Budgen v Andrew Gardner Partnership

When deciding costs, a court should reflect success and failure on distinct issues. Pursuit of a hopeless issue may justify an adverse order both to deter unreasonable conduct and to relieve the opposing party of part of its costs liability.

An issue-based order does not automatically follow. Under rule 44.3(7) of the Civil Procedure Rules, the court must instead make a proportionate or date-based order where practicable. A trial judge may make a broad assessment of the appropriate percentage. The parties cannot compel an issue-based order by failing to provide more precise costs information.

The claimant recovered damages from his former solicitors for negligently allowing his personal injury proceedings to be struck out. Although he succeeded overall and beat the payment into court, he failed on a substantial claim for profits allegedly lost through the failure of a computer software project. Wright J found that this issue was untenable and should have been abandoned.

The judge ordered the solicitors to pay 75% of the claimant’s costs. He declined to order the claimant to pay the solicitors’ costs of the unsuccessful issue. The solicitors appealed, principally contending that the judge was required to make an issue-based costs order under rule 44.3(6)(f) of the Civil Procedure Rules. Alternatively, they contended that the 25% reduction was insufficient.

1. By a majority, the appeal was dismissed. Simon Brown LJ gave the leading judgment, with which Latham LJ agreed. Mance LJ dissented and would have increased the reduction in the claimant’s recoverable costs from 25% to 50%.

2. Judges should be readier under the Civil Procedure Rules to make costs orders reflecting failure on particular issues. Where an otherwise successful party pursues a hopeless issue, an adverse costs order may serve two purposes: deterring unreasonable conduct and relieving the unsuccessful party of some liability for costs incurred in contesting that issue.

3. That principle does not require an issue-based order. Rule 44.3(7) provides that where the court would otherwise consider an order relating to a distinct part of the proceedings, it must instead make a proportionate or date-based order if practicable. Such an order can avoid the cost and difficulty of requiring a costs judge to separate work attributable to individual issues. Wright J was therefore entitled to make a percentage order.

4. The trial judge could assess the percentage on a broad basis. The appellant’s failure to provide useful, detailed costs information could not force him to make an issue-based order. Nor had he been invited to adjourn for further evidence.

5. The majority was not persuaded that Wright J had considered only punishment for misconduct and overlooked the appellant’s entitlement to relief from costs incurred on an unreasonable issue. Rules 44.3(5)(b) and (c) separately address the reasonableness of pursuing an issue and the manner in which it was pursued.

6. The material before the Court of Appeal did not permit a satisfactory reassessment of the percentage. The appellant had principally sought an issue-based order, the parties disputed the extent of overlap between the failed issue and the successful loss-of-earnings claim, and the trial judge was better placed after hearing the evidence to exercise the costs discretion. The majority’s doubts about the generosity of the order were insufficient to justify appellate intervention.

7. Mance LJ considered that the judge had proceeded on the erroneous basis that requiring the successful claimant to bear both sides’ costs of an unequivocally lost and unreasonable issue would be draconian. He would have substituted a 50% reduction.

• Court of Appeal (Civil Division): By a majority, dismissed the defendant solicitors’ appeal against the costs order and ordered the costs of the appeal to be paid on the standard basis. The application to set aside judgment was dismissed with no order as to costs.
• High Court, Queen’s Bench Division: Wright J awarded the claimant £328,970 and ordered the defendant to pay 75% of his costs on the standard basis. The 25% reduction reflected the claimant’s pursuit of the unsuccessful HIS issue.