Promar International Ltd. v Clarke

Where substantive issues have been settled or otherwise resolved without judgment, the guidance governing costs after a compromise applies even if their resolution did not result from a single agreement. A judge asked to determine costs must consider whether there are sufficient agreed or determined facts to identify success and evaluate conduct. The judge should avoid trying disputed facts solely for that purpose and may properly make no order where neither party can be identified as the winner.

Where the parties invited the judge to undertake that exercise, an appellate court should not interfere with the resulting costs order unless it was legally erroneous and produced manifest injustice.

An employer sought an injunction, damages and costs for an alleged breach of a restrictive covenant by a former employee. At trial, the employee offered a final undertaking in lieu of an injunction. The employer accepted it and abandoned its substantial damages claim, leaving only costs unresolved.

The judge initially ordered the employee to pay 75% of the employer’s costs. After considering BCT Software Solutions Ltd v C Brewer and Sons Ltd [2003] EWCA Civ 939, he reconsidered the matter and made no order as to costs. The employer appealed, contending that the authority concerned a true compromise and was distinguishable, and that the later costs decision was manifestly unjust.

1. Appeal dismissed unanimously. BCT Software Solutions Ltd v C Brewer and Sons Ltd [2003] EWCA Civ 939 was not confined to cases resolved by a single compromise. Its guidance applied generally where substantive issues had been settled or otherwise resolved without judgment and the judge was asked to adjudicate upon costs. The undertaking resolved the claim for injunctive relief, while the employer’s abandonment resolved the damages claim. Nothing remained to be litigated except costs.

2. A judge has jurisdiction to determine costs after substantive issues have been resolved, but is not obliged to make an order. The judge must have an adequate basis of agreed or determined facts upon which to identify success and apply the costs principles. The court should be slow to determine disputed facts merely to decide costs. Where the merits and responsibility for the litigation remain indeterminate, no order may be the proper result.

3. The trial judge was entitled to reconsider his initial assessment after receiving the relevant authorities. He could find that both parties might have missed opportunities to settle and that it was impossible to determine whether the employer would have accepted a full undertaking if offered earlier. Those findings were not manifestly unjust.

4. The employer could not be treated as the clear winner merely because it obtained an undertaking. The central allegation of actual or attempted breach was never tried, and either party might have succeeded upon it. The substantial damages claim was not a makeweight and was abandoned at trial. Much of both parties’ expenditure related to the unresolved breach allegations and damages.

5. Where parties invite a judge to determine costs after resolving the merits, they should ordinarily accept the resulting exercise of discretion. Following BCT Software and Venture Finance plc v Mead and another [2005] EWCA Civ 325, appellate intervention required manifest injustice. An order that each party bear its own costs fairly reflected the absence of an identifiable winner or loser and did not meet that threshold.

1. Court of Appeal (Civil Division): Dismissed the claimant’s appeal and affirmed the order making no order as to costs.

2. High Court, Queen’s Bench Division: His Honour Judge Tetlow initially ordered the defendant to pay 75% of the claimant’s costs. After a further hearing prompted by BCT Software Solutions Ltd v C Brewer and Sons Ltd [2003] EWCA Civ 939, he reconsidered that decision and made no order as to costs on 17 February 2005.