Barr & Ors v Biffa Waste Services Ltd (No.2) [2009] EWHC 2444 (TCC)

[2009] EWHC 2444 (TCC)Case No HT-09-165
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Date Friday, 2 nd October 2009
WESTMILL LANDFILL GROUP LITIGATION
St. Dunstan’s House
133-137 Fleet Street
London EC4A 1HD
Before
MR. JUSTICE COULSON
Between
DEREK BARR & ORSClaimantsBIFFA WASTE SERVICES LTD.Defendant
MR. NIGEL COOKSLEY QC and MR JOHN BATES (instructed by Messrs. Hugh James) for ClaimantsMR. IAN CROXFORD QC and MR. THOMAS DE LA MARE (instructed by Messrs. Nabarro LLP) for DefendantHearing Hearing Date: 24 th September 2009
Judgment
[1]INTRODUCTION Pursuant to a Group Litigation Order (“GLO”) made on 27th March 2009 by Ramsey J, this action comprises claims for negligence and nuisance by 163 claimant households said to arise out of odour emissions from the defendant’s Westmill Landfill Site near Ware in Hertfordshire. Other matters of background are set out in my Judgment on the defendant’s successful application for disclosure of the claimants’ ATE insurance policy at [2009] EWHC 1033 (TCC).[2]By an application dated 17th September 2009, the defendant now seeks, pursuant to CPR 44.18, an order capping the recoverable costs of the claimants if, contrary to the defendant’s case, the claimants are ultimately successful in these proceedings. The cap sought is by reference to the limit of the claimants’ ATE policy. That has recently been increased to £1 million, which is therefore the maximum recoverable by the defendant, if the defendant is ultimately successful in the action. As we shall see, the defendant’s application is unusual, because it concentrates on the issue of disproportionality, not by reference to the amount of the claimants’ future costs itself – a figure which was in fact unknown to the defendant at the time that the application was made and argued, and which the defendant suggests is in any event too low – but instead by reference to what the defendant says are the significant inequalities inherent in this particular litigation.[3]I summarise the relevant principles of law in section 2 below. In section 3, I identify the particular features of this litigation which lie at the heart of the application. At section 4, I then consider the application against the test set out in CPR 44.18 and those principles of law. In section 5, I deal with a separate but related point arising out of the claimants’ costs estimate and the rules at CPR 44.3. There is a short summary of my conclusions at section 6. I am again very grateful to all counsel for their assistance in dealing with this interesting and difficult application.[2]COSTS_CAPPING/RELEVANT PRINCIPLES OF LAW 2.1. Pre-April 2009[4]CPR 44.18 came into force in April 2009. It is therefore necessary to consider, albeit briefly, the pre-April 2009 authorities dealing with costs capping before setting out the new provisions.[5]The starting point for any consideration of costs capping orders is the decision in Musa King v. The Daily Telegraph Group Limited(Practice Note) [2005] 1 WLR 2282, in which the court’s power to make such orders was affirmed. It was a defamation case in which the claimant’s solicitors were working on a CFA with a significant uplift, but there was no ATE cover. In other words, the defendant was faced with what Lord Hoffmann described in Campbell v MGN Limited (Number 2)[2005] 1 WLR 3394 as ‘the blackmailing effect of defamation litigation conducted under a CFA without ATE insurance’. In King, the Court of Appeal set out robust general rules relating to the making of costs capping orders.[6]Guidance as to the circumstances in which a costs capping order may be appropriate was provided in Smart v. East Cheshire NHS Trust [2003] 80 BMLR 175. In that case Gage J (as he then was) said this:
“In my judgment the court should only consider making a costs cap order in such cases where the applicant shows by evidence that there is a real and substantial risk that, without such an order, costs will be disproportionately or unreasonably incurred, and that this risk may not be managed by conventional case management and a detailed assessment of costs after a trial, and it is just to make such an order. It seems to me that it is unnecessary to ascribe to such a test the general heading of exceptional circumstances. I would expect that, in the run of ordinary actions, it would be rare for this test to be satisfied, but it is impossible to predict all the circumstances in which it may be said to arise. Low value claims will inevitably mean a higher proportion of costs to value than high value claims. Some high value claims will involve greater factual and legal complexities than others.”
