Journal

Practico Blog: When the winner doesn’t necessarily take all in costs

Almost two years ago I wrote an article regarding the High Court’s application of CPR 44.2(2) in Oldcorn v Southern Water Services Ltd [2017] EWHC 460. In that case, the Claimant succeeded on several issues but failed to prove causation and was ultimately unsuccessful. His Honour Judge McKenna deemed the Defendant to be the successful party and ordered the Claimant to pay the Defendant’s costs of the action in accordance with the general rule that the loser pays the winner’s costs.

But what happens when both parties succeed on key issues? How does the Court define success and what approach is adopted when determining the appropriate costs order? That was the question put before the Court of Appeal in Sirketi v Kupeli [2008] EWCA Civ 1264.

This case involved a group action of 838 Claimants who claimed damages against Atlasjet for breach of the Denied Boarding, Compensation and Assistance Regulations 2005 (SI 2005 No 975), and for breach of contract.

Although proceedings were never formally incorporated into a Group Litigation Order, the claims were joined and managed together. In respect of the contractual claim, Claimants fell within three categories. A trial was listed before Whipple J to address sixteen legal issues and ten lead cases. By the time of the trial the Claimants had abandoned all but one of the issues in the list of issues, which Whipple J found in Atlasjet’s favour. All claims based upon the breach of Regulation consequently failed. In respect of the contractual claims, Categories 2 and 3 failed. However, Category 3 Claimants were afforded the opportunity to reconsider and recategorise their claims under Category 1. Fourteen of the Category 1 claims succeeded, with damages of £8,602.75 awarded.

Eventually 76 claims, all categorised or re-categorised as Category 1, were transferred to the County Court, with the rest of the claims dismissed pursuant to the main judgment. The County Court claims settled. Each party argued that they had been successful and agreed that the correct starting point was CPR 44.2.

In determining the outcome, Whipple J followed the principle applied in A L Barnes Limited v Timetalk (UK) Limited [2003] EWCA Civ 402 and subsequent authorities (each claim relating to a claim for money), and found there was no reason to depart from the general rule as the starting point because this was a group claim, concluding that the Claimants were the winners “because at the end of the day, they will receive a cheque from the Defendant”. Whipple J nevertheless awarded the Claimants only 33% of their reasonable costs, applying a reduction to reflect Atlasjet having succeeded in every one of the List of Issues and the majority of contractual claims having lost at trial.

The Court of Appeal concluded that the trial judge was wrong to equate “who receives the cheque” with the successful party and that the fact that the Claimants had received a cheque as the determinative factor was “too crude an approach to such litigation as this”.

Giving the leading judgment, Hickinbottom LJ referred to Jones and Others v Secretary of State for Energy and Climate Change [2012] EWHC 3647 (QB), which supported the position that assessing success in group litigation the court should not follow the principle derived from the AL Barnes line of authority.

The Court of Appeal emphasised that it was appropriate to consider who was successful, in the context of the group litigation as a whole, and it was necessary to consider material factors such as:

  1. Atlasjet was entirely successful on all preliminary issues designed to give guidance for the determination of the cohort of claims.
  2. Atlasjet was successful in the legal issues which led to the dismissal of Category 2 and 3 claims, although the Claimants were successful on the issue of principle left in relation to the Category 1 claims.
  3. Whipple J found firmly for the Claimants in respect of the main factual issue live at trial but found for Atlasjet in respect of the issue relating to overbooking which also featured heavily at the trial. Both parties in principle were entitled to its costs associated with these issues.
  4. Neither party had anything close to complete success, and that honours were fairly even.

The Court of Appeal deemed that no order as to costs was the appropriate order. To the extent that Atlasjet achieved any slight success over and above the outcome obtained by the Claimants at the trial, that partial success was offset by conduct issues identified by Whipple J.

Following this decision, the High Court considered similar issues in the case of Hamad M. Aldrees & Partners v Rotex Europe Limited [2019] EWHC 526 (TCC), albeit this was not group litigation. In this claim, the Claimant recovered £700,000, having sought damages in the region of £38 million. Both parties claimed to be the successful party and sought its costs (or a substantial part of its costs) of the action. In determining the appropriate order for costs, Sir Anthony Edwards-Stuart considered the following factors:

  1. The Claimant “maintained an untenable position” in respect of part of its claim, and the Defendant “ran every available point and fought the claim tooth and nail”.
  2. Even though the sum recovered amounted to approximately 2% of the sum claimed, it was not considered derisory and was “likely to bear a more realistic relationship to the expenditure of costs necessary to recover it”. However, the fact that the Defendant ‘wrote the cheque’ did not provide “a reliable test for identifying the unsuccessful party” in this specific case.
  3. Discretely taking the seven principal issues raised by the Statements of Case and explored at the trial, but without having regard for their impact on the eventual outcome, it was established that each party prevailed on three issues and partly prevailed on another. In terms of issue-based results, each side “had a roughly equal measure of success”.
  4. The application of an issue-based approach might lead to the conclusion that each party should bear its own costs. However, the Claimant recovered “a sum of money that was significantly more than nominal” and the Defendant “made no appropriate offer”.
  5. The paramount consideration was “the absence of any early and admissible offer to pay some compensation”. The Defendant could have made a reasonable offer and relied on its refusal.

The judge concluded that “a more nuanced approach is possible and should be adopted if it leads to a different result”. From the Defendant’s view, the judge attributed approximately 40% of the costs to the claim for lost production (beyond 2014) and found it would not be unjust in ordering the Claimant to pay costs to that extent. The Defendant’s costs were approximately 23.5% higher than the Claimant’s.

From the Claimant’s point of view, approximately 30% of its costs related to that aspect of the claim and therefore its recoverable costs should be limited to 70%. Having regard to CPR 44.2(7), the Defendant was ordered to pay 20% of the Claimant’s costs.

What is clear from the above cases is that “who writes the cheque” is no longer the acid test for identifying who is the successful party where there are a number of issues in dispute. This is especially pertinent for those involved in group litigation which often involves multiple issues and lead cases being determined one way or the other. Parties would be wise to keep this at the forefront during the course of the claim, particularly as efforts made to settle are often important in tipping the balance...