British Sky Broadcasting Plc v Sky Home Services Ltd

When costs are apportioned on an issues-based approach, the court must account consistently for both the issues lost and the consequential costs generated by those issues. A failed allegation may materially increase a defendant’s costs by requiring investigation of evidence relevant to other parties or issues. An appellate court may correct a discretionary costs order where that consequence was omitted, while leaving an unchallenged allocation between defendant groups intact. Where the claimant substantially succeeds and the defendant’s success concerns comparatively minor issues, the appropriate response is ordinarily a deduction from the claimant’s recoverable costs rather than an order requiring the claimant to pay the defendant’s costs. The assessment may be broad-brush.

The appeal concerned the costs order made after a substantial passing-off action in the High Court of Justice, Chancery Division, before Briggs J. The claimant succeeded overall against two groups of defendants, but failed on allegations of common design and on direct liability against the Crane defendants for telephone marketing.

The judge allowed a 10% reduction for failure on the common-design issue and apportioned the claimant’s costs 30% to the Crane defendants and 70% to the Reynolds defendants. The 30% share was reduced to 27%. The Crane defendants challenged the order, arguing that the judge had failed to reflect the time and expense caused by allegations which they successfully defended.

Lady Justice Arden delivered the leading judgment. Lord Justice Dyson and Sir Andrew Morritt agreed. Permission to appeal was granted and the appeal was allowed unanimously.

1. Failure to account for consequential costs. The judge had taken account of the core of the failed common-design allegation when allowing a 10% reduction. However, he had not accounted for its wider consequences. Because the Crane defendants were sued jointly with the Reynolds defendants, they reasonably had to examine the Reynolds defendants’ disclosure, telephone transcripts and recordings to assess whether the evidence implicated them. Those consequences were substantial in costs terms [28]–[29].
2. Appellate correction of the costs assessment. The Court of Appeal was required to make its own assessment of the further deduction from the Crane defendants’ apportioned share. The unchallenged 30% to 70% allocation between the two defendant groups remained intact. A further reduction could be made from the Crane defendants’ 30% share [30].
3. Proper form of relief. The claimants had won the action, while the Crane defendants’ success was on comparatively minor issues. That important factor meant that an order for the Crane defendants’ costs was inappropriate. The proper approach was to deduct an amount from their share of the claimants’ costs, reflecting success which had not previously been taken into account [31].
4. Amount and final order. The court made a broad-brush assessment of the consequences. It assessed the further deduction at 15%, subject to deducting 10% of that amount for the failed core element of the common-design claim. The order requiring payment of 27% of the claimants’ costs was replaced by an order requiring the Crane defendants to pay 13.5% [32], [35].

• Court of Appeal (Civil Division): [2008] EWCA Civ 1101. Permission to appeal granted; appeal allowed; the Crane defendants’ liability for the claimants’ costs reduced from 27% to 13.5%.
• High Court of Justice, Chancery Division (Briggs J): the claimants succeeded overall. The judge allowed a 10% reduction for failure on common design and apportioned the claimants’ costs 30% to the Crane defendants and 70% to the Reynolds defendants, producing a 27% liability for the Crane defendants.