In Hospira UK Limited v Cubist Pharmaceuticals LLC [2016] EWHC 2661 Pat, Mr Justice Henry Carr gave consideration to the circumstances under which an issue based costs order ought to be made. In doing so, he determined that, "there must be something which makes it appropriate and just to order not only that the successful party does not recover his costs, but also that it should pay the costs of the relevant issue. On the other hand, it is not intended to imply that such awards of costs will be extremely rare. Where there is a discrete issue, which required substantial expenditure of costs, it may be just in all the circumstances to order payment of costs.”
The facts of the case are as follows: the Claimant successfully applied to have three of the Defendant’s patents revoked. Both parties were in agreement that the Claimant was entitled to general costs, but there was a disagreement about certain aspects of the claim on which the Claimant had not succeeded.
A key piece of case law considered by Mr Justice Carr was Monsanto v Cargill [2007] EWHC 3113, the approach of which was that the overall winner is likely to be entitled to payment of all of his costs, save for costs that are allocated to a particular issue. If the costs can be allocated to issues upon which the overall winner had lost, there were two questions: 1) should the party recover the costs of that issue? and 2) is the case so exceptional that the winning party should pay the otherwise unsuccessful party's costs incurred in respect of that issue?
When assessing the meaning of the phrase “so exceptional that the winning party should pay the otherwise unsuccessful party’s costs”, Mr Justice Carr looked to the principles set out in the White Book at Paragraph 44.27, p. 1254, which states that there is no requirement to the effect that an issue-based costs order should be made only in a “suitably exceptional case.” The lack of need for exceptional circumstances was reinforced by Davis LJ’s judgement in F&C Alternative Investment (Holdings) Ltd v Barthelmy (No. 3) [2012] EWCA Civ 843.
Mr Justice Carr then went on to opine that, “the question of the extent to which costs of a particular issue are to be disallowed or notionally paid should be left to the evaluation and discretion of the judge, by reference to the justice and circumstances of the particular case.” He also referred to Arnold J's judgment in Hospira UK Ltd and Novartis AG [2013] EWHC 886, where it was considered appropriate "not merely to deprive the winning party of its costs on an issue... but also to require it to pay the other side's costs."
Mr Justice Carr considered that the issue could be resolved by "a proper understanding of the phrase "suitably exceptional" and that "there must be something which makes it appropriate and just to order not only that the successful party does not recover his costs, but also that it should pay the costs of the relevant issue.” He also concluded that such an award of costs should not be considered to be "extremely rare." He concluded that “where there is a discrete issue, which required substantial expenditure of costs, it may be just in all the circumstances to order payment of costs.”
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