Summary

The court illustrated its approach to the determination of costs in a multi-party action raising multiple issues and sub-issues, in which all parties had been both winners and losers. Areas of focus included how to treat the costs of discontinuing a small strand of one issue; entitlement to recovery of a success fee as an "additional liability" under CPR r.44.3B when form N251 had not been served, and entitlement to payments on account and indemnity costs.

Facts

The court was required to determine costs issues in a multi-party action where multiple causes of action had been pursued.

One action had been between the claimants (F1 and F2) and the first defendant (P). The overall winner was F2. The second action had been between F1 and F2 on the one hand, and P and the second defendant (N) on the other. In that action, P and N had been the overall winners, P successfully defending allegations of breach of contract, and N allegations of breach of trust. The court had to decide the basis on which costs would be awarded, including how to deal with a small strand of one issue which had been discontinued by F2 before trial, and F2's entitlement to recover a success fee as an "additional liability" under CPR r.44.3B when it had failed to provide information about its funding arrangements on form N251. It also had to decide whether any party was entitled to an interim payment on account and whether indemnity costs were justified.

Held

(1) In litigation involving relatively indeterminate legal standards which raised a plethora of issues and sub-issues, there was considerable value in keeping the costs issues as simple as reasonably possible. While a broad-brush approach was desirable, and likely to meet the overall demands of justice, that did not mean that figures or percentages could be plucked from the air. A principled approach was still required and any exercise of discretion had to be properly grounded, F&C Alternative Investments (Holdings) Ltd v Barthelemy (Costs) [2011] EWHC 2807 (Ch), [2012] Bus. L.R. 891 and Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC), 122 Con. L.R. 88 applied (see paras 3-4 of judgment). (2) In the first action, the starting point was that F2, as the overall winner, was entitled to its costs on the standard basis unless there was any reason to depart from principle. F2 had not succeeded on all three strands of its case. The strands were very closely intertwined and it would not be just to treat them separately. However, one had been discontinued before trial and F2 was liable under CPR r.38.6 for the costs of discontinuing unless the court ordered otherwise. There was no justification for departing from that rule: F2 had held suspicions which turned out to be unfounded. It had to bear the consequences of litigating on a hunch. Discontinuance for practical or pragmatic reasons would not, itself, justify a departure from the presumptive position. What was required was some change of circumstance to which the party did not contribute, and which had been brought about by the unreasonable conduct of the opposing party. The policy of encouraging the abandonment of unsustainable claims was not, however, to be undermined by awarding indemnity costs unless there was a really strong case for doing so (paras 9-13, 18, 21-23). (3) In the second action, it was difficult to know how to give effect to a costs order in favour of P because it was not easy to ascertain the proportion of costs spent on the various issues, so it was impossible to found a correct exercise of discretion. Performing separate assessments relating to each issue would be unnecessarily expensive and prolonged. As directed by CPR r.44.2(7), it was necessary to consider whether it was "practicable" to make a different order. Weighing the competing considerations together, the fair order was for P to pay 52.5 per cent of F2's costs to be assessed on the standard basis (paras 27-34). F2 was entitled to a payment on account calculated on a cautious assessment and with a deduction of 35 per cent to allow for scrutiny at the assessment hearing. The appropriate sum was £133,000 (para.36). Regarding F2's attempt to claim its success fee from P, a prerequisite to claiming an "additional liability" under CPR r.44.3B was that the party had to give information about its funding arrangements on form N251. F2 had never done that, although it had, belatedly, given the requisite information by letter. F2 applied for relief from sanction under CPR r.3.9. That provision demonstrated the importance that rule-makers attached to the giving of notice about funding arrangements. In the circumstances, there was no reason to fix P with constructive knowledge of F2's conditional fee arrangement, Scott v Duncan [2012] EWHC 1792 (QB), [2012] 4 Costs L.R. 787 and Haydon v Strudwick considered, Supperstone v Hurst [2005] EWHC 2808 (Ch), [2006] B.P.I.R. 517 applied. Nevertheless, it was fair in the circumstances to grant relief from sanction, Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 W.L.R. 795 referred to (paras 37-47, 63). (4) With regard to N's entitlement in the second action, costs would be ordered on the indemnity basis as the claim had started without any real warning and without compliance with the pre-action protocol. That alone was not enough to justify indemnity costs, but the claim had also been initiated by the wrong claimant, in pursuit of a very small recovery, and in the face of a sensible offer from N. F1 and F2 were jointly and severally liable for N's costs plus interest (paras 48-55). N was entitled to an interim payment on account of £192,000. Even though F2 had no liquid assets, it had other resources (paras 56-60).

Costs determined