiffahrisgesellsch "Hansa Australia" MGH & Co [2001] EWCA Civ 717 (3 May 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/717.html Cite as: [2001] EWCA Civ 717, [2001] 2 Lloyd's Rep 275, [2001] 2 LLR 275

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
(MR JUSTICE DAVID STEEL)

		Royal Courts of Justice Strand London WC2 Thursday 3 May 2001

1. LORD JUSTICE THORPE: I will ask Lord Justice Clarke to give the first judgment.
2. LORD JUSTICE CLARKE:

Introduction

3. This is an appeal by the claimants from an order of David Steel J, dated 20 July 1999, in which he gave judgment for the claimants in the sum of £774,990 plus interest. He also ordered the defendants to pay the claimants' costs up to and including 17 June 1999 and the claimants to pay the defendants' costs from and including 18 June 1999. This appeal is brought with the permission of Mance LJ. It raises two issues. The principal issue relates to the measure of damages and the subsidiary issue relates to costs. I shall consider them in turn after summarising the facts.

The Facts

4. The judgment of the judge is reported at [1999] 2 Lloyd's Rep 491. The facts are summarised at pages 492 - 493. I do not need to repeat them here save to this very limited extent.
5. On the evening of 18 February 1995 the defendants' container vessel "Maersk Colombo", entered the port of Southampton with a view to making fast alongside the claimants' container terminal. Shortly after about 00.10 on 19 February, as she was manoeuvering alongside with the assistance of tugs, the Maersk Colombo struck number 1 crane of the berth causing it to fall over and collapse. She also struck number 3 crane causing slight damage.
6. Before the trial the defendants admitted that the Maersk Colombo was handled negligently. It followed that the defendants were liable in respect of the damage to number 1 crane, subject to an allegation of contributory negligence. The judge held that the claimants failed to take reasonable care for the protection of their crane and assessed contributory negligence at 15 per cent (see pages 493 - 495). There is no appeal from that part of the judgment.

Measure of damages

7. The principal issue before the judge was whether the claimants were entitled to recover damages based on the cost of reinstatement of number 1 crane or based on its resale value. The parties agreed that the cost of reinstatement, which they called the reinstatement value, was £2,359,484 and that the resale value of the crane in Southampton was £665,000.
8. The judge held that the correct measure of damages was the resale value, namely £665,000. The difference between that figure and the amount of £774,990 is accounted for by the costs of removal of the crane, namely £230,000, together with damage to the quay, ancillary expenses and damage to number 3 crane. The claimants say that the judge was wrong to take the resale value of the crane and invite this court to hold that the correct measure of damages should he based on the reinstatement value.
9. The reason why there was such a substantial difference between the reinstatement value and the resale value of the crane was that a second hand crane would have had to be purchased and modified in the United States and transported from there to Southampton. The cost of modification and transport would have amounted to £1.7 million.
10. I should note in passing that this is a subrogated claim brought in the name of the claimants by their underwriters. They had insured the crane for £2,960,000 and are now seeking to recoup what is now the agreed replacement value as damages from the defendants. That fact is, however, irrelevant to the correct measure of damages: see Taylor (Wholesale) Ltd v Hepworths Ltd [1977] 1 WLR 659.

Findings of Fact

11. The judge found the following facts:

(1) But for the demolition of the crane by the Maersk Colombo, the claimants would have continued to use the crane as they were on the night of the collision. The design of the crane made it more convenient for the discharge of feeder vessels than the larger post-Panamax cranes which were on order.

(2) The crane was not, however, replaced because in June 1994 the claimants had signed a contract for the delivery of two post-Panamax cranes for delivery in May/June 1995. Those cranes were delivered in the summer of 1995.

(3) Only two days before the collision the claimants' managing director had prepared a memorandum entitled "Terminal Developments", which contained the following:

"Quay Cranes. Currently the terminal is equipped with four Panamax and four post-Panamax cranes with two post-Panamax cranes being delivered in June/July this year. It is recommended that one of the 1972 vintage Panamax cranes is sold to TCS in, say, September (Dock Express available) leaving six post-Panamax and three Panamax over No 3 Terminal. To ideally equip the four berth terminal when 207 is completed by August 1996 three super post-Panamax cranes will be required - with added outreach and lift height for possible 18 wide vessels of the future. Delivery of such cranes can be achieved by August 1996 if ordered by mid-May of this year."

12. The transfer of a Panamax crane such as number 1 crane to TCS, which was a company in the same group as the claimants, was not practicable.

(4) The memorandum made it clear that the managing director, Mr Dawes, regarded it as practicable to operate the berth satisfactorily with one less Panamax following the installation of the two new cranes, even if such an arrangement would not be particularly welcome to the operations' director.

(5) Satisfactory operation was achieved in the period between the collision and the arrival of the two cranes, perhaps because it was a relatively quiet time of the year.

(6) One less crane may have caused some inconvenience, but it was not suggested that any material expense, such as overtime, was incurred or any other consequential losses were sustained. Accordingly, there was no loss of flexibility measurable in financial terms, nor was there any loss in capacity given the imminent arrival of the two new cranes.

(7) It would have been unreasonable to replace the crane because the expenditure would have been out of all proportion to the benefit obtained. That was confirmed by a letter from underwriters dated 13 October 1995 which was quoted by the judge in these terms:

"Having investigated, without success, the possibility of purchasing a second hand crane, discussions were held with the member to establish the best course of action. In the end, being mindful that the member is currently expanding his operations, and there were at the time two post-Panamax cranes being built on the terminal (which have subsequently come into service) we reach the conclusion that the cost, time scale and disruption involved in bringing in a second hand crane (even if one could be found) onto the site was not in the business interest of the member, would in any event not be an efficient mitigation of the loss. You may be aware from press reports that the member has a port expansion programme, which would necessarily include consideration of the required infrastructure, such as cranes; the size of any order for cranes has inevitably been influenced by the fact that the member today operates with nine cranes, instead of the anticipated ten...."

The issue

13. The judge expressed his conclusion in this short paragraph:

"In my judgment, the cost of reinstatement by reference to transportation and modification costs that will never be incurred is not recoverable in these circumstances: see Ruxley Electronics Ltd v Forsyth [1996] 1 AC 344."

