Sycamore Bidco Ltd v Breslin & Anor

A successful party may receive less than its full costs where it pursued significant, costly and severable issues and lost them. There is no automatic reduction merely because some issues failed. Unsuccessful serious allegations do not themselves justify an additional costs penalty; particularly bad conduct is required. Part 36 consequences depend on the objective terms and context of the offer. An all-in offer to joint defendants was not beaten by a defendant whose liability was capped below that sum. For the other defendant, reliance on witnesses, uncertainty over damages, litigation costs, a CFA and interest did not make the sanctions unjust. Interest on costs ordinarily followed the rate applicable to damages, while the Judgments Act rate could be postponed where unusually large costs required assessment. A stay was granted pending appeal, but a tax inquiry was premature.

This was a post-judgment hearing in a warranty and misrepresentation claim arising from the purchase of a company. The court had previously awarded the claimant £5.25m in damages and interest. The remaining issues concerned the incidence and amount of costs, the effect of two Part 36 offers, interest, interim payments, permission to appeal and a stay, a possible tax-related inquiry, and costs and interest in a separate LTIPs claim. The central questions were whether the successful claimant’s costs should be reduced for failed issues or conduct, whether the Part 36 consequences were unjust or had been beaten by each defendant, and what ancillary orders should follow.

The court determined the outstanding costs and ancillary matters as follows.

1. Costs. The general framework in Multiplex v Cleveland Bridge [2009] Costs LR 55, together with the principles in Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm), Budgen v Andrew Gardner Partnership [2002] EWCA Civ 1125 and Antonelli v Allen The Times 8th December 2000, was applied. The claimant’s failed misrepresentation claim and commission-, rebate-, Bank of New York- and Rotch Properties-related claims were significant, costly and sufficiently severable to justify a proportionate deduction. The claimant was awarded 60% of its costs. Failed dishonesty allegations did not justify a further deduction: Lilleyman v Lilleyman (No 2) [2012] 1 WLR 2801 and Walsh v Singh [2010] EWHC 1167 (Ch) concerned materially different conduct. Certain disclosure costs were costs in the case, and no apportionment was made between the defendants.
2. Part 36. The claimant had beaten its offers overall. Applying the objective terms and context of the all-in £5.5m offer, the offer was made to Mr Dawson to settle the whole claim for that sum. His liability was less than £5.5m, so the Part 36 consequences did not attach to him. Technical defects may sometimes be overlooked where fair, as considered in Huntley v Simmonds [2009] EWHC 406, but that approach did not assist here. The consequences applied to Mr Breslin. Reliance on witnesses, late quantification, uncertainty over judgmental damages, allegations of dishonesty, the CFA and the burden of interest did not make their application unjust. The claimant was awarded the relevant Part 36 interest at 8%.
3. Interest and ancillary orders. Following F&C Alternative Investments v Barthelemy [2012] 4 All ER 1096, interest on costs followed the rate applicable to damages, rather than the claimant’s related-party borrowing rate. The Judgments Act rate was postponed by four months because of the scale of the costs and the serious proportionality issues, save for the interim payment of £1.5m. Permission to appeal was granted on grounds with a real prospect of success, and enforcement was stayed pending appeal subject to protective undertakings and escrow arrangements. An inquiry under clause 8.14 of the SPA was premature.
4. LTIPs claim. The claimant was ordered to pay the LTIPs costs. Interest on the claim and its costs was set at the same rate as on the main damages claim. No order was made to reallocate the previously ordered £250,000 interim payment.

This was the third post-judgment hearing. Earlier hearings dealt with finalisation of the damages claim and interest. No lower-court or appellate decision is identified.