The High Court has ordered a claimant that won nominal damages to pay the defendants’ costs, with its failure to accept a part 36 offer constituting a “game changer” in terms of deciding whether any other order was appropriate.
In Marathon Asset Management LLP and Anor v Seddon and Ors, Mr Justice Leggatt found that the first and third defendants, Mr Seddon and Mr Bridgeman, were liable for unlawfully copying and retaining when they left Marathon’s employment documents containing confidential information about Marathon’s business.
However, he ruled that Marathon had not shown that these actions had caused it any loss or the defendants any gain, with the result that he ordered each of them to pay Marathon £1 in damages. In this week’s costs ruling, he said that “in a commercial case such as this, a judgment for only nominal damages is a defeat” and went on to consider whether there was any reason not to order that Marathon pay their costs.
Mr Bridgeman left his employment in December 2012 and admitted liability for breach of contract and returned all the files taken in January 2014. Marathon argued it still had a legitimate interest thereafter in investigating what use had been made of its confidential information.
But the judge did not accept that this justified departing from the general rule about liability for costs. “A party which pursues a claim for damages for misuse of confidential information without evidence of any significant misuse but in the expectation that such evidence will or may be uncovered through the litigation process takes the risk that such evidence will not be uncovered because it does not in fact exist.
“In the result, the forensic inquiry in this case established that Mr Bridgeman’s claim that he had made very little use of the documents he took was substantially true.”
He ordered Mr Bridgeman to pay Marathon’s costs incurred prior to 24 January 2014, but his costs of defending the claim after that date should be paid by Marathon.
Leggatt J said he reached this conclusion without taking account of the fact that, on 3 February 2016, the two men made a £1.5m part 36 offer which expired on 24 February.
Mr Seddon, however, made no admissions of liability and denied throughout the proceedings that he had participated in copying and removing any confidential files. The judge decided this issue in Marathon's favour and found that Mr Seddon's evidence about the relevant events was false.
As a result, exercising the court's discretion under CPR 44.2(2), “I would in principle have thought it right not merely to disallow Mr Seddon's costs of unreasonably contesting the issue of his liability for copying the 33 files but to order him to pay Marathon's costs of that issue”.
He continued: “Implementing such an issue-based order would, however, cause considerable complication and cost. Not only would it potentially require a detailed assessment to be undertaken of Marathon's costs of the misuse claim which would otherwise be unnecessary, but it would require a close analysis to disaggregate the costs referable to this issue from the other costs incurred by Marathon and by Mr Seddon in contesting the misuse claim.
“In my view, it is practicable and far preferable to avoid these difficulties by instead reducing Mr Seddon's entitlement to costs by a proportion which reflects my broad assessment as the trial judge of the significance of this issue and the costs likely to be attributable to it. Applying this approach, I consider that Mr Seddon should be entitled to recover only 50% of his costs of defending the misuse claim.”
The judge then went on to consider the part 36 offer, which he described as “a game-changer which cast Marathon's subsequent pursuit of the claim in a very different light”.
“The context in which the offer was made was that Marathon had no evidence to suggest that Mr Seddon and Mr Bridgeman had derived any financial gain from misusing its confidential files, let alone caused Marathon to suffer any loss. Indeed, it was clear from the facts mentioned [in] the main judgment that any financial gain which the defendants could possibly have made from their conduct was on any view modest and of a different order of magnitude from the amount of the part 36 offer.
“In these circumstances, Marathon's decision not to accept the offer of £1.5m and instead to pursue a claim for what I described in the main judgment as "jackpot" damages makes it fair, in my opinion, to treat Marathon as litigating thereafter entirely at its own risk and potential cost. In particular, I do not consider it unjust to order Marathon to pay the costs incurred by all parties from 25 February 2016 in resolving the factual dispute about whether Mr Seddon had assisted Mr Bridgeman in copying 33 files which were never afterwards accessed or used.
“The offer made by the defendants should have rendered that dispute entirely academic. The policy underlying part 36 requires that the cost consequences should be visited on parties in Marathon's position who, instead of taking a realistic attitude, open their mouths too wide.”
Accordingly, he ordered Marathon to pay 50% of Mr Seddon's costs of defending the misuse claim from the date when the action was begun until 24 February 2016 and the whole of his costs of doing so thereafter.
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