14. The simple issue in this appeal is whether he was right so to hold. The defendants do not challenge any of the judge's findings of primary facts. However, they submit before us, as they did before the judge, that where a chattel held for use (as distinct from sale) is destroyed through the defendants' action of negligence, the authorities show that the victim is entitled to the cost of replacement, provided that he held, and continued to hold, the destroyed chattel (the crane) for potential use rather than resale.
15. That was the issue as summarised in the claimants' skeleton argument, both on the application for permission to appeal and on the appeal. As developed during his oral argument, Mr Veeder put what is potentially the same point in this way. The overriding principal is that of restitutio in integrum. Where a chattel held for use is destroyed by a tort, the claimant owners are entitled to the value of the chattel as a going concern at the time and place of the loss and there is no room for any requirement of reasonableness.
16. Mr Veeder further submitted during the hearing of the appeal that the judge was wrong to hold that it would have been unreasonable to replace the crane at a cost of £2.35m on the ground that the expenditure would have been out of all proportion to the benefit obtained. Mr Gross submits, on the other hand, that that submission is not foreshadowed, let alone clearly made, in the claimants' skeleton argument either on the application for permission to appeal or on the appeal. There is considerable force in Mr Gross' submission, but I am prepared to assume that the point is open to the claimants and to consider it on its merits.
17. As I have already indicated, the claimants do not challenge the judge's findings of fact. They were right not to do so. Moreover, on the basis of those findings, the judge was, to my mind, entirely justified in reaching the conclusions that he did. The essence of his conclusions was that, put at its highest, the effect of the loss of the crane might have caused some inconvenience to the claimants but that neither that inconvenience, nor any loss of flexibility, caused any identifiable loss in money terms. The terminal operated satisfactorily in the period before the arrival of the two larger cranes and there was no loss of capacity either before or after their arrival.
18. Moreover, this was not a case in which the decision to buy the two new post-Panamax cranes was affected by the collision because they had already been ordered and they arrived during the summer of 1995. Thus, this is not a case in which the claimants bought a new or larger crane because of the defendants' tort. If the position with and without the destruction of the crane is compared, it may be summarised in this way. If the crane had not been destroyed, the claimants would have continued to operate it until there came a time at which they would have sold it. It seems likely that by that time they would have realised less for the crane than its agreed value (no doubt, as, so to speak, a going or working crane) at the time of the casualty of £665,000. They would have had the use of the crane in the meantime and would have used it. The two new cranes would have arrived as they did and operated as they did. There is no suggestion that in those circumstances the terminal would have had more capacity, cost less to run or made more profit than it did.
19. In the event, the claimants did not have the use of the crane, but they did have the use of the two new cranes. As just stated, the absence of the number 1 crane had no financial effect on the claimants' business. At most it cause, or may have caused, some unquantifiable inconvenience and, perhaps, some unquantifiable inflexibility. On the judge's approach, they also received £665,000 or, more accurately, 85 per cent of that figure because of the contributory negligence, to compensate them for no longer having the crane.
20. It seems to me that if the purpose of damages is to recompense the claimants for their true loss, or their real loss, as a result of the tortious destruction of the crane, the judge's approach has that effect. The claimants at no stage intended to replace the number 1 crane by buying a second-hand crane in America, then modifying it and transporting it to Southampton at an extra cost of about £1.7m over the resale value of the crane in Southampton. This is scarcely surprising because, as the underwriters put it in their letter quoted by the judge, the cost, timescale and disruption involved in bringing a second-hand crane on to the site was not in the business interest of the claimants and would not have been efficient or, as I would prefer to put it, reasonable mitigation of the loss.
21. In these circumstances the judge was right to hold that expenditure of nearly £2.36m would be out of all proportion to the benefit obtained. He plainly had in mind that the benefit would be limited to extra convenience and flexibility which the claimants could not quantify and did not therefore include extra capacity, cost saving or profit. Mr Veeder submits that that is not the comparison which the judge should have been making, but I am unable to accept that submission. To my mind the judge was making the correct comparison and reached the only conclusion which he could sensibly reach on the basis of his findings of primary fact, namely, that it would have been unreasonable to replace the crane at such a cost.
22. I should add, by way of postscript on the facts, that Mr Veeder submitted at one stage that the letter from underwriters (quoted by the judge) supports the conclusion that the size of the order for cranes was influenced by the collision because the claimants now operated 9 cranes instead of 10. However, the facts are clear. I have already referred to the two Panamax cranes ordered before the collision. The memorandum written by the claimants' managing director two days before the collision shows that two post-Panamax cranes had already been ordered and that Mr Dawes contemplated ordering three super post-Panamax cranes in May 1995 for delivery in August 1996. The documents show that, in the event, the claimants ordered three such cranes in January 1996 in accordance with a tender dated December 1995. It thus appears that, as Mr Gross put it, there was no increased haste in ordering these further canes as a result of the casualty. In short, there is no justification for concluding that, in terms of ordering new cranes, the claimants acted any differently as a result of the destruction of number 1; they simply had one less crane than they would otherwise have done.
23. The question is whether, in all these circumstances, the judge erred in awarding the claimants £665,000 and not £2.359m. Unless compelled by authority to reach a different conclusion, I would hold that he did not. The cost of reinstatement by reference to transportation and modification costs that have not been and will never be incurred, and which it would be unreasonable to incur, cannot fairly be regarded as caused by the defendants' tort. It should be noted that the claim was presented to the judge and has been presented to us as a choice between the two figures. It was not, and is not, suggested that the claimants are entitled to general damages for inconvenience, or for loss of flexibility, or indeed for loss of use of the crane for the remaining portion of its life. It follows that it is not necessary for us to consider what the position would have been if the claim had been presented on one or more of those bases. I turn to the relevant principles and to the authorities.

The Principles

24. The only case referred to by the judge is the decision of the House of Lords in Ruxley Electronics Ltd v Forsyth [1996] 1 AC 344, which is concerned with the measure of damages for breach of contract and upon which he expressly relied in support of his conclusions. Mr Veeder submits that the judge should not have allowed himself to be influenced by recent developments in the law of contract. He submits that, whereas in Ruxley the claimants received 95 per cent of what they bargained for, namely a swimming pool, and the costs of supplying the missing 5 per cent was out of all proportion to the contractual consideration, in the present case the claimants lost 100 per cent of their chattel through the negligent conduct of those with whom they made no bargain. He submits that it is an affront to common sense that a stranger should be permitted to say to his victim, "You don't really need your crane and can manage without it, therefore I will only pay you what you would have received if you had been forced to sell it against your will".
25. Mr Gross submits that the judge was right. He relies upon the following propositions:

"(1) The question of damages is largely one of fact, subject only to the most general guiding principles. The relevant principle in the law of tort is restitutio in integrum.

(2) Common to the law of tort and contract are the principles that a loss is only recoverable if (i) it is caused by the breach of duty or contract complained of; and (ii) it could not have been mitigated.

(3) Damages are only recoverable if reasonable. If damages are unreasonable then they were not caused by the breach or should have been mitigated, and are irrecoverable.

(4) In particular, where replacement costs exceed market value, they will only be recoverable if shown to be reasonable.

(5) Whether or not a claimant has an intention to replace the item is relevant to the question of reasonableness.

