Issues-based costs order: only where an issue on which the successful claimant lost “so starkly stands out as being separate”

The Court considered consequential matters, including costs, following the landmark decision in Canary Wharf (BP4) T1 Limited and others v European Medicines Agency [2019] EWHC 335 (Ch), in which the Court ruled that Brexit did not frustrate the Defendant’s lease.

The Court did not order indemnity costs.

The Claimant argued that the Lease entitled it to recover costs on an indemnity basis. The Judge accepted that, in principle, where a contract makes provision for the payment of costs, that should be taken into account (per CPR 44.5). However, this did not avail the Claimant because the costs provision in the Lease kicked-in only after the Lease had been breached (which it had not been).

It was then argued that the Defendant’s inefficient management of the disclosure process caused the Claimant additional work. The Judge found that this will be best dealt with not by an order for indemnity costs but by way of assessment.

Lastly the Claimant said that the Defendant’s case was so weak that the Court should sanction the Defendant by way of indemnity costs. The Court did not agree. Costs were ordered on the standard basis.

The Court then considered whether it could make an issues-based costs order, whereby the costs order is, in effect, in favour of the winning party in respect of the issues won and a countervailing order in respect of the losing side’s winning issues.

The Court noted that in any litigation, but especially in complex commercial litigation, any winning party is likely to fail on one or more issues in the case. In the present case the issues were significantly intertwined. The Court came to the view that “unless there is an issue which so starkly stands out as being separate and on which [the Claimant] lost, I should not make an issues-based costs order”.

The Court found one issue which stood out so as to justify an issues-based costs order: the foreseeability of Brexit (for which the Claimant could have simply accepted that Brexit was unforeseeable). As a result, the Court reduced the recoverable costs by 15%.

The Court was asked to order a payment on account of the Claimant’s costs (which were in excess of £2m). The Court deducted 40% to account for the likely reduction on a standard assessment (noting that this deduction was more than usual). The Court then deducted 15%. The Defendant was ordered to pay £1m by way of interim payment on account of costs.