England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice
		9th February 2000

MR JUSTICE NEUBERGER: The issue in this application relates to costs. The claimants have applied for interlocutory relief and the defendants have now conceded that the claimants should have such relief. The parties are however at odds on costs. The claimants say that they should have a favourable order for costs, ideally that they should have an order for costs of the interlocutory proceedings in their favour, to be assessed and paid forthwith. The defendants contend that the proper order is costs reserved.

The facts, briefly, are as follows. The claimants issued their claim form on 14th September 1999, seeking injunctive relief and damages, based on their contention that the defendants had infringed their design right, and that in relation to one of the defendants he was in breach of fiduciary duty. The effect of the injunction that they sought was to prevent the defendants carrying out activities which, on the claimants⁷ case, involved a breach of their design rights. Prior to the action being brought the claimants had sought undertakings from two of the defendants, but the discussions that followed had not proved fruitful. On the same day as the claimants issued their proceedings, they applied for an interlocutory injunction. When that came on for hearing on 20th September 1999, the defendants stated that the application would be opposed, and directions were given for the filing of evidence and for a hearing to take place, with an estimate of one and a half days, on 8th/9th February 2000. Meanwhile the defendants were prepared to give undertakings along the lines of the injunction sought by the claimants until that hearing. The defendants filed their witness statement on 18th October 1999 and on the same day filed a fairly lengthy defence. The claimants' evidence in reply was filed on 15th November 1999.

On 2nd February 2000 the defendants' solicitors notified the claimants' solicitors that the application would not be contested and that undertakings would be offered by the defendants until trial or further order in the normal way, essentially in the same form as those which had been offered and accepted on 20th September 1999. The defendants' solicitors also proposed that costs of the interlocutory proceedings be reserved.to the trial judge. The claimants were content with the undertakings offered, but were not content with the proposed order for costs. The matter came before me yesterday on the 8th February.

Unusually, on an issue of costs, I thought it right to reserve my decision overnight. This was because there was a recent Court of Appeal authority which bore on this issue and merited careful consideration, and that authority had not come to the attention of counsel for the defendants, Mr Shantanu Majumdar, who had only been instructed, as I understand it, very much at the last minute. Further, Mr Tim Penny, counsel for the claimants, had also referred to one or two other authorities which were not in court, and it seemed to me undesirable to give judgment on this point, particularly in the comparatively early stage of a new regime under the CPR, without ensuring that the matter had been fully argued and the authorities fully and fairly considered by both sides. I have since been provided with a number of additional authorities and further argument this morning.

The question then is: what approach should the court take to the question of costs in the case of an application for an interim injunction when that injunction is granted or when the defendants accede to the injunction being granted?

It seems to me that the following guidance can be obtained from the cases to which I have been referred: (1) In a case without any other special factors, where a claimant obtain an interlocutory injunction on the basis of the balance of convenience, the court normally reserves the costs. While one can see an argument, particularly under the new regime, for saying that an order more favourable to the claimant should be made on the basis that the claimant has won the issue in respect of which the costs have been directly incurred - namely, whether an interlocutory injunction should be granted or not - it seems to me that the reasoning of the Court of Appeal in the so far unreported case of Richardson v. Desquenne et Giral UK Ltd. 23rd November 1999, indicates that an order reserving the costs is appropriate.

In that case the judge at first instance had ordered the trial of a preliminary issue but had continued the interlocutory injunction until the hearing of the preliminary issue, despite the defendant's contention that the injunction - which had been granted without notice - should be discharged, on the basis of the balance of convenience. While accepting that the question of costs was a matter for the judge's discretion. Lord Justice Morritt was of the view that the Court of Appeal was "entitled and indeed bound, to interfere with" that exercise of discretion. He said this:

While accepting that the question of costs was a matter for the judge's discretion. Lord Justice Morritt was of the view that the Court of Appeal was "entitled and indeed bound, to interfere with" that exercise of discretion. He said this:

"It is quite plain from the passage in the judge's judgment ... that he granted or continued the injunction on the basis of the balance of convenience in order to hold the ring until the dispute between the parties could be properly decided at a trial. It is inconsistent with an order such as that, that there should be successful or unsuccessful parties for the purposes of the rules either new or old". He then stated that, while the judge was right to consider the question of costs in the context of CPR rule 44.3, he was wrong to decide that the defendant was the unsuccessful party or that the claimant was the successful party. He said that the order which the judge had made - which was for costs in favour of the claimant and indeed an order assessing the costs to be paid forthwith - was wrong because "there were no successful or unsuccessful parties at that stage, and the proper orders to be considered were those under the terms of the practice direction to which I have referred".

