United Kingdom Upper Tribunal (Lands Chamber)

UPPER TRIBUNAL (LANDS CHAMBER)

UT Neutral citation number: [2014] UKUT 490 (LC)

UTLC Case Number: LCA/24/2010

LCA/102/2013 & Others

 

TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007

Compensation – injurious affection – cost protection – reciprocal capping – section 29, Tribunal Courts and Enforcement Act 2007 – rule 10(7), Tribunal Procedure (Upper Tribunal)(Lands Chamber) Rules 2010

 

BETWEEN:

 

HAMISH G JOHNSTON & OTHERS

                                   PHILIP JOHN DANDY & OTHERS                      Claimants

 

and

 

                                 TAG FARNBOROUGH AIRPORT LIMITED     Respondent

Re: Tanglewood

175 Sycamore Road,

Farnborough

Hampshire GU14 6RF

and other properties

 

 

 

 

Before: Martin Rodger QC, Deputy President

 

Sitting at: Royal Courts of Justice, Strand, London WC2A 2LL

on

23 October 2014

 

Richard Wald, instructed by Hugh James, solicitors, for the claimants

Andrew Tabachnik instructed by Herbert Smith Freehills, solicitors, for the respondents

 

 

© CROWN COPYRIGHT 2014

 

 

The following case is referred to in this decision:

 

Dickinson v Network Rail Infrastructure Limited [2014] UKUT 0372

 

DECISION

1.              The Tribunal is asked by the claimants in these proceedings to exercise its power under rule 10 of the Tribunal Procedure (Upper Tribunal)(Lands Chamber Rules 2010 (the 2010 Rules) to limit the costs recoverable against them.

The proceedings

2.              Part I of the Land Compensation Act 1973 gives a right to compensation where the value of an interest in land has been depreciated by physical factors caused by the use of certain public works, including any aerodrome.  The physical factors relevant for this purpose including noise, vibration, artificial lighting and the discharge of any solid or liquid substance.

3.              These references to the Tribunal concern two groups of claims under Part I of the 1973 Act arising out of work said to have been undertaken between 1994 and 1 January 2011 to adapt Farnborough Airport in Hampshire (the aerodrome) from its former military use to fit it for civilian aviation. 

4.              The aerodrome is the UK’s only dedicated business aviation airport and is located 55 km south west of central London on the edge of the town of Farnborough.  It was occupied by the Ministry of Defence until the early 1990s but planning permission was granted in 2000 for business aviation use.  The Civil Aviation Authority granted an operational licence early in 2003. 

5.              The original references were commenced in December 2009 by the occupiers of 279 homes in the vicinity of the aerodrome; these have been referred to as the “Johnston proceedings” and focus on works undertaken at the aerodrome before 1 January 2003.  A second group of references by the owners of five Farnborough properties was commenced in July 2013; these are referred to as the “Dandy proceedings” and relate to works carried out at the aerodrome up to October 2011.  The claimants in the Dandy proceedings are also claimants in the Johnston proceedings.

6.              There were originally 279 separate claims in the Johnston proceedings of which 24 have subsequently been withdrawn.  Of the 255 outstanding claims 226 of the claimants (or joint claimants where properties are owned by couples) are represented by Hugh James, solicitors, while the remaining 29 claimants are currently unrepresented. 

7.              In the Dandy proceedings all of the claimants are represented by Hugh James, solicitors. 

8.              The respondent to both the Johnston and the Dandy proceedings is TAG Farnborough Airport Limited, which it is common ground is the responsible authority for the purpose of claims in relation to public works at the aerodrome under Part I of the 1973 Act.  The respondent is represented by Herbert Smith Freehills, solicitors.

9.              A claim for compensation following alterations to an aerodrome may not be made under Part I earlier than 12 months from the date on which the public works were first used after completion of the alteration (sections 1(9), 3(2) and 9(2), 1973 Act).  The effect of these provisions is to add a further year to the 6 year limitation period under section 9 of the Limitation Act 1980 (section 19(2A), 1973 Act). These provisions apply only to “runway or apron alterations”, expressions defined in section 9(6) of the 1973 Act as the extension or strengthening of an existing runway or a substantial addition to or alteration of a taxiway or apron for the purpose of providing facilities for a greater number of aircraft.

10.          The potential value of the claims in the Johnston proceedings is estimated to exceed £14m, based on the alleged diminution in value of the claimants’ homes as a result of the use of the public works at the aerodrome.

11.          There are five claimants in the Dandy proceedings whose claims in aggregate currently exceed £340,000.  It is common ground that the Dandy proceedings are in the nature of a test case and that a successful outcome for the claimants will open up the potential for claims to be made by the remaining Johnston claimants as well other residents of Farnborough and surrounding areas. 