[7]In Knight v. Beyond Properties Pty Ltd. [2007] 1 WLR 625 Mann J applied this test and concluded that, on the facts of that case, no costs capping order was appropriate. That was because, he said, any extravagant costs could be left to detailed assessment post-trial, rather than by way of any application before the costs had actually been incurred. He remarked that “retrospective judgments about such things are likely to be more reliable than prospective judgments”. In addition, he rejected the suggestion that King was authority for the proposition that costs capping orders would always be made in cases where there was a CFA and no ATE insurance. On the contrary, he stressed that both Kingand Campbell were dealing with “the particular vices of CFAs in defamation actions”.[8]The Court of Appeal decision in Willis v. Nicolson [2007] EWCA 199 (Civ) was concerned with a personal injury claim where the damages sought were in the region of £5 million. The defendants sought a cost cap. Although Field J refused an overall cost cap, he ordered that the claimant’s prospective costs should not exceed £460,000 (the figure that the claimant’s solicitors had estimated), a result that the claimant was in any event quite prepared to accept. The defendant’s appeal was rejected. Amongst his general observations Buxton LJ said this:
“7. In cases where a Group Litigation Order has been made it is well recognised, first, that excessive costs may be a significant problem; and second that the court must for that reason, amongst others, exercise direct and continuing control over the proceedings. Costs capping, or something equivalent to it, is therefore a familiar exercise in that context. … 10. But however attractive costs capping orders may be in theory, in practice they present some formidable problems. These can be demonstrated from consideration of the order sought in the present case; and from some more general observations about costs capping that we venture in the last section of the judgment. … 24. With all these factors in mind we drafted a comprehensive set of principles to be applied in personal injury cases, which are the most obvious candidates for costs capping; which could also be considered for application to other types of case. However, further discussion with members of the court, including the Master of the Rolls and the Deputy Head of Civil Justice, has demonstrated that, despite the terms in which permission to appeal was granted in this case, and the observations in this court to which attention is drawn in paragraph 8 above, there remain serious doubts as to whether further guidance on costs capping, if it is to be given at all, should emanate from a constitution of the court as opposed to being formulated by the Civil Procedure Rules Committee, after extensive consultation. We are bound to recognise the imperative of that view. We therefore do not pursue the question further. It will be for the Rules Committee to decide whether, and if so with what degree of urgency, to take up the issues that we have identified earlier in this judgment.”
[9]The Rules Committee did indeed take up these issues. It is that reference that has led to the new CPR 44.18.[10]Finally, in this short tour of the relevant principles in play before CPR 44.18 came into force, mention should be made of the decision of Akenhead J in the Corby Group Litigation [2008] EWHC 619, the only authority that I have been able to find concerning a costs capping order in the TCC in a case where a GLO had been made. There, the parties accepted that the costs on both sides should be capped and the issues before the judge focused on the best way in which the necessary calculations should be carried out. I note that, in a case that might be regarded as rather more complicated than the present one, the costs were capped at £900,000 for the claimants, and £1.25 million for the defendant. 2.2. CPR 44.18[11]CPR 44.18 provides as follows:
“(1) A costs capping order is an order limiting the amount of future costs (including disbursements) which a party may recover pursuant to an order for costs subsequently made. (2) In this rule, ‘future costs’ means costs incurred in respect of work done after the date of the costs capping order but excluding the amount of any additional liability. … (5) The court may at any stage of proceedings make a costs capping order against all or any of the parties, if – (a) it is in the interests of justice to do so; (b) there is a substantial risk that without such an order costs will be disproportionately incurred; and (c) it is not satisfied that the risk in sub-paragraph (b) can be adequately controlled by – (i) case management directions or orders made under Part 3; and (ii) detailed assessment of costs. (6) In considering whether to exercise its discretion under this rule, the court will consider all the circumstances of the case, including – (a) whether there is a substantial imbalance between the financial position of the parties; (b) whether the costs of determining the amount of the cap are likely to be proportionate to the overall costs of the litigation; (c) the stage which the proceedings have reached; and (d) the costs which have been incurred to date and the future costs.”
