Active Media Services Inc v Burmester, Duncker & Joly GmbH & Co & Ors

The general rule that costs follow the event does not prevent an issue-based costs order. The court may reflect a party’s success on some issues, the conduct of both parties, and the manner in which particular allegations were pursued. Dishonest conduct may justify disallowing costs attributable to the dishonest case or ordering payment of the opponent’s related costs, but there is no automatic entitlement to all costs of proving dishonesty. The order should avoid double recovery and may be broad-brush where precise attribution would be impracticable or disproportionate. A party whose wrongful conduct caused another party to be joined may nevertheless be ordered to bear its own costs.

This was a hearing concerning costs following the court’s judgment of 9 February 2021. The claimant’s claim against the first and second defendants had been dismissed, although the defendants’ case based on waiver, estoppel and acquiescence succeeded after they failed on aspects of the construction of the Completion Guarantee. The claimant accepted that its own destruction of relevant documents and other conduct justified indemnity costs, but argued that the defendants’ dishonest case concerning completion, delivery, backdated notices and an enhanced film should reduce their recovery.

The fourth defendant sought its costs from the claimant. The central issues were the appropriate costs order between the claimant and the guarantor defendants, the payment on account, and responsibility for the fourth defendant’s costs.

1. The court ordered the claimant to pay 75% of the first and second defendants’ costs on the indemnity basis. The defendants had succeeded overall, but the order had to reflect the separate construction and waiver issues, the dishonest case advanced by the defendants, and the claimant’s reprehensible conduct, including document destruction and failure to engage in ADR.

2. The court applied the discretion under CPR 44.2. Costs need not be allocated solely by reference to the overall result. The court may make separate or broad-brush orders where a precise issue-by-issue assessment would be difficult or disproportionate.

3. The defendants’ case that the film had been completed and delivered by the contractual date, supported by dishonest evidence and backdated notices, was not an honest case to advance. Its pursuit materially required time and effort from the claimant and the court. That conduct could therefore be reflected under CPR 44.2(5)(c), although it did not displace the fact that the defendants had defeated the claim overall.

4. The appropriate payment on account of the guarantor defendants’ costs was £900,000, having regard to the order for 75% of approximately £2 million of costs.

5. The fourth defendant’s involvement resulted from the guarantor defendants’ dishonest case concerning the contractual notices and enhanced film. The starting point was therefore that the guarantor defendants, rather than the claimant, should bear the fourth defendant’s costs. However, the fourth defendant had itself played a central and wrongful role in the scheme, including issuing false notices and rewriting its account of events. The court accordingly ordered the fourth defendant to bear its own costs.

First-instance costs decision following the court’s judgment of 9 February 2021. No appellate history is stated in the judgment.