(6) Whether the dispute arises in a commercial context, or whether the dispute involves questions of personal preference is relevant to the question of reasonableness.

(7) The essential question is as follows: what loss did the Appellants really suffer? This is a question of fact and degree. If it is unreasonable in a particular case to award the cost of re-instatement it must be because the loss sustained does not extend to the need to re-instate.

(8) In summary, where, as here, the replacement purchase cost differs from the resale value, it is the resale value which best achieves restitutio in integrum when it would be unreasonable (or absurd) to purchase a replacement."

26. I accept Mr Gross' submissions, which, in my judgment, are to be preferred to those of Mr Veeder. It is convenient to consider, briefly, each of Mr Gross' propositions in turn.

(1) Restitutio in integrum

27. It is not in dispute that the general principle is that of restitutio in integrum.

(2) Causation and Mitigation

28. It is not in dispute that the loss must have been caused by the tort and that a claimant cannot recover a loss which he incurred because he failed to take reasonable steps to mitigate the loss caused by the tort. Those principles are both aspects of causation, although the burden of proving that the loss was caused by the tort is on the claimant, whereas the burden of proving a failure to take reasonable steps to mitigate is on the defendant. For recognition in the cases of the close relationship between these concepts see eg: Radford v De Frobeville [1977] 1 WLR 1262 at 1272 per Oliver J; Dodd Properties v Canterbury City Council [1980] 1 WLR 433 at 453 and 456; The Borag [1981] 1 WLR 274 at 281 and 285 per Templeman LJ and The Alecos M [1991] 1 Lloyd's Rep 120 at 125 per Neill LJ.

(3) - (8) Reasonableness

29. This is the crux of the appeal. In a fairly recent but unreported case, Scutt v Lomax, in which judgment was given on 20 January 2000, I had the opportunity of considering the role of reasonableness in a similar, but different, context when sitting with Evans LJ. We were concerned with the measure of damages for trespass in a case in which the defendant had unlawfully uprooted a number of trees which had been planted some years earlier by the claimants. The claimants' claim was advanced, not on the basis of a diminution of value of the land (which was no doubt minimal) but on the basis of the cost of reinstatement. It was common ground that it was appropriate that the damages should be assessed on a reinstatement basis, but the issue was how that assessment should be made. The claimant had claimed the sum of £25,000, whereas the district judge awarded £18,500 which the judge reduced on appeal to £2,000. In the event, we increased the damages for reinstatement to £8,000.
30. After referring to paragraphs 1474-1481 of the 16th edition of McGregor on Damages, I summarised the relevant principles in this way:

"Where trespass by the defendant has caused damage to the claimant's land, the claimant may be entitled to the diminution in value of the land or the reasonable cost of reasonable reinstatement, or in some cases a figure in between. All will depend upon the circumstances of the particular case, but the authorities seem to me to establish the following general propositions.

1. The claimant will ordinarily be entitled to the diminution in value of the property unless the reasonable claimant would have reinstated the land at less cost.

2. The claimant who has in fact reinstated the property will ordinarily be entitled to recover the reasonable cost of doing so, even if the cost is greater than the diminution in value, unless he has acted unreasonably in reinstating the property.

3. Where the claimant has not in fact yet reinstated the property, (subject to 4 and 5 below) he will ordinarily be entitled to recover the reasonable cost of reasonable reinstatement, even if it is greater than the diminution in value.

4. In assessing what is the reasonable cost of reasonable reinstatement, the court will consider whether the amount awarded is objectively fair; that is fair to both parties. In particular, the court will not award a sum which is out of proportion to the benefit conferred on the claimant.

5. In assessing what steps it is reasonable to take by way of reinstatement, the court will take account of the cost of the reinstatement. Thus it may not be reasonable fully to reinstate the property because the cost of doing so may not be justified. All will depend on the circumstances of the particular case."

31. I observe that in reaching those conclusions, I considered a number of cases, including the following: Lodge Holes Colliery Co Ltd v Wednesbury Corporation [1908] AC 323; The Susquehanna [1926] AC 655; Hutchison v Davidson 1945 SC 395; Hollebone v Midhurst and Fernhurst Builders [1968] l Lloyd's Rep 38; Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447; Hole & Son (Sayers Common) v Harrisons of Thurnscoe [1973] 1 Lloyd's Rep 345; Taylor (Wholesale) Ltd v Hepworths Ltd [1977] 1 WLR 659; Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 WLR 433; Ward v Cannock Chase District Council [1986] Ch 546; Farmer Giles Ltd v Wessex Water Authority [1990] 1 EGLR 177; Dominion Mosaics and Tile Co v Trafalgar Trucking Co [1990] 2 All ER 246; Jordan v Norfolk County Council [1994] 1 WLR 1353; and Ruxley Electronics Ltd v Forsyth [1996] 1 AC 344. Some of those cases were referred to by counsel in this appeal.
32. As I read the authorities, where reinstatement is the appropriate basis for the assessment of damages, it must be both reasonable to reinstate and the amount awarded must be objectively fair as between the claimants and the defendants. That can be seen, in particular, from paragraph 1480 of McGregor and from Farmer Giles Ltd v Wessex Water Authority. Paragraph 1480 of McGregor is in these terms:

"The difficulty in deciding between diminution in value and cost of reinstatement arises from the fact that the plaintiff may want his property in the same state as before the commission of the tort but the amount required to effect this may be substantially greater than the amount by which the value of the property has been diminished. The test which appears to be the appropriate one is the reasonableness of the plaintiff's desire to reinstate the property; this will be judged in part by the advantages to him of reinstatement in relation to the extra cost to the defendant in having to pay damages for reinstatement rather than damages calculated by the diminution in value of the land."

33. The editors refer in particular to Hutchison v Davidson, Lodge Holes Colliery Co Ltd v Wednesbury Corporation and Dodd Properties (Kent) Ltd v Canterbury City Council in support of the proposition that the test is one of reasonableness.
34. In Farmer Giles Ltd v Wessex Water Authority Russell LJ put the matter in this way at page 179C-D:

"In reality, therefore, in making that award, I take the view that the judge has done no more than reflect in the damages the true diminution in value of this site in the circumstances of this case caused by the destruction of the building. The award, particularly when contrasted with the cost of full reinstatement, in my judgment, also passes the test of reasonableness. I add that test of reasonableness because the authorities to which we have been referred indicate that reasonableness always has to be taken into account. The judge must stand back, when he has done his arithmetic, and ask himself whether the figure achieved by his finding is fair both to the plaintiff and the defendants."

