Mears Ltd v Leeds City Council

In commercial litigation, the party obtaining judgment or payment will generally be treated as the overall successful party. The court should begin with the general rule that the successful party receives its costs, then consider all the circumstances, including success on individual issues, common costs, offers and litigation conduct.

A proportionate costs order may be appropriate where the successful party has failed on substantial claims which generated significant costs. There is no fixed formula based on the number of issues, evidence pages or submissions. The assessment is evaluative and should be just, fair and reasonable.

Mears brought procurement proceedings against Leeds City Council after being an unsuccessful tenderer for a social housing contract. Mears succeeded on one alleged breach of the Public Contracts Regulations 2006 and obtained judgment for damages to be assessed, but failed on other allegations and did not obtain an order setting aside the procurement.

Following the earlier judgments and directions for a quantum hearing, the parties sought competing costs orders. The central issue was how the court should exercise its discretion in light of the parties’ relative success, the costs attributable to unsuccessful issues, and their litigation conduct.

1. Overall success. Mears was properly characterised as the overall successful party because it obtained judgment against LCC for damages to be assessed. The starting point was therefore that LCC should pay Mears’ costs under the general rule.
2. Relative success. Mears succeeded only on the allegations concerning the Evaluation Table. It failed on the Scoring Table allegations and achieved only limited success concerning the Model Answers, which produced no damages or other relief. LCC also successfully resisted the application to set aside the procurement.
3. Conduct. The court found no conduct, apart from the parties’ relative success and failure on the issues, which justified altering the costs order. Mears’ pursuit of unsuccessful relief and its timing did not, in the circumstances, amount to conduct requiring a separate costs penalty. Mears was generally successful on the disputed disclosure application, although no substantive relief ultimately followed from the Model Answers.
4. Proportionate order. Applying the principles summarised in Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited [2008] EWHC 2280 (TCC), the court recognised that success on one claim carried common costs, but that Mears should not recover costs relating to substantial issues on which it failed. The assessment was impressionistic; no simple percentage could be derived from the number of issues or documents.
5. Order. A discount of 65% was appropriate. LCC was ordered to pay 35% of Mears’ costs up to 25 May 2011, assessed on the standard basis if not agreed. Mears was to pay LCC’s costs caused by the amendments to the Particulars of Claim. There was no order for the costs of the written costs submissions, and no payment on account was ordered.