High Court clarifies costs allocation in franchising dispute

The High Court's recent decision in Steven Ellis & Ors v John Benson Limited has provided important guidance on costs allocation following preliminary issue determinations in complex commercial disputes. The case, heard in the King's Bench Division, addressed the challenging question of appropriate cost recovery where claimants achieve substantial but not complete success on contested preliminary matters.

The dispute centred on three preliminary issues where the Represented Claimants secured victory, leading to the dismissal of John Benson Limited's (JBL) counterclaim. This outcome established the foundation for determining the appropriate costs order, with the court ultimately finding that the claimants deserved recognition as the successful party despite not prevailing on every contested point.

Cost Recovery Principles

The court's analysis under CPR 44.2 emphasised that overall success, rather than victory on individual issues, determines entitlement to costs recovery. The judgment reinforced that claimants achieving their primary litigation objectives should ordinarily recover their costs, even where some subsidiary arguments fail. This principle proved decisive in awarding the claimants at least 80% of their costs, rejecting JBL's argument for a 20% reduction.

The claimants' application for indemnity costs required separate consideration. Such costs, which provide fuller recovery than standard basis costs, typically require evidence of unreasonable conduct by the paying party. Despite arguments regarding JBL's litigation conduct, the court declined to make an indemnity costs order, finding insufficient grounds to deviate from the standard basis.

Conduct Assessment

The judgment examined both pre-action and trial conduct in determining the appropriate costs order. Particular attention was paid to Mr Benson's courtroom demeanour during testimony, which the court described as overbearing. However, this behaviour fell short of the threshold required for indemnity costs, establishing useful guidance on the standard of conduct expected during litigation.

JBL's previous settlement offers were scrutinised but found insufficient to demonstrate unreasonable rejection by the claimants. This analysis reinforced that settlement offers must provide genuine value to influence subsequent costs determinations materially.

Interim Payment and Appeals

The court ordered JBL to make an interim payment on account of the claimants' costs, providing immediate financial relief whilst detailed assessment proceedings continue. This reflects the court's confidence in the claimants' entitlement to substantial cost recovery.

JBL's application for permission to appeal faced significant obstacles, with the court noting that the findings were heavily fact-specific and unlikely to raise points of general importance suitable for appellate consideration. The court particularly emphasised that the franchise relationship bore closer resemblance to employment than traditional commercial arrangements, a characterisation that influenced both the substantive determination and costs analysis.

Wider Implications

The judgment provides valuable guidance for similar commercial disputes, particularly those involving franchise relationships or preliminary issue trials. The decision clarifies that partial success need not undermine a party's claim to be treated as the overall winner for costs purposes, provided their main litigation objectives are achieved.

The court's approach to conduct-based costs arguments offers practical guidance on the evidence required to justify departures from standard costs orders. The emphasis on proportionality and the specific nature of franchise relationships suggests courts will continue to take contextual approaches to costs determinations in commercial disputes.

This decision represents a measured approach to costs recovery in complex litigation, balancing the principle that costs should follow the event with recognition that modern commercial disputes rarely produce complete victories for either party. The judgment's careful analysis of the parties' conduct and the specific commercial context provides a useful framework for similar future disputes.

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