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03 March 2022
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Court of Appeal refuses permission to appeal costs-capping order decision

The Court of Appeal has refused permission to appeal a decision to refuse what is believed to be the first application for a costs-capping order (CCO) since budgeting was introduced in 2013.

Lord Justice Coulson said that given his judgment indirectly addressed “one or two aspects of costs law and practice on which there is no authority, and because appellate judgments on costs are anyway rare”, he had agreed to provide a full ruling and neutral citation number: [2022] EWCA Civ 233.

At first instance, Mr Justice Cavanagh accepted that capping the costs of 31 women suing the British owners of tea and macadamia nut plantations in Malawi over claims of systemic sex abuse would bring an end to their claim and so refused the application by PGI Group, the UK parent company of Malawian tea company Lujeri, to cap the women’s future recoverable costs at £150,000.

They had incurred nearly £1.7m up to the date budgets were filed last August, with their budget for future costs up until the end of the trial of the common issues and the liability issues relating to two lead claimants – scheduled for the summer – totalling £1.5m. At a subsequent hearing, the judge fixed their budget at £850,000.

PGI said it had incurred £750,000 up to the budget and estimated future costs at £1.75m.

Before getting to the grounds of appeal, Coulson LJ identified general reasons why the application for permission had no real prospect of success.

These included that the appeal focused on the second of the three pre-conditions which each needed to be made out before a CCO was made – whether or not there was a substantial risk that, without a CCO for £150,000, costs would be disproportionately incurred.

The grounds did not on their face go either to the first pre-condition (a CCO is not in the interests of justice) or the third (that the risk of costs being disproportionately incurred could be adequately controlled by cost budgeting).

“That seems to me to be fatal to the application, because the judge dealt with both of those other two pre-conditions and rejected the applicant's case on each.” This meant that, even if he upheld the appeal on the second pre-condition, it would be insufficient.

This was not just “idle box-ticking”, Coulson LJ emphasised. “It is impossible to over-state the interests of justice in the present case, given the nature, scope and extent of the respondents' allegations and what the judge said about them.

“If a CCO in the sum of £150,000 would have the effect of stifling these valid claims, then that might be regarded as a very powerful factor against making such a CCO.

“Moreover, as to the third pre-condition, costs budgeting has always been regarded as a scientific way of keeping future costs to proportionate levels, whilst Mr Bacon accepted that a CCO was – or certainly could be – ‘a blunt instrument’.”

Coulson LJ rejected too the attacks on the judge's conclusion that, without the CCO, there was not a substantial risk that costs would be disproportionately incurred.

Cavanagh J properly considered the issue and came to a conclusion which “the vast majority of judges” would also have reached, not least given that the defendant proposed to spend more than 10 times the amount of the CCO.

Even though the size of the applicant's own costs could never be the decisive factor in either CCOs or costs budgeting, “such a stark difference might be said to perpetuate the substantial imbalance in the parties' financial positions and give rise to a potentially grave inequality of arms going forward”.

Further, the claims were about “much more than money” and “any attempt to calculate proportionality by way of some sort of cost/benefit analysis which concentrates on the level of damages only – an attitude which I consider informs the applicant's approach, despite Mr Bacon's pleas to the contrary – is not in accordance with the proportionality rules”.

Coulson LJ agreed that the CCO would amount to the striking out of a valid claim by the back door. “That would, in my judgment, be contrary to the overriding objective set out in r.1.1. The court would need exceptional reasons for taking such a course.”

He added: “No authority was cited in which any court has ever made either a CCO or fixed a costs budget in a figure (£150,000) which was so much lower than the figure for future costs which the judge considered reasonable and necessary (£848,150).”

He concluded that if there was a case which, on its facts, would make a good vehicle for testing the limits of the proportionality provision by way of a CCO, “this is most assuredly not it”.

In going on to dismiss the specific grounds of appeal, Coulson LJ said in principle, a costs budget or CCO could be set at a sum that was less than the reasonable and necessary costs to be incurred, because that sum might still be disproportionate. However, that was not the case here.

He also rebuffed the suggestion that, if the judge had wanted to make a CCO in a higher figure, it was open to him to do so.

“In my view, that is unrealistic. These sorts of costs decisions are complicated enough as it is. They require express consideration of a lengthy list of factors. In such circumstances the judge is not obliged to cast around and seek to find another figure, which neither party is contending for, and suggest that figure instead… This is an adversarial process, not a horse fair or an open-ended test of a judge's ingenuity.”

There was a debate at the hearing about the need for a detailed analysis of the incurred costs before a CCO could be made, which Coulson LJ said the judge could not have done here as there were no detailed submissions on them. However, the subsequent changes to the CPR, and in particular the proportionality test, “may make it harder to justify any CCO which does not involve a detailed consideration of both past and future costs”, he said.

“Depending on the facts of the case, if a CCO is to be proportionate, then it may well call for a much more detailed analysis of the appropriate figure than the framers of the original rule perhaps had in mind.”

Nicholas Bacon QC and Ognjen Miletic (instructed by Hogan Lovells) for the applicant. Benjamin Williams QC and Kate Boakes (instructed by Leigh Day) for the respondents.


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