12.          The respondent resists the claims for compensation in the Johnston proceedings on five separate grounds.  These are:

(1)       Limitation: it is said that alterations were completed and first used in July 2002, and that the references were therefore made too late.

(2)       Exemption: it is said that when the alterations were carried out the aerodrome was still in the occupation of the MoD, a government department in whose favour a specific exemption from compensation applies by section 84(1) of the 1973 Act.

(3)       It is said that no valid claim notices have been served.

(4)       It is said that the alterations carried out to the aerodrome were not “runway or apron alterations” as defined, and that there were therefore no public works for the purpose of Part I of the 1973 Act.

(5)       It is said that no loss has been caused to the claimants.

13.          In response to the assertion that the claims were brought out of time, the claimants rely on a formal statement made to them by the respondent’s planning and development director, as a result of which the respondent is said to be estopped from asserting that the date of first use of the aerodrome was earlier than 1 January 2003. On 9 March 2011 the Tribunal ordered that five preliminary issues be tried in the Johnston proceedings; in substance these issues cover all of the grounds of defence, other than the contention that no loss has been suffered, and the estoppel issue.

14.          It was originally intended that the trial of the preliminary issues would take place in October 2011, but the Johnston proceedings were subsequently stayed by the Tribunal to permit the claimants to make an application to the Secretary of State for a certificate under section 15(2) of the 1973 Act which would, if granted, have fixed the date of first use of the aerodrome potentially rendering at least two of the preliminary issues redundant.  The Secretary of State refused to make such a determination, apparently on the basis that the Tribunal was already seized of the issue. Proceedings for judicial review of that refusal were subsequently commenced by the claimants, but on 23 April 2013 those proceedings were withdrawn on the basis that the substantive issues would be determined by the Tribunal.

15.          By the time the Johnston proceedings returned to the Tribunal, the Dandy proceedings had been commenced.  At a case management hearing on 24 March 2014 further directions for the trial of the preliminary issues in Johnston were given and preliminary issues were also ordered to be tried in the Dandy proceedings.  Although superficially the preliminary issues appear similar in both proceedings, the works involved are different, and the factual inquiry in the Dandy proceedings will cover a much longer period. Nonetheless, directions were given for a single trial of the preliminary issues to commence on 6 July 2015 with an expected duration of 15 days.

The relevant rules and statutory provisions

 

16.          Section 29(1)-(3) of the Tribunals, Courts and Enforcement Act 2007 (“the 2007 Act”) provides that, subject to the Tribunal Procedure Rules, the Upper Tribunal shall have “full power” to determine by whom and to what extent the costs of proceedings before it are to be paid.  Specific provision is made by section 29(4)-(5) for wasted costs to be disallowed or ordered to be met by the legal or other representative whose conduct has caused them to be incurred.

17.          In the Lands Chamber of the Upper Tribunal the relevant procedural rules supplementing section 29 are contained in rule 10 of the 2010 Rules as now amended (with effect from 1 July 2013)  by the Tribunal Procedure (Amendment No. 3) Rules 2013.  Rule 10(1) gives the Tribunal power to make an order for costs on an application or on its own initiative, but rule 10(2)(a) limits that power so that an order may only be made in accordance with the conditions or in the circumstances referred to in paragraphs (3) to (6).  Paragraph (3) of rule 10 relates to orders for wasted costs under section 29(4) of the 2007 Act. 

18.          Paragraphs (6) to (8) of rule 10 are of specific relevance to this application and provide as follows:

“(6) The Tribunal may make an order for costs in proceedings –

 

(a)                for compensation for compulsory purchase;

 

(b)               for injurious affection of land;

 

(c)                under section 84 of the Law of Property Act 1925 (discharge or modification of restrictive covenants affecting land);

 

(d)               on an appeal from a decision of the Valuation Tribunal for England or the Valuation Tribunal for Wales.

 

(7) Subject to paragraph (3), in proceedings to which paragraph (6) applies, the Tribunal may direct that no order for costs may be made against one or more specified parties in respect of costs subsequently incurred.

 

(8) In proceedings to which paragraph (6) applies, the Tribunal must have regard to the size and nature of the matters in dispute.” 

19.          It is common ground that the Johnston and Dandy proceedings are for injurious affection of land falling within paragraph 6(b) of rule 10.  It follows that the Tribunal’s power under paragraph (7) to direct that no order for costs may be made against a specified party is engaged.