35. See also Jordan v Norfolk County Council at page at 1358E-F.
36. In the result, in Scutt v Lomax we increased the award made by the judge from £2,000 to £8,000 on the basis that that would be the reasonable cost of replacement of the trees. In addition, as explained by Evans LJ, a further sum of £3,000 was awarded for loss of amenity, which included an element to reflect the affect the fact that the award of £8,000 would not enable the property to be fully restored to its state before the tort.
37. Scutt v Lomax was concerned with trespass to land, but I see no reason why the approach of reasonableness should not be adopted in a case such as the present, where what was destroyed by the defendants' tort was not a tree but a crane.
38. I observe that in setting out what seemed to me to be the relevant principles in Scutt v Lomax I referred to Ruxley. However, as I indicated earlier, Mr Veeder submits that the principles discussed by the House of Lords in that case had no application in a case of tort, or at least in a case of tort of this kind. I do not agree. In Ruxley the defendant had agreed to build a swimming pool with a diving area 7ft 6ins deep. In breach of the contract, the pool, as built, had a diving area which, although suitable for diving, was only 6ft 9ins. That difference did not affect the value of the property, but it would have cost £21,560 to rebuild the pool to the specified depth. The judge refused to award £21,569 by way of damages for breach of contract, but awarded £2,500 as general damages for loss of amenity. This court allowed the claimants' appeal and awarded the costs of rebuilding the pool, but the House of Lords allowed the appeal and restored the decision of the judge.
39. The essential reasons for allowing the appeal were that it would not have been reasonable to rebuild the pool and that the test was one of reasonableness. Thus Lord Bridge said at page 345D that to hold in a case such as that that the measure of the building owner's loss was the cost of reinstatement, however unreasonable it would be to incur that cost, seemed to him to fly in the face of common sense. Both Lord Jauncey and Lord Lloyd cited a number of cases which considered reinstatement. Many of them were naturally cases of breach of contract but that was not true of them all. In particular, both Lord Jauncey and Lord Lloyd referred with approval to the decision of May J in CR Taylor (Wholesale Ltd) v Hepworths Ltd. In that case a building, principally comprising a billiards hall, had been destroyed by fire because of the negligence of a servant or agent of the defendants who admitted liability in tort. The issue was thus the measure of damages in tort, not contract, although the property damaged was real property and not a chattel. The cost of reinstatement of the billiard hall would have been £28,956.95 after giving credit for any betterment that such reinstatement would have produced. Rather as in the instant case, the plaintiffs' insurers had paid that sum under the terms of the relevant insurance policy. The judge held that the diminution in the value of the property as a result of the fire was only £2,500.
40. The judge quoted the same passage from 13th edition of McGregor as I have quoted from paragraph 1480 of the 16th edition and said at page 667D-F:

"I think that these passages which I have just read from McGregor on Damages correctly reflect the state of the law. The various decided cases on each side of the line to which my attention has been drawn, and to some of which I have referred in this judgment, show in my opinion merely the application in them of two basic principles of law to the facts of those various cases. Those two basic principles are, first, that whenever damages are to be awarded against a tortfeasor or against a man who has broken a contract, then those damages shall be such as will, so far as money can, put the plaintiff in the same position as he would have been had the tort or breach of contract not occurred. But secondly, the damages to be awarded are to be reasonable, reasonable that is as between the plaintiff on the one hand and the defendant on the other."

41. That passage was followed by Scott J in the important case of Ward v Cannock Chase Council [1986] 1 Ch 546 at 575 and also by the Supreme Court of Ireland in Munnely v Calcon Ltd 1978 IR 387, which was in turn followed by Scott J in Ward at pages 576 to 577.
42. In Taylor v Hepworths May J concluded at page 669G-H:

"After the fire I think that the value of the premises was £40,000 and that accordingly the diminution in value caused by the fire was £2,500. Are the plaintiffs only entitled to this figure or are they entitled to the notional cost of restoring the billiard hall to its pre-fire condition? I think that they are merely entitled to the former. To award the plaintiffs the cost of reinstatement, theoretical or not, if it is intended thereby to put them in the same position as they would have been had the fire not occurred, in so far as money can, and also be reasonable as between themselves and the defendants, one must at least be able to contemplate the possibility, if not probability, that the plaintiffs were indeed minded to rebuild their billiard hall and shops.

The judge held that the plaintiffs intended to do no such thing. He therefore awarded damages of only £2,500.

34. That approach was approved by both Lord Jauncey and Lord Lloyd in Ruxley (see pages 356G and 369F respectively). Lord Mustill agreed with Lord Jauncey and Lord Lloyd and Lord Keith agreed with Lord Jauncey, Lord Mustill and Lord Lloyd. It is thus clear that the House of Lords treated the principles identified by May J in Taylor v Hepworths as applicable to the approach to damages for breach of contract and vice versa. In my opinion a similar approach applies to the measure of damages for the tortious destruction of chattels as it applies to the measure of damages for both the tortious destruction of real property and for breach of contract in circumstances such as those in Ruxley.

35.The following statements of principle seem to me to be of particular assistance in this regard. Lord Jauncey said at page 357E-F:

"Damages are designed to compensate for an established loss and not to provide a gratuitous benefit to the aggrieved party from which it follows that the reasonableness of an award of damages is to be linked directly to the loss sustained. If it is unreasonable in a particular case to award the cost of reinstatement it must be because the loss sustained does not extend to the need to reinstate."

43. He cited with approval this passage in the judgment of Sir Robert Megarry VC in Tito v Waddell (No 2) [1977] Ch 106 at 332:

"Per contra, if the plaintiff has suffered little or no monetary loss in the reduction of value of his land, and he has no intention of applying any damages towards carrying out the work contracted for, or its equivalent, I cannot see why he should recover the cost of doing work which will never be done. It would be a mere pretence to say that this cost was a loss and so should be recoverable as damages."

44. Lord Jauncey added at page 358A:

"The Vice-Chancellor was as I understand it there saying that it would be unreasonable to treat as a loss the cost of carrying out work which would never in fact be done."

45. He held that what constitutes the victim's loss is in every case a question of fact and degree and concluded at page 358C-D that on the facts, if the claimant was to receive the cost of building a new pool and retain the existing one, he would receive a substantial gratuitous benefit, which Lord Jauncey said was something which damages are not intended to provide. To my mind, much the same could be said here if the claimants were to receive £2.35m by way of damages.
46. Lord Mustill emphasised the fact that there is only one measure of damages, namely the loss truly suffered by the claimant (see page 360G). I note in passing that in The Alecos M Neill LJ asked the question, "What damage did the buyers really suffer?" Lord Mustill also said at page 361C:

"As my Lords have shown, the test of reasonableness plays a central part in determining the basis of recovery, and will indeed be decisive in a case such as the present when the cost of reinstatement would be wholly disproportionate to the non-monetary loss suffered by the employer."

