Smoke Club Limited & Ors v Network Rail Infrastructure

Costs following determination of a standalone preliminary issue should be decided without awaiting the final compensation outcome. A party may be successful overall while achieving only partial success on the issues advanced. Where the successful party fails on its primary case and succeeds only on an alternative basis, its recoverable costs may be substantially reduced to reflect the work attributable to the unsuccessful issue. The Tribunal may award a percentage of costs, order detailed assessment if necessary, make a payment on account, and specify different rates of interest before and after the costs order.

The Tribunal had determined a preliminary issue concerning whether the claimants possessed a compensatable interest in land under the Compensation Code. It rejected the claimants’ primary case that they held a 15-year lease arising from proprietary estoppel, but found that they held a periodic tenancy from year to year with security of tenure under the 1954 Act.

The parties made written submissions on costs. The claimants sought their costs as the successful party. The respondent contended that the result was effectively a draw or that each party should bear the costs of the issues on which it succeeded. The Tribunal also considered interest on costs and a payment on account.

1. Costs were determined independently of the eventual compensation. The existence of a compensatable interest had been decided as a standalone preliminary issue, so the costs of that issue could be determined without waiting for the amount of compensation to be assessed.
2. The outcome was not properly characterised as a draw. The claimants achieved material success by establishing a periodic tenancy rather than a tenancy at will, but they failed on their primary proprietary-estoppel case and did not obtain the 15-year lease sought.
3. The costs order therefore had to reflect partial success. Although evidence about the parties’ relationship was relevant to the alternative tenancy issue, a significant proportion of the costs related to the unsuccessful proprietary-estoppel case. The claimants were awarded 50% of their costs, subject to detailed assessment if not agreed.
4. The respondent was ordered to make a payment on account of £120,000. The Tribunal treated £400,000 as the appropriate global figure for costs incurred on the preliminary issue and awarded 60% of one half of that sum.
5. Interest was awarded at 2% above the Bank of England base rate up to the date of the order and 3% above base rate thereafter.