The practice direction to which he referred contains the following provision in paragraph 2.4, which Lord Justice Morritt quoted:

"There are certain costs orders which the court will commonly make in proceedings before trial. The following table sets out the general effect of these orders",

and then follows costs in cause, costs reserved, costs thrown away.

One can see the force of that, particularly when one bears in mind that the balance of convenience will often be determined by reference to facts which may be contested, and the court may at trial conclude that it had been persuaded to grant an interlocutory injunction on the basis of assumed facts which turn out to be inaccurate, or even in the context of a claim which should never have been brought.

(2) As this present issue concerns the question of costs, it would plainly be wrong to treat Richardson, even bearing in mind that it is a recent decision of the Court of Appeal, as authority which ties the court's hands when it comes to the question of costs in a case such as this. However, in my view, it is plainly undesirable that there should be inconsistency of approach to questions of costs between different courts. This is especially true when one bears in mind what was said, as long ago as 1990, about costs by Mr Justice Hoffmann in Kickers International S.A. v. Paul Kettle Agencies Ltd [1990] FSR 436, at 436:

"This is a dispute over costs. At one time it might have been said that it was only about costs. But litigation has become so expensive that there is no 'only' about costs any more. The ruling on costs can easily be the most important decision in the case".

(3) A defendant who accedes to the grant of an interlocutory injunction before the hearing should not, for that reason alone, normally be the subject of a more disadvantageous order for costs than if he had fought and lost. It would be, as I see it, illogical and contrary to the modern approach if a defendant were discouraged from agreeing to a sensible course by knowing that he was likely to be worse off in terms of costs than if he incurred the cost, time and effort in fighting.

(4) There will obviously be circumstances where it is right to depart from the general approach. Thus there may be cases where the balance of convenience is so clear, and the outcome of the hearing of the application for the interlocutory injunction should be so plain to the parties, that the court should conclude that an order should be made against the defendant for wasting time and money in fighting the issue (whether or not the defendant eventually concedes).

(5) It is also important to bear in mind that an order for costs reserved or an order for costs in the case may not turn out to be as sensible and fair as it seems at the time it is made. In Kickers, at 438, Mr Justice Hoffmann pointed out that very often there is no trial. If there is no trial then the order for costs, whether it is reserved or in the case, effectively might as well not have been made. In some circumstances, that is a point which has less force than might appear, because, if the case does not go to trial, it may settle and, if it settles, the parties are perfectly able to take into account the potential order for costs, which costs reserved or costs in the case involves. However, the court should bear in mind that the case may not go to trial and may not settle, and that it is undesirable to encourage parties to go to trial or to discourage them from settling by having the uncertainty of an order for costs - such as costs reserved or even costs in cause - hanging over them. So far as the apparently preferred order of costs reserved is concerned, there is the additional problem identified by Mr Justice Hoffmann, which he describes at 438, as "the difficulty of reconstructing for the trial judge how things looked at the time of the interlocutory application, particularly when it involved questions of balance of convenience which were irrelevant at the trial".

(6) In this context it seems to me that the court should adopt a realistic attitude where it is fair and possible to do so as to whether the case is likely to go to trial or not. At one extreme, one has Richardson. where the interlocutory injunction was granted or, more accurately, continued when the judge also ordered a preliminary issue, which was fixed to come on for hearing less than five weeks later. In that case, one can well understand the Court of Appeal thinking the judge should have anticipated that, not only would the main issue in the trial be determined, and determined very shortly, but also that the issues and arguments at the interlocutory stage would be very much in everyone's mind. At the other extreme, there are the facts of Direct Line Group Ltd & Others v. Direct Line Estate Agency & Others Ltd [1997] FSR 374, where Mr Justice Laddie formed a very clear view as to the merits: while he was only granting an interlocutory injunction, he not only made a favourable order for costs to the claimant but ordered those costs to be assessed and paid forthwith. In that case, it seems to me the tone of his judgment indicates that, not merely did he think that the substantive merits were very plain, but that, particularly in light of his judgment, he did not expect the case to go any further.

