COST BITES 52: “WE WANT IT ALL AND WE WANT IT NOW”: COURT REFUSES CLAIMANT’S APPLICATION FOR A SUMMARY ASSESSMENT OF COSTS

One of the aims of this series is to look at those issues of costs that are, on the face of it, incidental to the main issue decided by the court. However, in practical terms, the costs issue is of fundamental importance to the client (both the successful and losing party). In  Oxford University Innovation Ltd v Oxford Nanoimaging Ltd (Re Consequentials) [2023] EWHC 138 (Pat) Mr Daniel Alexander KC refused an application by the claimant for detailed assessment to be dispensed with.

There are some other significant issues in relation to costs: (i) who should pay; should there be a percentage deduction; should costs be on an indemnity basis; what interim payment should be made.

“… summary assessment in a case where such is not required under the rules and where substantial sums are in issue is only appropriate where there is sufficiently complete information for the court properly to evaluate the reasonableness and proportionality of the costs claimed. To do that, the court should be placed into a position in which it can examine, at an appropriate level of detail, things like hourly rates, time spent and staffing of tasks. It is true that a significant part of the costs has been budgeted, setting a benchmark of reasonableness. However, given the sums involved and the relatively limited information on certain aspects of costs here, justice is best done by ordering an interim payment which aims to be a realistic estimate of what would be awarded on detailed assessment without shutting the parties out from pursuing a more detailed assessment if they wish.”

THE CASE

The judge had earlier given judgment on a claim for royalties due of £700,000.  The claimant was successful in its action in establishing the royalties were due.  This section judgment dealt with issues relating to costs and other consequential matters.

THE JUDGMENT ON COSTS

COSTS

1. 1. There are five issues on costs:

a. Should a percentage deduction be made to reflect ONI prevailing on the issue of whether Mr Jing was a consumer?

b. Should ONI be ordered to pay costs from 13 June 2020 on the indemnity basis?

c. Should the costs be the subject of summary assessment?

d. If not, what interim payment should be ordered?

e. Interest.

SHOULD THERE BE A PERCENTAGE REDUCTION

The judge considered, and rejected, the argument that there should be a percentage reduction.

Percentage deduction

1. 1. It is common ground that this issue is generally approached by asking:

a. Who has, in substance, won?

b. Has the winning party lost on an issue which is ‘suitably circumscribed’ so as to deprive the winning party of the costs of that issue? and

c. Is it appropriate in all the circumstances also to require the overall winner to pay the other party’s costs of an issue on which it has been deprived of its costs? (Hospira UK Ltd v Novartis AG [2013] EWHC 886 (Pat) at [2], Unwired Planet International Ltd v Huawei Technologies Co Ltd [2016] EWHC 410 (Pat) at [8])

1. 1. OUI submits that it won and that there are no suitably circumscribed issues justifying depriving it of any of its costs. ONI submits that the issue of whether Mr Jing was a consumer was ‘suitably circumscribed’. It does not seek an order that OUI pays its costs of that issue but claims a reduction of 25% in any costs order in OUI’s favour. ONI submits that there were three issues raised by that part of the case (i) was Bo Jing a consumer? (ii) did the IP Terms create a significant imbalance to his detriment? (iii) were the IP Terms contrary to good faith? It says that issue (iii) added relatively little to issue (ii) while issue (i) and (ii) were of roughly equal substance. ONI therefore submits that an appropriate deduction would be 25%, based on a 60:40 split between the consumer case and employee invention case and splitting the 60% 25:25:10 between issues (i)-(iii).

1. 1. In my view, the issue of whether Mr Jing was a consumer was not suitably circumscribed to justify such a reduction. First, none of the evidence or disclosure provided by OUI would have been materially different had that point not been in issue. Second, although the court addressed this issue in detail in the Main Judgment, it is not possible to say that Oxford’s costs of argument would have been significantly affected had it not run the point. That is partly because the point was advanced by Oxford contending, with comparatively brief reference to the key case law that, on the facts of the case, Mr Jing was not a consumer in respect of his DPhil Contract. Third, the legal analysis of the UCTD meant that the scope of application of that directive and the approach to evaluation of fairness were not completely separable.

