The winner doesn’t take it all

A contractor that won a High Court procurement case overall against a local authority still only received 35% of its costs. Andrew Johnson explains why.

So Abba were wrong – at least regarding legal costs. The recent decision on costs in the case of Mears v Leeds City Council [1] demonstrates that winning at trial does not necessarily guarantee full costs recovery.

The costs ruling in late 2011 was made following an earlier decision that Leeds City Council had breached the public procurement rules in a tender for improvement and refurbishment works for social housing. Despite an overall finding in favour of the disappointed contractor, Mears Ltd (Mears), as the council had successfully defended a number of claims, including that the entire procurement process should be rerun, Mears recovered only 35% of its costs.

The original trial

Mears had been one of a number of contractors tendering to the council for capital improvement and refurbishment works contracts for social housing. The procurement was to be carried out in accordance with the provisions of the Public Contracts Regulations 2006 (the Regulations).

After being informed that its tender had been unsuccessful, Mears brought a claim alleging the council was in breach of the Regulations for failing to act transparently and/or to treat Mears in an equal and non-discriminatory way, and for evaluating the tenders on the basis of undisclosed criteria and weightings. Success on part of its claim enabled Mears to obtain an award for damages (to be assessed) but not for the procurement to be set aside.

The costs hearing

Mears sought an order that the council should pay it at least 80-90% of its costs, but although Mears had won at trial, it did not recover all its costs. The High Court began with the general rule in commercial litigation that the unsuccessful party will be ordered, subject to the court’s discretion, to pay the successful party’s costs. The party that ends up receiving payment should generally be characterised as the overall winner of the entire action. In this case, Mears submitted that it had obtained judgment for damages to be assessed, albeit only on part of its claims, while the council argued that it had defeated many of Mears' arguments, including the need to rerun the procurement. The Court held that the council was not successful in defending the claim on which Mears did succeed, and therefore the starting point was that the council would pay Mears' costs.

However, the Court also considered the principle that, in many cases, the judge can, and should, reflect the relative success of the parties on different issues by making a proportionate costs order. In addressing this issue the court considered Multiplex [2] and found that the fact that Mears had succeeded on one claim and obtained relief carried with it not only the costs of that claim but also the common costs which Mears had to expend in order to pursue these proceedings. In addition, the court noted that there was no simple formula for establishing the percentage based on the number of issues, pages of evidence or paragraphs of submissions or judgments, but rather the judge must make an objective assessment based upon impressions of the case.

Taking into account the substantial success of the council on a number of the allegations on which costs were spent, a proportionate order was made that it should pay only 35% of Mears' costs.

Comment

The threat of an adverse costs award often has a significant impact on whether parties to a dispute seek to resolve matters at an early stage, by cheaper alternative dispute resolution such as mediation. This case shows if a party raises multiple arguments and wins only on some, it may well not recover its costs in pursing the arguments it has lost. This is an important gloss on the general 'loser pays costs' starting point, and is one which parties are advised to remember when deciding how to frame their case.

Andrew Johnson is a director at Walker Morris. He can be contacted on 0113 283 2500 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.. He regularly contributes articles and updates to reach…®, the free Walker Morris knowledge database and alerter service.

[1] Mears Ltd v Leeds City Council [2011] EWHC 2694

[2] Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited [2008] EWHC 2280