(7) On the other hand, where the court takes the substantive merits into account at the interlocutory stage, it must be careful, before also taking them into account on the question of costs. If, as in Direct Line, the court's view on the merits is based on incontrovertible facts or the construction of a document which is accepted by the parties as governing their relationship, then that is something which the court can, to my mind, properly take into account as pointing towards a more favourable order for costs from the claimant's point of view than costs reserved. On the other hand, if the court is faced with disputed facts, and believes the claimant's version of the facts is more likely to be accepted, it may be dangerous to take that into account in the claimant's favour when deciding what to do about costs. It is obviously conceivable that at trial the court's preliminary, even its strongly held, view as to the likely outcome of the dispute on fact may turn out to be wrong. It would be adding insult to injury if an unfavourable order for costs is made against the defendant, in addition to the injunction being granted at the interlocutory stage, on the basis of a wrong (as it turned out) view of the facts by the court.

(8) I have been taken by Mr Penny to a number of cases where the court has made favourable orders of varying degree to a defendant in cases where it has refused an interlocutory injunction. I have already referred to Kickers. In addition, there is Silicon Graphics Incorporated & Another v. Indigo Graphic Systems (U.K.) Ltd & Others [1994] FSR 403, and two cases where the Court of Appeal refused to interfere with the exercise of the judge's discretion in such circumstances, Bushburv Land Rover Ltd v. Bushburv Ltd [1997] FSR 709 and Mayfair Brassware Ltd v. Aaualine International Ltd [1998] FSR 135. While unnecessary for me to rule on the point, it may be that, at least in some cases, a claimant who brings an unsuccessful application for an interlocutory injunction is more at risk on costs than a defendant who unsuccessfully resists an application for an interlocutory injunction. In the one case, it is the claimant's choice to come to court. In the other case, the defendant is effectively forced to come to court. Perhaps one should not make too much of that distinction, because, in many cases where a claimant comes to court to seek an interlocutory injunction, it transpires, either at the hearing of the interlocutory application or at the final hearing, that the defendant has brought the proceedings on himself and has left the claimant with no alternative but to bring the proceedings. A little indirect support for the view that there may not be equivalence between an unsuccessful claimant and an unsuccessful defendant, however, may be found in what Mr Justice Hoffmann said in Kickers, at 437. Having said that "No doubt it is desirable to encourage litigants to give up when they realise that a motion is hopeless" (I add) or where they realise that opposition to a motion is hopeless, he added "But it may be even more desirable to encourage them not to launch such motions in the first place".

In cases where the defendant successfully fights off the injunction, Mr Justice Knox in Silicon. at 421, identified the two questions which, on the basis of the reasoning in Kickers, he thought had to be answered when considering what order for costs to be made. First, "Would it be unfair for the defendants to have the costs of the motion even if they lost at the trial?" Secondly, "And was the launch of the motion justified?" In a case where the claimant has obtained an injunction, despite the possible distinction between a case where the claimant wins and a case where the defendant wins, and the fact that Kickers and Silicon were decided under the Rules of the Supreme Court, it seems to me that those two questions, appropriately altered, can usefully be asked. Would it be unfair for the claimants to have their costs of the motion even if they lost at trial? Was the opposition to the motion justified?

