West (t/a Eastenders) v Smith & Turner Plc

Under CPR 44, where parties succeed on separate and significant issues, costs should ordinarily be allocated by reference to the relative importance and expense of those issues. The court should not treat commercial objectives as determinative of which party succeeded; it should identify what value, if any, each party obtained from the litigation.

An admissible offer is relevant according to whether it was beaten. The court should not conduct a speculative examination of subsequent correspondence or alternative negotiating conduct.

The claimant had partially succeeded at first instance in an attack on the registration of ESB as a trade mark. The registration was limited to bitter, but remained effective for other beers. The claimant failed on the distinctiveness issue, which had consumed the great majority of the evidence, disclosure and hearing costs.

The High Court, Chancery Division (Mr Christopher Floyd QC), made no order as to costs. The respondent appealed that costs order. The Court of Appeal also determined the costs of the substantive appeal and cross-appeal.

1. The respondent’s appeal against the costs order was allowed. The judge had erred in principle by making no order as to costs despite finding that the distinctiveness issue, on which the respondent succeeded, accounted for the great majority of the costs.

2. Where parties have succeeded on distinct and separately identifiable issues, the proper exercise under CPR 44 is ordinarily to assess costs on an issues basis. Here, the claimant was in principle entitled to the costs of the non-use issue and the respondent to those of the distinctiveness issue. Unallocated costs should also be apportioned fairly by reference to the relative time and money spent on each issue.

3. The court could not decide who had been commercially successful from the material before it. Commercial motives and strategy do not themselves establish the successful party. The relevant inquiry is whether a party obtained something of value from the litigation.

4. The admissible offer of 31 August 2001 did not assist the claimant because it was not beaten. The court rejected an inquiry into later correspondence to determine which party had negotiated more reasonably.

5. The respondent was awarded 80 per cent of its costs of the action. The reserved costs of three interlocutory applications remained costs in the case. The respondent was also awarded its costs of the costs appeal and 65 per cent of its costs of the substantive appeal and cross-appeal, with an interim payment of £200,000.

• Court of Appeal (Civil Division): allowed the respondent’s appeal against the no-order costs decision and substituted an order that the respondent recover 80 per cent of its costs of the action: [2003] EWCA Civ 429.
• High Court, Chancery Division (Mr Christopher Floyd QC): the claimant achieved limited success on non-use but failed on distinctiveness; the judge made no order as to costs.