Royal Courts of Justice
Strand, London, WC2A 2LL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
SENIOR COURTS COSTS OFFICE
The Senior Costs Judge
Case No HQ06X03370 & others
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MAURICE KAY, VICE-PRESIDENT OF THE COURT OF APPEAL, CIVIL DIVISION
LORD JUSTICE HUGHES
| YAO ESSAIE MOTTO
|- and -
|(1) TRAFIGURA LIMITED
(2) TRAFIGURA BEHEER BV
Christopher Butcher QC, Richard Hermer QC and Benjamin Williams (instructed by Leigh Day & Co) for the Claimants
Hearing date: 27-29 June 2011
Crown Copyright ©
The Master of the Rolls:
Introductory: the factual background
"6. Save … for the purposes of costs as set out below, the claims of the accepting claimants are stayed pending further order of the court on the terms set out in the agreement. Liberty to apply for the purpose of carrying such terms into effect.
7. The defendants shall pay the costs of the claimants identified in Schedule 1 Part A of the Abidjan Personal Injury Group Litigation on the standard basis, to be subject to detailed assessment if not agreed.
8. On any such assessment:
(i) the defendants may not raise any issue as to the indemnity principle;
(ii) the claimants are entitled to recover the reasonable and proportionate costs of obtaining after the event legal expenses insurance; and
(iii) there should be no recovery of individual costs of claimants who are not settling claimants (being costs exclusively referable to such claimants). For the avoidance of doubt this does not affect the right of recovery of the rateable share of generic costs referable to claimants who are not settling claimants.
9. The defendants shall make an interim payment on account of the claimants' costs in the amount of £20 million to be paid to the claimants' solicitors … by 30 September 2009 and a further £10 million to be paid to the claimants' solicitors 90 days thereafter provided that the Claimants' solicitors will provide at least 21 days prior to the second interim payment an outline bill in such detail as the Defendant shall specify by 22 September 2009."
"The parties have since August 2006 expended considerable time and money investigating in detail the events in Abidjan in 2006. As part of that process, in excess of 20 independent experts in shipping, chemistry, modelling, toxicology, tropical medicine, veterinary science and psychiatry have been appointed to consider all the issues relating to those events.
These independent experts are unable to identify a link between exposure to the chemicals released from the slops and deaths, miscarriages, still births, birth defects, loss of visual acuity or other serious and chronic injuries. Leigh Day in the light of the expert evidence, now acknowledge that the slops could at worst have caused a range of short term low level flu like symptoms and anxiety.
From these investigations it is also clear that there are many claims which have been made for symptoms, in some cases perhaps understandably, which are unconnected with any exposure to the slops." TC "THE DETAILED ASSESSMENT" \f C \l "1"
"24. The defendants, not surprisingly, have launched an extremely vigorous attack on both the generic and individual bills. I have been given electronic copies of the bills, which I am told run to some 55,000 items, all of which are challenged …. For the purpose of these key issues I was presented with in excess of 60 ring-binders of documents, and … the defendants' skeleton argument, including supporting schedules, ran to over 1,000 pages, this being in addition to a witness statement … dealing with the key issues, which, with exhibits, ran to over 3,000 pages. The claimants' skeleton runs to 73 pages, and their supporting witness statements, including exhibits, run to 923 pages. ….
25. The claimants lodged with me two ringbinders of privileged material, all of which I have read. This has enabled me to understand the decision to issue proceedings, and especially the speed with which that decison was reached. I have also seen correspondence between solicitors and counsel relating to the setting up of the GLO, and also correspondence with counsel relating to the obtaining of evidence and the strengths and weaknesses of the case. Most helpfully from my point of view are the internal reviews undertaken regarding the case as it developed, the work to be done and the taking of instructions. In addition I have seen material relating to the Solicitors Regulatory Authority and the waiver which was granted; correspondence with local representatives; regarding the vetting process; sample attendance notes; correspondence with local doctors regarding medical reports; and correspondence with claimants, including client care letters and update letters. I have also seen the opinion of [leading counsel], in support of the application for approval of the settlements.
26. Although the defendants do not accept the level of the core costs of dealing with the actual litigation, which they put at some £8.2 million base costs, the main thrust of their argument [in addition to the issues relating to uplift and the ATE premium] relates to base costs of £36 million, which they argue relate to the signing-up, registration and vetting of the claimants, and the costs of settlement and distribution of the damages."
ii) Vetting costs;
iii) Pre-Action Protocol;
iv) Medical reports;
v) Abandoned claims;
vi) Settlement and distribution;
vii) Cost of funding;
viii) Success fee;
ix) ATE premium.
i) The "base costs" which the claimants were seeking from the defendants (i.e. the claimants' costs of the proceedings shorn of the 100% success fee and the ATE premium) were £49 million, although the claimants make the point that, as a result of the Judge's determination on various other preliminary issues, the correct figure is about £40 million;
ii) He had "no hesitation in saying that the base costs, excluding additional liabilities, have the appearance of being disproportionate";
iii) When carrying out the detailed assessment, he would not thereby be "precluded from deciding that an item or number of items are in fact proportionate, and thus that the test of necessity should not apply to them".
