Enterprise Managed Services Ltd v McFadden Utilities Ltd

In fixing costs proportionately, the court should first identify the party successful overall. It should then consider the litigation’s context, the parties’ conduct, the reasonableness of the issues pursued, the resources applied, and the significance of success or failure on each issue.

A simple mathematical comparison of issues won, or a comparison based on the length of the judgment or time spent on particular issues, is generally inappropriate. Where detailed costs information is unavailable, the court must do the best it can. A proportionate costs order may fairly reflect partial success without treating each issue as having equal weight.

The substantive dispute between Enterprise Managed Services Ltd and Tony McFadden Utilities Ltd had been determined in earlier Part 8 proceedings. Enterprise had achieved its principal objective because the defendant could not properly continue an adjudication, although the defendant had succeeded on issues concerning novation and the basic validity of an assignment.

The court was asked to determine the appropriate costs order. Both parties accepted that Enterprise was successful overall, but differed substantially on the percentage of Enterprise’s costs which should be recoverable. The central issue was whether a proportionate costs order was appropriate and, if so, what percentage fairly reflected the parties’ relative success and conduct.

1. Costs discretion. Under Civil Procedure Rules 1998 Part 44.3, the court has a discretion as to costs. The general rule is that the unsuccessful party pays the successful party’s costs, subject to relevant conduct, including conduct before and during proceedings and the reasonableness of pursuing particular allegations or issues.
2. Proportionate costs approach. The court approved the approach in Multiplex Construction (UK) Ltd v Cleveland Bridge Dorman Long Engineering Ltd, [2008] EWHC 2280 (TCC). The court should identify the party successful overall, consider the context and conduct of the litigation, assess the significance and resources associated with the issues on which each party succeeded or failed, and fix a fair percentage of the successful party’s overall costs. Counting issues or comparing the amount of judgment text devoted to them is not ordinarily a sound method.
3. Application. Enterprise was successful overall because it secured its strategic objective of preventing the adjudication from legitimately continuing. The defendant’s premature pursuit of the adjudication and refusal to agree a full suspension placed tactical pressure on Enterprise. Enterprise’s unsuccessful arguments were not unreasonable, and the issues on which the defendant succeeded required materially fewer resources than the issues central to the outcome.
4. The appropriate reduction was 20 per cent. The defendant was ordered to pay 80 per cent of Enterprise’s costs of the litigation, to be assessed on the standard basis.

The judgment concerned the costs consequences following the earlier substantive determination in the same litigation by Mr Justice Coulson. No separate appellate history was stated.