Portsmouth City Council 'PCC' v Ensign Highways Ltd 'Ensign'

Where a Part 8 claim produces mixed results on several issues, costs should reflect the parties’ relative success and the proportion of time and preparation attributable to each issue. The court may adopt a pragmatic and proportionate costs order where detailed assessment would be disproportionate. This may include awarding costs for one period, requiring each party to bear its own costs for another, and making no order for costs where the parties’ respective successes substantially balance.

The judgment concerned the costs and formal declarations following a Part 8 claim about the construction of a long-term PFI contract between Portsmouth City Council and Ensign Highways Limited. The substantive issues concerned the operation of clause 24, the applicability of the contractual good-faith obligation in clause 44.4.1, an implied term governing the assessment of service points, and the meaning of values in Schedule 17.

In an earlier judgment, PCC largely succeeded on the clause 24 issue, while Ensign succeeded on the Schedule 17 issue. The present judgment determined the appropriate allocation of costs and the form of the declarations.

1. PCC largely succeeded on the clause 24 issue. Clause 44.4.1 did not impose a duty of good faith when PCC awarded service points. However, clause 24 contained an implied term requiring PCC’s Representative to act honestly, on proper grounds, and not arbitrarily, irrationally or capriciously.

2. Ensign succeeded unequivocally on the Schedule 17 issue. Approximately 40 per cent of the time and costs after 18 March 2015 was attributable to that issue.

3. The court assessed PCC’s success on the clause 24 and implied-term issues as substantial but not total. PCC was therefore entitled in principle to two thirds of its costs up to 18 March 2015 and to 40 per cent of the costs incurred thereafter. Ensign was in principle entitled to 40 per cent of its post-18 March costs for its success on Schedule 17.

4. Because the competing post-18 March entitlements substantially balanced, and detailed assessment would be neither proportionate nor pragmatic, there was no order for costs for that period. Each party was ordered to pay its own costs of the 18 March hearing.

5. The final order required Ensign to pay two thirds of PCC’s costs up to, but excluding, the costs of the 18 March hearing, subject to detailed assessment if not agreed. The declarations were made in amended form to reflect the contractual construction and implied term.