Morgan & Anor v Ministry of Justice & Anor

Where preliminary issues are discrete, free-standing and capable of separate success or failure, costs may be allocated by reference to the outcome of each issue. Where parties succeed on some issues and fail on others, the court may make a proportionate costs order, taking account of the relative size and significance of the issues. A costs order may be made subject to enforcement only with the court’s permission. Set-off of costs against costs may be permitted as natural and equitable, but set-off against damages requires separate justification and may be refused at the interlocutory stage.

The claimants and defendants disputed responsibility for costs following a trial of three preliminary issues. The defendants succeeded on issues 1 and 2, while the claimants succeeded on issue 3. The court was required to determine the costs of the preliminary issues and related applications, amendments and re-amendments, including whether enforcement should be permitted by set-off against damages or costs.

1. Costs of the preliminary issues. Costs should follow the event. Issues 1, 2 and 3 were discrete, free-standing, win-or-lose issues and were of roughly equal size in argument and hearing time. Since the defendants succeeded on two issues and the claimants on one, the claimants were ordered to pay one third of the defendants’ costs of the trial of the preliminary issues.
2. Related costs. The defendants were entitled to their costs in any event of the claimants’ application dated 8 April 2009, incurred from 19 June 2009, and of the re-amendment and re-re-amendment of the defence. Costs of complying with paragraphs 1–6 of the order dated 18 June 2009, including costs of amending the defence, were costs in the case because they were not attributable solely to issues 1 and 2. Certain remaining costs attracted no order.
3. Enforcement. The costs orders were not to be enforced without leave of the court. Applying the principle stated in Lockley v National Blood Transfusion Service [1992] 1 WLR 492 (CA), set-off of costs against costs was regarded as natural and equitable. The court was not satisfied that set-off against damages was justified at that stage, although the defendants could later seek leave to enforce the order.
4. The claimants’ publicly funded costs relating to the specified application, amendments and trial of the preliminary issues were subject to detailed assessment.