The application

20.          On 23 September 2014 the respondent wrote to the 29 unrepresented claimants in the Johnston proceedings informing them that it was its intention, if it succeeded at the trial of the preliminary issues, to seek an order for reimbursement of its costs against all of the claimants.  The unrepresented claimants were informed that the respondent had incurred costs exceeding £1m which were expected to increase significantly by the time of trial.

21.          Within a few days of being provided with a draft of that letter the claimants applied to the Tribunal for orders relating to costs under rule 10 of the 2010 Rules.  The form of the order sought was attached to a witness statement of Mr Stockdale, the claimant’s solicitor.  It asked first that “pursuant to rule 10(7) and subject to rule 10(3) no order for costs may be made against the claimants in respect of costs incurred after 3 October 2014 up to and excluding the trial of preliminary issues.” I take the reference to “excluding” to be a misprint and that “including” was intended as the application was conducted before me on the basis that costs protection was being sought in respect of the costs up to the conclusion of the trial of preliminary issues.

22.          The effect of the first part of the draft order would therefore be that, in the event of the respondent being successful in its defence of the claims, it would be limited in the recovery of its costs to the sums estimated to exceed £1m referred to in the letter to unrepresented claimants, and would not be entitled to any of its costs incurred after 3 October 2014.

23.          The draft order also made provision for the responsibility of individual claimants, in the event of adverse cost orders against the claimants generally, to be several rather than joint.  That part of the proposed order has been agreed between the parties in a slightly modified form the effect of which is that the claimants in each of the sets of proceedings will each be responsible only for his or her own share (calculated in accordance with the number of properties in respect of which claims are made) rather than being exposed to liability for the whole of the respondent’s costs which may subsequently be ordered to be paid by the claimants.

24.          The parties also agreed that the costs of the preliminary issues which were common to both the Johnston and Dandy proceedings should be split equally between them.  They were unable to reach any consensus on the relative proportions of the total costs which are likely to be incurred in each of the proceedings.

The evidence

25.          The rationale for the claimants’ application was explained by their solicitor, Mr Stockdale, in two witness statements dated 26 September and 15 October 2014.  A further statement of Mr Stockdale’s was provided on the day before the hearing of the application in response to the witness statement of Mr Bonye, the respondent’s solicitor, provided on 20 October 2014.

26.          Mr Stockdale estimated that, including VAT (which the claimants are unable to recover) the claimants’ total base costs to date are just over £700,000, and that a further £550,386 will be incurred up to the conclusion of the preliminary issues, so that in round terms getting to that stage will cost £1.25m.

27.          Mr Bonye estimated that, excluding VAT (which the respondent can recover) the respondent’s costs to date total £1,448,193, and that a further £1,245,500 will be incurred up to the conclusion of the preliminary issues.  At approximately £2.7m, the respondent’s costs are therefore thought likely to be more than double the base costs of the claimants.

28.          The claimants in the Johnston proceedings pursue their claims with the benefit of conditional fee agreements (CFAs) entered into with Hugh James, solicitors, and counsel.  In the event that their claims are dismissed they will be liable for disbursements (which largely comprise the fees of experts instructed on the preliminary issues) but will not have to pay the fees of their own solicitors and counsel.  They are, however, personally at risk of liability for the respondent’s costs as they do not have after the event (ATE) insurance.

29.          The claimants in the Dandy proceedings also have the benefit of CFAs.  Additionally, they have negotiated ATE insurance cover up to a limit of indemnity of £1.25m, providing protection against adverse costs orders and the risk of being unable to recover their own disbursements.  It was explained that this figure is sub-divided so that £1m is available as cover against adverse costs while the balance is attributable to disbursements.  The claimants in the Dandy proceedings will be liable personally only to the extent that any costs awarded against them exceeded the limit of their indemnity (after deducting for disbursements). 

30.          The CFAs were not in evidence, nor would I have expected them to be despite the respondent’s request that they be disclosed.  Mr Tabachnik invited me to assume that in each case the CFAs allowed for an uplift of 100% with the result that the total bill of costs of both parties would be broadly similar in the event of success on the part of the claimants.  In view of the complexity of the proceedings that does not seem to me to be an unreasonable assumption.

31.          Mr Stockdale explained in his first witness statement that the claimants had been extremely surprised and concerned at the level of the respondent’s costs and could not understand how they had already exceeded £1m.  He criticised those costs as being disproportionate.

32.          Mr Stockdale expressed concern that the Johnston proceedings might be “stifled entirely if costs issues cannot be controlled”. He said that it would be “impractical and disproportionate” to provide a statement of means in relation to individual claimants, each of whom had different financial circumstances.  Nonetheless, all were very concerned about their potential cost liability.  He illustrated this concern by referring to conversations he had had with claimants who are retired and with others who have young families, all of whom are anxious about the impact of adverse cost orders on their financial position.

