Marathon Asset Management LLP & Anor v Seddon & Ors (Rev 1)

A claimant who recovers only nominal damages will ordinarily be treated as the unsuccessful party for costs purposes where its real objective was substantial compensation. Costs may nevertheless be apportioned to reflect wrongdoing, unreasonable conduct and the issues actually contested. A claimant who rejects a realistic Part 36 offer and fails to obtain a more advantageous judgment will face the prescribed costs consequences unless that would be unjust; the burden of showing injustice is substantial. In current commercial conditions, absent evidence supporting another rate, interest on costs should ordinarily be assessed at 2% above the Bank of England base rate.

The judgment concerned consequential issues arising from the court’s earlier decision on claims by Marathon Asset Management LLP and Marathon Asset Management (Services) Ltd against former employees and others. The first and third defendants had been found liable for copying and retaining confidential documents, but Marathon had proved neither loss nor gain and was awarded only nominal damages.

The court determined liability for costs, the rate and commencement of interest on costs, and Marathon’s application for permission to appeal. The central issues were whether the defendants should nevertheless bear costs attributable to their wrongdoing, how their rejected Part 36 offer affected the costs order, and whether there was any real prospect of an appeal.

1. Costs and nominal damages. The defendants were treated as the successful parties because Marathon’s real objective was substantial damages and that claim failed. The court adopted the approach in Hyde Park Residence Ltd v Yelland [1999] RPC 655, that recovery of nominal damages in such circumstances is in reality a loss.
2. Mr Bridgeman. He was ordered to pay Marathon’s costs of investigation and commencement of the misuse claim because his copying, concealment and delayed delivery of confidential files caused those costs. After he returned the files and admitted liability on 24 January 2014, Marathon’s pursuit of damages was at its own risk. He was therefore entitled to his defence costs after that date, subject to the later Part 36 consequences.
3. Mr Seddon. He was not made responsible for investigation and delivery-up costs because he had not possessed or used the files. However, his unreasonable denial of liability caused substantial trial expenditure. Rather than order detailed issue-based assessment, the court reduced his recoverable costs to 50% up to 24 February 2016, and ordered Marathon to pay his full costs thereafter.
4. Part 36. The defendants’ offer of £1.5 million plus costs was a game-changer. Marathon’s failure to accept it and its pursuit of speculative jackpot damages justified treating the post-offer litigation as entirely at its own risk. Applying Lilleyman v Lilleyman (No 2) [2012] 1 WLR 2801 and Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch), the court held that the burden of showing injustice under Part 36 was formidable and was not discharged.
5. Interest. The enhanced rates in McPhilemy v Times Newspapers Ltd (No 2) [2002] 1 WLR 934 and KR v Bryn Alyn Community (Holdings) Ltd [2003] EWCA Civ 383 arose under a different Part 36 provision. They did not justify an enhanced rate here. In the absence of contrary evidence, 2% above Bank of England base rate was an appropriate commercial rate. Interest was ordered from the dates costs were incurred, continuing at that rate until three months after the costs orders, after which interest under section 17 of the Judgments Act 1838 would run.
6. Permission to appeal. Permission was refused. The factual findings were not realistically challengeable and Marathon had identified no arguable error in the fundamental reasoning that the remedy sought did not match the wrong proved.