47. Here, too, on the judge's findings of fact, the cost of reinstatement of the number 1 crane would be wholly disproportionate to the non-monetary loss suffered by the claimants. That is precisely what the judge meant when he said that the expenditure would be out of proportion to the benefit obtained.
48. Lord Mustill added:

"But it would be equally unreasonable to deny all recovery for such a loss. The amount may be small, and since it cannot be quantified directly there may be room for difference of opinion about what it should be. But in several fields the judges are well accustomed to putting figures to intangibles, and I see no reason why the imprecision of the exercise should be a barrier, if that is what fairness demands."

49. In that case the judge had awarded £2,500 general damages for loss of amenity. By contrast, as stated earlier, no claim for general damages was or is advanced here.
50. Lord Lloyd's approach was similar to that of Lord Jauncey. I shall refer to only two aspects of his speech. The first is his adoption of two principles identified by Cardozo J in Jacob & Youngs v Kent (1921) 129 NE 889 at 891, namely, as Lord Lloyd put it at page 367B:

"....first, the cost of reinstatement is not the appropriate measure of damages if the expenditure would be out of all proportion to the benefit to be obtained, and, secondly, the appropriate measure of damages in such a case is the difference in value, even though it would result in a nominal award."

51. The second aspect of Lord Lloyd's speech to which I would like to refer expressly is his emphasis upon reasonableness. Thus, he said at page 368B, after referring to the decision of the High Court of Australia in Bellgrove v Eldridge 1954 90 CLR 613:

"Once again one finds the court emphasising the central importance of reasonableness in selecting the appropriate measure of damages. If reinstatement is not the reasonable way of dealing with the situation, then diminution in value, if any, is the true measure of the plaintiff's loss. If there is no diminution in value, the plaintiff has suffered no loss. His damages will be nominal."

52. After referring to Taylor v Hepworths he said at page 369G that mitigation is not the only area in which the concept of reasonableness has an impact on the law of damages. Judge Bowsher QC was thus right to say in Pegler v Wang UK Ltd [2000] All ER 260:

"The tenor of the speeches of the House of Lords in Ruxley ... was that reasonableness is part of the primary assessment of damages as well as of mitigation of damage."

53. Lord Lloyd added at page 369H-370A:

"If the court takes the view that it would be unreasonable for the plaintiff to insist on reinstatement, as were, for example, the expense of the work involved would be out of all proportion to the benefit to be obtained, then the plaintiff will be confined to the difference in value. If the judge had assessed the difference in value in the present case at, say, £5,000, I have little doubt that the Court of Appeal would have taken that figure rather than £21,560. The difficulty arises because the judge has, in the light of the expert evidence, assessed the difference in value as nil. But that cannot make reasonable what he has found to be unreasonable."

54. That is precisely the principle which is applied by the judge here, in my opinion correctly.
55. Thus far the decision and the reasoning in Ruxley support the proposition that, at any rate in the case of damages for breach of contract and for tortious destruction of real property, where the claimant asserts the right to recover the cost of reinstatement of the property, he must persuade the court that it would be reasonable for him to insist upon reinstatement. I can see no reason in principle why the same approach should not be adopted to the tortious destruction of a chattel such as the crane.
56. Ruxley also supports the proposition that, although what a claimant does with any damages he receives is irrelevant, his intention to reinstate or not to reinstate, while not conclusive, is relevant to the question whether it would be reasonable to reinstate the property (see Lord Jauncey at page 359C-D and Lord Lloyd at pages 372-373; see also, for example, the passage from the judgment of Sir Robert Megarry VC in Tito v Waddell (No 2) quoted above, Hole & Son (Sayers Common) Ltd v Harrisons of Thurnsco Ltd [1973] 1 Lloyd's Rep 345 and Taylor v Hepworths).
57. Mr Veeder submits that the authorities on the measure of damages for the destruction of goods lead to a different conclusion. He relies upon paragraphs 1362-1364 in the 16th edition of McGregor and in particular upon The Liesbosch [1933] AC 449, which was recently analysed by this court in Kuwait Airways Corporation v Iraq Airways Company [2001] 1 Lloyd's Rep 161 at paragraph 595 on page 261.
58. As I stated earlier, Mr Veeder submits that the correct measure of damages in a case such as the present is the market value of the goods, which means in the case of a ship or a crane which is being operated as a going concern her or its value at the time and place of the loss. He further submits that that means not the notional resale value of the chattel destroyed but, in effect, the replacement cost. He relies in particular on paragraph 1362 of McGregor, which is in these terms:

"The normal measure of damages is the market value of the goods destroyed at the time and place of destruction. In the ship collision cases, it has always been said that the owners of the lost ship are entitled to restitutio in integrum: this was said to be 'the leading maxim' by Dr Lushington in The Clyde (1856) Swab 23 and 24, and its applicability was not questioned by the defendant in Liesbosch Dredger v S S Edison. The basis of putting the plaintiff into the position he would have been in had the collision not occurred, which is what is required to effect restitutio in integrum, is the award of the market value of the lost ship: this was accepted in Liesbosch Dredger v S S Edison where Lord Wright stated the rule to be that the measure of damages was 'the value of the ship to her owner as a going concern at the time and place of the loss'. With this sum the plaintiff can generally obtain a replacement."

59. Mr Veeder further relies upon the approach of the House of Lords in The Liesbosch as demonstrated in the speech of Lord Wright, with whom the other members of the appellate committee agreed. Lord Wright said at page 463:

"In these cases the dominant rule of law is the principle of restitutio in integrum and subsidiary rules can only be justified if they give effect to that rule."

60. A little later he said at pages 463-4:

"The true rule seems to be that the measure of damages in such circumstances is the value of the ship to the owner as a going concern at the time and place of the loss."

61. On the facts the dredger Liesbosch sank outside Patras as a result of the fault of the Edison. As I read the speech of Lord Wright at page 462, it was not in dispute that the owners of the Liesbosch were at least entitled to "the market price of the dredger, together with the cost of transport to Patras and interest".
62. Mr Veeder submits that it follows that on the facts of the instant case the claimants were entitled to the cost of a second-hand crane together with the cost of its modification and the cost of transportation to the relevant place, which, in this case, was not Patras but Southampton. In my judgment, however, the claimants would only be entitled to those costs if it was reasonable to incur them. There is nothing in Lord Wright's speech in The Liesbosch, or in this court's analysis of it in the Kuwait Airways case, which leads to any contrary conclusion. It was clear on the facts of The Liesbosch that the dredger had to be replaced so that it was not argued that it was or would have been unreasonable to do so.
63. Equally, paragraph 1362 in McGregor does not to my mind support Mr Veeder's submission. I do not read the expression "market value" in that paragraph as meaning replacement value. That is, I think, clear from the last sentence of paragraph 1362 and the first sentence of paragraph 1363. The last sentence of paragraph 1362 says that, with the sum identified, the plaintiff "can generally obtain a replacement". Paragraph 1363 begins:

"Should the replacement cost be more than the market value, that cost is still recoverable if it is reasonable to replace. Nor is it relevant that the replacement cost should exceed the amount at which the plaintiff had acquired the goods."