[12]The reference in subrule (2) to “any additional liability” is a reference to (amongst other things) the percentage uplift within any CFA: see CPR rule 43.2(o). Thus the costs capping order must relate only to the base costs incurred by the solicitors, and not any percentage uplift.[13]It seems to me that, on their face, these provisions reflect closely the words of Gage J in Smart. In Peacock v. MGN Limited[2009] EWHC 769 (QB) Eady J expressed the view the new rules comprised ‘a more restrictive approach’ to costs capping than that favoured by many. He said:
“8. Thus, it is clear that, at least for the moment, the proactive and interventionist approach recommended by Brooke LJ in Musa Kingis on the wane. The contrasting judicial viewpoint, exemplified by the cautious approach of Gage J (as he then was) in Smart v East Cheshire NHS Trust…, is now in the ascendant. Indeed, it is clearly reflected in the wording of the new rules.”
[14]On the detail of the application in Peacock, Eady J reached the same conclusion as Mann J in Knight, namely, that the matters raised in support of the making of a costs capping order could be dealt with at the assessment of costs at the end of the case. He did, however, make clear a certain level of unhappiness with this result, saying at paragraph 22: “If I had a free hand, and were to follow the guidance offered in Musa King, I should be strongly inclined to impose a costs cap and to refer the matter to a costs judge to address hourly rates. I should also recommend that the case was not one in which the costs of leading counsel could reasonably be incurred. At the moment (unlike the situation confronting Gray J in Henry v BBC[2006] 1 All ER 154) the proceedings are not so far advanced that it would be too late to make a prospective costs capping order. It might be possible thereby to reduce the Defendant's exposure by approximately £100,000. On the other hand, consistency in these matters is important and I do not have a free hand. I am inhibited both by the ‘exceptionality’ principle and by the fact that I am satisfied that the risk of disproportionality could be adequately controlled by a costs judge at the stage of detailed assessment.” 2.3. Summary[15]From these various authorities, I would venture to summarise the law on costs capping orders as follows: (a). A party seeking a costs capping order will need to demonstrate on the evidence that such an order satisfies the criteria at sub rules 44.18(5) and 44.18(6). Those sub rules mirror the restrictive approach outlined by Gage J in Smart. (b). A case in which these criteria are satisfied is likely to be exceptional: see Eady J in Peacock. (c). The mere fact that there is the claimant has the benefit of a CFA and no ATE cover will not, as of right, entitle a defendant to a costs capping[16]For what it is worth, I should add that, in my view, the observations of Brooke LJ in King, and Lord Hoffmann in Campbell, about the potentially blackmailing effect on a defendant, in cases where a claimant has the advantage of a CFA and no ATE cover, are pertinent to all kinds of civil litigation, not just defamation cases. A defendant with no prospect of recovering its costs, even if it successfully defends all the claims made, may well be the effective victim of commercial blackmail, whether the claim is for damage to reputation, damage to property or personal injury.[3]PARTICULAR FEATURES OF THIS LITIGATION 3.1. Introduction[17]I have been provided with a lengthy statement from the defendant’s solicitor, Mr. Gibson, and a shorter statement from the claimants’ solicitor, Miss Evans. From that evidence and from the other papers in the case, I set out below what I consider to be the particular features of this litigation that are relevant to the defendant’s application for a costs capping order. 3.2. Particular Features of the Claimants’ Position[18]There are 163 claimant households. Their claims are limited to general damages calculated, amongst other things, in accordance with the observations by Lord Hoffmann in Hunter & Others v. Canary Wharf Limited [1997] 1 AC 655. The claimants suggest that their damages claims are worth about £1 million, which indicates an average recovery of about £6,000 per household. I am bound to say that, on the material available so far, this seems to me to be at the upper end of the range of likely damages recoverable.[19]With a maximum recovery per household of, say, £6,000, and with a real possibility that, even if liability is established, the amount recovered may be less, it will immediately be seen that the making of the GLO in this case was of the greatest importance to the individual claimants. Without it, these claims would almost certainly not have been worth pursuing by the claimants individually. Their own costs, and the risk as to their liability for the defendant’s costs if they were unsuccessful, would have been out of all proportion to the likely damages recovered. Furthermore, I note that such GLOs are rare. I am told that there have been about 70 such orders since the relevant legislation was introduced. I am also told that no further GLO has been made by the President of the Queen’s Bench Division since the order in the present case in March 2009.