Sprint Electric Ltd v Buyer's Dream Ltd & Anor

The court determined the allocation of costs arising from two linked sets of proceedings: the Source Code Claim and the unfair prejudice petition under sections 994-996 of the Companies Act 2006. The court applied the ordinary principle that costs generally follow the event but adjusted that rule in light of the parties' conduct, the reasonableness of issues pursued, and settlement offers (drawing on CPR 44 and authorities such as O'Neill v Phillips and Re Southern Counties Fresh Foods Ltd). Having weighed the significance of offers, the comparative success on liability and quantum, and the parties' conduct before and during litigation, the judge concluded that Dr Potamianos was the overall successful party on the unfair prejudice petition but should not recover all of his costs. The court ordered a percentage approach to costs: 65% of Dr Potamianos' costs for the liability stage and 80% for the quantum stage, and noted earlier consequential orders (made on 9 March 2021) in relation to costs of the Source Code Claim.

Background and parties: The proceedings comprised two linked disputes. Sprint Electric Limited (SEL) pursued a Source Code Claim against Dr Aristides George Potamianos and his service company Buyer’s Dream Limited (BDL). Separately, Dr Potamianos presented an unfair prejudice petition under sections 994-996 of the Companies Act 2006 against Sprintroom Limited (SRL) and Mr Edwin John Prescott. Earlier judgments relevant to liability and quantum were the Liability Judgment ([2018] EWHC 1924 (Ch)), the Source Code Quantum Trial (HHJ Hacon, [2020] EWHC 2004 (Ch)) and the Unfair Prejudice Quantum Judgment ([2020] EWHC 3465 (Ch)); the Court of Appeal handed down Prescott v Potamianos & Anor [2019] EWCA Civ 932.

Nature of the application: The hearing on 30 March 2021 concerned allocation of costs between the parties arising from the two sets of proceedings, the effect of settlement offers (including ‘global’ offers covering both proceedings), the parties' conduct (pre-action and during litigation), whether issue-based cost orders were appropriate, and whether payments on account and interest should be ordered.

Issues framed:

• Whether costs should follow the event or be adjusted for conduct, unreasonable issues pursued, and offers to settle (considering CPR 44 and authorities).
• Whether the successful party (Dr Potamianos) should be deprived of all or part of his costs because he failed on a number of issues or otherwise acted unreasonably.
• Whether and to what extent settlement offers (including offers made by both sides at various times) should affect costs orders.
• Whether issue-based costs orders or proportionate percentage reductions should be made and whether payment on account and interest should be ordered.

Court’s reasoning and decision: The judge reviewed the governing principles: costs are discretionary (section 51 Senior Courts Act 1981 and CPR 44), but ordinarily follow the event; departures are appropriate having regard to "all the circumstances" (including conduct, success on parts of the case, and offers). The judgment analysed offers made during pre-action and litigation phases, noting that some offers were commercially significant (for example offers of £1.34m and £1.58m, and a later offer of £1.2m by Dr Potamianos). The court found both sides at fault in conduct at times. It held that Dr Potamianos was the overall successful party on the unfair prejudice petition but had failed on a number of significant issues and had pursued some arguments that added materially to costs. Taking into account offers (including an offer by Dr Potamianos on 27 June 2018) and the parties' conduct, the judge rejected a rigid issue-counting exercise and preferred a pragmatic percentage adjustment. The judge concluded that the fair allocation was that Dr Potamianos should recover 65% of his costs of the liability stage and 80% of his costs of the quantum stage. The decision also recorded and relied on earlier consequential orders (for example an order on 9 March 2021 that BDL and Dr Potamianos pay 90% of SEL’s costs of the liability trial up to 31 May 2018, summarily assessed at £198,000) and left some ancillary matters (payment on account, interest rate and particular hearing costs) for further argument or agreement.

This is a first instance costs ruling. The court determined that Dr Potamianos was the overall successful party on the unfair prejudice petition but that his partial losses and conduct justified adjustment to the normal rule that costs follow the event. The court ordered that Dr Potamianos recover 65% of his costs for the liability stage and 80% of his costs for the quantum stage; the judgment relied on established principles in CPR 44 and authorities such as Re Southern Counties Fresh Foods Ltd and O'Neill v Phillips when assessing offers and conduct. The court also recorded previous consequential cost orders made on 9 March 2021 (including an order that BDL and Dr Potamianos pay 90% of SEL's liability trial costs assessed at £198,000) and invited further argument on payment on account and interest.

The judgment sits after a series of interlocutory and substantive decisions. Relevant prior decisions include the Liability Judgment: Sprint Electric Ltd v Buyer's Dream Ltd & Anor [2018] EWHC 1924 (Ch); the Source Code Quantum Trial judgment: Sprint Electric Ltd v Buyer's Dream Ltd & Anor [2020] EWHC 2004 (Ch) (HHJ Hacon); the Unfair Prejudice Quantum Judgment: Potamianos v Prescott & Anor [2020] EWHC 3465 (Ch); and the Court of Appeal decision Prescott v Potamianos & Anor [2019] EWCA Civ 932, [2019] 2 BCLC 617. SEL obtained permission to appeal HHJ Hacon's costs decision to the Court of Appeal on 22 February 2021, with that appeal listed for hearing in July 2021.