Astrazeneca UK Ltd v International Business Busiines Corporation
| Jurisdiction | England & Wales |
| Judge | Mr Justice Ramsey |
| Judgment Date | 14 December 2011 |
| Neutral Citation | [2011] EWHC 3373 (TCC) |
| Docket Number | Case No: HT-11-299 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 14 December 2011 |
[2011] EWHC 3373 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr. Justice Ramsey
Case No: HT-11-299
Mark Hapgood QC and Alan Roxburgh (instructed by Milbank Tweed Hadley and McCloy LLP) for the Claimant
Jeffery Onions QC and Simon Henderson (instructed by Herbert Smith LLP) for the Defendant
Judgment No 2
Hearing date: 1 st December 2011
Introduction
On 22 November 2011 I handed down judgment determining a number of issues arising from the termination of a Master Services Agreement ("the MSA") entered into between the Claimant ("AstraZeneca") and the Defendant ("IBM"). I now deal with the costs of these proceedings commenced under Part 8.
In summary Mark Hapgood QC, who appears with Alan Roxburgh, on behalf of AstraZeneca submits that the appropriate order is that AstraZeneca should have 80% of their costs. He submits that they were substantially successful but that there were issues on which they did not succeed which, he submits, gives rise to an appropriate proportional costs order.
On behalf of IBM Mr Jeffery Onions QC, who appears with Simon Henderson, submits that the way in which AstraZeneca conducted these proceedings up to 24 October 2011 means that AstraZeneca should pay IBM 75% of its costs up to that date. Otherwise he submits that each party should have 50% of the costs and therefore the appropriate order is "no order as to costs".
Submissions on behalf of AstraZeneca
AstraZeneca relies on Clause 89.4 of the MSA which provides as follows:
"[IBM] shall indemnify AstraZeneca…on demand from and against all Defence Costs incurred by AstraZeneca in connection with any Dispute in which judgment is given in AstraZeneca's favour."
There is a similar provision in clause 89.5 requiring AstraZeneca to indemnify IBM in respect of Defence Costs incurred by IBM in connection with any Dispute in which judgment is given in IBM's favour.
In Clause 1 of the MSA the phrase "Defence Costs" is defined as follows:
"reasonable attorney's fees and disbursements (calculated on a solicitor-own client basis) including fees and disbursements charged by counsel and other legal advisers (including solicitors and counsel from other jurisdictions), fees levied by any court, arbitrator or mediator and the fees and disbursements charged by expert witnesses."
Mr Hapgood submits that the word "Defence" in the definition has to be read in the light of Clause 2.2 of the MSA which provides that: "The headings in this Agreement and the names given to defined terms are for convenience only, and do not affect the interpretation of this Agreement." He submits that, as the word "Defence" does not appear within the definition, it should not affect the interpretation of Clauses 89. 4 or 89.5 and, in particular, the meaning of the term "Defence Costs" so as to limit those costs to costs spent in defence of a claim.
He also relies on the definition of "Dispute" in Clause 1 as meaning: "any question or difference which may arise between the Parties concerning the construction, meaning or effect of this Agreement."
As a result he submits that IBM has to indemnify AstraZeneca against the costs incurred by AstraZeneca in connection with these proceedings to the extent to which judgment has been given in AstraZeneca's favour in relation to any of the issues. He accepts that, similarly, AstraZeneca has to indemnify IBM in respect of the costs of the proceedings in relation to those issues where judgment was given in IBM's favour. He submits that 90% of the costs of the proceedings were incurred on the issues where judgment was given in favour of AstraZeneca, with 10% of the costs being incurred in relation to the issues where judgment was given in IBM's favour. On that basis he submits that the court should, overall, award AstraZeneca 80% of their costs, thereby deducting the 10% which would be due from AstraZeneca to IBM from the 90% which would be due from IBM to AstraZeneca.
He submits that the reference in the definition of "Defence Costs" to "reasonable attorney's fees and disbursements (calculated on a solicitor-own client basis)" is a reference, properly construed, to costs being assessed on an indemnity basis, as now provided for under CPR 44.4(1)(b) and 44.4 (3). He relies on the description of "solicitor and own client basis" and "the indemnity basis" in the judgment of Sir Robert Megarry VC in EMI Records Limited v Ian Cameron Wallace Ltd [1983] Ch 59 at 64 E-G.