33.          Mr Stockdale also drew attention to the financial resources available to the respondents and exhibited a copy of its 2013 accounts which showed net assets in excess of £54m. 

34.          For those reasons Mr Stockdale sought immunity from further cost liabilities (except in relation to any wasted costs which might be ordered under rule 10(3)). He concluded his second witness statement with two final points.  First he said the claimants were concerned to ensure that they had appropriate level of ATE cover in the Dandy proceedings and were concerned that the cover currently available to them may not be sufficient “raising the prospect that the claimants may need to obtain top up cover.”  Secondly, as an alterative to immunity from liability for the respondent’s costs going forward Mr Stockdale said that the claimants would seek “a reciprocal cap” in relation to both the Dandy and Johnston proceedings.

35.          The claimants’ application was also supported by a witness statement of Jeffrey Marks OBE, himself a claimant in the Johnston proceedings and chairman of the Farnborough Aerodrome Residents Association.  Mr Marks referred to the respondent’s letter to unrepresented claimants and said, at paragraph 6 of his statement:

“My very real concern having discussed this matter with a number of individuals is that the potential size of the adverse cost risk is likely to result in substantial number of claimants wishing to withdraw their claims unless costs can be controlled.”

36.          Mr Marks said that when the proceedings had commenced it had been his understanding and, he believed, that of other claimants that the overall cost risk associated with obtaining a determination of the preliminary issues by the Tribunal was in the order of £0.5m.  He appreciated that the issues had increased in complexity but nonetheless feared that little effort had been made by the respondents to control their costs to a proportionate level. 

37.          Similar concerns were apparent from short informal statements by other claimants (14 in total) who responded to a letter from Mr Stockdale dated 13 October 2014 informing them of the making of the application.  Mr Stockdale notified his clients that the respondent’s costs were now said to exceed £1m and would increase significantly by the time of trial.  He invited those who were concerned about costs “or would like particular circumstances to be considered by the Tribunal” to write to him setting out their comments.  It is notable that Mr Stockdale’s letter did not provide any estimate of the liability of individual claimants, and it seems likely from their responses that some of those who replied had their attention firmly focussed on the total figure mentioned which they described variously as “intimidating” “very worrying” and “so high that we are having to consider whether to withdraw our claims.”  Comments by others confirmed Mr Marks’ evidence that they had expected their total liability in the event of the failure of the claims to be in the order of £1,000 - £2,000 (although one mentioned the figure of £2,500 plus vat).

38.          None of the claimants who responded to Mr Stockdale’s invitation to provide details of particular circumstances which the Tribunal might take into account included any specific reference to the value of their property, the extent of any borrowing secured on it, any other capital resources available to them or their income. 

39.          In his evidence on behalf of the respondents Mr Bonye wholeheartedly opposed the cost protection sought by the claimants.

40.          Mr Bonye provided information about the respondent’s expenditure so far and explained that much of it had been incurred in a substantial disclosure exercise which was not yet complete.  He pointed out that there had been discussions on the extent of the disclosure required and that the exercise had, as he put it, “been undertaken consensually” and without substantial complaint by Hugh James.  He referred to the claimant’s total claims in the Johnston proceedings, exceeding £14m.  Most of the Johnston claimants were also waiting in the wings to bring further claims in the event of the success of the Dandy proceedings and others might join in.  Extrapolating the current claims by the population of Farnborough Mr Bonye suggested that on a worst case basis the respondent’s total potential liability could be £340m.  The scale of the actual and potential claims explained the approach taken by the respondents, whose business would be financially unviable in the face of such liability.

Submissions

41.          In his submissions on behalf of the claimants Mr Wald began by taking issue with Mr Bonye’s suggestion that disclosure had been conducted on a consensual basis.  On the contrary, he submitted, there was considerable disquiet amongst the claimants and their advisers which had been made clear in correspondence, that the respondents had adopted a disproportionate approach to disclosure before any discussions between the parties had taken place and without the prior sanction of the Tribunal.  A vast amount of the material so far disclosed was, Mr Wald suggested, “obviously not relevant to the preliminary issues”.  This exercise had contributed substantially to the respondent’s costs incurred so far which, Mr Wald suggested, was a deliberate policy designed to scare off the claimants; it had indeed produced a state of alarm amongst many of them, as the evidence of Mr Marks and Mr Stockdale illustrated.

