Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd

The court may determine liability-trial costs before the final resolution of split litigation where the parties need certainty and the costs can fairly be assessed. A successful party may receive indemnity costs where the paying party’s conduct is unreasonable to a high degree and takes the litigation out of the norm. A weak but arguable claim will not ordinarily suffice, although a hopeless claim may do so. Late amendments require a balance between injustice to the applicant, the opposing party and other litigants, together with a good explanation for delay. Amendments concerning detailed quantum may properly be left to the quantum stage.

The judgment dealt with consequential matters following the court’s liability judgment in [2017] EWHC 1763 (TCC). The defendant had succeeded on almost all liability issues, but the claimant had succeeded on a separate restitutionary issue concerning possible recovery of overpayment. The defendant sought its liability-trial costs on an indemnity basis and applied to amend its defence and counterclaim to plead losses said to have resulted from the claimant’s repudiation. The issues were whether costs should be ordered before the quantum stage, whether indemnity costs were justified, and which proposed amendments were liability issues or matters of detailed accounting and damages.

1. Costs. Costs should be ordered at once. Although no payment would be made before the quantum stage, the liability trial was complete, the costs were substantial, and postponement would leave both parties uncertain. The defendant was awarded its liability-trial costs on the indemnity basis, subject to detailed assessment, with a five per cent reduction reflecting the claimant’s success on the restitutionary issue.

2. Indemnity costs. The relevant principles included that the paying party’s conduct must be unreasonable to a high degree and that the litigation or its circumstances must take it out of the norm. Pursuing a weak but arguable claim does not usually justify indemnity costs, whereas pursuing a hopeless claim may. The court also considered the overall litigation, including unreasonable contractual conduct, misleading conduct concerning an unauthorised payment, knowledge that there were no grounds for alleging repudiation, factually insubstantial alleged breaches, and unsatisfactory explanations concerning disclosure and a material witness.

3. A sensible concession made at the end of the evidence was not a reason for indemnity costs. Concessions of that kind should be encouraged.

4. Amendment. The proposed amendments were analysed by reference to the case-management order. Detailed accounting and quantification of damages belonged to the quantum stage. Liability issues should have been dealt with at the liability trial. Amendments alleging that management was prevented or handicapped from winning work were therefore treated differently from amendments concerning professional fees, management time, income, financing and tax losses.

5. The late-amendment discretion required the court to balance injustice to the applicant against injustice to the opposing party and other litigants. Lateness was relative, and the applicant should provide a good explanation for delay. Taking account of the absence of quantum directions, the defendant’s financial circumstances and the consequences of refusing all amendments, the court allowed the amendment only to the limited extent identified and required the remaining parts to be removed.

The judgment followed the court’s liability decision in [2017] EWHC 1763 (TCC). It also referred to an earlier case-management order which directed separate liability and quantum stages.