1. 1. The costs of neither party were materially increased as a result of this point being in issue. Neither side addressed the point in argument at the level of detail of the Main Judgment. Where the approach taken by one or other party does not increase its costs that cannot normally be addressed by a percentage deduction of this kind, even if the court has to deal with the issue more extensively to satisfy its own obligations of producing a properly reasoned decision. Accordingly, there is no basis for the alleged deduction in the costs claimed by OUI.

1. 1. ONI should have been paying royalties to OUI on the agreed basis under the Licence and, given that it has advanced creative (albeit losing) points to avoid doing so, in principle it should pay the full costs of the claim which OUI had to bring to secure payment.

SHOULD INDEMNITY COSTS BE ORDERED?

Indemnity costs

1. 1. OUI claims indemnity costs from ONI from 12 June 2020. ONI contends that it did not behave out of the norm to justify such a basis of assessment. I agree and am unpersuaded by Oxford’s arguments in favour of indemnity costs.

1. 1. First, both sides engaged in settlement discussions and there was a mediation and an Early Neutral Evaluation. These were unsuccessful but do not show that ONI was not engaging at all with attempts to resolve the case.

1. 1. Second, OUI made early WPSATC offers which left the Licence in place. They required payment at the full rate but offered to forgo some interest (which was a relatively modest sum) and costs. These were not made under Part 36 and such offers are not to be treated as if they were (see Coward v Phaestos [2014] EWCA Civ 1256 at [90]-[102]). ONI is in my view right that not accepting such offers does not justify the award of indemnity costs in this case. In circumstances such as these, indemnity costs may be warranted if refusal of such an offer was highly unreasonable (see White Book CPR 44.3.12, F & C Alternative Investments (Holdings) v Barthelemy [2012] EWCA Civ 843 at [70] (citing Kiam v MGM), Astex Therapeutics v AstraZeneca [2018] EWCA Civ 2444 at [61]-[78]). In my view it was not highly unreasonable for ONI not to accept OUI’s offers. There were genuine issues between the parties, even though the case would (or should) have appeared weak to ONI.

1. 1. Moreover, the question of whether an offer should or should not have been accepted at those times and whether a reasonable party would have appreciated that it would not have done better at trial is hard to second guess. Oxford’s WPSATC offer was essentially that ONI should give in completely on the substance and pay all of the royalties (albeit without interest and costs). It would not be desirable to hold that because a defendant failed to accept a claimant’s WPSATC offer, which was not made under Part 36, to accept capitulation in exchange for being let off on costs and minor sums in interest, that failure to do so attracts indemnity costs on the basis that the case should have been appreciated to be weak and would have attracted an additional liability for costs/interest. Such a situation does not take a defendant’s conduct out of the norm for the purpose of an indemnity costs award. This is not a case for application of the statement in Lejonvarn v Burgess & Anor [2020] EWCA Civ 114 at [80] which was made in a particular factual context and mainly by reference to Part 36 offers.

1. 1. Third, points are made by Oxford about ONI’s (relatively short) delay in filing documents post judgment, delay in payment and its seeking permission to appeal. None of those points justifies indemnity costs at all still less from 13 June 2020. Oxford also says that ONI was previously seeking to run up Oxford’s costs which ONI denies. It does appear that ONI’s original request for disclosure was too broad (seeking among other things disclosure about relationships with all of the Oxford spin-outs) but it came down to a more reasonable position and security for costs was ultimately given. So again here, there is nothing out of the norm and no justification for indemnity costs.

1. 1. Accordingly, I do not consider that any part of Oxford’s costs should be paid on the indemnity basis.

SHOULD THE COSTS BE SUMMARILY ASSESSED

The claimant wanted costs to to be summarily assessed. The judge rejected this arguemnt.

