The recent case of Triumph Controls UK Ltd & Anor v Primus International Hold Co & Ors, heard in the Technology and Construction Court, serves as a timely reminder on the rules surrounding costs awards. Specifically, it draws attention to the factors which ought to be taken into account by a Court in deciding the amount of costs payable to the 'winning' party.
The case also raises the peculiar question of whether a party can lose on costs, despite winning the claim?
The underlying case related to a breach of warranty claim made by Triumph against Primus. Triumph was successful in its claim, with the Court handing down judgment in its favour on 11 March 2019.
A further judgment was handed down on 13 August 2019, with the Court determining the outstanding issues on quantum.
The Court also ordered that issues as to costs would be determined on paper following the exchange of short written submissions by the parties.
The parties’ respective positions
Triumph’s position was that as the successful party it was entitled to the usual order that costs should follow the event. Triumph submitted that whilst numerous arguments were made by both parties, and although it did not succeed on all of its pleaded arguments, the overall outcome in the case was in its favour.
Conversely, Primus’ position was that Triumph should be awarded a reduced percentage of their total costs. In support of this, it pointed to Triumph’s reliance on 3 heads of claim, but its success on only one. In short, Primus argued that this led to additional and avoidable costs being incurred by both parties (and so any costs order made ought to reflect this).
A reminder of the rules
In making its assessment, the Court has discretion as to whether costs are payable by one party to another, the amount of those costs and when they are to be paid – see CPR 44.2(1).
The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, although the Court may make a different order (see CPR 44.2(2)) - which is what Primus was seeking in this case.
CPR 44.2(4) provides that in deciding what (if any) order to make about costs, the Court will have regard to all the circumstances in the case, including the conduct of the parties and whether a party succeeded on part of its case, even if that party has not been wholly successful.
CPR 44.2(5) provides that the conduct of the parties includes:
a. Conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – PreAction Conduct or any relevant pre-action protocol;
b. Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
c. The manner in which a party has pursued or defended its case or a particular allegation or issue; and
d. Whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
As to the types of order made, the Court may make an issues-based costs order but before doing so, will consider whether it is practicable to make an order limiting the costs payable to a proportion of the overall costs (see CPR 44.2(6) & (7)).
How the rules were applied in this case
Type of Costs Order
The Court found it to be common ground that Triumph having obtained an award of substantial damages in its favour against Primus was entitled to recover at least part of their costs.
Triumph’s position was that it had shown reasonable conduct, properly advanced its arguments and did not exaggerate its claim (even on the points it lost on). Accordingly, stating that neither an issues based or proportional costs order would be appropriate.
On the other hand, Primus argued that a proportional costs order would be appropriate, submitting that Triumph brought forward three claims, one of which was unreasonably brought and led to identifiable, substantial and severable costs.
In making her decision, Mrs Justice O’Farrell concluded that an issues-based order was not required. However, she ruled that a proportional costs order was appropriate in this case, given that one of the claims, “…caused Primus to incur costs in successfully defending the claim that would not have been otherwise incurred.”
The proportional costs order dictated that Primus should pay 85% of Triumph's costs. The costs would still be subject to a detailed assessment on the standard basis.
CPR 44.2(7) provides that where the Court orders that a party is to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so. Where the amount of costs is to be assessed on the standard basis:
i) The Court will only allow costs which have been reasonably incurred and are reasonable in amount, resolving any doubt in favour of the paying party: (see CPR 44.3(1)&(2)); and
ii) The Court will only allow costs which are proportionate to the matters in issue: (see CPR 44.3(2)).
In assessing the ‘reasonableness’ of the costs incurred, pursuant to CPR 44.4, the Court will have regard to all of the circumstances of the case, including the conduct of the parties, the value of the claim, the importance of the matter to the parties, the complexity of the issue, and the skill, time and effort involved.
In this case, Mrs Justice O’Farrell provided a favourable assessment of the costs incurred, believing them to be reasonable, stating that:
“… the overall figures identified do not appear to be disproportionate to the claims. Having seen the volumes of factual and expert evidence in this case… and having heard the trial, it does not come as any surprise that the estimated costs for one party exceed £6 million… taking the above matters into account, I consider that a reasonable sum on account of costs is £3 million.”
Whilst Triumph was not successful in convincing the Court to make a costs order in line with its submissions, it was ultimately triumphant, following the Judge’s review of its costs breakdown.
The case does have valuable lessons, given Primus saved a rather significant sum by obtaining a proportional costs order. The key takeaway for unsuccessful Defendants, therefore, is that they ensure that where exaggerated or unmeritorious claims are brought by a Claimant (as part of a wider claim) they seek to document the effect these have on the costs of the case. This should increase the chances of a percentage saving on costs.