Claimant Awarded Costs Against First, Second, and Sixth Defendants on Joint Ad Several Basis Following Successful Liability Judgment, With £20 Million Interim Payment Ordered On Standard Assessment Basis.

IBM UNITED KINGDOM LIMITED V LZLABS GmbH & ORS [2025] EWHC 998 (TCC)

IBM United Kingdom Limited v LzLabs GmbH & Ors [2025] EWHC 998 (TCC) addressed complex costs proceedings following a substantial commercial litigation. The court considered multiple costs issues under CPR 44.2, determining that IBM, as the substantially successful party, was entitled to recover costs from the First, Second, and Sixth Defendants on a standard basis. The court rejected the Defendants’ arguments for reducing costs, finding that the fact IBM did not succeed on every single issue was insufficient grounds for a proportionate reduction. The court ordered joint and several liability for costs against the First, Second, and Sixth Defendants, noting their intertwined claims and common defence strategy. Critically, while the Claimant sought indemnity costs based on allegations of deliberate concealment and obstructive litigation conduct, the court declined to award indemnity costs, characteriSing the litigation as complex but not unreasonably conducted. The court ordered an interim payment of £20 million on account of costs, allowing the Defendants until 1 October 2025 to make the payment, considering potential financial hardship. The costs order explicitly excluded the Third, Fourth, and Fifth Defendants, with the court finding their defence costs were minimal and not warranting a separate costs award.

“The Claimant obtained substantial findings of fact and law in its favour against the First, Second and Sixth Defendants. The Claimant should be regarded as the successful party against each of those Defendants and is entitled to recover its costs against them.”

Citations

Convoy Collateral Limited v Broad Idea International Limited [2023] AC 389 (PC) The High Court’s power to grant injunctions is not restricted to protecting pre-existing rights but may be exercised whenever it is just and convenient, provided equitable principles are observed. Wolverhampton CC v London Gypsies and Travellers [2024] AC 983 (SC) An injunction need not be founded on an existing cause of action; the court’s discretion to grant equitable relief evolves with legal and societal developments, enabling it to prevent injustice in new circumstances. Jaggard v Sawyer [1995] 1 WLR 269 (CA) The court may refuse an injunction and award damages instead where the injury to the claimant is minimal and the injunction would be oppressive or disproportionately burdensome on the defendant. Coventry v Lawrence [2014] AC 822 The power to award damages in lieu of an injunction should be exercised in line with equitable discretion, allowing the court to avoid granting injunctions that are unfair or impractical. Murphy & Sons Ltd v Johnston Precast Ltd [2008] EWHC 3104 (TCC) A party who succeeds overall should not be deprived of their costs merely because they have failed on particular issues within complex litigation. Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspeden & Johnson [2002] EWCA Civ 879 Indemnity costs may be awarded when a party’s conduct is unreasonable to a high degree or otherwise outside the norm of litigation behaviour. Excalibur Ventures v Texas Keystone [2015] EWHC 566 (Comm) When determining payment on account of costs, the court should estimate the likely recovery on assessment with a margin of caution to account for uncertainties. Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2002] CP Rep 21 (CA) A stay of costs may be granted where refusal would risk injustice, particularly if it would stifle an appeal or risk irreparable financial harm before the appeal is determined. Goldtrail Travel Ltd v Onur Air Tasimacilik AS [2017] 1 WLR 3014 (SC) A stay of a costs order pending appeal may be granted to prevent injustice where there is cogent evidence that payment would stifle the appellant’s ability to appeal. Novartis AG v Hospira UK Ltd [2013] EWCA Civ 583 The test for a stay of injunctive relief pending appeal requires the court to assess the prospect of success and the balance of hardship to ensure fairness pending the appellate decision. HTC Corporation v Nokia Corporation (No.2) [2014] RPC 31 (CA) The grant of a stay pending appeal requires balancing competing injustices; refusal to grant a stay may be justified even where an appeal is arguable, depending on the impact on each party. Minnesota Mining and Manufacturing Co v Johnson & Johnson Ltd [1976] RPC 671 A stay of a permanent injunction may be appropriate if enforcement would cause irreparable harm to the defendant and the appeal has a genuine prospect of success, subject to safeguarding the claimant’s position.