42.          Mr Wald referred to the recent decision of the Tribunal (Sir Keith Lindblom, President) in Dickinson v Network Rail Infrastructure Limited [2014] UKUT 0372 in which an order had been made limiting the liability of two claimants seeking compensation for the injurious affection of their property under Part 1 of the 1973 Act.  In that case the Tribunal had set out some general principles relating to the Tribunal’s powers to limit costs (at paragraphs 14-16).  The Tribunal retains a very broad discretion in making orders for costs which ought to be applied with reasonable flexibility in the light of the particular circumstances of each case and with a view to achieving the Tribunal’s overriding objective of dealing with cases fairly and justly.  That objective includes dealing with cases in ways which are proportionate to the importance of the case, the complexity of the issues, the anticipated costs and the resources of the parties.  Secondly, in a case to which paragraphs (5) and (6) of rule 10 applies (which include claims for injurious affection) a disparity in resources between the parties may be a relevant and important consideration.  Thirdly, the Tribunal has power to limit the future liability for costs of one or more of the parties and to make cost capping orders, and in exercising that power the Tribunal must consider, all cases, the size and nature of the matters in dispute (rule 10(8)).

43.          On the facts in Dickinson the Tribunal was not persuaded that the claimants would be denied access to justice or left unable to pursue their claims effectively if costs protection was refused.  For that reason the Tribunal refused to make an order under rule 10(7) protecting the claimants from all liability for costs in the event of the failure of their claims.  Despite refusing full costs protection the Tribunal considered whether it should exercise control over costs at that early stage of the proceedings.  Section 29 of the 2007 Act gave the Tribunal “full power” over costs, subject to procedural rules, and it could therefore make costs capping orders.  Having regard to the size and nature of the matters in dispute, it was appropriate to make such an order in that case.  The Tribunal therefore limited the claimants’ liability for future costs to £15,000.  One effect of that cap was, the Tribunal considered, that it would maintain on both sides a sense of realism and proportion in the conduct of the reference which was for compensation of £30,000.

44.          Mr Wald invited me to consider the two sets of proceedings separately.  He made a number of points on the merits which were refuted by Mr Tabachnik on behalf of the respondents and which I feel bound to disregard at this stage.  Mr Wald acknowledged that the Tribunal could not resolve substantive issues in the context of a cost capping application and I intend to approach the application on the basis that the claimants’ claims are not fanciful and have a realistic prospect of success, but no more than that. 

45.          Mr Wald submitted that the Johnston claimants had had no reason to expect that their exposure to adverse costs would exceed about £2,000.  The Dandy claimants who had protected themselves with ATE insurance against costs liability of up to £1m ought to have been reassured by that protection.  The levels of costs now being incurred by the claimant were disproportionate and the risk to the continuance of the claims (in particular the Johnston claims) justified a cost cap of no more than £2,000 per property in the case of the Johnston claimants and a total liability for the Dandy claimants of £1m (in both cases including costs incurred both before and after the making of the application).  Those would be reasonable figures for the determination of the preliminary issue and any higher figure risked injustice to the claimants.

46.          Mr Wald also relied, by analogy, on the Aarhus Convention, which requires member states to ensure that members of the public have access to a review procedure before a court of law to challenge decisions on proposals for development affecting the environment.  Such access is required to be “not prohibitively expensive” (a condition to which effect has been given in the UK by requiring that the personal liability of claimants in such claims be limited to £5,000).  Mr Wald suggested that the Aarhus Convention, although not directly applicable, was a material consideration for the Tribunal when exercising its discretion in relation to cost capping or protective costs orders.

47.          Mr Tabachnik described the application as “half baked”, and suggested that the claimant had come nowhere near demonstrating a “compelling reason” for total costs protection sufficient to justify a departure from the normal rule in injurious affection claims that the successful party should recover its costs from the unsuccessful party (see Dickinson paras 19, 23).  There was no evidence of the means of the individual claimants and therefore no basis on which the Tribunal could assess the suggestion that claims would be stifled in the event that an order was refused.  In the Johnston proceedings the 241 claimants were all the owners of property but no evidence had been adduced of the value of that property or the equity available to the claimants. 

