England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		06/05/2010

Mr Justice Jack :

1. On 18 March 2010 I handed down my judgment following the trial of liability in this action. I held that the claimants had established causes of action against the defendants, and I determined the final relief by way of injunction to which the claimants were entitled. I also determined financial claims against the employee defendants. The claimants' claims against the defendants for damages will be determined by me at the subsequent hearing, at present pencilled in for 1 March 2011, with an estimate of 4 weeks. On 30 April 2010 I heard submissions as to the orders which should be made in consequence of the judgment, including as to costs. I reserved my ruling on costs, though not on other matters. This judgment deals with the claimants' application for an order for costs.
2. The claimants sought an order that the corporate defendants, the first and second defendants, pay the claimants' costs of the action to date on an indemnity basis, to be assessed if not agreed, with a substantial payment on account. The basis of the application was that the claimants had succeeded in their claims against the corporate defendants, and had successfully resisted the Part 20 counterclaim. It was submitted that indemnity costs were appropriate because it had been held that much of the corporate defendants' defence through their witnesses, in particular Mr Lynn and Mr Verrier, was dishonest. No order was sought against the other defendants at this point. As the other defendants are being indemnified as to costs by the corporate defendants, this was a practical concession intended to keep the situation more simple. From here on, where I refer to the defendants it is to the corporate defendants.
3. The primary submission on behalf of the defendants was that it was premature to make any order as to costs. The foundation for that submission was the existence of two Calderbank letters dated 28 September and 29 October 2009. These each made offers as to the relief by way of injunction and as to compensation by way of money. I was rightly not told more.
4. In his closing submissions for the claimants Mr Jeffery Onions Q.C. accepted that I should assume for the purpose of his application that the claimants had not so far done better than had been offered and that this would continue when the damages were tried. Realistically that is the only way I can proceed if I am not to know the content of the letters. In the light of that, Mr Onions concentrated on the costs arising up to 21 days after the first letter, that is, 19 October 2009. At least for the purposes of Part 36 offers 21 days was agreed to give the appropriate date: Part 36.14(2) read with Part 36.3(1)(c).
5. Mr Andrew Hochhauser Q.C. submitted on behalf of the defendants that I could not be sure that in the end there would be a balance due on costs to the claimants because the letters might be effective to deprive the claimants of their subsequent costs and to make them liable for the defendants' costs. He also relied on my findings against the claimants in respect of the claimants' intention at the whiteboard meetings with Mr Sully, Mr Bishop, Mr Harkins and Mr Yexley, where I rejected the evidence of Mr Wink and Mr Potter, and on my criticism of the claimants in relation to their evidence concerning the decisions of Mr di Palma, Comer and Stevenson not to perform their contracts with the first defendant. These matters had taken up substantial time, though my findings as to them had not ultimately assisted the defendants on liability.
6. Where there has been a payment into court, the amount of the payment should not be disclosed following the success of the claimant on liability, and save in the most exceptional case the determination of costs should await the determination of damages, for only then will it be known if the claimant has beaten the payment: see HSS Hire Services Group plc v Builders Merchants Ltd [2005] 3 All E R 486, and Shepherds Investments Ltd v Walters [2007] EWCA Civ 292. In Multiplex Constructions (UK) Ltd v Cleveland Bridge (UK) Ltd [2007] EWHC 659 (TCC) Jackson J stated in paragraph 26 of his judgment:

"I deduce from the authorities which have been cited that, following the trial of a preliminary issue, the court may make an order for costs in favour of the party that has won that issue. Before doing so, however, the court must consider all the circumstances of the case. If the judge is told that the unsuccessful party on that issue has made a payment into court, or a Part 36 offer, the normal order should be to reserve costs. Nevertheless, in an exceptional case, despite such payment in or offer, the judge may still make an immediate order for costs if the circumstances warrant such a course."

Jackson J held that in the circumstances an order should be made in respect of certain costs which in any event had been wasted by the defendant's conduct of the case and, applying Mars UK Ltd v Teknowledge Ltd [1999] 2 Costs L R 44, considered whether there should be a payment on account of those costs and held that in the circumstances there should be.

7. I am satisfied that it would be plainly wrong to make any order in respect of costs incurred after 19 October 2009, and I do not think that in the end Mr Onions pressed that submission. However, the situation as to costs in the period where the defendants cannot rely on the letters is different in that the claimants will now recover substantial costs in respect of that period. That was not contested. What is said is that there may be a set off of costs awarded to the defendants in respect of the later period, which will cancel out the award, and that any award up to 19 October 2009 should be reduced by reason, inter alia, of the claimants' failings in the action which I have mentioned.
8. The claimants consider that they have been successful in the action so far, and, subject to the two points I have mentioned, they are fully entitled to do so. I am told that their costs up to 19 October 2009 were £2.3 million. It may seem harsh in the circumstances that they should not get payment of some of their costs at this stage. But, for two reasons, that is the conclusion I have come to. The first is that there is a possibility that the claimants will not overall recover a balance of costs. How real that possibility is I cannot judge without knowing the terms of the Calderbank letters. Hence the concession referred to in paragraph 4 above. The claimants are a substantial company well able to carry the costs of even this litigation without straining their resources. Second, if the claimants succeed in obtaining an order for their costs after 19 October 2009, a deduction will fall to be made on account in particular of the two matters I have mentioned. I express no view whether any other matters will call for a reduction. I will then have to decide what that reduction should be and how it should best be expressed. If I make an order for costs up to 19 October 2009, a corresponding reduction will have to be made, though not necessarily in the same manner. That is because costs incurred in respect of an aspect of a case largely before a trial commences may be proportionately different to those incurred in respect of it after, for example where the trial involves extensive cross-examination on a point. But neither side advanced any assessment of the contribution of those matters to the whole. While proportionately the contribution may be small, it nonetheless requires determination. So I have no basis on which to decide what an appropriate order for costs up to 19 October 2009 might be.
9. All outstanding matters as to costs are therefore reserved.