England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/06/2016

Mrs Justice Whipple:

BACKGROUND

1. This judgment deals with costs following the Part 1 Trial of this action.
2. On 25 April 2016 I handed down judgment following the Part 1 Trial. In advance of the hearing, I had received written submissions from each party going to costs and a number of other ancillary matters arising out of the judgment. I had also received a fourteenth witness statement from Mr Zafer Armutlu, solicitor for the Claimants, dated 22 April 2016 (the Friday before the hearing on Monday 25 April 2016) together with exhibits. At the hand-down hearing, I heard submissions from each party on costs arising out of that judgment. Mr Adkin QC, who appeared for the Second Defendant ("Atlasjet") with Miss Holcombe, asked for time to consider Mr Armutlu's fourteenth witness statement, and I permitted him 7 days to make any further submissions on points arising out of it. I now have Mr Adkin and Miss Holcombe's "Responsive Note" for Atlasjet dated 3 May 2016, accompanied by a third witness statement of Gunter Zimmer, solicitor for Atlasjet. Mr Armutlu made further submissions by email on 16 May 2016 responding to Mr Zimmer's third witness statement.
3. This costs judgment should be read alongside the judgment handed down on 25 April 2016 (the "main judgment"). In the main judgment, I concluded that the Category 1 claims were good claims, in principle. There are a total of 49 Claimants within Category 1. Those 49 Category 1 Claimants fall into nine separate family groups. Three of those family groups were represented by test claimants whose cases were before me. Two of the family groups (connected with Mrs Atesogullari and Mr Ozkes, respectively) have succeeded in their claims. Quantum for those individuals is now agreed, and their claims are concluded. One family group (connected with Mrs Akguc) has failed. The remaining six family groups within Category 1 will have their claims transferred to the Central London County Court where those claims can be progressed to trial, if a trial proves to be necessary. It is the common hope of the parties that those claims can be resolved without need of a trial, given that the principles are now established and the damages at stake are modest.
4. I dismissed the Category 2 claims. There were 95 Claimants within Category 2.
5. As to Category 3, which category contains 694 individuals, the picture is less clear. I dismissed the test claims within Category 3, but I have given permission to the other Category 3 Claimants to apply to amend their statement of case on or before 20 June 2016. I have reserved any such application to myself. If no such application is made, or if such an application is made but refused, then all the Category 3 claims will stand dismissed. If an application is made which is allowed, then life will remain for some Category 3 claims at least, but I am unable at present to predict the outcome of those claims. The point which lies at the heart of this uncertainty is that, on the basis of my analysis of the Category 1 claims, the Claimants' representatives need to examine whether some of the Category 3 Claimants have in fact been misclassified, so that, with some amendment to the pleading, they should in effect be classified as Category 1 Claimants in relation to whom a contract existed with the Defendant at the material time; if that is done, then their claims will depend on the facts, and specifically, on their establishing both that they did have a confirmed reservation on a flight, and that that reservation was cancelled by Atlasjet without authorisation and in breach of contract. For present purposes, I must proceed on the basis that the Category 3 claims have failed: that is the current position, on the basis of the pleadings as they currently stand.

APPROACH

6. The Claimants did not litigate under a group litigation order provided for within the CPR 19.11, but rather by way of joined claims.
7. The approach to the determination of costs is guided by CPR 44.2 which provides as follows:

"44.2

(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.

…

(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.

(6) The orders which the court may make under this rule include an order that a party must pay –

(a) a proportion of another party's costs;

(b) a stated amount in respect of another party's costs;

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

(f) costs relating only to a distinct part of the proceedings; and

(g) interest on costs from or until a certain date, including a date before judgment.

(7) Before the court considers making an order under paragraph (6)(f), it will consider whether it is practicable to make an order under paragraph (6)(a) or (c) instead.

…

(8) Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so."

8. CPR 44.3 represents the right starting point, and would represent the right starting point even if this was group litigation under a GLO. That much was made clear by Swift J in Jones and Ors v Secretary of State for Energy and Climate Change and Another [2013] Costs LR 230, a case concerning group litigation covered by a GLO, which Mr Adkin urges me to follow, where she said:

"[12] … there is no provision in the CPR which indicates that a different approach should be adopted when determining costs in group litigation. Accordingly, it seems to me that I must follow the general approach and begin by deciding which party was successful in the litigation."

