Costs following an injunction

Costs in Injunction Applications – Are Claimants entitled to significant costs if they secure only modest damages?

This issue was explored in the recent High Court case of Marcura Equities FZE & Anor v Nisomar Ventures Ltd & Anor [2018] EWHC 523 (QB).

The Facts

In this case the Claimants sold computer software packages to the maritime industry globally and the Defendants, a company and its owner, had not yet traded but were developing a computer programme for the same industry.

The Claimant’s claim focused on the actions of an individual who was not a party to the proceedings but was a former employee, who worked on the development of one of the Claimant’s computer software packages. The individual allegedly provided the Defendants with confidential information belonging to the Claimants over the period of a year. The Claimants alleged that the Defendants had induced, facilitated, assisted or conspired with the individual in breaching the individual’s contractual obligations of confidence to the Claimants, and that the Defendants had used the Claimants’ confidential information without the Claimant’s permission.

The Claimants claimed damages and injunctive relief.

The Defendants admitted possession of some of the information and gave undertakings pending the trial and then made a written settlement offer to discharge a quarter of the Claimant’s then £108,000 costs. The offer was rejected by the Claimants, however the parties eventually settled on terms including a full injunction and £35,000 damages.

The question of costs, which had risen to £450,000 was left open to the Court’s determination.

The Court’s determination on costs

The High Court found in favour of the Claimant and granted a costs order. In doing so the Court determined three main points:

1. Where the Court could ascertain which party had in effect succeeded, and it was not disproportionate to do so, the Court could determine the issue of costs despite all other issues being settled outside of Court.

In making this determination the Judge, Nicholas Vineall QC, referred to the Court of Appeal case, M v London Borough of Croydon [2012] EWCA Civ 595. In this case Lord Neuberger, stated “it is open to parties in almost any civil proceedings to compromise all their differences save costs, and to invite the court to determine how the costs should be dealt with. The court has jurisdiction in such a case to determine who is to pay costs, but it is not obliged to resolve such a free-standing dispute about costs.

The Judge also referred to BCT Software Solutions Ltd v C Brewer & Sons Ltd [2004] FSR 150 in which Chadwick LJ stated “there will be cases (perhaps many cases) in which it will be clear that there was only one issue, that one party has been successful on that issue, and that conduct is not a factor which could displace the general rule” that the successful party recovers its costs.

The Judge in this case stated “it is hard see why a claimant who, after complying with any relevant protocol and issuing proceedings, is accorded by consent all the relief he seeks, should not recover his costs from the defendant, at least in the absence of some good reason to the contrary” and that “there is no ground for refusing the claimant his costs simply on the ground that he was accorded such relief by the defendants conceding it in a consent order, rather than by the court ordering it after a contested hearing. In the words of CPR r 44.3(2) the claimant in such a case is every bit as much the successful party as he would have been if he had won after a trial”.

2. The Defendant’s offer to discharge a fraction of the Claimant’s costs, was insufficient to deny the Claimant even part of its costs.

Here the Judge stated that because “the offer is materially less favourable to the Claimants than the settlement they have in fact achieved. The offer to contribute only £25,000 to the Claimants’ costs was not, in my view, a realistic or reasonable offer, and I do not consider it was in any way unreasonable of the Claimants not to have accepted it”.

3. The fact that the costs vastly exceeded the damages obtained, this did not prevent an award for costs being made.

The Defendants submitted that the agreed payment of £35,000 was so modest that it could not be used as part of the justification of the award of the substantial costs claimed by the Claimants.

In making his determination, the Judge distinguished from Medway Primary Care Trust v Sebastian Marcus 2011 EWCA Civ 750, a case regarding a claim for damages for personal injury, on the basis that “a personal injury case, where the only relief sought is damages, is very different from a confidential information case”. The Judge stated that in confidential information cases monetary claims are only a part, and sometimes one of the least important parts, of the relief sought and it would therefore “rarely if ever be right to focus only on the payment of money when determining a costs order….in determining who the successful party is”. The Judge stated that he did not consider the claim for costs to be disproportionate because £450,000 had been spent to recover £35,000 on the basis that this “ignores the important delivery up and other injunctive relief that has been obtained”.

Points to note

Parties to an injunction application should be mindful that:

• Parties can seek to obtain a determination on the issue of costs from the court, even where a settlement has been reached on all other disputed points, providing the court can ascertain which party has in effect succeeded. However the parties take the risk that the court will not be prepared to make any determination other than that there be no order for costs.
• An offer that is unrealistic, unreasonable and materially less favourable than the settlement actually achieved is unlikely to deny a winning party part of its costs later on. Parties should therefore ensure that if they want to rely on an offer later on when it comes to a determination of costs, the offer must be realistic and reasonable.
• The value of all the remedies achieved at settlement will be considered when determining an award for costs. So even if the damages obtained by the winning party are small the Court may determine that the overall value of the settlement to the successful party is high because of the value of other remedies obtained such as an injunction to the successful and will make a costs award accordingly.