The High Court ruled on costs in Sere Holdings Ltd v HSE, an unsuccessful challenge against a procurement decision. We looked at the substantive judgment here (in relation to procurement) and here (in relation to mediation).

Given that the challenge was unsuccessful, the HSE was awarded its full costs. The winning tenderer, IAS Medical Limited, was a notice party and was not awarded full costs. The Court looked at the questions below.

Should an unsuccessful challenger have to pay the costs of not only the awarding authority, but also the notice party which chose to join the proceedings?

Based on previous authorities, (see Sanofi V HSE), the Court set out the relevant principles as follows:

• a notice party is prima facie not entitled to costs, even if it is successful in helping the respondent defeat the challenge;
• to the extent that for commercial reasons, a notice party decides to be joined to the proceedings, it will not be paid its legal costs for protecting its commercial interests by the applicant;
• in the absence of compelling reasons, a respondent is well able to protect its own legal interests and a notice party does not need to replicate its defence, be represented at the hearing or fully participate in the proceedings;
• a notice party is obliged to keep its input (and so its legal costs) to a minimum by considering why any factual matters, within its knowledge, which are in dispute, could not be adequately dealt with on affidavit, without incurring the full costs of the litigation;
• in exceptional circumstances, such as relating to matters within the particular knowledge of the notice party (and not available to the respondent), a notice party may be entitled to such costs as are reasonable to deal with that issue;
• in summary, a notice party is not per se entitled to any costs and must provide evidence that its involvement was necessary, in order to justify any award of costs.

In this case, the litigation concerned the legal interest of the HSE, not IAS. IAS’s decision to have full representation was a commercial decision and it would be inappropriate to require Sere to pay double for the defence against its challenge. IAS had applied to join the proceedings. Sere had not consented and had put IAS on notice it would not be liable for its costs.

IAS was, however, awarded costs for filing affidavit evidence which was relevant to the proceedings, but not within the HSE’s knowledge. It was also awarded the costs of reviewing overnight transcripts of the proceedings, appropriate lest it needed to address something of importance that might have been missed by the HSE.

Should the HSE’s costs award be reduced due to its alleged failure to consider mediation?

The Court found that the HSE did consider resolving the dispute by mediation or other means. There was ‘without prejudice’ communication after the institution of the proceedings. The HSE took into account the savings to the taxpayer which would accrue from a successful defence of the challenge. All parties should consider mediation, and Sere had not provided evidence of its attempts to resolve the dispute by mediation or other means.

Should the HSE’s costs award be reduced for other reasons? 

Sere argued that the tender documents should have been clearer and so the HSE should bear some responsibility for the litigation. The Court disagreed. The relevant test was whether it was sufficiently clear for a RWIND tenderer to reach the interpretation claimed by the parties to the litigation. That the tender documentation might have been clearer, was not a basis to reduce the HSE’s costs’ entitlement. Nor was the fact that the HSE’s early correspondence in the proceedings was not particularly clear – there was no evidence it impacted the proceedings.

Sere also argued that it was misled into thinking that the contract with IAS would not be signed, so it missed the opportunity to apply for automatic suspension. This allegation arose from an alleged ‘without prejudice’ conversation between the parties’ lawyers and subsequent correspondence. In the circumstances of the case, the Court found it was not appropriate to make findings on these allegations but, if it had been, the question was whether Sere’s loss of opportunity to prevent the contract being signed was relevant to costs. The answer was no. It had no relevance to the issue in the substantive case, which concerned interpretation of tender documents. Further, an automatic suspension would have by now been lifted. Generally, there was no evidence that HSE conduct led to wasted Court time or led Sere to incur additional legal costs.

The judgment is available here.