With these principles in mind, I turn to the facts of the present case. The defendants have conceded that the interlocutory injunction should be granted or, more accurately, continued, through the medium of their proposed undertaking. Although not spelt out in their offer of 2nd February, it seems to me clear that this must be on the basis of the balance of convenience and not on the basis that they accept that the claimants have a very strong case, let alone an unanswerable case, on the merits. First, there is nothing in the correspondence to suggest that the defendants are going back on what is in their defence and in their affidavit. Secondly, the matter is to proceed to trial. Accordingly, this is a case where Mr Majumdar is entitled to say, subject to one point, that this is a normal case where the defendants have decided that the claimants' case for an interlocutory injunction is justified on the balance of convenience, that, had the matter proceeded to a hearing and the court had so decided, then the approach would have been to reserve the costs, and that the defendants should not be penalised by accepting that and avoiding the costs of a hearing and full argument.

Mr Penny first contends that in this case the claimants⁷ case was very strong and the claimants would have argued that, over and above the balance of convenience, the interlocutory injunction should be granted on the basis of the strength of the claimants⁷ case and the weakness of the defendants⁷ case. I have already mentioned that that can be a reason for departing from the costs reserved approach, but that it is by no means always appropriate that it should be so. I have not been taken to the evidence in detail, nor have I had it explained to me why and on what basis the claimants contend that their case is so much stronger than that of the defendants. If a claimant wishes to argue that point in relation to costs alone, he is faced with the unpalatable choice of either merely asserting that this would have been his argument or of virtually having to argue the whole interlocutory application at least so far as the merits are concerned. I therefore mean no criticism of Mr Penny when I say that he did not take me to the merits of the argument. But given that he did not do so, I do not think I can proceed fairly on the basis that the claimants would have successfully been able to run an argument based on their overwhelming prospects of success.

I mentioned that I was attracted by Mr Majumdar's argument subject to one point, and that is Mr Penny's second contention. He says that this hearing could have been avoided if the defendants had indicated their acceptance of the situation earlier. In this connection, it seems to me that there are three important dates. The first is that the evidence was all in by 15th November 1999, by which time the defendants knew of the second important date, namely that this hearing would be on 8th February 2000, more than two- and-a-half months away. The third important date is 2nd February 2000 (which, ignoring weekends, was three clear days before the hearing) when the defendants' solicitors notified the claimants' solicitors that the application would not be contested. In light of the modern approach to litigation embodied in the Civil Procedure Rules, and particularly where the timetable for interlocutory proceedings is as comparatively lengthy as it was in the present case, it seems to me that, if a defendant decides only virtually at the last minute that it will not contest an issue for which one-and-a- half days have been set aside, he must appreciate that he will be very much at risk on costs. In my judgment, in such a case that there is obviously a strong basis for saying that, at least in the absence of any cogent explanation, the court will inevitably be attracted to the argument that there was no good reason why the defendants could not have made their position clear earlier, thereby avoiding the need to prepare for and have a hearing.

In the present case I have not been given any reasonable or satisfactory explanation as to why it took the defendants and their advisers between 15th November 1999, when they received the claimants' not very voluminous evidence in reply to their evidence, and 2nd February 2000 before accepting that the injunction should be granted. In my judgment, if a defendant accedes to an injunction, once all the evidence is in, reasonably promptly on the basis of the balance of convenience, then, in the absence of any other special factors, the proper course for the court to take on costs is to follow the approach suggested by the Court of Appeal in Richardson, and to reserve the costs. However, where, as here, the timetable is comparatively relaxed - which it was certainly not in Richardson - and the defendant waits till very shortly before trial before acceding to the application, then he must give the court a satisfactory explanation for that delay if he is to be at all confident of avoiding an adverse order for costs, reflecting the fact that he has delayed unreasonably. In the present case, I have reread the affidavits and I have heard what explanation Mr Majumdar is in a position to give. I am satisfied on all that I have read and heard that it would be wrong merely to reserve all the costs without compensating the claimants for the loss in costs they have suffered due to the unreasonable delay in the defendants agreeing to the order that is now agreed today.

In those circumstances it seems to me that the right order is that costs should be reserved, save in so far as the costs relate to today's and yesterday's hearing, in respect of which the costs should be the claimants' in any event.

MR PENNY: My Lord, I am very grateful.

Two matters: one is whether your Lordship would consider assessing those costs. I do not have the partner sitting behind me from B.P. Collins and I think I am going to have to give your Lordship broad figures.

