Canary Wharf (BP4) T1 Ltd & Ors v European Medicines Agency & Anor

Contractual costs provisions should be taken into account when the court exercises its discretion on costs, but they do not automatically require indemnity costs. An anticipatory repudiation does not operate as a breach capable of triggering contractual costs provisions unless the repudiation is accepted by the innocent party. Difficulties in disclosure ordinarily belong in the detailed assessment of costs and do not, without more, take the case out of the norm. Indemnity costs require conduct sufficiently outside the norm. An issues-based costs order is inappropriate where the issues are substantially intertwined, but may be justified for a distinct and separable issue. Here, the expert evidence issue justified a 15 per cent reduction in recoverable costs.

This consequential ruling followed the court’s substantive judgment of 20 February 2019, [2019] EWHC 335 (Ch), concerning the effect of Brexit on the parties’ lease and the doctrine of frustration. The claimants sought indemnity costs, an issues-based costs order and an interim payment on account. The defendant also sought permission to appeal.

The court had to determine the appropriate basis and allocation of costs, the amount payable on account, and whether permission to appeal should be granted.

1. Indemnity costs. The court had an overriding discretion as to costs, but under CPR 44.5 it should take contractual costs provisions into account. Clauses 4.24.3 and 4.31 of the Lease were not engaged because there were no rent arrears, no presently established sums due, and no breach of the tenant’s covenants. An anticipatory repudiation remained ineffective as a breach for this purpose because the innocent party had not accepted it; the Lease therefore remained on foot.
2. The alleged disclosure failures could be reflected in the detailed assessment, if established, but did not take the case out of the norm. Applying the broad approach in Three Rivers District Council v The Governor & Company of the Bank of England, [2006] EWHC 816 (Comm), the defendant’s conduct in advancing its case did not justify indemnity costs. Costs were ordered on the standard basis.
3. Issues-based costs. The defendant had substantially lost whichever way the issues were analysed. The issues were materially intertwined, so an issues-based order was generally inappropriate. The expert evidence issue was different: it was separable and could have been avoided by an admission that Brexit was unforeseeable. Recoverable costs were therefore reduced by 15 per cent after standard assessment.
4. Interim payment and appeal. On account of costs, the court ordered payment of £1 million within 14 days. Permission to appeal was granted on both the real-prospect and compelling-reason grounds. The court noted that the order, rather than the judgment, would be appealed and that the interconnected reasoning might unravel if a higher court took a different view.

High Court (Chancery Division): The substantive judgment was handed down on 20 February 2019 under [2019] EWHC 335 (Ch). In this consequential ruling, the court determined costs, ordered an interim payment and granted permission to appeal.