ISSUES

9. There are two main issues to decide on costs. They are: (i) who was the successful party? And (ii), should the successful party's costs be discounted, reduced or subject to any offset by way of a costs order in the opposite direction, to reflect particular aspects of this case?

ISSUE 1, WHO IS THE WINNER?

10. The Defendant argues that it is the winner. Mr Adkin reminds me that of the total number of claimants in the group, only a few have succeeded. Further, he reminds me that the trial was listed to determine, amongst other things, a "List of Issues" and that the Defendant has succeeded on every single one of those issues (most of which were abandoned before trial, with the remaining few decided against the Claimants at trial). He submits that this was group litigation, and in that context the fact that two individuals within a very large group succeeded in their claims should not detract from the big picture, which is one of failure for the bulk of the claims. He suggests that common sense demands, taking an overview, that the Defendant must be seen to be the winner, and therefore should have a costs order in its favour.
11. By contrast, the Claimants argue that they are the winners. The Claimants, appearing by Mr Bradley, rely in particular on A L Barnes Limited v Timetalk (UK) Limited [2003] EWCA Civ 402 where, at paragraph 28, Lord Justice Longmore says:

"In deciding who is the successful party the most important thing is to identify the party who is to pay money to the other. That is the surest indication of success and failure."

He also relies on the notes in the White Book under the heading "Who is the successful party?" at 44x.3.6, which emphasise that success is not a technical term but a result in real life which is to be determined with the exercise of common sense, but that in money claims, the successful party will be the one who receives money as a result of the case, citing Widlake v BAA Limited [2009] EWCA Civ 1256 and Ward LJ in Day v Day, noted in the White Book, who said that "the question of who is the unsuccessful party can easily be determined by deciding who has to write the cheque at the end of the case…". There are other more recent cases which are cited in the White Book to similar effect, for example, Fox v Foundation Piling Limited [2011] EWCA Civ 790 where Lord Justice Jackson agreed that a claimant who had only recovered a fraction of the overall claim was the "winner" for costs purposes.

12. The White Book commentary is consistent with paragraph 22.17 from Cook on Costs 2016 to which I was taken by Mr Bradley.
13. Mr Adkin argues that these authorities are distinguishable because they are not concerned with group litigation, but rather with individual claims where the assessment as a matter of common sense is different.
14. I see no reason to distinguish the authorities on which Mr Bradley relies, which apply regardless of the number of claimants involved. The broad principle for which all these authorities stand is that common sense must be applied to reach a realistic evaluation of who has won and who has lost, and that one highly relevant factor is whether, at the end of the day, one party will receive money from the other.
15. I agree with Mr Bradley that the Claimants are the winners because at the end of the day, they will receive a cheque from the Defendant.
16. In assessing the extent of that success, I disagree with Mr Adkin's evaluation that his client has succeeded at least to the extent of 94% (comprising the total number of Claimants in Categories 2 and 3: see paragraph 25.3 of his submissions dated 21 April 2016). The Part 1 Trial litigated the overarching principles applicable to the claims by reference to test claims drawn from each category. The number of claims in each category did not affect the trial or preparation for trial in any meaningful way. A more realistic approach is one or other of the following: two out of ten of the test Claimants succeeded in their actions and walked away with damages in their favour, which equates to 20% success (if a percentage is to be adopted); alternatively, one out of three categories of claims succeeded, namely Category 1, which equates to 33% success. Mr Adkin argues that the Category 1 cases were not disputed in principle, because Atlasjet accepted that a contract had existed with the Category 1 Claimants (cf paragraph 55 of the main judgment). But Atlasjet maintained its defence to all the Category 1 claims on the facts. And so the Claimants in Category 1 still had to come to Court, within the Part 1 Trial, to prove the viability of their claims (accepting of course that the Part 1 Trial did not extend to determining each and every one of the Category 1 claims on their own facts). But as a category of claimants, they were successful. I conclude that the Claimants' success is not so modest that it can or should be treated as immaterial. I reject Atlasjet's arguments to the contrary.
17. For those reasons, I conclude that the Claimants are the winners in the Part 1 Trial. As a starting point, Atlasjet should pay the Claimants' costs.