[20]It should also be noted that the claimants’ solicitors are experienced in the obtaining of GLO’s, and the procedure in proceedings such as these. The evidence shows that claims of this kind represent a major element of the claimants’ solicitor’s business. Given the modest value of the individual claims here, it is inevitable that, as the defendant argued, these proceedings are going to benefit the lawyers on either side just as much as, if not more than, the claimants themselves.[21]The claimants’ solicitors are, of course, working on a CFA. It is my understanding that that CFA operates in a relatively standard fashion, namely, that if the action is lost, the claimants’ solicitors recover nothing, and if it is won, they recover 100% uplift on the costs that they have incurred.[22]Unlike in King, the claimants here do have the benefit of ATE insurance. That was the policy which I required to be disclosed earlier this year. The limit on that policy was £375,000. That low limit was the subject of complaint by the defendant. A day or so before the CMC last week, the claimants notified the defendant and the court that that limit had been increased to £1 million. Given that the defendant’s original application was linked to the total value of the ATE policy, that increase has obviously had an effect on this application.[23]In breach of CPR 43, and paragraph 16.4.1 of the TCC Guide, the claimants attended the CMC without having provided any detail as to their costs, either past or future. They indicated in their answers to the CMC Questionnaire that their costs to date were £500,000, but no breakdown of that figure was provided. The sum for future costs was merely noted “TBA”. At the hearing on 24th September I required a proper breakdown to be provided by 28th September, so that I could consider the actual figures before reaching a conclusion on the defendant’s application. Costs breakdowns were provided in accordance with that order, and I have been helpfully provided with a certain amount of material dealing with those breakdowns. Further short submissions were made on the figures this afternoon.[24]As to the £500,000 said to have been incurred to date, I express some surprise at the size of that figure. I do not under-estimate the organisational effort required to get a GLO off the ground in these circumstances, particularly given the large number of claimants. But as was pointed out during argument, the claimants’ pleadings are very short and there is nothing yet prepared by way of expert evidence. The £500,000 therefore appears on its face to be excessive, a point made by the defendant in their written submissions. The skeletal breakdown of the sum provided on 28th September does not provide any information that leads me to modify that view. Of course, the fact that such a large sum has been incurred is largely irrelevant for the purposes of any costs capping exercise, because that can relate to prospective costs only.[25]The future costs to be incurred by the claimants are now said to be £1,471,767 including VAT. This figure is based upon a number of assumptions that may or may not turn out to be accurate. For example, it assumes that there will be one single expert on each side, as opposed to the defendant’s estimate, which is based on there being three experts per side. As things stand, in accordance with the current directions, there will be one expert per party but, depending on the outcome of other directions that I ordered at the CMC, there could be at least one further surveyor expert on each side and possibly – although I have to say that I consider it to be very unlikely – an additional expert in relation to land use and waste disposal policy.[26]I note that the defendant criticises these estimated future costs for being, at least potentially, too low. However, given the assumptions on which they are made, I reject that submission. I consider that in the circumstances they are, if anything, higher than they should be, given the relatively straightforward nature of the issues in this case. However, the estimates mean that in an action which is not, I think, overly complex, and where the likely maximum value of the claim is £1 million, the claimants’ overall costs will be £1.471 million for the future and £500,000 already, coming to a total of just under £2 million.[27]The claimants’ liability for the defendant’s costs, if the defendant is successful will, at least in theory, considerably exceed these figures. The defendant’s costs are said to amount to £750,000 so far, with a total estimated at £3.3 million. On the face of it, I am bound to consider that estimate also to be excessive, based as it is on a large amount of expert evidence, some of which I have indicated may well not be necessary, and a 30-day trial, which is also not the period for which the trial has now been fixed. But it may very well be that the claimants’ theoretical liability for the defendant’s costs will exceed £2 million and could be as high as, say, £2.5 million.