Factual and Procedural Background
The substantive judgement in this Group Litigation matter was handed down on 29 July 2009. The judgment resolved the common issues affecting the group, with 16 or possibly 15 of the 18 Claimants on the Group Register able to pursue their individual claims against the Defendant. The court reserved judgment on the issue of costs. The Group Litigation issues are now complete, and individual claims will proceed in the general part of the Queen's Bench Division. The current judgment addresses the outstanding questions concerning the costs of the Group Litigation.
Legal Issues Presented
- Should the Court make a costs order at this stage?
- If so, should there be an order of costs in favour of the Claimants?
- If so, should the costs be payable on an indemnity or standard basis?
- Should there be any reduction, on any basis, in the amount of costs payable?
- Should there be an interim costs payment order? If so, in what amount and subject to what terms?
Arguments of the Parties
Claimants' Arguments
- The Claimants argued that they substantially won on the Group Litigation issues and should be awarded costs accordingly.
- The Claimants contended the Defendant unreasonably contested the issues, losing on every material point, and much of the Defendant's evidence was rejected.
- They criticised the Defendant for refusing a request for Alternative Dispute Resolution (ADR) in summer 2008.
- The Claimants sought indemnity costs rather than standard costs, relying on perceived unreasonable conduct by the Defendant.
- They requested a substantial interim costs payment, including disbursements and insurance premiums.
- The Claimants resisted any reduction in costs payable, attributing delays and inefficiencies to the Defendant's conduct.
Defendant's Arguments
- The Defendant argued it would be premature to award costs until the final outcome of all individual claims was known, as there was a possibility that all might fail to recover damages.
- The Defendant contended that the Claimants' approach to the case was a "scattergun" and unformed, justifying some reduction in costs.
- The Defendant asserted that the Claimants caused some wasted trial time and inefficiencies.
- The Defendant maintained that its conduct in defending the Group Litigation was reasonable and not deserving of indemnity costs.
- The Defendant indicated it might seek permission to appeal the judgment, which should be considered in relation to any interim costs payment.
- The Defendant questioned the recoverability and reasonableness of the Conditional Fee Agreement (CFA) uplift and After The Event (ATE) insurance premiums.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Colour Quest Ltd and others v Total Downstream UK PLC and others [2009] EWHC 823 (Comm) |
Guidance on awarding indemnity costs based on parties' conduct and whether the losing party acted unreasonably. |
The court referred to this case to explain the principles and discretion involved in awarding indemnity costs but concluded indemnity costs were not appropriate here. |
| Excelsior Commercial v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879 |
Requirement that conduct must be out of the norm to justify indemnity costs. |
Referenced to support that moral reprehensibility is not required, but conduct must be exceptional to award indemnity costs. |
| Brawley v Marcynski (No 2) [2003] 1 WLR 813 |
Indemnity costs appropriate where judge disapproves of losing party’s conduct. |
Used to illustrate circumstances where indemnity costs may be awarded; court found Defendant’s conduct did not warrant indemnity costs. |
| Three Rivers District Council v BCCI and the Bank of England [2006] EWHC 816 (Comm) |
Indemnity costs awarded where claim is speculative or weak and pursued at high risk. |
Referenced but court found the Defendant’s defence was reasonably arguable, so indemnity costs were not justified. |
| Amoco UK Exploration v BAO [2002] 1 BLR 135 |
Indemnity costs justified where party prioritises commercial interests over merits and suffers resounding defeat. |
Court noted this principle but did not find Defendant’s conduct met this standard. |
| Halsey v Milton Keynes General Health NHS Trust [2004] EWCA Civ 576 |
Reasonableness of refusal to engage in ADR and factors to consider in assessing this. |
Court applied this precedent to conclude Defendant’s refusal of ADR was not unreasonable given the circumstances and timing. |
| Blackmore v Cummings (29 July 2009) |
No presumption for interim costs payment; discretion exercised based on circumstances. |
Court exercised discretion to order interim costs payment, considering financial positions and potential appeal. |
| Mars UK Ltd v Teknowledge Ltd (Costs) [1999] EWHC 226 (Pat) |
Principles for ordering interim payment on account of costs. |
Court relied on this to justify ordering an interim payment on account of costs before full assessment. |
Court's Reasoning and Analysis
The court first considered whether to make a costs order at this stage, concluding it was appropriate since the Group Litigation issues were resolved and the Claimants substantially succeeded. The absence of any Part 36 offers or payments into court by the Defendant simplified the assessment.
On the question of whether costs should be awarded on an indemnity or standard basis, the court applied established principles emphasizing that indemnity costs require conduct out of the norm, though not necessarily morally reprehensible. The court found that the Defendant’s defence was reasonably arguable given the broad and initially unclear pleadings by the Claimants, and that the Defendant did not act improperly in contesting the issues or refusing ADR.
Regarding the refusal of ADR, the court applied the reasoning from Halsey v Milton Keynes, considering the timing and circumstances of the Defendant’s refusal. The court concluded the refusal was not unreasonable, as the Defendant reasonably believed mediation would not be productive.
The court acknowledged some criticisms of the Defendant’s witness statements and procedural conduct but found these did not justify indemnity costs or a significant increase in costs awarded.
In considering reductions to the costs payable, the court identified two main factors: the Claimants’ "scattergun" approach to pleading and evidence, and wasted trial time due to insufficient witnesses. The court quantified the lost trial time and inefficiencies, concluding that a 10% reduction in the Claimants’ costs was a fair reflection.
Finally, the court exercised its discretion to order an interim costs payment to the Claimants, recognizing the substantial costs incurred and the lengthy process for detailed assessment. The interim payment was set at £1,600,000, subject to undertakings to repay in the event of a successful appeal by the Defendant. The court also adjusted the interest provisions on costs to balance fairness.
Holding and Implications
The court ordered that the Defendant pay the Claimants’ costs of the Group Litigation to be assessed on the standard basis, with a 10% reduction to reflect inefficiencies attributable to the Claimants’ approach and trial management.
An interim costs payment of £1,600,000 was ordered to be paid to the Claimants within 42 days, subject to undertakings to repay if a successful appeal occurs. The court declined to award indemnity costs, finding the Defendant’s conduct was within the bounds of reasonable litigation conduct.
This decision directly affects the parties by establishing the costs liability and payment arrangements following the Group Litigation phase. No new legal precedent was established beyond the application of existing principles on costs, indemnity costs, ADR refusal, and interim payments.