Track allocation housing disrepair CPR 46.13 settlement sum costs restriction SCCO

MRO fee markup cap 25% detailed assessment personal injury Senior Courts Costs Office

Security for costs refused CPR 25.27 very high probability success excessive estimate King's Bench

IPEC scale costs transfer Patents Court PD 30 para 9.2 costs caps Court of Appeal

Costs budget variation CPR 3.15A promptness significant development unfair prejudice Chancery Division

Costs budgeting inter partes proportionality high hourly rates AI disclosure Patents Court CPR 3E

Beneficiary personal liability section 71(3) Solicitors Act 1974 indemnity costs VAT self-supply SCCO

Summary assessment indemnity costs unless order payment on account disclosure default Chancery Division

Provisional assessment set aside CPR 3.1(7) points of dispute filing duty PD 47 para 14.3 SCCO

Fixed recoverable costs police claims CPR 26.9(10)(e) intentional tort exemption

Key Points

A claimant who succeeds on the central issues in a complex claim is generally entitled to recover its full costs, even if it did not succeed on every issue, provided that its overall success rendered it the successful party within the meaning of CPR 44.2. [43–45]
Where multiple defendants act in concert and present a unified defence, the court may order them to be jointly and severally liable for the claimant’s costs, even if one was joined at a later stage or some claims against others failed. [47]
A successful defendant who raised no distinct factual or legal case and incurred no material additional costs due to its participation may be refused a costs order in its favour, even if claims against it were dismissed. [49–50]
The standard basis of costs assessment is appropriate unless the paying party’s conduct has been unreasonable to a high degree or otherwise outside the norm, regardless of the seriousness of the underlying breaches. [53–54]
When ordering a payment on account of costs under CPR 44.2(8), the court must make a cautious estimate of the likely level of recovery on detailed assessment, allowing for a margin of error and focused on likelihood rather than the full claimed amount. [60–63]

"The claims for breach of the ICA and procurement of such breaches against the First, Second and Sixth Defendants were intertwined and found to arise out of an unlawful means conspiracy. The Sixth Defendant adopted in his pleaded Defence the substantive defences raised by the other Defendants. They presented a common position on the key issues at trial, relying on the same factual and expert evidence. Therefore, a joint and several costs order against each of the First, Second and Sixth Defendants is appropriate."

Key Findings In The Case

The First, Second, and Sixth Defendants were found liable for unlawful means conspiracy, having deliberately and systematically used the Claimant’s proprietary software in breach of the InterCompany Agreement (ICA) over a multi-year period, thereby disrupting IBM’s mainframe business and derivatively benefitting from such conduct [2(iii), 22].
The Sixth Defendant, Mr Moores, was held jointly and severally liable for the Claimant’s costs, despite being joined to the proceedings at a later stage, due to his central role in orchestrating and financially supporting the unlawful conduct alongside the First and Second Defendants, and having adopted their common defence at trial [47].
The Third Defendant (LzLabs UK) was denied a costs order in its favour notwithstanding the dismissal of claims against it, because it incurred no discernible separate costs and had raised no distinct legal or factual defence, having presented a unified defence with the other Defendants [49].
The Court declined to assess the Claimant’s costs on the indemnity basis despite findings of deliberate misconduct, holding that the Defendants’ conduct during litigation, including their full participation in the trial on arguable points, was not unreasonable to the high degree required to warrant indemnity costs [54].
The Claimant’s request for a payment on account of costs was granted in the sum of £20 million, following a cautious estimate by the Court of probable recovery on detailed assessment, taking into account the scale and complexity of the litigation and the limited breakdown of the Claimant’s claimed costs of approximately £45 million [63].