[28]There may, however, be significant difficulties in terms of the defendant’s ability actually to recover those costs against the claimants. Under the GLO, the claimants are severally liable for the defendant’s costs, but they are not jointly liable. Thus, if the defendant is successful and the defendant’s costs exceed the amount of the ATE policy, then the defendant will have to commence a number of separate enforcement actions against those individuals, if any, who may have the resources to pay at least their share of the shortfall in the defendant’s costs. I accept Mr. Croxford’s submission that that is, on any view, an unattractive proposition, involving not only further cost, uncertainty of recovery and inconvenience, but also a real commercial dilemma, given the defendant’s position as a large local employer. 3.3. Particular Features of the Defendant’s Position[29]The very existence of the GLO has created a disadvantage for the defendant, in that, without it, these individual claims may never have been commenced. But that, so it seems to me, cannot now be a source of legitimate complaint. It might be said that this is precisely the sort of situation in which Parliament envisaged that a GLO might give the requisite equality of arms between a large commercial organisation on one side, and individual householders on the other.[30]The defendant also criticises the effects of the particular GLO here. Mr. Croxford submits that the defendant is faced with a wholly inadequate ATE limit of £1 million such that, if the defendant was successful, it could only recover £1 million from the insurers by way of costs, and thus be out of pocket to the tune of £2.3 million (on their figures) or between £1 million and £1.5 million (on my figures). There is, of course, the additional problem referred to above of enforcement against the individual claimants.[31]The defendant contrasts that with their potential liability for the claimants’ costs if they lose these proceedings. The claimants’ current total estimate of costs is, as we have seen, just under £2 million. With 100% uplift, that would mean that the defendant would be faced with a potential costs liability to the claimants of £4 million if they lost (together with their own costs of somewhere between £2 million and £3.3 million). Moreover, all of this - a possible maximum liability of £7.3 million by way of costs alone - would have been spent on proceedings in which the likely damages recovery will not be more than £1 million and may well be less.[32]I should make one further observation on the defendant’s own costs (which I consider will be less than the £3.3 million currently estimated). I do understand that the defendant has incurred costs in the region of £750,000 so far, and that at least some of that considerable expenditure can be seen in their extensive pleaded defence, and the defendant’s detailed analysis of the issues, in particular their case on the proper operation and running of the Westmill Landfill site. It seems to me this latter topic will lie at the heart of the trial. But, as Mr. Croxford has accepted, the defendant, given the nature and size of its business as international waste contractors, sees these proceedings as something of a test case, and I have formed the impression that at least some of these costs may be referable to wider issues, which are not necessarily confined to the Westmill Landfill site. It seems to me that I must bear that in mind when assessing whether or not a costs capping order is appropriate in the present case. 3.4. Summary[33]By reference to the particular features of this Group Litigation, noted in the preceding paragraphs, I am bound to conclude that, in the wider sense, these parties are not currently operating on a level commercial playing field. If they win, the defendant is likely to be able to recover only £1 million by way of costs (the maximum sum due under the ATE), because of the difficulties of enforcement noted above. The defendant will therefore be out of pocket to the tune of between £1 million (my lowest figure) and £2.3 million (their figure). And if they lose, the defendant is going to be out of pocket by between £2 million and £3.3 million on its own costs, together with £4 million-odd (including uplift) that will be due to the claimants in respect of their solicitor’s costs. To that, of course, must also be added any amount by way of general damages that is awarded.[34]In consequence, it seems to me that the blackmailing effect discussed in the cases noted above is very much present in these proceedings. Whatever the result, the defendant will be out of pocket by a large sum, whilst the claimants’ exposure is almost non-existent. But the real issue is whether a costs capping order can or should be made in such circumstances. Can a costs capping order address this underlying inequality? That is therefore the issue to which I now turn.