Brawley v Marczynski

Where proceedings are resolved without a trial but costs remain disputed, the court may make a costs order after a proportionate assessment of the likely merits. There is no general rule that settlement requires no order as to costs. The court need not conduct the substantive litigation afresh. It should instead decide into which broad category the discontinued or settled case falls, having regard to justice, proportionality, the costs at stake and the parties’ conduct.

A no-order outcome may be the default where the likely result cannot fairly be identified. It is not appropriate where one party was plainly the overall victor. An arguable issue about the validity of a patent does not make a contractual claim for an agreed share of profits pointless where that contractual entitlement was not conditional on patent validity.

Brawley v Marczynski concerned an agreement under which the defendants were said to market a wheel-nut safety device and pay the claimant half of the resulting profits. Following proceedings, the parties compromised liability before Pumfrey J. They agreed to co-own the patent and that the claimant should receive half the business profits over the agreed period. The remaining accounting dispute was later settled for £300,000, leaving costs in issue.

Laddie J ordered the defendants to pay the claimant’s costs, assessed on the indemnity basis, and made an interim payment order. The defendants appealed. They contended that the possible invalidity of the patent made the litigation pointless, that the settlement sum was merely a negotiated figure, and that a settlement ordinarily required no order as to costs. The central issue was whether Laddie J had erred in awarding the claimant his costs.

1. Disposition. Longmore LJ gave the leading judgment, with which Mance and Aldous LJJ agreed. The appeal against the order requiring the defendants to pay the claimant’s costs was dismissed. The separate appeal concerning assessment on the indemnity basis was adjourned.

2. A court retains power to determine costs after the substantive dispute has settled. There is no general tradition that settlement alone requires no order as to costs. The court should not try the settled claim as though substantive relief remained available. It should make a proportionate assessment of the likely outcome and decide whether one party was the clear overall victor. The principles stated in R v Holderness Borough Council, ex p James Roberts Developments Ltd (1992) 66 P&CR 46 and Boxall v London Borough of Waltham Forest were applied.

3. The possible invalidity of the patent did not make this litigation pointless. The defendants’ obligation to account for and pay an agreed share of profits was contractual and was not shown to depend on the patent’s validity. There also remained disputes about underpayment and the alleged termination of the agreement. The compromise reached in 1999 and the competing accountants’ figures supported the conclusion that those issues required resolution.

4. The later £300,000 settlement was within the range of the competing accounting figures. Even if negotiation and the claimant’s legal aid had influenced it, that did not undermine the conclusion that the claimant had been kept out of money to which he was entitled and was objectively the overall victor. Laddie J had made no error in his exercise of discretion. The interim-payment order was varied as set out in the formal order, and the defendants were ordered to pay the costs of the appeal incurred to that point.

• Court of Appeal (Civil Division). In [2002] EWCA Civ 756, the court dismissed the defendants’ appeal against the order that they pay the claimant’s costs. It adjourned the appeal concerning indemnity assessment for a further hearing.
• High Court, Chancery Division, Patents Court (Laddie J). Ordered the defendants to pay the claimant’s costs, assessed on the indemnity basis, and subsequently made an interim-payment order.
• High Court (Pumfrey J). The parties compromised liability in 1999. They agreed co-ownership of the patent and an inquiry into profits, while reserving costs for later determination.