Summary assessment

1. 1. ONI submits that the court should follow normal practice and order detailed assessment rather than assess the costs summarily, as Oxford requests. It contends that detailed assessment is the usual approach under the CPR (see CPR PD 44 paras 8.2, 9.2(b)) and that, while the Court does have power to summarily assess the costs (CPR 44.6(1)), to exercise it in this case would risk unjust imprecision in assessment which may have a substantial impact due to the large sums involved.

1. 1. Oxford says that the court should cut through this and make a final award now. It points to the fact that costs claims of over £1m have been the subject of summary assessment in Shorter Trial Scheme (STS) proceedings (Insulet Corporation v Roche Diabetes Care [2021] EWHC 2047 (Pat)), to which ONI responds that the rule in STS proceedings is that costs will be the subject of summary assessment, except in exceptional circumstances (CPR PD 57AB para 2.59) and that, in Insulet, the costs were so large (£1.6m) that detailed assessment would have been appropriate but that the point was not taken and the parties appear to have been content for summary assessment to take place. ONI submits that Oxford has not provided even the limited information available to the court in Insulet upon which a summary assessment can be reliably made. Except in respect of the costs incurred from receipt of the draft judgment, which are set out in a full costs statement, the information is contained in the table in para. 27 of Ms Butler’s third witness statement. She is a partner handling the case for Oxford at Powell Gilbert. The statement is informative but it does not go into the detail needed to evaluate whether the costs claimed are at that level because a so-called “Rolls Royce” service was provided to Oxford by Powell Gilbert (to use the language of the case law) for which ONI would not be obliged to pay.

1. 1. Oxford says that that summary assessment is justified because there is a risk that, if detailed assessment is ordered, the case will drift because ONI will fail to engage in settlement efforts and/or try to use detailed assessment as a way to exert pressure on Oxford. It also says that there is no point in ordering detailed assessment since the parties are not very far apart on costs (as shown by ONI’s offer of an interim payment). ONI rejects both of these points, saying that the position on costs after trial leaves a paying party at risk, disincentivising drift, and that a difference of more than £200,000 is substantial.

1. 1. Performing a summary assessment and ordering an interim payment at around the level which it is considered likely will be recovered are different ways trying to prevent further costs being wasted on detailed assessment. However, summary assessment in a case where such is not required under the rules and where substantial sums are in issue is only appropriate where there is sufficiently complete information for the court properly to evaluate the reasonableness and proportionality of the costs claimed. To do that, the court should be placed into a position in which it can examine, at an appropriate level of detail, things like hourly rates, time spent and staffing of tasks. It is true that a significant part of the costs has been budgeted, setting a benchmark of reasonableness. However, given the sums involved and the relatively limited information on certain aspects of costs here, justice is best done by ordering an interim payment which aims to be a realistic estimate of what would be awarded on detailed assessment without shutting the parties out from pursuing a more detailed assessment if they wish.

1. 1. I therefore reject OUI’s application to assess the costs summarily.

THE AMOUNT OF THE INTERIM PAYMENT

Interim payment

1. 1. ONI accepts that an interim payment should be made, in accordance with usual practice. It proposes a figure of £850,000 (estimated without particular precision on the basis of 50% of the unbudgeted costs and 90% of the budgeted costs). This is in the right ball-park but is somewhat too low.

1. 1. An interim award of the budgeted costs (of c.£687K) is merited on the basis that no good reason has been given for it being likely that there will be a departure from the costs budgets on assessment. An award of approximately 60-65% of the unbudgeted costs (namely c. £265K of costs incurred pre-budget and c.£114K in respect of post-judgment and form of order hearing costs) is also appropriate. The post-trial costs are high but are partly explicable on the basis that considerable work needed to be done on evidence for the hearing including in relation to payment of outstanding sums. A larger proportion of the pre-budget costs and a smaller proportion of the post-trial costs are likely to be awarded, should a detailed assessment proceed.

1. 1. These points are reflected in an interim payment of £925,000. That is reasonable and proportionate for the costs of this case, given the issues, the work inevitably required on evidence, disclosure and trial and the sums, past and future, in dispute.

Interest on costs

1. 1. ONI accepts the principle that interest is due and the draft order contains a standard provision