[4]THE APPLICATION UNDER CPR 44.18 4.1. The Specific Cap Sought[35]The cap sought in the original application was £340,000, which was the amount of the ATE insurance limit when the application was made, less the costs incurred on the claimants’ unsuccessful attempt not to disclose the ATE policy. In his submissions, Mr. Croxford sought to argue that the costs should be capped at the limit of the ATE insurance, now £1 million. He said that this was fair, and created mutuality, because the £1 million was likely to represent in practical terms the maximum that the defendant would be able to recover from the claimants if the defendant was successful. He argued, therefore, that the same figure should be the most that the claimants should be permitted to recover from the defendant if in fact they were successful.[36]Although attractively put, I do not accept the principle that the amount by way of costs that X may be able to recover against Y, if X is successful in the proceedings, can be equated to the cap to be imposed (pursuant to CPR 44.18) on Y’s costs, if it turns out that Y is successful and can recover its costs against X. There is nothing in CPR 44.18 to suggest that that is the right approach; nor do any of the authorities suggest any such connection. Indeed, as I have already noted, in cases where costs caps are imposed on both sides, the amount of the respective caps will often be different: see, for example, the Corby Group Litigation. That merely reflects the different levels of costs that might reasonably be incurred by different parties in the same proceedings.[37]In addition, the order sought would have the odd effect of increasing the costs cap (on the costs recoverable by the claimants), whenever the cover was increased by the claimants under the ATE policy, which increase would be solely for the defendant’s benefit. We have already seen an increase from £375,000 to £1 million. It seems entirely random to link the amount at which the claimants’ costs should be capped to the amount that the defendant can recover against the claimants under the ATE policy, particularly when the latter figure is outside the control of the defendant and, at least directly, outside the control of the court.[38]I therefore reject the submission that the measure of the cap should be the amount of the ATE policy. But I go on to consider whether, as a matter of principle, a costs cap, measured in a different way, should be imposed. 4.2. All the Circumstances of the Case (Sub rule (6))[39]I refer to the analysis set out at section 3 above. For the reasons set out there, I consider that there is a substantial imbalance between the commercial positions of the parties. This is specifically by reference to the commercial risks being run by each side. The claimants will be able to avoid any significant liability, win or lose. The defendant is going to be significantly out of pocket, whatever the result.[40]In the light of the large costs incurred or to be incurred on each side, the costs of determining the cap, if any, are plainly proportionate to the overall costs of the litigation. Indeed, the claimants have not suggested to the contrary. Moreover, the first detailed CMC must be the appropriate time for such orders to be sought and again the claimants have not indicated otherwise. 4.3.

(a) Preface

[41]It therefore seems to me that what matters for the present application is the criteria set out in sub rule (5). In accordance with that sub rule, I should ask myself the following questions: (1). Is there a risk that costs will be disproportionately incurred (sub rule (5)(b))? (2). If so, can that risk be adequately controlled by case management and/or detailed assessment of cost (sub rule (5)(c))? (3).

(b) ‘Disproportionately Incurred’ – Sub rule (5)(b)

[42]In truth, the critical issue arising on this application is this: what does “disproportionate” mean? Disproportionate to what? In the reported cases, the costs capping order has been sought by a defendant concerned about the claimant’s expenditure on costs which, so it is commonly argued, is disproportionate, either as against the value/worth of the litigation, and/or when measured against the costs that the defendant itself is incurring.[43]Plainly, that second argument is not available to the defendant in the present case because, on any view, it appears that the claimants are going to spend less than the defendant by way of costs. And although the first argument, that is to say measuring costs against the value of the claims themselves, does arise - because the claimants are going to spend £2 million by way of costs on claims which may not be worth more than £1 million and could well be worth less - it may be difficult to say, in all the circumstances, that such costs, even when measured against this likely recovery, are automatically disproportionate in accordance with CPR 44.18(5)(b). After all, both sides anticipate spending much greater sums by way of costs than the amount which the claim is worth.