64. Those sentences make it clear that the expressions "market value" and "replacement cost" are not, or may not, be the same thing and that, where the replacement cost is more than the market value, the replacement cost is only recoverable if it is reasonable to replace. That statement is, to my mind, entirely consistent with the conclusions which I expressed earlier.
65. The remainder of paragraph 1363 contains a reference to the decision of this court in Dominion Mosaics and Tile Co Ltd v Trafalgar Trucking Co Ltd [1990] 2 All ER 246, where the plaintiffs' building was damaged and some carpet-holding machines were destroyed as a result of a fire caused by the defendants' negligence. I note in passing that I referred to this case in Scutt v Lomax in relation to the measure of damages for damage to the building because it is entirely consistent with the principles identified in that context. Mr Veeder relies upon it, however, with regard to the measure of damages for the destruction of the machines.
66. The facts relating to the machines were, briefly, that they had been purchased for a special or unique price of £13,500, but would cost £65,000 to replace. The judge awarded only £13,500 and said that the machines were worth no more than that at the time of the fire. This court allowed the claimants' appeal and awarded the replacement cost of £65,000. It held that the figure of £13,500 was not appropriate because it did not represent the market value but a special price. It awarded £65,000, observing that the judge had accepted the claimants' evidence that they would have replaced the machines if they had had the funds to do so. It also expressed some doubt as to whether the judge was right to hold that the machines were only worth £13,500.
67. In the course of his judgment, Taylor LJ said at page 255:

"Counsel's arguments both before the judge and before us were based solely on the alternative awards of £13,500 or £65,000. No intermediate figure was canvassed. It was not suggested by the appellants, either in evidence or by submission, that there was any secondhand source of paternoster machines. The respondents' evidence was that no such source existed to their knowledge. Where this is the case and the only way the owner of destroyed chattels can replace them is by buying new ones, the measure of damages is the cost of doing that, unless the result would be absurd (see 12 Halsbury's Laws 4th Edn para 1163: '....the cost of replacement in an available market ... ' and Bacon v Cooper (Metals) Ltd [1982] 1 All ER 397)".

68. Mr Veeder submits that that case supports his submission that the claimants in a case of this kind are entitled to replace the chattels destroyed, at any rate unless the result would be absurd, which it was not. However, I do not think that the reasoning in that case is inconsistent with the conclusions stated above. The judge there accepted that the claimants would have replaced the machines and there is no suggestion that it would have been unreasonable to do so. There is no indication that Taylor LJ was addressing his mind to the distinction between an absurd and an unreasonable result. It can perhaps be said that, if it would be unreasonable for a destroyed chattel to be replaced, it would be absurd to award damages based on the cost of replacement. However that may be, there is nothing in the reasoning of either Taylor or Stocker LJJ, with both of whom Fox LJ agreed, to suggest that they would have awarded the cost of replacement if it had been unreasonable to replace the machines with new ones. No-one suggested that there should be any reduction for betterment.
69. Paragraph 1364 of McGregor begins by saying that the plaintiff will not be entitled to the cost of a replacement where it is unreasonable to demand an exact replacement. Mr Veeder correctly observes that this is not such a case, but it seems to me that it must follow that the plaintiff will not be entitled to the reasonable cost of a replacement where it is not reasonable to replace at all. Indeed, the second supplement to the 16th edition of McGregor quotes the decision of the judge in the instant case with apparent approval.
70. The only other case relied upon by Mr Veeder, to which I should shortly refer in this context, is J & E Hall v Barclay [1937] 3 All ER 620. I have not, however, found it of any assistance, partly because it was a claim for damages for conversion to which particular considerations apply, and partly because it was a claim for the return of experimental davits and testing apparatus in circumstances in which the plaintiff needed to have the davits and testing apparatus back. This court rejected the suggestion that, in those circumstances, they had only had a scrap value and held that the plaintiff was entitled to the cost of replacement. There is no suggestion that it would have been unreasonable to replace them.
71. In all these circumstances I am unable to accept the submission that the claimants were entitled to the replacement value of number 1 crane, regardless of whether it was reasonable to replace it. In the course of my preparation of this judgment, Mr Justice Holland suggested that the following propositions would or might be appropriate in a case of this kind:

(1) On proof of the tortious destruction of a chattel, the owner is prima facie entitled to damages reflecting the market value of the chattel "as is".

(2) He is so entitled whether or not he intends to obtain a replacement.

(3) The market or resale value is to be assessed on the evidence, there being no standard measure applicable to all circumstances.

(4) If the claimant intends to replace the chattel, and if the market or resale value as assessed is inadequate for that purpose, then the higher replacement value may, in the event, be the appropriate measure of damages.

(5) When and if replacement value is claimed, the claimant can only succeed to the extent that the claim is reasonable; that is, that it reflects reasonable mitigation of its loss.

(6) The claim will ordinarily be reasonable if it is reasonable to replace the chattel and the cost of replacement is reasonable.

72. I respectfully agree with that approach, which leads to the conclusion that, in the light of the conclusions of the judge discussed earlier, this part of the appeal should be dismissed.
73. It remains for me to refer briefly to a line of cases upon which Mr Veeder relies in support of the proposition that substantial damages are awarded for damage or destruction of goods even in cases where there is clearly no measurable loss when the matter is looked at in purely financial terms. They are The Greta Holme [1897] AC 596; The Mediana [1900] AC 113; and The London Corporation [1935] P 70.
74. The Greta Holme and The Mediana are the first in a line of cases in which non-profit earning ships were damaged in collision and the question arose whether their owners, who were normally state or public bodies, were entitled to damages for the loss of use of their vessels during repairs. They are authority for the proposition that they were so entitled. The cases were not, however, concerned with the problem of the measure of damages which has arisen in this case. Indeed, they were not concerned with quantum at all. It was only in later cases that the courts worked out how general damages for such loss of use should be assessed, often on the basis of interest on the capital value of the vessel during the period of detention (see McGregor paragraphs 1355-1361).
75. It certainly does not follow from the fact that in such circumstances the court is willing to award general damages for detention that it is appropriate to award the claimants in the instant case the cost of replacing a crane which it would be unreasonable to replace. Such a submission seems to me to suffer from the same or a very similar logical fallacy to that identified by Lord Bridge in Ruxley. At page 354B he said, with regard to the argument advanced on behalf of the respondent:

"Attractive as was Mr Jacob's development of this argument, it seems to me to suffer from an inherent logical flaw in that it leads from the premise that a loss has been suffered which is incapable of economic measurement to the conclusion that it must be compensated by reference to a measure of economic loss, sc. the cost of reinstatement, which has not been and will not be incurred."