“The Court retains a wide discretion to order costs to be assessed on the indemnity basis, where the conduct of the relevant party is unreasonable to a high degree or otherwise out of the norm... Although the court has found against the First, Second and Sixth Defendants... I do not consider that an indemnity basis of costs is appropriate.”

Background

The case of IBM United Kingdom Limited v LzLabs GmbH & Ors. ([2025] EWHC 998 (TCC)) concerns a dispute wherein IBM United Kingdom Limited (“IBM”) brought claims against LzLabs GmbH, Winsopia Limited, LzLabs Limited, Mark Jonathan Cresswell, Thilo Rockmann, and John Jay Moores (collectively, “the Defendants”) regarding breaches of the Integrated Collaboration Agreement (ICA).

On 10 March 2025, the Court handed down judgment ([2025] EWHC 532 (TCC)), ruling in favour of the Claimant against the First, Second, and Sixth Defendants, and dismissed the claims against the Third, Fourth, and Fifth Defendants. The Court’s key findings included that the Second Defendant (Winsopia) breached the ICA, the First Defendant (LzLabs) and the Sixth Defendant (Mr Moores) unlawfully procured breaches of the ICA by Winsopia, and that the First, Second, and Sixth Defendants were liable for the tort of unlawful means conspiracy.

Following the judgment, a Consequentials Hearing was held to determine several matters including the ambit and terms of injunctive relief, disposal and directions for the quantum trial, any declaratory relief, costs, permission to appeal, and stay of injunctive relief.

Costs Issues Before the Court

The primary costs-related issue before the court was whether the Defendants should pay the Claimant’s costs and the basis of such costs. The Claimant sought an order for payment of its costs on a joint and several basis, subject to detailed assessment on the indemnity basis if not agreed. The Defendants argued for a reduction in costs on grounds that the Claimant lost on certain issues and against specific defendants.

The Defendants also sought an order that the Claimant should pay the costs of the Third, Fourth, and Fifth Defendants due to the unsuccessful claims against them. Additionally, there was a discussion surrounding the extent to which the Claimant’s costs in the failed claims should be accounted for.

The Parties’ Positions

The Claimant’s position was that it was the successful party and thus entitled to recover costs against the First, Second, and Sixth Defendants jointly and severally. They argued for indemnity costs on the grounds of the Defendants’ alleged deliberate concealment, non-compliance with audit requests, systematic breaches, and obstructive conduct during the proceedings.

Conversely, the Defendants contended that the costs should be apportioned relative to the issues on which the Claimant did not succeed, particularly the claims against the Third, Fourth, and Fifth Defendants. They also argued for joint rather than several liability for costs and sought reduction and standard basis assessment of the Claimant’s costs.

The Court’s Decision

The Court ruled that the Claimant should be regarded as the successful party and therefore entitled to recover costs from the First, Second, and Sixth Defendants on a joint and several basis. The Court did not find it practical to make an issue-based costs order or a reduction in proportionate costs simply because the Claimant did not succeed on every issued aspect.

The Court rejected the claim that indemnity costs were appropriate, viewing the Defendants’ conduct, while assertive, not unreasonable to a degree warranting penalisation through indemnity costs. The costs were ordered to be assessed on the standard basis.

Regarding the payment on account, the Court acknowledged the extensive litigation costs (£45.3 million) and found £20 million to be a reasonable sum to award as an interim payment on account of the costs incurred, factoring in anticipated adjustments upon detailed assessment.

The Court rejected the application for the costs of the Third, Fourth, and Fifth Defendants on the basis that their legal representation and defence positions were aligned with those of the First, Second, and Sixth Defendants, and their incurred costs were minimal.

Finally, the Court granted a stay of the injunctive relief awarded to IBM, allowing for the possibility of an appeal, but did not extend this to the orders for delivery up/destruction in respect of the ICA Programs given the built-in safeguards.

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