[44]As I indicated at the outset of this Judgment, the defendant’s argument is a different and novel one. The defendant argues that the costs incurred by the claimants are disproportionate because those costs constitute a major element of the unlevel playing field to which I have referred above, namely, their potential costs liability of £2.3 million (maximum) if they win, and their potential liability of £7.3 million if they lose. It is that essential disproportionality on which the defendant bases the present application.[45]However, that summary position needs to be unpicked in a little more detail. The £2.3 million liability for costs that the defendant may bear, even if successful, is the product of the terms of the ATE and the GLO. The limit of the ATE may be capable of being increased. Further, as Mr. Croxford has pointed out this afternoon, the terms of the GLO may also be capable of being modified, if the defendant decides to make an application to that effect. Thus the potential shortfall of £2.3 million allows the defendant at least to raise the possibility of a costs capping order (because of the blackmailing effect, as in King), but it seems to me that the shortfall cannot of itself mean that the claimants’ costs will be ‘disproportionately incurred’.[46]Moreover, when considering the other side of the equation (namely, the defendant’s liability for costs if they lose), CPR 44.18 states plainly that the 100% uplift on the claimants’ solicitor’s costs has to be ignored. So in reality the only thing that the defendant can truly complain about under this rule is the £2 million base costs to be incurred by the claimants’ solicitor, and for the reasons noted above, the defendant cannot say that those costs themselves are disproportionate, because they are going to spend more than that to get through to the end of the trial.[47]I endeavour to test that analysis in this way. If I acceded to the defendant’s application I would cap the claimants’ recoverable costs at the base cost figure of £1 million. With 100% uplift, that would mean that the defendant, if unsuccessful, would owe the claimants £2 million by way of costs and, say, £1 million maximum by way of damages. That produces a total of £3 million. And if the defendant succeeds then they would have their own unpaid costs liability (which would be unaffected by my order) and which, on their own figures, would be £2.3 million odd. So the order sought, even if granted, would make little overall difference to what I perceive as the unlevel playing field in this case. It would not address the fundamental imbalance in the overall position between the parties. That is because that imbalance is a product, not of the future costs to be incurred by the claimants, but the terms of the GLO, the terms of the CFA, and the terms of the ATE policy.[48]Thus, whilst I have considerable sympathy for the defendant’s position, it seems to me that it is principally a product of the terms of the GLO (which may have to be reviewed at some future date); the terms of the ATE (which at least offers some cover and may be increased); and the rule that excludes the 100% uplift from any consideration at all. By contrast with all that, sub rule (5)(a) is designed to focus only on the claimants’ base costs and to ask whether those base costs are disproportionate, as against either the value of the claim or the other side’s costs. On the evidence, I have concluded that the claimants’ costs are not disproportionate when measured in that way.

(c) Case Management/Detailed Assessment – Sub rule (5)(c)

[49]As noted, a costs capping order will not be made if the risk of disproportionate costs being incurred (almost always by a claimant) can be contained by case management or a detailed assessment. This sub rule therefore makes clear beyond doubt that what the court is examining on a costs capping application is the claimants’ own base costs, and the manner in which they can be controlled by the court, and not the wider considerations contended for by the defendant in the present case.[50]I am unable to say, on the evidence before me, that case management directions and cost assessments could not, between them, control any risk that the claimants’ base costs will be disproportionately incurred. There is, I think, no cogent evidence that would allow me to reach a different conclusion. Indeed, I venture to suggest – echoing Mann J in Knight and Eady J in Peacock – that it would be a very unusual case in which a High Court Judge did not feel able to utilise one or both of these tools to control disproportionate costs. That is, after all, what they are there for.[51]Accordingly, I have concluded that the defendant’s application does not get over this second hurdle either. It will be apparent from my comments that, in truth, I find it difficult to conceive of any case which could get over this particular hurdle.

