Brown v MCASSO Music Production Ltd.

A costs judge has a wide discretion, so permission to challenge a costs order will ordinarily be difficult. A substantial order may nevertheless justify permission where there is a properly arguable error of principle. An offer need not be a Part 36 offer to be relevant, and an offer marked without prejudice save as to costs may be considered if its wording permits. The court should weigh the claimant’s success, the timing and terms of offers, and the reasons litigation continued. A successful claimant who obtained judgment on liability and damages may have a strong case for costs, but admissible settlement offers and other special factors may justify a different order.

The claimant succeeded in a four-day copyright action in the Patents County Court, establishing ownership of 10 per cent of the copyright and infringement, and recovering £180 damages. HHJ Fysh QC nevertheless ordered him to pay the defendant’s costs, exceeding £50,000. The claimant sought permission to appeal. Permission on damages was refused, but the Court of Appeal considered whether the costs decision might have involved an error of principle. The issue included the effect of a pre-action offer of £450, a later offer on the basis that each party bear its own costs, and the defendant’s stated wish to litigate the copyright issue.

Application allowed in relation to costs. Lord Justice Neuberger had already refused permission to appeal on damages, but granted permission to appeal against the costs order. The costs of the application were to be costs in the appeal.

1. A costs judge enjoys a very wide discretion, and a party challenging the exercise of that discretion faces an uphill task. Permission may nevertheless be justified where there are reasons to think that the judge may have erred in principle, particularly where the costs order is very substantial compared with the damages recovered.
2. The fact that an offer was not a Part 36 offer was not conclusive against its being considered on costs. The court referred to Peter Crouch v King’s Healthcare NHS Trust [2004] EWCA Civ 1332.
3. The precise wording of an offer determines whether it is privileged and whether it may be considered. The pre-action letter was not headed without prejudice, but its express reference to being without prejudice save as to costs meant that the costs judge may have been entitled to take it into account. The later offer, although also made without prejudice save as to costs, was made on the basis that each party would bear its own costs and had not been rejected.
4. The claimant’s prospects were weakened because he had commenced proceedings after being offered more than the judge ultimately found he was entitled to receive. However, there had been no offer after proceedings were issued, and the defendant had expressly chosen to litigate the copyright issue on which the claimant succeeded. In those circumstances, the claimant had some, though not substantial, prospect of showing that an order requiring him to pay all the costs went too far.

• Court of Appeal (Civil Division): In [2005] EWCA Civ 620, permission to appeal on damages was refused, but permission to appeal on costs was granted.
• Patents County Court: HHJ Fysh QC awarded the defendant its costs after the claimant recovered £180 damages in a copyright infringement action.