Clayton Recruitment Limited v James Wilson & Anor.

When substantive issues are compromised but costs remain disputed, the court may determine costs without a trial if it has sufficient agreed or reliable material to assess the likely outcome and the reasonableness of the steps taken. The court should avoid treating settlement concessions as admissions of liability, since that may discourage sensible compromises. A party may nevertheless be treated as successful to the extent that the compromise secures clear contractual entitlements or relief which the other party was bound to provide. Costs may therefore be apportioned to reflect both the degree of practical success and the uncertainty created by the absence of a trial.

The claimant, a recruitment agency, sought interim relief against a former employee and his new company concerning confidential information, contractual restraints, LinkedIn connections and access credentials. The substantive dispute was compromised at the first hearing. The action was stayed, subject to liberty to restore it for a possible inquiry as to damages, and the remaining issue was the costs of the interim application.

The claimant contended that the consent order gave it the substance of the relief sought and made it the successful party. The defendants maintained that the concessions were made for practical reasons and without admitting liability. The court therefore had to decide whether it could determine costs without a trial, how the parties’ respective merits and conduct should be assessed, and what order should follow.

1. Costs jurisdiction. The court had sufficient material to assess whether the claimant was likely to succeed on particular issues and whether the application was justified. It was therefore appropriate to determine costs, although the court had to remain conscious of the limitations identified in BCT Software Solutions Ltd v C Brewer and Sons Ltd [2003] EWCA Civ 939.
2. LinkedIn connections and password. The employment contract made professional connections created during employment protectable for the claimant’s benefit and required their deletion on termination. The separate LinkedIn agreement reinforced that conclusion. Mr Wilson was contractually obliged to provide his password so that the connections could be removed. The LinkedIn user agreement did not override those contractual obligations.
3. Other contractual obligation. Mr Wilson was also obliged to provide a signed statement confirming compliance with the relevant post-termination obligations, although the claimant’s proposed affidavit went beyond that contractual requirement.
4. Reasonableness and settlement policy. The claimant was justified in commencing proceedings because of the use of the connections and the defendants’ response. However, parts of the pre-action demands were excessive, and the court should guard against converting practical settlement concessions into adverse costs consequences where no trial has occurred.
5. Order. The claimant had achieved clear contractual relief and was justified to a significant degree, but the wider relief might not have been granted after trial. The claimant was awarded 55% of the application costs, assessed at £13,750 excluding VAT. Each party was ordered to bear its own costs of the costs hearing. Payment was allowed within 28 days.