76. The London Corporation was a somewhat different case. The plaintiff owners of the vessel Benguela, which had collided with The London Corporation, did not repair her but sold her for scrap. It was agreed that the repairs, if executed, would have cost £250. The plaintiffs claimed damages in that sum, but the defendants argued that the plaintiffs had suffered no loss. It was held that the parties had agreed that, if any damages were recoverable, the measure of those damages was £250 plus £25 expenses. The plaintiffs succeeded on the basis that, prima facie, the measure of damages in such a case is the cost of repairs because, as Greer LJ put it at page 77:

"....prima facie, the value of a damaged vessel is less by the cost of repairs than the value it would have if undamaged."

77. He added that evidence might establish that the value of the vessel damaged was the same as her value undamaged, but that, given the prima facie rule, it was for the defendants to establish it, which they failed to do. The court was not willing to infer from the fact that the vessel was sold for scrap that the damaged and the undamaged values were the same. Indeed, as Greer LJ put it at page 78:

"....non constat that this vessel would have been sold for breaking up if she had not been a damaged vessel."

78. In these circumstances I can see nothing in that case which assists the submission that, on the facts of this case, the claimants were entitled to the cost of replacing the number 1 crane.

Conclusion

79. For all these reasons, which I regret are set out in much more detail than those expressed by the judge, I can see no basis either in fact or law for holding that he was wrong in any way. On the contrary, I have reached the firm conclusion that he was right for the reasons he gave. I would accordingly dismiss the appeal on this point.

Costs

80. The claimants challenge the decision made by the judge on costs as being wrong in principle. They do so principally by reference to a decision of this court, which was not available to him for the very good reason that it was only given on 15 November 2000, namely, Amber v Stacey [2001] 2 All ER 88. As stated at the outset, the judge ordered the defendants to pay the claimants' costs up to and including 17 June and the claimants to pay the defendants' costs thereafter. The reason was that on 27 May 1999 the defendants made an offer to settle for less than was ultimately recovered, which the claimants did not accept. The claimants recognise that that fact should be given some effect, but submit that the judge erred in principle in ordering them to pay any of the defendants' costs. They say that he should have made no order for costs after the appropriate date, which they accept was 17 June.
81. In order to evaluate that submission it is necessary to consider the facts, the relevant provisions of the CPR, the way in which the judge exercised his discretion and the decision in Amber v Stacey. The facts may be shortly stated. On 27 May 1999 the defendants' solicitors wrote to the claimants' solicitors on behalf of their clients offering £956,867, plus interest at 8 per cent from 19 February 1995 until the date of payment, plus costs in full and final satisfaction of the claimants' claims. The offer was stated to be open for 21 days which, for the avoidance of doubt, was said to be up to and including 17 June 1999. The claimants expressly reserved the right to draw the letter to the attention of the court on the question of costs. It was thus what we used to call an open offer and what is often known as a Calderbank offer.
82. On 9 June 1999 the defendants served a notice to admit the fact that the crane would not have been struck if it had been parked at anchor position 223.5 at the time of the collision. On 11 June the defendants admitted liability subject to an allegation of contributory negligence. On the same day, they wrote saying that their offer would remain open after 17 June 1999, but stated that if the claimants wished to accept the offer after that date they could only do so if the parties agreed the liability for costs or if the court gave permission. That last point was, I think, included because of the provisions of CPR 36.5(6). On 22 June the claimants wrote admitting the fact asserted in the notice to admit.
83. Until then the claimants had not responded in any way to the offer. On the same day, 22 June, they wrote saying that under CPR Part 36, in order to have "the costs consequences usually associated with such proposals", the defendants should have made a payment into court and reserving their clients' position. On 2 July 1999, the defendants paid the sum of £956,867 into court. That sum was stated to be exclusive of interest, but interest of £361,701.72 was offered in addition. No attempt was made by the claimants at any stage either to accept the offer or to take the payment in.
84. Part 36 of the CPR contains detailed provisions relating to offers to settle actions of this kind. By CPR 36.20, where a claimant fails to better a Part 36 payment, or fails to obtain a judgment which is more favourable than a defendant's Part 36 offer, unless the court considers it unjust to do so, the court will order the claimant to pay any costs incurred after the latest date on which the payment or offer could have been accepted without needing the permission of the court. It was agreed that that date was 17 June 1999. CPR 36.20 must, however, be read subject to CPR 36.3 which provides, subject to relevant exceptions, that an offer to settle a money claim, like this, will not have those consequences unless it is made by way of a Part 36 payment, which means a payment into court.
85. In this case no payment in was made less than 21 days before the trial, and it is not suggested that the defendants can rely upon the payment in. Before the judge they relied upon CPR 36.1(2) which provides:

"Nothing in this Part prevents a party making an offer to settle in whatever way he chooses, but if that offer is not made in accordance with this Part, it will only have the consequences specified in this Part if the court so orders."

86. The judge recognised that this was not a case to which CPR 36.20 applied because the defendants had not made a payment into court. It followed that the applicable rule was not that the claimants should be ordered to pay the defendants' costs unless the court otherwise ordered. On the other hand, under CPR 36.1(2), the court has a discretion to make an order to the same effect. The judge was also referred to CPR 44.3, which contains the general discretion as to costs. Thus, by CPR 44.3(4) in deciding what order (if any) to make about costs, the court must have regard to all the circumstances including:

"(c) any payment into court or admissible offer to settle made by a party which is drawn to the court's attention (whether or not made in accordance with Part 36)".

87. In this case the offer was made in accordance with Part 36 and, on the face of CPR 36.1(2), the court had a wide and unfettered discretion whether to make the same order as would have been made under CPR 36.20 or not. The judge referred to that rule and to the submissions of the parties. Thus, on the one hand he adverted to Mr Mildon's argument that no good reason had been advanced as to why a payment into court had not been made as opposed to an offer. On the other hand, he described the defendants' submissions in this way:

"The defendants counter to that, firstly, that it takes time to arrange for payment into court. The underwriters of the defendants were the Swedish Club and they needed a period of time to collate together the significant sum involved, on any view of the case. Secondly, that the offer that was made by letter under the letter heading of Messrs Bentleys, Stokes and Lowless was manifestly an offer from the MAERSK COLOMBO'S Club and could not be regarded at least as an offer that was lacking in some substance, and that, in all the circumstances, given that even if the payment in had been made, say, at the end of May it is perfectly plain that this would have had no impact upon the progress of the action, the offer would not have been accepted regardless of its form and, accordingly, the owners should have their costs."

