Ras Al Khaimah Investment Authority v Azima & Ors

Factual and Procedural Background

The Court held a Costs and Case Management Conference ("CCMC") on 19 July 2023, addressing several procedural matters in ongoing litigation scheduled for an eight to ten week trial in May 2024. The primary outstanding issue was the parties' costs budgeting, with other matters such as security for costs and trial directions resolved by consent. The case involves extremely high anticipated litigation costs, with the Counterclaimant budgeting over £21 million and the Additional Defendants jointly budgeting nearly £25 million. Several prior judgments have been delivered in these proceedings, including decisions upheld by the Court of Appeal, which provide detailed background not restated here.

Legal Issues Presented

1. Whether the parties' future costs budgets are reasonable and proportionate under CPR 3.15(2), specifically concerning disputed items in the Counterclaimant's budget.
2. The extent to which incurred costs may inform the assessment of future costs in a complex, high-value case.
3. The appropriateness of the scale of costs claimed for disclosure, trial preparation, and trial phases by the Counterclaimant compared to the Additional Defendants.
4. The reasonableness of objections raised to specific items in the Additional Defendants' costs budgets.

Arguments of the Parties

Counterclaimant's Arguments

• The high incurred and estimated costs are justified by the complexity and nature of the allegations, including a sophisticated fraud and cover-up requiring extensive investigations and third-party disclosures.
• Costs related to disclosure include necessary US lawyer fees and third-party legal fees, which are recoverable and appropriate given the investigation's scope.
• The size and seniority of counsel engaged for trial preparation and trial are justified by the case's complexity and market rates, despite their high cost.
• Disagrees with objections to the costs budget, emphasizing the need for thorough investigation and trial preparation.
• Rejects the relevance of the source of litigation funding to the reasonableness and proportionality of costs.

Additional Defendants' Arguments

• Contend that the Counterclaimant's costs budgets are disproportionately high relative to the claims' likely value and damages recoverable.
• Argue that the Counterclaimant's incurred disclosure costs should inform a reduction in future budgeted costs.
• Propose that the Counterclaimant's trial preparation and trial costs be aligned with those agreed for their own legal teams, citing excessive solicitors' hours and counsel fees.
• Highlight the lack of detailed evidence supporting some proposed costs, particularly for disclosure-related disbursements.
• Point to the Counterclaimant's litigation funding source as enabling disproportionate spending.

Counterclaimant's Response to Additional Defendants

• Maintains that it is premature to assess the likely damages recovery and that all claims remain live and undismissed.
• Emphasizes no obligation to disclose litigation funding and notes security for costs protects the Additional Defendants.
• Contends that market rates justify the size and seniority of counsel engaged.
• Rejects the notion that incurred costs should unduly constrain future budgeted costs given the ongoing necessity of investigations.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
[2022] EWHC 1295 (Ch); [2022] EWHC 2727 (Ch); [2023] EWCA Civ 507	Background and procedural context of the litigation.	The Court adopted these judgments for detailed background and definitions, refraining from repeating them.
CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC)	Use of Court's power to comment on incurred costs sparingly in costs budgeting.	Referenced to illustrate the limited and cautious role of the Court in commenting on incurred costs in complex cases.
CPR 3.15(2), 3.15(4), 3.17(3)(b); CPR PD 3D para 12; Chancery Guide para 6.70	Legal framework for assessing reasonableness and proportionality of future costs budgets and limits on detailed assessment.	The Court applied these provisions to guide its evaluation of disputed budget items, emphasizing a broad and proportionate approach rather than detailed line-by-line assessment.

Court's Reasoning and Analysis

The Court acknowledged the extraordinary scale and complexity of the litigation, noting the difficulty in precisely assessing reasonable future costs. It confirmed its obligation under CPR 3.15(2) to assess only future costs, with incurred costs considered sparingly and only to inform proportionality.

On disclosure costs, despite the high incurred costs, the Court accepted that the nature of the allegations justified extensive investigations, including the use of private investigators and US discovery procedures. It found the proposed future costs reasonable and proportionate, approving disputed disbursements related to US lawyer fees, third-party legal fees, and independent barrister review.

Regarding trial preparation, the Court agreed with the Additional Defendants that the solicitors' fees claimed by the Counterclaimant were excessive, particularly the high number of Partner hours. It also found the counsel brief fees excessive relative to comparable fees for the Additional Defendants' teams, despite accepting the size and seniority of the counsel team as reasonable. The Court reduced counsel fees by £500,000 and solicitors' fees to £500,000, lowering the total trial preparation budget accordingly.

For trial costs, the Court noted similar factors causing differences in costs and reduced the Counterclaimant's counsel refresher fees by £300,000 to reflect proportionality.

In relation to the Additional Defendant's costs budget, the Court found the disputed items minor and allowed the estimates as reasonable, criticizing the Counterclaimant for objecting to relatively small sums while seeking approval for very large costs elsewhere.

The Court was unpersuaded that the source of the Counterclaimant's funding or the potential value of the claims should influence the costs budgeting decision, emphasizing the need to assume success on all claims for the purpose of this assessment.

Holding and Implications

The Court APPROVED the parties' costs budgets with the following modifications:

• Approved the Counterclaimant's future disclosure costs including disputed disbursements totaling £1,467,000.
• Reduced the Counterclaimant's trial preparation costs from £5,857,000 to £5,034,500 by decreasing solicitors' fees and counsel brief fees.
• Reduced the Counterclaimant's trial costs from £2,505,410 to £2,205,410 by cutting counsel refresher fees.
• Allowed the Additional Defendant's costs budget items disputed by the Counterclaimant in full.

The decision directly affects the recoverable costs limits for the parties in this litigation but does not establish new legal precedent. It reflects a careful balancing of proportionality and reasonableness in a highly complex, high-value case with unusually large costs budgets.