In relation to the exercise of the court's discretion as to costs under section 51 of the Senior Courts Act 1981 and CPR 44.3 he submits that where there is a contractual right to costs, the discretion should ordinarily be exercised so as to reflect that contractual right. He relies on the decision of the Court of Appeal in Gomba Holdings (UK) Limited v. Minories Finance Limited [1993] Ch 171 and in particular, the judgment of the court given by Scott LJ at 194 B. He submits that this principle should be followed in this case and there should be an order for costs to be assessed on an indemnity basis.
He also relies on CPR 48.3 which deals with the amount of costs where costs are payable pursuant to a contract and which provides that, unless the contract expressly provides otherwise, the costs payable under the terms of the contract are to be presumed to be costs which have been reasonably incurred and are reasonable in amount.
Mr Hapgood also relies on paragraph 50.1 of the Costs Practice Direction to CPR Part 48 which provides as follows: "Where the court is assessing costs payable under a contract, it may make an order that all or part of the costs payable under the contract shall be disallowed if it is satisfied by the paying party that costs have been unreasonably incurred or are unreasonable in amount."
He submits that the overall effect of those provisions is the same or substantially the same as an assessment on an indemnity basis. He refers to the decision of the Court of Appeal in Venture Finance Plc v Mead [2006] 3 Costs LR 389 where Chadwick LJ said at [22] :
"The relevance of CPR 48.3, as it seems to me, is that CPR 44.3(4) requires that when deciding what order (if any) to make about costs the court must have regard to all the circumstances; and those circumstances will include the fact, if it be the case, that there is a contractual obligation to pay costs—as there is under clause 9 of the guarantees. So, it is said, in order to be consistent with the requirement in CPR 48.3 at the assessment stage, the court ought (unless there is good reason to the contrary) [to] exercise discretion under CPR 44.3(4) so as to reflect contractual rights."
In relation to the proportion of costs that AstraZeneca should recover, Mr Hapgood accepts that AstraZeneca is not entitled to 100% of its costs because IBM was successful on two issues. He submits that the appropriate way to reflect this is for IBM to pay an appropriate proportion of the costs of AstraZeneca as provided for in CPR 44.3(4)(b) which states that one of the circumstances to which the Court must have regard is whether a party has succeeded on part of his case, even if he has not been wholly successful. He also refers to CPR 44.3(6)(a) which provides that one of the orders a court may make is that a party must pay a proportion of another party's costs and CPR 44.3(7) which provides that where the court would otherwise consider making an order relating to a distinct part of the proceedings, it must instead, if practicable, make an order for a proportion of that other party's costs.
He refers to the reasoning behind CPR 44.3(6)(f) and (7) set out in National Westminster Bank PLC v Kotonou (Costs) [2007] EWCA Civ 223 at [22] and submits that, as stated by Chadwick LJ in Venture Finance Plc v Mead at [23], the court may decide on a percentage of the overall costs of the action where it has to give effect to a contractual right. In those circumstances he seeks an order that IBM should pay 80% of AstraZeneca's costs, to be assessed on an indemnity basis.
Submissions by IBM
Mr Onions submits that the court should disregard the claim made by AstraZeneca which relies on Clause 89.4 of the MSA because that claim is unpleaded and has been raised at a late stage. He submits that the interpretation of Clauses 89.4 and 89.5 should not be dealt with in the context of this application because they have potentially far reaching effects on both parties. He submits, although with less force in his oral submissions, that in the event that the court does consider the proper construction of Clauses 89.4 and 89.5, those clauses are concerned only with the question of costs incurred in defending a claim.
He further submits that all that Clauses 89.4 and 89.5 do is to give effect to the ordinary principle that the winning party would be entitled to its costs. He submits that the definition of "Defence Costs" can be summarized as a reference to reasonable costs. He submits that the reference to "reasonable attorney's fees and disbursements" should govern the provision and that the reference to "solicitor-own client basis" does not give rise to costs assessed on an indemnity basis.
Mr Onions submits that an appropriate costs Order is that IBM should be paid 75% of their costs up to and including the Case Management Conference on 24 October 2011. In relation to that period he submits that the approach taken by AstraZeneca meant that the stage the proceedings had reached by that Case Management Conference was the position they should have started from had AstraZeneca properly formulated its claim from the beginning.
He...
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