48.          Mr Tabachnik submitted that the agreement that the liability of individual claimants would be several, so that each would be responsible only for their proportionate share of any costs awarded in the respondent’s favour, had had a significant effect on the risk each claimant assumed and was highly material to the exercise of the Tribunal’s discretion.  His expectation (which was no more than that) was that the costs of the preliminary issues would effectively be divided equally between the Johnston and Dandy proceedings.  It was possible, on that basis, to consider the likely exposure of the claimants in each category of proceedings.  If the claimants’ eventual claim for costs was as much as £2.5m that would be divided equally between the Dandy and Johnston claims.  In the Dandy proceedings the claimants had the benefit of ATE insurance procured in March 2013 providing cover of up to £1m against adverse costs awards.  From the costs break down now provided it could be seen that the claimants’ prospective disbursements were not likely to be as much as the £0.25m for which they had insurance.  There should therefore be scope to increase the share of the total cover available for costs and to reduce the share attributable to disbursements.  Even if that was not possible the gap between the insurance cover and the potential liability was in the order of £250,000 (assuming no significant reduction in costs on a detailed assessment).  Mr Stockdale in his second witness statement had acknowledged the ability of the claimants to seek top-up cover and, Mr Tabachnik suggested, there was no reason to think such top-up cover would not be available.  On that basis there was no justification for a fear that the Dandy proceedings would be stifled by a refusal of the Tribunal to make a protective or cost capping order.

49.          In the Johnston proceedings, on the same assumption that costs of the preliminary issue would be about £1.25m the total potential liability of individual claimants was £5,200 per property.  If the costs were assessed down to, perhaps, £1m, that liability would be £4,150.  There was no evidence, Mr Tabachnik submitted, that the Johnston proceedings would be stifled by a risk to individual claimants of having to pay costs of £4,000 or £5,000 in the event of the respondent succeeding.  That picture might change if, for example, a large number of claimants dropped out, but the application ought to be determined on the basis of the number currently participating and on the evidence they had submitted.  In light of the CFA agreements it could not be suggested that there was any disparity in resources between the parties, nor was it likely that the eventual bills of costs on each side would be substantially different.  The claimant’s schedules suggested that their total costs for the preliminary issues were expected to be in the order of £1.36m and if a 100% uplift was applied to that figure the respondent’s exposure to the claimant’s costs was of the same order as its own costs of about £2.7m. 

50.          Mr Tabachnik submitted that, bearing in mind Mr Stockdale’s proposed reciprocal cap, any cost capping order made by the Tribunal ought to be fully reciprocal, and should take into account the uplift provided for by the CFAs. 

51.          In response Mr Wald said that it was impossible to determine at this stage whether the costs of the Dandy proceedings and the Johnston proceedings would be equal, as Mr Tabachnik had suggested.  It was the claimant’s expectation that the Johnston proceedings (where no ATE insurance was in place) would absorb the majority of the costs, although Mr Wald was unable to say what the respective proportions would be.  Nonetheless Mr Wald accepted that in the Johnston proceedings it was appropriate for me to assume that the claimant’s individual liability would not be less than £5,000 (if there was no significant reduction in the respondent’s bill on a detailed assessment) and that it was unlikely to exceed £10,000. 

Discussion and conclusions

52.          In considering these applications it is first necessary to form a view (albeit provisional and on very limited information) of the likely division of costs between the Dandy proceedings and the Johnston proceedings.  The division which is relevant for this purpose is of the costs which are to be incurred after 3 October 2014 when the claimants’ application was made; rule 10(7) empowers the Tribunal to make orders “in respect of costs subsequently incurred” and does not contemplate retrospective orders.  It is therefore irrelevant that the Johnston proceedings have been under way since 2010, whereas the Dandy proceedings commenced only in 2013.  There are legal issues common to both sets of proceedings and others (in particular the estoppel issue in Johnston and the prematurity issue in Dandy) which are discrete.  The parties have agreed that the costs in relation to issues common to both sets of proceedings should be split equally between the proceedings (rather than by reference to the number of claimants).  In view of that agreement it seems to me to be realistic to assume, as Mr Tabachnik invited me to, that the remaining costs of discrete issues will be roughly equivalent and that, over all, in the event of the failure of both sets of proceedings the Dandy claimants will be liable for about half of the respondent’s costs and the Johnston claimants will be liable for the remainder.  I was not invited to make an order to that effect, nor was it agreed, but it seems to me to be a sensible starting point.

53.          The costs estimates provided by the respondent are for their total projected costs.  It is likely that that a figure of £2.5m or £2.7m (depending on the extent of further disclosure) will be reduced on a detailed assessment. 

54.          In the Dandy proceedings the claimants have the benefit of £1m ATE cover against their prospective liability.  The risk to the Dandy claimants is therefore they may be liable to pay the balance of the respondent’s assessed costs of those proceedings. Assuming the costs of the remaining disclosure exercise are kept under control the respondent anticipates that its total bill of costs will be in the order of £2.5m, half of which would be attributable to the Dandy proceedings.  After taking into account the ATE insurance cover the shortfall for which individual claimants would be at risk (before detailed assessment) would therefore be in the order of £250,000.  There may also be some potential (at further cost) for the claimants to supplement their existing insurance arrangements. 

