BCT Software Solutions Ltd. v C Brewer & Sons Ltd.

Where substantive issues are compromised without trial, the court retains a discretion whether to make a costs order. It should not undertake that exercise unless agreed or determined facts provide a proper basis for deciding success, issues and conduct. In a complex case, the proper course may be to require the parties either to agree costs or proceed with the action.

An appellate court is especially reluctant to disturb a costs order made after the parties jointly invited the judge to decide costs following settlement. Intervention requires manifest injustice. A proportionate, issue-based costs order may be made without separately assessing every issue where that would be impracticable or disproportionate.

BCT brought proceedings alleging infringement of copyright in computer software licensed to Brewer. Shortly after the trial began, the parties settled the substantive dispute by a Tomlin order but left costs for the judge.

HHJ Rich QC, sitting as a Deputy Judge of the High Court in the Chancery Division, made a broad-brush costs order. Its agreed effect was that BCT should pay all its own costs and most of Brewer’s costs. BCT appealed, principally challenging the post-amendment costs order. It contended that the judge had wrongly treated four issues as equal, imposed a double penalty, and should have made no order as to costs.

The central question was whether the judge’s discretionary order, made without a completed trial after the parties had asked him to decide costs, was erroneous and manifestly unjust.

Appeal dismissed. Mummery LJ gave the leading judgment. Chadwick LJ added reasons, and Brooke LJ agreed with both judgments.

1. The ordinary appellate basis for interfering with a discretionary costs order was that stated in AEI Ltd v PPL [1999] 1 WLR 1507: error of principle, an impermissible treatment of relevant matters, or a decision that is wholly wrong. Where the parties have compromised the merits but jointly asked the judge to decide costs, the appellate court should be still more reluctant to intervene. In this case, BCT had to establish manifest injustice, not merely imperfections in the judge’s broad-brush reasoning.

2. A judge should be cautious before deciding costs after a compromise without trial. Under section 51(1) of the Supreme Court Act 1981 and CPR 44.3, the discretion first requires a proper factual basis. If disputed and undetermined facts prevent a proper decision as to success, issues or conduct, the judge may decline to make a costs order and require the parties either to agree costs or continue the action. This was guidance on the proper exercise of the discretion; the parties in this case had asked the judge to decide costs on the available material.

3. There is no automatic convention that a court should make no order as to costs whenever substantive claims are settled: see Brawley v Marizynski (No 1) [2002] EWCA Civ 756. Nor could BCT complain that the judge had not made that order when it had not sought it.

4. The judge was entitled to adopt an issue-based approach. CPR 44.3(7) favoured a proportionate order over separate issue-by-issue assessments where practicable. He could therefore attribute proportions of the overall costs to the four issues and adjust those proportions to reflect the parties’ respective success. There was no error of principle in doing so.

5. The settlement, the late recasting of BCT’s case, the abandonment of substantial allegations, and the modest sum recovered entitled the judge to conclude that BCT should pay the bulk of the post-amendment costs. The order was not manifestly unjust.

• Court of Appeal (Civil Division) — dismissed BCT’s appeal from the costs order: [2003] EWCA Civ 939.
• High Court, Chancery Division (HHJ Rich QC sitting as a Deputy Judge) — after settlement of the copyright action, made a broad-brush order requiring BCT to pay all its own costs and most of Brewer’s costs. No citation for that order was stated.