MR JUSTICE NEUBERGER: I do not think you can do that. The defendant is under the rules, if you want me to assess costs, entitled to a schedule

MR PENNY: Yes.

MR JUSTICE NEUBERGER:… and it was your duty - not your personal duty - your solicitor's duty to give them a schedule in advance. I am afraid my attitude is this: if a party wants costs assessed and has not complied with the rule, I do not think it is fair to deprive them of costs - that is excessive, to my mind - but what I think it is right to do as a salutary lesson to show the rules should be complied with is to give the defendants the opportunity of having the costs assessed by a costs judge or coming back for a further hearing from me to assess them.

MR PENNY: In response, I cannot argue with your Lordship so far as that is concerned. We did serve a schedule of costs. Unfortunately we did not take into account, because we were expecting to have a day-and-a-half's hearing

MR JUSTICE NEUBERGER: I am sorry/ then I am being unfair to you.

MR PENNY: No doubt my clerk and those instructing me did have conversations about my brief fee, but this all happened last week, and the ball park has changed. In the schedule that we served, there is not a specific sum included for my brief fee, given the shorter hearing, and in those circumstances, so far as my fee is concerned, all I can do is say to your Lordship that I discussed it with those instructing me yesterday, who instructed me to ask for £400 for yesterday, and, my Lord, I would have to ask your Lordship for perhaps £250 for today and I can tell your Lordship what my hourly rate is.

MR JUSTICE NEUBERGER: What about your solicitors' costs?

MR PENNY: So far as my solicitors' costs are concerned, I can show your Lordship the schedule

MR JUSTICE NEUBERGER: If you are asking for less than your schedule suggests, I do not think it is fair to be critical.

MR PENNY: I can show your Lordship the schedule of claimants' costs.

MRJUSTICE NEUBERGER: I usually say that the question of whether they should be paid forthwith and how I assess them is unrelated - I should decide one person and then the other - but I think actually whether to assess them and order that they be paid forthwith may depend on the quantum, so I think you are right to be addressing me on that. Mr Majumdar may persuade me to reconsider. Yes, I see.

MR PENNY: Mr Pritchard attended me yesterday and in court yesterday.

MR JUSTICE NEUBERGER: Did you really need the senior of three people to attend you?

MR PENNY: He did yesterday, but

MR JUSTICE NEUBERGER: Did you need him yesterday?

MR PENNY: Well,

MR JUSTICE NEUBERGER: Why could not Mr Mozack(?) have been there yesterday?' You knew it was about costs.

MR PENNY: Yes.

MR JUSTICE NEUBERGER: I can see why you may have wanted a Grade 3 rather than a Grade 4. How many hours do you ask for him?

MR PENNY: My Lord, he comes in from

MR JUSTICE NEUBERGER: How many hours?

MR PENNY: I would ask for three hours for him.

MR JUSTICE NEUBERGER: Yesterday and today?

MR PENNY: That is for yesterday, and the third individual on that list sits behind me today and I would ask for a couple of hours today for his time.

MR JUSTICE NEUBERGER: It seems to me that, if I give you the costs you ask for you and the costs you ask for today and yesterday but I am afraid scaling down for yesterday for Mr Pritchard to Mr Mozack, that makes £910.

MR PENNY: My Lord, that is exclusive of VAT?

MR JUSTICE NEUBERGER: Exclusive of VAT.

MR PENNY: I am very grateful.

MR JUSTICE NEUBERGER: Subject to Mr Majumdar. That is not a very large sum of money. I think it would be a denial of justice to say you should wait for that. I will hear Mr Majumdar, but at the moment I am minded to give you that.

MR PENNY: My Lord, I am grateful.

MR MAJUMDAR: My Lord, having heard the figure, I am inclined to agree.

MR JUSTICE NEUBERGER: Yes. I am very grateful. It seems, if I may say so, very realistic. Yes.

MR PENNY: My Lord, the only other matter is - and I hesitate to make it, given your Lordship's very careful judgment -

MR JUSTICE NEUBERGER: Do not worry.

