Bim Kemi AB v Blackburn Chemicals Ltd.

When determining costs, the court should identify the party who succeeded overall, while reflecting any major issue on which that party failed. Where practicable, an issue-based adjustment may be expressed as a proportion of the successful party’s costs rather than requiring detailed assessment of a distinct part of the proceedings.

A settlement offer outside Part 36 may be highly relevant to the parties’ conduct, but does not give the offeror unrestricted freedom to pursue unsuccessful issues. Interest on costs may compensate a party for being kept out of money. In a commercial case, 1% above base rate is the usual starting point for pre-judgment expenditure unless evidence justifies another rate.

Following an appeal from the Commercial Court, the Court of Appeal had held that a binding contract existed, that Bim Kemi AB was in repudiatory breach, and that Blackburn Chemicals Ltd was not in breach. Questions concerning the costs of the trial and appeal were adjourned for determination by Kennedy and Waller LJJ.

Blackburn sought all its costs on the indemnity basis, together with interest and orders concerning particular categories of expenditure. Bim accepted that Blackburn was the successful party overall, but sought a substantial reduction because Blackburn had lost the heavily contested issue concerning the existence of the contract. The court also considered the effect of Blackburn’s pre-trial offer to discontinue the competing claims on a costs-neutral basis, the appropriate rates of interest, the timing of costs relating to damages, and the court to which the remaining proceedings should be remitted.

1. Costs determined in Blackburn’s favour. Waller LJ, giving the judgment of the court, held that Blackburn was the successful party in the litigation determined so far. The unresolved allegation that the contract was void under European Community competition law did not alter that conclusion. Both parties had litigated the other issues, and the illegality argument had always been capable of benefiting whichever party otherwise succeeded.

2. The parties’ conduct did not justify penalising Blackburn. Although the trial judge had criticised Blackburn’s conduct, the Court of Appeal had taken an adverse view of Bim’s late disclosure. Blackburn’s pre-trial offer that both sides discontinue their claims and bear their own costs was highly relevant and demonstrated a reasonable attitude to the litigation, notwithstanding that the offer did not conform to Part 36.

3. Blackburn’s failure on the substantial “no contract” issue nevertheless required a costs reduction. The issue had reasonably been pursued, particularly given Bim’s late disclosure and late reliance on the October meeting. Blackburn had, however, lost the issue and ultimately benefited from losing it. It would therefore have been unjust to require Bim to pay all the associated costs.

4. Under rule 44.3(6), the court should, where practicable, avoid requiring the costs judge to assess the costs of a distinct issue. A proportionate order was appropriate because the adjustment depended not only on the expense of the unsuccessful issue but also on the reasons for pursuing it and the rejected settlement offer. Bim was ordered to pay 75% of Blackburn’s costs at trial and on appeal, assessed on the standard basis.

5. Blackburn’s costs of the earlier costs assessment were summarily assessed at £3,761, with interest at 1% above base rate. Applying by analogy the commercial approach discussed in Jaura v Ahmed [2002] EWCA Civ 210, hypothetical evidence of what a bank might have charged did not establish that Blackburn fell outside the usual presumption of 1% above base rate.

6. Interest on costs previously paid by Blackburn was awarded at 1% above base rate from payment. Blackburn was also entitled to judgment-rate interest on costs awarded in its favour from the trial judge’s order, because that interest would have followed had the correct costs order originally been made. Interest on earlier invoices was awarded at 1% above base rate.

7. Costs incurred addressing Bim’s alleged losses formed part of the present costs order. Blackburn’s costs of preparing its own damages claim were to await the damages assessment. The proceedings were to return to the Commercial Court, although the court indicated that it would probably be preferable for them not to return to Langley J.

1. Court of Appeal (Civil Division): On the substantive appeal, held that the 1994 contract was binding, that Bim was in repudiatory breach, and that Blackburn was not in breach. By this judgment, the court ordered Bim to pay 75% of Blackburn’s costs at trial and on appeal on the standard basis.
2. Commercial Court: The trial judge held that a binding contract existed and that Bim was in breach, but held that Bim’s breaches were not repudiatory and that Blackburn was in breach. The judge’s original costs order in Bim’s favour was displaced following the appeal. No citation for the lower court’s decision is stated.