55.          Although there are only five claimants in the Dandy proceedings it is acknowledged that they are a test case for a larger number (likely to include at least the 240 Johnston claimants).  It is open to the claimants as a whole to enter into arrangements amongst themselves to apportion liability for costs and it therefore seems to me to be over generous to regard the eventual costs shortfall as a risk resting exclusively on the shoulders of the five claimants in the Dandy proceedings, rather than those of the whole body of claimants in both proceedings who stand to benefit from the success of the claims. 

56.          Finally, as required by rule 10(8), I have regard to the size and nature of the matters in dispute.  If the Dandy proceedings are successful the current claims are in the order of £340,000 but as these are test cases there is no reason to assume that the total claims which may be put forward, based on 2011 property values, will be significantly less than the claims in the Johnston proceedings which seem to be in the order of £14m.  These are clearly very substantial proceedings which the respondents are entitled to treat seriously and to resist strenuously.  They are factually and legally complex.  Nonetheless there is a real risk, from what I have seen, that they may be conducted disproportionately and I therefore bear in mind the possibility that detailed assessment may make substantial in-roads into the bills of costs of whichever of the parties is eventually successful. 

57.          Taking all of those matters into account I am not satisfied that any case has been made out either for a costs protection order under rule 10(7) or for a costs cap in the Dandy proceedings.  Assuming the continuance of the Johnston proceedings, I see no risk of the Dandy proceedings being stifled without costs protection. 

58.          I would have been attracted to an overall cost cap for the proceedings if an application had been made at an earlier stage, but I do not think such an order is now feasible and I do not have sufficient information to impose one.  Such an application could not have been made before the amendment to the 2010 Rules on 1 July 2013.  Any application made now would come only after very substantial expenditure has already been incurred and at a time when the parties are already embarked on preparations the interruption of which might jeopardise the trial date and cause some of the expenditure already incurred to be wasted.  Given the protection the claimants have from ATE insurance, and the possibility that they may be able to top up that insurance to provide further comfort, I have concluded that the appropriate course in the Dandy case is to rely on the Tribunal’s powers of detailed assessment, rather than to seek to impose a speculative cap at this stage.

59.          The Johnston proceedings raise different considerations. 

60.          I accept that the claimants were prompted to make this application urgently in response to the 23 September letter to unrepresented claimants and that, in the time available to them, it would have been impractical to have presented evidence of the financial resources and liabilities of each of their number.  To be of much use such a body of evidence would have had to be very substantial and its preparation would have been a costly exercise in its own right; the assessment of such material would also have involved a considerable further commitment by the Tribunal. 

61.          Nonetheless, the absence of evidence of financial means makes it impossible for me to accept the claimant’s application for a costs protection order under Rule 10(7) absolving them of any responsibility for the costs of the respondents incurred after 3 October 2014 in the event that their claims fail.  I consider that, without knowledge of the financial resources of the claimants, such an order would be unjust to the respondents.

62.          In common with the Dandy proceedings, there appears to me to be a significant risk of disproportionate expenditure in the Johnston case.  Even if that impression is unjustified, the material put before the Tribunal by Mr Marks and the individual responses of claimants to Mr Stockdale’s recent letter make clear that the uncertainty of their potential liability is of greatest concern to claimants.  I find entirely convincing Mr Marks’ fear that, without some assurance as to the scale of their liability, individuals of more modest means may find the current uncertainty intolerable, as may those whose homes are of more modest value and whose claims are smaller in absolute terms.  In the absence of some limitation, the effect of a reduction in the number of claimants would be to increase the potential liability of the remaining group.  I can well see how the departure of a small number may precipitate a greater flight and result eventually in the proceedings becoming unsustainable. 

63.          There would, in my view, be a significant risk of injustice if these claims cannot be determined because the risk of adverse costs orders proves too intimidating to claimants.  For that reason I am satisfied that it is appropriate for the Tribunal to limit the costs which may be recovered against the claimants.  The limit which I think appropriate is £4,000 per property (whether that property is owned by one claimant or by a couple).  I appreciate that that figure is approximately double the upper expectations of the claimants when the proceedings commenced in 2010.  Since then, however, the proceedings have become more complex.  Although this limit may exceed what some claimants are prepared to contemplate, I take into account the absence of evidence of means and also the sums which the claimants expect to recover in the event of the success of their claims. 

64.          I am satisfied that the risk of a haemorrhaging of support for the Johnston proceedings will be adequately controlled by a cap at the level I have fixed upon.  The limit will apply to the whole of the cost of the proceedings up to the conclusion of the preliminary issue.  It is not possible on the information provided to me reliably to calculate a limit appropriate to the costs incurred after 3 October 2014, and neither party invited me to do so.

