BSkyB Ltd and Another v HP Enterprise Services UK Ltd and Another (No 2)
| Jurisdiction | England & Wales |
| Judge | THE HON. MR. JUSTICE RAMSEY,The Hon. Mr. Justice Ramsey |
| Judgment Date | 28 June 2010 |
| Neutral Citation | [2010] EWHC 862 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-06–311 |
| Date | 28 June 2010 |
[2010] EWHC 862 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: The Hon. Mr. Justice Ramsey
Case No: HT-06–311
Mr Mark Howard QC and Mr Alec Haydon (instructed by Herbert Smith LLP) for the Claimants
Mr Alan Gourgey QC, Ms Zoe O'Sullivan and Mr Stephen Tudway (instructed by DLA Piper) for the Defendants
Approved Judgment No.2
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon. Mr. Justice Ramsey:
Introduction
In this judgment I deal with issues arising from the main judgment handed down on 26 January 2010: the liability for the costs of the proceedings, the basis of assessment of costs, the effect of change of corporation tax on Sky's claim for damages and the impact of tax on interest.
Costs Liability
In the main judgment I held that Sky had established allegations of fraud against EDS in relation to representations relating to time which induced them to enter into both the Letter of Intent and the Prime Contract. I also held that Sky had established a claim for damages for negligent misstatement prior to the Letter of Agreement and for breach of contract. The damages established by Sky are accepted by EDS to be at least £270 million.
Sky failed to establish their claims for fraudulent misrepresentation in relation to a number of other heads and failed to establish other allegations of negligent misstatement prior to the Letter of Agreement.
In these circumstances, EDS accept that Sky should be entitled to costs but contend that because Sky lost on a number of issues and abandoned one issue, Sky should only be awarded a proportion of their costs, which EDS submits should be 62%. Sky contends that they should be entitled to all of their costs and that they should be assessed on an indemnity basis.
I now turn to consider these two issues: whether Sky should be awarded a proportion of their costs and if so what proportion and whether the costs should be awarded on an indemnity basis.
The appropriate costs order
The starting point for consideration of costs is CPR Part 44 which at rule 44.3(2) provides that the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party but that the Court may make a different order. In deciding whether to make a different order, and if so, what order to make, rule 44.3(4) provides that the Court has to have regard to all the circumstances, including in this case, the conduct of the parties and whether a party has succeeded on part of his case, even if that party has not been wholly successful.
Rule 44.3(5) states that the conduct of the parties includes conduct before, as well as during, the proceedings and includes consideration of whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue as well as the manner in which a party has pursued or defended their case or a particular allegation or issue and also whether the claim has been exaggerated.
There is a range of possible orders set out under rule 44.3(6) which includes an order that a party must pay a proportion of another party's costs or the costs relating to particular steps in the proceedings. The Court is encouraged by rule 44.3(7) to order a proportion of costs rather than costs relating to particular steps, evidently because of the difficulty of distinguishing which costs related to particular steps, when costs come to be assessed.
The rules under CPR 44.3 have been considered in a number of cases to which I was referred. Whilst the appropriate order in each case is a matter for the Court's discretion based on the particular circumstances of that case, the following guidance can be derived from previous decisions in relation to proportionate costs orders.
Lord Woolf set out in Phonographic Performance Ltd v AEI [1999] 1 WLR 1507 at 1523 that: “The most significant change of emphasis of the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the “follow the event principle” encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”
As Jackson J said in Multiplex Construction (UK) Ltd v Cleveland Bridge (UK) Ltd [2008] EWHC 2280 (TCC) at [72(v)] : “In many cases the judge can and should reflect the relative success of the parties on different issues by making a proportionate costs order.”
As set out in CPR 44.3(7) an approach based on issues should, if practicable, lead to a proportion of costs as summarised by Chadwick LJ in National Westminster Bank v Kotonou [2007] EWCA Civ 223 at [22]: “A more convenient method, while keeping in mind the issue based approach, is to assess all the costs together and then apply a proportion which reflects the fact that a party has won on some issues and lost on the other issues. That is what the Costs Rules require.”
In my judgment a proportionate costs order may be appropriate to reflect the extent to which a successful party has not been selective in the points they have taken and so should not recover all of their costs. An example of this situation is a case where an issues based approach might otherwise be appropriate. It is clear that in such a case the Court should avoid ordering, for instance, that each party should have the costs of certain issues, but if practicable should make a proportionate costs order or, alternatively, one which gives one party the costs from or until a particular date.
EDS submit that Sky should be deprived of their costs in respect of a significant number of discrete issues on which they failed, either because the allegation was abandoned or because Sky's case was rejected at trial. EDS say that Sky succeeded only on one of its five allegations of fraud pre-Prime Contract and then on a narrow aspect of the overall estimating process which was otherwise held to be honest. EDS also say that Sky only succeeded on one of its allegations of negligent misrepresentation prior to the Letter of Agreement.
Sky say that this approach should be rejected and that the fact that they were not completely successful should not displace the usual principle that costs follow the event and there should therefore be no deduction. Sky say that there was a significant overlap between the substance of the allegations on which they failed and the ones on which they succeeded.
I have come to the conclusion that this is a case where a proportionate costs order is appropriate. The approach of Sky to the claims of fraudulent misrepresentation and negligent misstatement was to plead wide ranging allegations under a number of heads but they have succeeded only on one aspect, albeit a central aspect relating to the time estimate.
However I accept Sky's submission that there was a considerable overlap between the various allegations which had to be understood in context by reference to Sky's estimates of costs, time and resources. That makes this a case where it would be extremely difficult to identify separately the costs of the issues on which Sky has succeeded and the costs of the issues on which Sky has failed. This is not a case where Sky has failed on the whole of their case on, for instance, negligent misstatement or breach of contract. It is a case where, to use Lord Woolf's words in Phonographic Performance Ltd v AEI, Sky has not been selective in the points they have taken and because of that have increased the costs of the litigation.
Subject to the question of overlap, I accept that in relation to fraud Sky failed and EDS were successful in relation to:
(1) The three components of the alleged resource misrepresentation: the Greater Resource Representation, the Lesser Resource Representation and the Ready to Start Misrepresentation.
(2) The allegations that EDS had made a misrepresentation as to costs.
(3) The allegation that EDS had made misrepresentations in relation to proven technology or “significant risk”.
(4) The allegations that EDS had made misrepresentations as to methodologies.
(5) The allegations of dishonesty against Gerald Whelan, John Chan and Tony Dean.
Sky also failed in relation to negligent misrepresentations as to resources, underestimation, progress and costs prior to the Letter of Agreement and in claims against EDSC and for repudiatory breach.
In addition, Sky abandoned an allegation to fraudulent misrepresentation as to the methodology prior to the Letter of Agreement and allegations in relation to Forte Fusion middleware.
Sky's failure on those issues and the corollary of EDS’ success makes it inappropriate for Sky to recover the whole of their costs of those proceedings. The question then arises of how this failure/success should be reflected in the order for costs.
EDS have carried out an analysis of the relative number of pages in the statements of case which were taken up with the issues on which Sky failed compared to those on which it succeeded. They say that of the total of 822 pages of Statements of Case, Sky failed on...
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