88. The judge accepted the submissions made on behalf of the defendants, save for their further point that costs should run from the date of the offer. He concluded that the defendants should pay the costs up to 21 days from the date of the offer and that, not having accepted the offer, the claimants should pay the defendants' costs thereafter.
89. In the absence of binding authority to the contrary, that seems to me to be not only well within the ambit of the judge's discretion but to reflect the justice of the case. The courts should encourage settlement. One way of doing so is to make effective orders for costs where claimants could have settled for more than they are ultimately held to be entitled. In the instant case there is to my mind no doubt that, if the claimants had accepted the offer in the letter of 27 May, which was expressly written without prejudice save as to costs, the agreement which would then have come into existence would have been honoured by the defendants' club.
90. In these circumstances the order made by the judge was in my judgment the just order to make. It was entirely fair to both parties and should, in my opinion, be upheld unless there is some binding authority leading to some other conclusion.
91. Mr Mildon submits that the decision in Amber v Stacey leads to the conclusion that the decision of the judge was wrong in principle. According to the headnote it was there held that a judge would be acting outside the wide discretion given to the court by CPR 44.3 if he made the same costs order where a defendant made an offer by letter as he would have done if there had been a payment-in. In the light of the express provisions of CPR 36.1(2) that would be a startling proposition.
92. However, a perusal of the judgments, in my opinion, shows that the case is not authority for that proposition. It was a very different case from this on the facts. In the course of his judgment, Sir Anthony Evans set out the provisions of the CPR to which the court had been referred. Sir Anthony Evans also set out the facts in some detail. In short, on 1 October 1997 the defendant made an offer to settle for £4,000 plus costs, which was more than was eventually recovered, although the letter expressly said that, if the claimant was not prepared to agree, the defendant's solicitors would advise him to pay the money into court. The sum of £2,000 was paid into court on 7 August 1998 and a further sum of £1,000 was paid in on 20 January 1999. Judgment was given on 30 April 1999 for £2,321.16 by the recorder, who also dismissed the defendant's counterclaim. The recorder made his order for costs, namely that the claimant should pay the defendant's costs from the date of the letter, on the basis that the offer should have been accepted and because of the way the claimant had conducted the litigation. The case involved a consideration of both the RSC and the CPR because most of the events had occurred before the coming into force of the CPR.
93. Sir Anthony Evans expressed his conclusions in this way in paragraphs 36 and 37 at pages 95-96:

"36. I am persuaded in these circumstances that the recorder erred in law when he made the same costs order as he would have done if the defendant had made the payment in and had succeeded on all issues at the trial. This seems to me to be an error of principle which is outside the wide discretion given to the court by CPR 44.3. I also consider that this part of the order was not consistent with the 'old' CCR and RSC and the principles stated in Re Elgindata (No 2). It may well be that, if the old rules remained in force, it would be necessary to hold that the claimant could not be ordered to pay any part of the defendant's costs during the period in question.

37. However, the CPR do apply and they permit the court a wide discretion. The recorder understandably felt that the claimant's approach was unreasonable throughout and that a more ameliorative response to the letter would have resulted in a generous settlement for him and would have made further proceedings unnecessary. I would hold that even in this respect the order was not wholly wrong, and that to give effect to the recorder's views on the relevant matters affecting the court's discretion, the claimant should be ordered to pay a proportion, namely, one half of the defendant's costs for the period from 1 October 1997 to 20 January 1999."

94. It is important to note that paragraph 36 expressly refers to the circumstances of the particular case and that the error of principle identified by Sir Anthony Evans was that the recorder made the same costs order as he would have done if the defendant had made a payment in and had succeeded on all issues at the trial (my emphasis). In fact the defendant did not succeed on all the issues at the trial because his counterclaim failed and the judge rejected his contention that the work done was worthless. It was, I think, for that reason that Sir Anthony Evans held that the recorder's decision was outside the principles stated in Re Elgindata (No 2) [1992] 1 WLR 1207. Also, it may well have been the position under the RSC that an offer of this kind would not have been effective without a payment in. In the event, Sir Anthony Evans expressly recognised in paragraph 37 that the CPR permit the court a wide discretion and held that it was appropriate to order the offeree to pay half (as opposed to all) the costs form the date of the offer, notwithstanding that it was long before the payment into court which had been made in that case.
95. In these circumstances I do not think that there is anything in the judgment of Sir Anthony Evans in that case which leads to the conclusion that the judge in this case exercised his discretion on a basis which was wrong in principle. This case is concerned only with the CPR and not with either the RSC or the principles in Re Elgindata (No 2), although as Sir Anthony Evans pointed out, those principles have been held to apply under the CPR in Gwembe Valley Development Co Ltd (in receivership) v Koshi (No 2), The Times 30 March 2000.
96. Mr Mildon also relies upon the judgment of Simon Brown LJ. He agreed with Sir Anthony Evans and stressed the importance of payments into court. Mr Mildon relies on two of the three paragraphs of his judgment as follows:

"39. I agree. Clear though it is that the claimant behaved thoroughly unreasonably from first to last, and tempting though it is therefore to uphold the recorder's order in full measure, I share my Lord's view that it was wrong to treat the letter of 1 October 1997 for all the world as though it constituted a payment into court. There are to my mind compelling reasons of principle and policy why those prepared to make genuine offers of monetary settlement should do so by way of Pt 36 payments. That way lies clarity and certainty, or at any rate greater clarity and certainty than in the case of written offers.

....

41. Payments into court have advantages. They at least answer all questions as to (a) genuineness, (b) the offeror's ability to pay, (c) whether the offer is open or without prejudice, and (d) the terms on which the dispute can be settled. They are clearly to be encouraged, and written offers, although obviously relevant, should not be treated as precise equivalents."

97. I respectfully agree with Simon Brown LJ that offers should not be treated as precise equivalents of payments into court and that they have many advantages. In particular the money is then readily available and no question can arise as to whether the offeror can or will pay if the offer is accepted. It should thus be appreciated that offerors who do not make a payment-in do so at their peril in the sense that the court may not be willing to reflect the offer in its order for costs.
98. However, the court retains a wide discretion under CPR 36.1(2) to make the same order as it would have made under CPR 36.20 even in the absence of a payment-in. All depends upon the circumstances of the particular case. As I have tried to demonstrate, this is a very different case from Amber v Stacey. The judge had all relevant considerations in mind and, in my opinion, reached the just result. There is in my judgment nothing in that case to lead to the conclusion that he made any error of principle and I would therefore dismiss the appeal on costs.
99. MR JUSTICE HOLLAND: I agree.
100. LORD JUSTICE THORPE: I also agree.
Order: Appeal dismissed with costs. Leave to appeal to the House of Lords refused. (Order does not form part of approved Judgment)