ISSUE 2, SHOULD THE WINNER'S COSTS BE DISCOUNTED, REDUCED OR OFFSET?

18. It is here that I believe Atlasjet's arguments have greater traction. There are two broad matters which tend to reduce the amount payable by Atlasjet to something less than 100%. The first is the fact that the Claimants lost every one of the List of Issues, either because that issue was abandoned before trial (true of most of them) or because I determined the issue in Atlasjet's favour. I accept that the List of Issues occupied a substantial part of the trial preparation, although they occupied only a modest part of the trial itself. Under CPR 44.2(4)(b), these are parts of the case on which the Claimants have not been successful.
19. The second is the fact that the majority of the contractual claims were indeed lost at trial, with only a minority succeeding. This too is relevant under CPR 44.2(b). However, care must be taken in determining the extent of the discount for this reason: the majority of the evidence and argument I heard at trial would have been required, even to establish just one of the claims in Category 1. That is because the key to the Claimants' success on the Category 1 claims was the unreliability of Atlasjet's own records, systems and witnesses. That unreliability was established as a result of the extensive evidence called to deal with booking systems, systems for cancelling reservations, allegations of systemic overbookings, Atlasjet's claim to the Court of Audit and the documents generated by the Court of Audit. These were generic areas of evidence not related specifically to the claims. But this evidence turned out to be very important to the successful Category 1 claims, and the Claimants should in principle recover their costs associated with it.
20. I have considered whether either or both of these matters should be reflected in an "issues based" costs order, permitted under CPR 44.2(6)(f). But, mindful of CPR 44.2 (7), I have concluded that it is both practicable and preferable to make an order under 44.2 (6)(a) instead, and to award the Claimants a percentage of their costs. That avoids the difficulty of identifying the issues to which the particular costs attach, which might be a very difficult exercise to perform in retrospect (for the parties and any costs judge in due course). That also avoids the prospect of continuing disputes over costs which might go on for months or years, noting that this is a case which has already been ongoing for a long time, appears to have generated a fair amount of ill feeling between the parties, and which quite clearly needs to be brought to an end. Finally, that avoids the spectre of what I would consider to be an undesirable and unfair outcome, namely of the Claimants' overall win (as I have found it to be) being eradicated (in effect) by the Defendant's costs attributable to particular issues. It is much better to determine the end position on costs now. I therefore conclude that a percentage costs order is appropriate.
21. In determining the correct percentage, and noting the two factors in Atlasjet's favour which I have recorded above, I turn to consider the Claimants' complaints about Atlasjet's conduct of the case, which the Claimants argue militate towards a higher costs percentage in their favour. The Claimants argue that the Defendant, by its conduct of this litigation and its attitude generally to the claims, has caused a great deal of unnecessary cost to be incurred; they argue that its conduct is to be taken into account under CPR 44.2(4)(a) and (5). The Claimants make a variety of complaints about Atlasjet's conduct. Those which are the more compelling are these: they complain that Atlasjet did not answer the pre-action protocol letter which they sent to Atlasjet on 26 May 2012, a factor specified as relevant by CPR 44.2 (5)(a). Further, they say that Atlasjet's conduct of the trial so far as evidence and disclosure was concerned was seriously deficient: Atlasjet failed to disclose all the documents which were relevant to these claims, and most notably in that context it failed to disclose the log books, which only came to the Claimants' and the Court's attention while Mr Ersoy gave his evidence. They complain that Atlasjet failed to assert at any time prior to trial that the Court of Audit documents, which formed a key part in the Claimants' case on passenger numbers, were not Atlasjet's documents, and further were not considered by Atlasjet to be reliable. Further and more generally, the Claimants argue that Atlasjet put forward confused and confusing evidence, the consequence of which was that the Claimants were sent on wild goose chases for information and have been left, even now, not knowing precisely what occurred in their cases. Finally, so far as efforts to settle were concerned, the Claimants rely on the fact that they did make an offer to settle on a Calderbank basis dated 28 April 2015, giving two options for settlement (one in the form of a cash offer). Atlasjet rejected that offer, and made no counter offer. I am told that there was an attempted ADR just seven days before trial but that suggestions of settlements, negotiations or ADR which were put forward by the Claimants prior to that were rejected out of hand by the Defendant.