MR PENNY: . . . but your Lordship was clearly heavily influenced by the judgment of Lord Justice Morritt, which, in my respectful submission - and I did make this point to your Lordship yesterday - does represent to a certain extent a sea change from what was happening before the CPR came in, in that - and I know the reported authorities tended to be on cases where the claimant had either dropped their motion or was unsuccessful - the tendency, in my respectful submission, pre-CPR, had got to the situation where the application itself was regarded on its own merit, if you like, that, if you were successful, either by getting the undertakings, you would get claimant's costs in the case, or claimant's costs, and indeed if you were a defendant you would get defendant's costs in the case or defendant's costs.

My Lord, it is, I suspect, regarded as representing quite an important change, and your Lordship has clearly regarded it as such. In those circumstances I would ask your Lordship for leave to appeal.

My Lord, I would just refer to the practice note of 17th November 1998, and I will hand it up to your Lordship. I mention paragraph 10 "Leave may also be given in exceptional circumstances even though the case has no real prospect of success" - I do not concede that. If there is ---

MR JUSTICE NEUBERGER: What you are saying is that it may be appropriate to have further guidance from the Court of Appeal.

MR PENNY: My Lord, yes. It says "if there is an issue which in the public interest should be examined by the Court of Appeal".

MR JUSTICE NEUBERGER: The trouble is really that I did not say the Court of Appeal, as it were, tied my hands. I specifically thought they did not. But it seems to me there is some force in your point, in the sense that that certainly is an important - to call it "straw in the wind" is slightly impertinent - signpost.

MR PENNY: My Lord, perhaps the important point is that Lord Justice Morritt appears to be saying that a claimant in my client's position is not a successful claimant under CPR 44.3, and the general rule is under CPR 44.3 that a successful party gets his costs. That is the starting point.

MR JUSTICE NEUBERGER: Yes.

MR PENNY: That, in my respectful submission, is a point

MR JUSTICE NEUBERGER: The Court of Appeal decided that. You may not like the way it was decided. Can I say this? It seems to me that I can see the force of your suggestion, but that is what Lord Justice Morritt says. That is quite an important observation and, if it is right, it has quite far- reaching consequences. It seems to me that it is not for me to say that the Court of Appeal should reconsider that. But I can see that, if you want to take it further, there is a powerful case for saying you should invite the Court of Appeal to consider if they want to reconsider it - that sounds very convoluted.

MR PENNY: My Lord, that is very helpful.

MR JUSTICE NEUBERGER: At least subject to the defendants saying something to Mr Majumdar. What I propose to do on the form is to make that point and say that it is not for me to tell the Court of Appeal to reconsider but it may be that they would want to reconsider.

MR PENNY: My Lord, I am very grateful.

MR JUSTICE NEUBERGER: I think that is the right course for me to take.

MR PENNY: I am very grateful.

MR JUSTICE NEUBERGER: I have to say that I would be very dubious about giving permission to appeal on an issue of costs when not a very great amount of money is involved - I have just been looking at your schedule - but I entirely see the point that you make and I have some sympathy with it. But I think that is the right course to take. Obviously Mr Majumdar may want to add something, so I do not want to . . .

MR PENNY: My Lord, finally may I hand up to your Lordship the form of the order?

MR JUSTICE NEUBERGER: Yes. While it is being handed up, do you want to say anything about

MR MAJUMDAR: No, my Lord.

MR PENNY: My Lord, I will draw it up then and submit it to your Lordship. It is fairly usual form. I have to change obviously the order as to costs, on page 2.

MR JUSTICE NEUBERGER: Yes.

MR PENNY: The substantive undertakings are given on pages 4 and 5 .

MR JUSTICE NEUBERGER: Yes.

MR PENNY: And they are in exactly the same form.

MR JUSTICE NEUBERGER: For the avoidance of doubt, let us come back on this. It is £910 plus VAT.

MR PENNY: Plus VAT. I am very grateful.

MR JUSTICE NEUBERGER: And that is - what - 14 days?

MR PENNY: Yes.

MR JUSTICE NEUBERGER: Thank you both. I am sorry to make you come back. I am very grateful to you both for the assistance you gave me.