(d) Interests of Justice

[52]In my view, for the reasons set out in section 3 above, it would be in the interests of justice to reduce the commercial risks being run by the defendant in this case. But, on my analysis, CPR 44.18 does not provide a route which would allow me to achieve that goal.[5]AN ORDER UNDER CPR 43[53]Although, for the reasons that I have given, I do not consider that a costs capping order can be made against the claimants in this case, I am concerned about the potential unfairness of the defendant’s wider commercial position. As a result, I have raised with the parties the possibility of making an order, similar to the one made by Field J in Willis, to the effect that, subject to certain important safeguards, the claimants’ eventual cost recovery in respect of future costs will not exceed the amount of their recent cost estimate.[54]Why would such an order be appropriate? Because it would provide for some modest reduction in the burden of risk being faced by the defendant, and because it would provide the defendant with at least an element of certainty: the defendant would know the level of the claimants’ costs, if the claimants were successful and the defendant was liable for such costs. In addition, it would be an order that the court was entitled to make, untrammelled by the particular considerations of CPR 44.18. It would be in accordance with the overriding objective; in accordance with CPR 43; and, because of the safeguards to which I shall refer, it would also be in accordance with the decision of the Court of Appeal in Leigh v. Michelin Tyre [2003] EWCA 1766 (Civ).[55]Although in that latter case, Dyson LJ made plain that an order in relation to a costs estimate could not be made as if it was the equivalent of a costs capping order, he made plain that costs estimates were an important yardstick as to reasonableness and should be used accordingly. The importance of accurate costs estimates in the TCC, and the adverse consequences of inaccurate costs estimates, was recently dealt with in Fitzpatrick v. Tyco (No. 3) [2009] EWHC 274 (TCC).[56]I consider that an order in these proceedings which seeks to link the claimants’ eventual costs recovery with the estimate now put forward, may be a way of ensuring that the claimants act reasonably in this litigation. I have a number of concerns about certain aspects of the claimants’ conduct of this action thus far. There was the original refusal, which I considered to be unreasonable, to provide the ATE policy. There has been the failure on the part of the claimants’ legal team to address the detailed issues raised by the defendant in their defence as to historic land use and waste policy. In addition there was the very belated increase in the amount of the ATE cover prior to the CMC; and the failure to provide the estimate of future costs for that CMC. All of those matters, whilst not of themselves overly significant, do seem to me to be matters which would be capable of being controlled in the future (and indeed may not recur at all) if I made an order along the lines indicated.[57]Therefore the proposal that I made to the parties earlier in the week was that:(a) The claimants’ estimate of their future costs (namely, £1,471,767 million) was to be taken as a reasonable estimate of such costs and therefore their likely maximum recovery at the end of the trial, subject to(b) The claimants having liberty to apply to modify the terms of that order if any of the assumptions made in estimating their costs (such as, for example, having only one expert), was altered or needed to be modified as a result of any of the court’s subsequent orders or directions.[58]I was provided with a helpful note by Mr. Bates on behalf of the claimants in which he indicated that this was not a course to which they would object. This afternoon (2nd October), very helpfully, Mr. Bates has confirmed that the claimants consent to an order in those terms, subject to one other safeguard which I shall address in a moment. For that reason I have concluded that this is the direction dealing with the claimants’ costs that should be included in the Order arising from the case management conference on 24th September.[59]In the course of his submissions this afternoon, Mr. Croxford drew attention to the fact that, in the alternative to the imposition of a costs cap, the defendant wished to reserve its right to come back to court to argue for a stay of proceedings until a reasonable level of ATE cover was put in place, and/or to make an application that the terms of the GLO be modified so as, for example, to allow for joint and several liability for common costs. I make plain that the defendant is entitled to come back to the court to raise either of those points subject, of course, to the giving of proper notice. There is a hearing due in March of next year, and it may be that that would be an appropriate time for those matters to be raised again.[60]By the same token, I made plain to Mr. Bates that if, by the time of the hearing fixed for March 2010, the claimants have become aware of some significant error or other matter within their present costs estimate which caused them concern, they could raise that in order for me to consider whether any other modification to the order that I now make as to their costs estimate should be made. Accordingly, those matters too may need to be revisited at the next case management conference. That is the other safeguard to which I referred in paragraph 58 above.[6]CONCLUSIONS[61]For the reasons set out in section 4.1 above, I am not able to make an order capping costs at £375,000 or whatever may be, from time to time, the limit of the ATE insurance.[62]For the reasons set out in sections 4.2 and 4.3 above, I am not able to make an order capping costs at all under CPR 44.18.[63]For the reasons set out in sections 3 and 5 above, I will make an order in the terms of paragraph 57 above, linking the claimants’ ultimate costs recovery to their recent estimate of future costs, subject to the express safeguards that I have indicated above. It seems to me that all other matters in relation to costs and costs capping should be regarded as open to either party, to be raised at the CMC in March of next year.

order

see Knight. That position must apply a fortiori where there is ATE cover, but it is or may well be insufficient. On the other hand, the fact that there is either no ATE cover, or inadequate ATE cover, must be a relevant fact for the court to take into account in considering all the circumstances of the case. (d). In cases where a GLO has been made, costs capping orders may be more common: see Buxton LJ in Willisand Akenhead J in Corby Group Litigation.

Cited in 3 later judgments