22. These points are answered by Mr Adkin in his submissions, and by Mr Zimmer in his latest witness statement. Mr Zimmer accepts that the pre-action protocol letter was not answered, but says that it was only sent days before proceedings were issued by the Claimants, which shows that the Claimants never had any intention of settling prior to issue anyway. He notes that the Claimants have failed on all the matters originally pleaded against Atlasjet, and that the modest success secured by the Category 1 Claimants only arises out of the amended claim which was served in December 2014, by which time this claim (and the costs incurred in relation to it) was well advanced. He says that the Claimants' Calderbank offer was unrealistically high, that the Claimants have achieved at trial far less than they offered in that letter. He suggests that this case was never going to be possible to settle. He disputes various criticisms advanced by the Claimants as to the manner in which Atlasjet litigated this claim. Finally, he suggests that the fault for confusion over the Court of Audit documents lies with the Claimants, who obtained those documents independently from the Court of Audit and then refused to explain them to Atlasjet.
23. Some of Mr Zimmer's points are then contested by Mr Armutlu in his latest email. But there is no need for me to detail his answers, save to record that he disputes many of the points made by Mr Zimmer.
24. There is, as is clear, a mass of accusation and counter accusation going to each party's conduct in the case. I am not able to resolve all the points raised, nor do I consider it necessary or proportionate for me to do so. From all of this material, however, I conclude that there are two matters which must be taken into account as conduct issues (under CPR 44.2(4)(a)) in the Claimants' favour. The first is that the Defendant failed to make full disclosure. It was plain long before trial that the Claimants wanted to establish passenger numbers on Atlasjet's flights from the UK. It was not until Mr Ersoy came to give evidence at trial that it became apparent that Atlasjet had the log books for each of those flights sitting, undisclosed, in his office (see paragraphs 40-41 of the Judgment). The logbooks were made available to the Claimants during the course of the trial. These logbooks should have been disclosed earlier.
25. Secondly, Atlasjet resisted all early attempts at discussion or negotiation of this case. This case was crying out for some sensible attempt at negotiation before costs racked up and the parties' attitudes hardened. But Atlasjet did not answer the Claimants' pre-action protocol letter (in fact Atlasjet was not served with proceedings until August 2012, over two months after that letter was sent, showing that the Claimants were open to an informal response; the Claimants are justified in saying that they had no option but to serve proceedings, given Atlasjet's silence). The Claimants' Calderbank letter dated 24 April 2015 was, as things turned out, pitched too high; but it was at least some attempt at settlement. Atlasjet refused the offer and made no counter offer. The Calderbank offer was undoubtedly an admissible offer to settle to which I must have regard under CPR 44.2 (4)(c). Mr Adkin is right to say that we will never know if this case could have been settled, but there are two further points to be made. The first is that even if the case could not be settled, an early meeting would surely have focussed the minds of those involved, and is likely to have led at least to some narrowing of issues, which would in the end have saved costs. The second point is that there is a world of difference between a case which comes to trial after reasonable efforts at settlement have been made but settlement has proved impossible, and a case where one party has simply refused to engage, preferring to take the view that it will see its opponents in Court. This is the latter type of case. That attitude inevitably gets weighed in the balance when it comes to costs, if that party fails.

Conclusion

26. Weighing these various factors, I conclude that Atlasjet should pay 33% of the Claimants' reasonable costs of the Part 1 Trial on the standard basis. I believe this percentage reflects the overall outcome of the case, the outcome on particular issues in the case, and the conduct of the parties in relation to the case.
27. I invite Mr Bradley to indicate to me what figure he seeks by way of payment of costs on account (ideally following discussion and agreement with Mr Adkin). I confirm that I do not award any interest on costs pending their assessment or earlier agreement.
28. I invite the parties now to agree an Order disposing of the Part 1 Trial.