"(1) The court is to have regard to all the circumstances in deciding whether costs were ….
(i) proportionately and reasonably incurred; or
(ii) were proportionate and reasonable in amount
(3) The court must also have regard to –
(a) the conduct of all the parties, including in particular –
(i) conduct before, as well as during, the proceedings; and
(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
(b) the amount or value of any money or property involved;
(c) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case; and
(g) the place where and the circumstances in which work or any part of it was done.
"3. The requirement of proportionality now applies to decisions as to whether an order for costs should be made and to the assessment of the costs which should be paid when an order has been made. Part 44.3 which deals with the making of an order for costs does not specifically use the word proportionate but the considerations which should be taken into account when making an order for costs are redolent of proportionality. …
8. The new requirement of proportionality, which is in mandatory and unqualified terms in Part 44.4(2), is important in itself, since it should discourage parties from incurring disproportionate costs as those costs will not be recoverable unless an indemnity order is made. This restriction on costs should encourage parties to conduct litigation in a proportionate manner, which is an important objective of the CPR. …"
"[The court] must have regard to the facts and circumstances as they reasonably appeared to the solicitor at the time when the CFA was entered into (see para 11.7 of the Costs Practice Direction and Atack v Lee  EWCA Civ 1712 at ). The principle that the use of hindsight is not permitted when costs are being assessed is an old one: see Francis v Francis and Dickerson  P 1887, 95; and compare, in a different context, Argyll (Duchess) v Beuselink  2 Lloyd's Rep 172, per Megarry J at p 184:
'In this world there are few things that could not have been better done if done with hindsight. The advantages of hindsight include the benefit of having a sufficient indication of which of the many factors present are important and which are unimportant. But hindsight is no touchstone [of negligence]… The standard of care to be expected of a professional man must be based on events as they occur, in prospect and not in retrospect.'"
The defendants' appeal
"In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This is turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner."
"For my part I do not accept that if a Costs Judge has ruled at the outset of a detailed assessment that the bill as a whole is not disproportionate he is precluded from deciding that an item or a number of items are or appear disproportionate having regard to the 'matters in issue'."
Conclusion on proportionality
i) "Are the claimants entitled to recover the costs associated with the collection, assessment and management of each of the claims during the period prior to (a) the signing of the CFA for each claimant and (b) each claimant's admission to the Group Register?"
ii) "Are the claimants entitled to recover the costs of liaising with, and supervising, the 3% representatives used (a) to collect prospective claimants, (b) to assist prospective claimants with making their claims (c) to communicate with claimants on behalf of Leigh Day during the proceedings and (d) to distribute the Settlement Sums to the Claimants following September 2009?"
iii) "Do the costs associated with the collection, assessment and management of each of the claims have the appearance of being disproportionate in the light of the nature of the claims and the quantum of the claims?"
i) "The claimants are entitled to recover the reasonable and proportionate costs associated with collection, assessment and management of each of the claims. With regard to the period prior to the signing of the CFA for each claimant, this depends on the particular wording of the CFA in use. Those CFAs which run "from the date you first instructed us" cover the cost from the first meeting. [CFAs] which state that they run "from the date of this agreement" would, in my judgment, include the meeting with the client immediately prior to the signing of the CFA, during which the CFA explanation was given, and the client finally signed the agreement. The claimants are similarly entitled to recover their reasonable and proportionate costs prior to each claimant's admission to the Group Register."
ii) (a), (b) and (c) "Yes".
(d) "This will have to be dealt with in connection with [settlement and distribution]".
iii) "It is not possible at this stage to deal with the proportionality of the costs claimed associated with the collection, assessment and management of each of the claims, other than the global view, which I have already expressed as to the proportionality of the costs of these proceedings."
The defendants' appeal
"What is clear is that the defendants have vigorously defended this action throughout, and even when the register was closed, and the full extent of the injuries was known, they chose to settle the case with a denial of liability. There is no reason to suppose, therefore, had they had that information at the outset, that they would have defended any less vigorously, or settled any earlier. In those circumstances, I am not persuaded that the failure to follow the pre-action protocol had any significant effect on the level of the claimants' costs."
I can see no basis for challenging that conclusion.
i) The Claimants were entitled to recover the reasonable and proportionate costs of, and associated with, the medical reports, including relevant administration costs, the cost of instructing the doctors, costs of drafting the reports, but excluding the cost of training doctors (as opposed to supervising them), the costs of amending defective reports and defective translations of medical reports; and
ii) It was not possible to deal with the proportionality of the costs associated with the medical reports.