65.          Mr Wald presented his application on the basis that it would be appropriate for the Tribunal to impose a reciprocal cap on the respondent’s liability.  No such cap was imposed in Dickinson and it should not be assumed that it is appropriate in every case.  Nonetheless, as the claimant’s application has been presented on that basis, I accede to Mr Tabachnik’s request for a reciprocal cap.  On the basis that there are now approximately 240 claimants, the costs recoverable by the claimants in the event of the Johnston proceedings succeeding will therefore not exceed £960,000 in base costs. 

66.          The only contentious issue regarding the reciprocal costs cap was whether it should apply also to the uplift to which the claimants’ lawyers will become entitled under their CFAs in the event of success in the proceedings.  I do not think it is appropriate for the cap to apply to that uplift.  In his second witness statement Mr Stockdale estimated that his costs to date were £587,000; if the uplift is only 60% a cap of £960,000 would already almost have been reached.  On the assumption that the uplift is 100% (or even if it is only 60%) the effect of such a cap would either be to deprive the claimant’s legal advisers of all of the benefit to them of the CFA arrangements, or would require that the claimants fund the uplift from their compensation.  Given that the conditional fee arrangements are the means by which the claimants have been able to mount their claims it does not seem to me to be in the interests of justice that their legal advisers should be deprived of the benefit of those arrangements even in the event that the claims are successful.  I was referred to CPR 44.18(2) and CPR 3.19(2) and although these rules do not apply in the Tribunal the conclusion I have reached is consistent with the approach which they take.

67.          I now invite counsel to draft an appropriate form of order to reflect this decision.

 

 

 

Martin Rodger QC

Deputy President

 

6 November 2014

Costs addendum

68.              The parties have exchanged submissions on costs.  The claimants ask for their costs of the applications in both the Johnston and the Dandy proceedings; the respondent seeks an order for its costs in the Dandy proceedings and proposes that the costs of the Johnston proceedings should be costs in the reference.  The respondent also proposes that the costs of the applications should be apportioned equally between the two sets of proceedings. 

69.              I agree with the respondent that they have been the successful party in the Dandy proceedings, where no order has been made.  The claimants criticise the conduct of the respondents in failing to respond to a request first made in August for details of their total costs and of their apportionment between the two sets of proceedings until they were provided in Mr Bonye’s witness statement served three days before the hearing, and suggest that that conduct ought to be taken into account.  On the other hand the claimants did not wait for that information before commencing the applications, and did not agree to a reciprocal exchange of information until relatively late.  I do not consider that the late provision of information on costs is sufficient to justify a departure from the standard order that the unsuccessful party should pay the costs of the application.

70.              The claimants have succeeded in obtaining a costs capping order in their favour in the Johnston proceedings.  They did not obtain the total costs protection for the future which they had originally sought and, as volunteered by Mr Stockdale in his second witness statement, the cap is reciprocal, but nonetheless I consider the claimants to be the successful party.  The only negotiations to which I have been referred took place too close to the hearing to be relevant to the issue of costs, and in any event neither side achieved as favourable an outcome as it had been prepared to accept.  I have considered whether the claimants’ entitlement to their costs in the Johnston proceedings should be tempered by their having achieved less than they originally sought, but I have concluded that it should not.  Although only an order under rule 10(7) was originally sought, capping became the substance of the application by the time of Mr Stockdale’s second witness statement (and had been mentioned as one option as early as 18 September).  I do not think the costs of the application would have been any different if it had focused on capping from the outset.

71.              I do not consider that the respondent’s suggested apportionment of costs equally between the two proceedings is appropriate.  The consequences of the availability of ATE insurance to the Dandy claimants but not to the Johnston claimants was reflected both in the preparation of evidence and in the hearing itself.  Significantly less attention and hearing time was devoted to the application in the Dandy proceedings.  Bearing in mind that much of the preparation was equally relevant to both proceedings, in my judgment it is appropriate to attribute 60% of the costs of the application to the Johnston proceedings and 40% to the Dandy proceedings.   

72.              My order is therefore:

1.                  The respondent will pay the claimants’ costs of the application for costs protection in the Johnston proceedings, which are to be taken to have been 60% of the costs of the joint applications.

2.                  The claimants will pay the respondent’s costs of the application for costs protection in the Dandy proceedings, which are to be taken to have been 40% of the costs of the joint applications.

3.                  In each case the costs will be the subject of detailed assessment on the standard basis if not agreed.

 

 

6 November 2014                                           Martin Rodger QC, Deputy President