The court was required to determine issues in relation to costs following a claim for damages brought by the claimant passengers against the defendant airline.
The passengers had sought to recover damages for breach of contract or compensation following the airline’s failure to provide them with replacement flights after another airline’s operator’s certificate was revoked. The defendant had previously agreed to provide the replacement flights. The claimants litigated by way of joined claims. There were: 49 “category 1” claimants who had good claims in principle; 95 “category 2” claimants whose claims were dismissed; and 694 “category 3” claimants whose claims were said to have failed on the basis of the pleadings as they stood at the time.
The court had to determine (i) who was the successful party; (ii) whether the successful party’s costs should be discounted, reduced or subject to any offset by way of a costs order in the opposite direction, to reflect particular aspects of the case.
HELD: (1) Common sense had to be applied to reach a realistic evaluation of who had won and who had lost. One highly relevant factor was whether, at the end of the day, one party would receive money from the other. Even though only a few of the claimants in the group had succeeded, their success was not so modest that it could or should be treated as immaterial. The claimants were the winners because at the end of the day, they would receive a cheque from the defendant. As a starting point, the defendant should pay the claimants’ costs, AL Barnes Ltd v Time Talk (UK) Ltd  EWCA Civ 402,  B.L.R. 331 applied (see paras 10-17 of judgment).
(2) It was both practicable and preferable to make a percentage costs order under CPR r.44.2(6)(a) rather than an issues-based order. That avoided the difficulty of identifying the issues to which the particular costs attached. It also avoided the prospect of continuing disputes over costs and the spectre of an undesirable and unfair outcome, namely of the claimants’ overall win being effectively eradicated by the defendant’s costs attributable to particular issues. In determining the correct percentage, there were two matters which had to be taken into account as conduct issues under r.44.2(4)(a) in the claimants’ favour. Firstly, the defendant had failed to make full disclosure, and secondly, it had resisted all early attempts at discussion or negotiation. The case was crying out for some sensible attempt at negotiation before costs racked up and the parties’ attitudes hardened. But the defendant did not answer the claimants’ pre-action protocol letter. Furthermore, although the claimants’ Calderbank letter was pitched too high, it was at least some attempt at settlement. It was undoubtedly an admissible offer to settle to which the court had to have regard under r.44.2 (4)(c). Even if the case could not be settled, an early meeting would have focussed the minds of those involved, and was likely to have led at least to some narrowing of issues, which would in the end have saved costs. There was a world of difference between a case which came to trial after reasonable efforts at settlement had been made but settlement had proved impossible, and a case where one party had simply refused to engage, preferring to take the view that it would see its opponents in court. Weighing those various factors, the defendant should pay 33% of the claimants’ reasonable costs on the standard basis. That percentage reflected the overall outcome of the case, the outcome on particular issues in the case, and the conduct of the parties (paras 20-26).