"279. In my judgment, given the terms of settlement, the Claimants are entitled to recover the reasonable and proportionate costs of investigating the claims. It is a matter for argument whether it was appropriate to investigate particular claims, for example gynaecological problems. But with regard to miscarriages, given that 149 Claimants had suffered miscarriages, it was clearly possible that these had been caused by the waste, and the Claimants' expert was still of the view that this was possible, even though it could not be proved to the required standard of proof.
280. … [I]f a claimant complains to a solicitor of certain symptoms, it is normally not open to the solicitor to say whether or not the condition complained of has been caused by the particular incident. The solicitor will need a report from a relevant expert. That is what appears to have happened here."
Settlement and distribution
"Generally and/or specifically under the terms of the Settlement Agreement, are the Claimants entitled to recover any costs subsequent to the date of the Settlement Agreement associated with the distribution of the [£30 million], specifically:
(a) Leigh Day's and counsel's travel to and accommodation in Côte d'Ivoire;
(b) verification, overseeing and general administrative costs relating to the distribution process;
(c) Leigh Day employees', counsel's and claimants' security costs".
A second question was whether the costs associated with the distribution of the £30 million had the appearance of being disproportionate.
"Under the terms of the Settlement Agreement the claimants are entitled to recover the costs of working out the order subsequent to the date of the settlement agreement.
(a) The cost of Leigh Day's travel to, and accommodation in, Côte d'Ivoire for the purpose of distribution is, in principle, recoverable. Counsel's travel and accommodation is, in principle, not recoverable. It is not clear why counsel's attendance was required.
(b) The costs of verification, over-seeing and general administrative costs relating to the distribution process is only recoverable to the extent that it is properly fee earner's work, and reasonable and proportionate.
(c) The question of security costs for Leigh Day employees, counsel and claimants is a matter which will have to be argued further."
The Judge also decided that no costs were recoverable under this head in so far as they were incurred after 26 October 2009. He declined to answer the second question because it was "not possible at this stage to deal with the proportionality of the costs associated with the distribution of the settlement sums, other than the global view, which I have already expressed as to the proportionality of the costs of these proceedings."
The defendants' appeal
"16. The receipt of the settlement sum [sc. the £30 million] into the settlement account, together with the agreement to pay assessed costs as provided herein, shall be in full and final satisfaction and settlement of all claims of the settling claimants in the litigation of whatsoever nature or howsoever arising. ….
18. … the claimants' solicitors agree to hold the settlement sum on trust for the benefit of the settling claimants and to apportion it between the settling claimants as they think fit. For the avoidance of doubt, the claimants' solicitors may pay from the settlement sum any amount necessary by way of banking or administrative charges or other costs incurred in effecting the distribution of the settlement sums between the settlement claimants (but not in relation to any costs of the claimants' solicitors themselves in relation to that distribution - 'the Distribution Charges')."
The claimants' appeal
"The defendants clearly cannot be held responsible for an open ended liability for costs; equally the claimants are entitled to recover reasonable and proportionate costs relating to distribution. The defendants paid the settlement money on 23 September 2009, CNVDT obtained their first order from the court on 26 October 2009. In my judgment the intervening month should have provided Leigh Day with sufficient time to distribute the settlement monies, had adequate preparations been made. It will be a matter for further argument what costs may properly be recoverable during that period."
Cost of funding
"The inference I would draw is that the Code is there to protect the legitimate interests of the client, and the administration of justice, rather than to relieve paying parties of their obligations to pay costs which have been reasonably incurred."
i) Proportionality: I would allow the defendants' appeal, and would hold that it follows that any item on the Bill is only to be allowed if it was necessary;
ii) Vetting costs: I agree with the Judge's conclusions, save that the necessity test must be satisfied before any item is recoverable, and any specific (as opposed to generic) item can only be recovered if it falls within the grasp of the relevant claimant's CFA;
iii) Pre-Action Protocols: I would dismiss the defendants' appeal against the Judge's finding that there should be no disallowance or reduction in respect of any sum claimed in the Bill on the ground of the claimants' failure to comply with any protocol or the PDPAC;
iv) Medical reports: Subject to the point that the cost of these reports should not be recoverable if it was unnecessary to obtain them, I would uphold the Judge's conclusion on this issue.
v) Abandoned claims: Subject to satisfying the requirement of necessity in relation to an item, the claimants can recover costs in respect of the "abandoned claims" in so far as it was reasonable and proportionate to plead, investigate and pursue them;
vi) Settlement and distribution: I would uphold the Judge's conclusions, save I would discharge his imposition of the 26 October 2009 cut-off date;
vii) Cost of funding: Contrary to the Judge's conclusion, I do not consider that the claimants can recover the costs of preparing and advising on the CFAs, nor do I consider that they can, recover any costs incurred in discussing the litigation with,, or taking instructions from, with the ATE insurers;
viii) Success fee: I would uphold the Judge's determination of 58% uplift for both Leigh Day and counsel;
ix) ATE premium: I would uphold the Judge's decision to fix the premium of £9,677,554 by reference to a 65% prospect of success.
Lord Justice Maurice Kay:
Lord Justice Hughes: