Sharp & Ors v Blank & Ors

I now have to deal with an application by the claimants for costs budgeting to be applied to these actions. The provisions of Section II of Part 3 of the CPR deal with costs management but do not apply to cases of more than £10million. This application was opened to me by Mr. Hutton, who appears for these purposes for the claimants, on the basis that it was necessary for the claimants to ask the court to make an order that Section II of Part 3 applies to these claims on the basis that it would not otherwise do so.

The amount in issue can be found by taking the number of shares belonging to the claimants, which is roughly 310,000,000 shares, and multiplying it by the amount of loss said to have been sustained by the claimants on each share, which is put variously between 70p and 88p, which produces a global figure for the claimant of £215-280,000,000. It is not surprising in those circumstances that it was thought that these claims exceeded the limit of £10 million below which the provisions of Section II of Part 3 automatically apply to the proceedings. It was on that basis that Mr. Hutton made his application.

However, it seemed to me, when studying the detail of the relevant rule, which is rule 3.12(1), that that actually raised a question on the wording of the rule. 3.12(1) reads as follows:

That raised an issue which, in the course of argument, became known as "issue 1", which is whether these claims are claims where the amount of money claimed, as stated on the claim form, is £10 million or more, and therefore within 3.12(1)(a), or for a monetary claim which is not quantified or not fully quantified and the claim form contains a statement that the claim is valued at £10 million or more.

There were, in fact, 7 claim forms issued. They are not all in the same form. Some of them did not contain any reference to particulars of claim. In the case of some of them, by the time they were served, generic particulars of claim had been served and they refer, on the face of the claim form, to an adoption of the generic particulars of claim. They all contain a statement of value in these terms: "The claimants expect to recover more than £25,000". The purpose of that was to comply with CPR 16.3(2) which provides that, in a case where the claimant is making a claim for money:

It is perfectly plain that the purpose of the statement of value that the claimants expect to recover more than £25,000 was to bring the case within r.16.3(2)(b)(iii). Incidentally, it became common ground that the claimants had failed to comply with r.16.3(5) which provides:

It can be seen that the claimants did not adopt the option of r.16.3(2)(a), which was to state in the claim form the amount of money claimed. Indeed, there is a box on the claim form for the amount claimed. In some cases that was left blank; in some cases the letters "TBC" were inserted (which one assumes mean "to be confirmed"), and in some cases "TBD" (which one assumes means "to be decided" or "to be determined"). None of them, however, contain on their face a statement that the claim is for £10 million or more.

It is true that shortly after the claim forms had been issued and served, and certainly by the time the matter came before me, there was no difficulty in identifying to the last penny the amount claimed in each claim form. Each claim form contains a schedule of the claimants who are parties to that particular claim form and, under para.9.2 of a group litigation order made by the Chief Master, it is obligatory on the claimants to provide information to the defendants which is in this form (this is an order made on 6^th August 2014):

Nevertheless, the difficulty I have is that the schedules of information are not served with the claim form, they come after the claim form, and it does not seem to me that one can read what is on the schedules of information or on another document, which contains similar information which is a register of the claimants, which is also said to be served on the defendants, as being, as it were, part of the claim form so that the sums stated in the schedule of information become stated on the claim form.

The claimants' counsel, Miss Davies, submitted to me that in those cases where the claim forms referred to amounts, "TBC" or "TBD", the subsequent service of a schedule of information was a confirmation or decision as to the amounts that were claimed and, therefore, the two documents can be read together and one can read back into the claim form the amounts claimed.

In dealing with that submission, it does not seem to me to entirely answer the point. Firstly, not all the claim forms have that. Some of the claim forms have the box for the amount claimed as completely blank. Secondly, in any event, I regard the words "the amount of money claimed as stated on the claim form", which is in r.3.12(1)(a), or "the claim form contains a statement that the claim is valued at £10 million or more", which is r.3.12(1)(b), is requiring those statements to be on the claim form itself, not to be something that is discernible after a good deal of work from collating the claim form with other documents.

Miss Davies submitted that that would be a most unfortunate literal and strict construction of the rule because it would effectively emasculate the provision that the costs budgeting did not apply automatically to claims for over £10 million. I agree that if that were the consequence it would be a very unfortunate and probably unintended consequence.

The earlier version of the rule, as it was introduced in April 2013, can be found set out, no doubt among other places, in a judgment which I was shown of Coulson J’s called CIP Properties (AIPT) Ltd. v Galliford Try Infrastructure Ltd. [2014] EWHC 3546 (TCC). At that stage r.3.12(1) said:

The Chancellor did make a direction in a statement of 18^th February 2013 and the direction was in these terms:

Nevertheless, it does seem to me that what I regard as the natural and ordinary meaning, which is a less pejorative way of describing it than "literal" or "strict", is entirely clear, that there has to be a statement on the claim form either of what the amount of money is that is claimed or that the claim is valued at £10 million or more, and I cannot find on these claim forms any statement of that type.

As I say, if that had the effect that it gave claimants a unilateral choice to require mandatory costs budgeting in any case, however large the claim, I would regard that as an unfortunate consequence, but rule 3.13 contains the starting point of the application of the section and provides as follows:

That, to a large extent, mitigates the concern that Miss Davies articulated that otherwise the literal construction of the rule would lead to a very unfortunate consequence. It does seem to me that on the true construction of the rule these claim forms did not come within r.3.12(1)(a) or (1)(b) and, therefore, the prima facie position is that Section II of Part 3 applies to these cases, being Part 7 multi-track cases. But, as I say, it seems to me to have little practical consequence because whether the discretion that I am being asked to exercise is, as Mr. Hutton originally suggested, a discretion under r.3.12(1)(a) to order that the Section applied to these proceedings, or whether it is, as I find that I am driven to hold that it is, the discretion in the opening words of rule 3.13 which enable the court to order that the filing and exchanging of budgets is not required, in either case the court has a discretion to do what it thinks is just and appropriate and in accordance with the overriding objective.

Before leaving issue 1, I may say that it seems to me, as I have already said, that that is probably an unintended consequence of the way in which it was drafted and that those who are responsible for the rules might like to consider whether either an extra requirement should be added to rule16.3, requiring the claimant to confirm whether the value is more or less than £10 million, or that rule 3.12(1) should be reworded in line perhaps with the Chancellor's statement under the former version of the rules so that the court can form a view as to the amounts in dispute at the relevant case management conference. That, however, is not a matter for me and does not affect my decision today. So under issue 1 I find that these claim forms are claims to which Section II applies and the question therefore is whether I should direct that budgets need not be exchanged, which would be the default position under rule 3.13.

That makes it strictly unnecessary to answer what Miss Davies characterised as issue 2, which concerns the discretion in r.3.12(1)(a). She accepted that that was a discretion, and that is confirmed by para.2 of Practice Direction 3E, which reads:

On that, as I say, although it does not directly arise in light of my ruling on issue 1, I was again referred to what Coulson J said in the Galliford Try case, where he held that there was an unfettered discretion. He said:

Miss Davies, without pressing too hard, submitted to me that that placed the emphasis in the wrong place and did not really give any weight to the evident decision that there should be a cut-off at £10 million, but it seems to me that I should, as a matter of judicial comity, follow Coulson J’s decision, unless convinced that it is wrong. That is the usual practice for one High Court Judge when considering a decision of another High Court Judge. The earlier decision is not binding but the practice is to follow a previous judgment of the same court unless satisfied that is wrong (see the remarks of Lord Goddard CJ, in Police Authority for Huddersfield v Watson (1947) 1KB 842 at 848). I am certainly not prepared to conclude that I am satisfied that Mr. Justice Coulson was wrong and, had it been a live issue, I would have held therefore that there was an unfettered discretion to apply Section II or not as the case may be. Equally, I regard the discretion under rule 3.13, although technically the burden now falls on Miss Davies to persuade me to exercise that discretion in her favour, is one that is wholly unfettered and enables the court to do what it thinks is most appropriate in the circumstances of the case.

There is, as far as I can see, no guidance (or at any rate I have not been referred to any guidance) from any of the higher courts or, indeed, apart from the remarks I have just referred to of Coulson J, any guidance from the High Court as to the appropriate exercise of discretion in a case where the amounts involved do exceed £10 million. Mr. Hutton referred me to a number of authorities but none of them were actually directly on point. They tended to illustrate a concern, before costs management was introduced in April 2013, that what were originally called multi-party actions, and are now group litigation cases, have a tendency to be cases where costs are capable of spiralling out of control and a particular concern that the costs may be disproportionate to the amounts. In one of the cases the costs claimed were some £210,000 but the amount recovered was some £90,000. One can see that in a case of that type a concern that costs exceed the amount in issue is one which will exercise the courts very significantly. So too in Coulson J's case, it appears from a subsequent judgment that the claimants were budgeting for costs of £9 million in a claim worth some £18 million, and again that obviously raised questions of proportionality, incidentally, one can see there, even in a case which exceeded £10 million.

Here, however, the amount at stake is, as I have already referred to, between £215 million and £280 million so the concerns of proportionality are likely to be much less to the fore. That does not mean that the parties have carte blanche to spend as much money as they want, but that it is unlikely the costs of the order of £20 or 30million or so would necessarily be regarded as disproportionate in the same way.

As I say, there is very little guidance that has been put before me as to what the policy reason is for the exception for cases over £10 million which makes it difficult to understand what are the factors which should be taken into account in deciding whether to exercise the discretion. It seems to me, as with most discretionary case management decisions, that there are pros and cons to be weighed up in deciding whether to make an order.

The pros of making a case management order are articulated very vigorously by Sir Rupert Jackson, speaking extra-judicially, in a lecture which I was shown by Mr. Hutton, called the Harbour Lecture, which was given on 13^th May of this year, in which he identified no less than seven benefits of costs management. It is quite apparent from the lecture that he is an avid enthusiast for costs management. In para.2.1 he said: "Costs management works", and he lists the benefits as being knowledge of the financial position; encouragement of early settlement; controlling costs from an early stage; focusing attention on costs at the outset of litigation; the conquering of an old chestnut (which is a reference to the lack of efficacy of the old summons for directions under the RSC); elementary fairness, giving the opposition notice of what you are claiming, and preventing legal catastrophes, where he cites a costs judge in Bristol who said:

It seems to me that the real advantage of budgeting in this case, and the one which Mr. Hutton put at the forefront of his submissions, is the ability of the claimants to know what their exposure was for the defendants' costs. That would enable them to form a view as to whether the ATE insurance, if obtained, is sufficient or not, something which he said would ultimately be to the benefit of the defendants as well as to the benefit of the claimants themselves. I accept that that is a real and tangible benefit. I also accept that, although the defendants have, through Miss Davies, offered to provide estimates of costs, that would provide less high quality information to enable the claimants to assess their continuing exposure for costs as the litigation progresses. Those are the pros.

The cons are obvious. There is inevitably a cost involvement in drawing up budgets, particularly as budgets have to be drawn up in accordance with the rules. The rules require a filling in of Precedent H and that would necessarily involve quite a lot of professional time and skill in providing a budget, especially if it is then used as a tool for costs management because the practical consequence of a budget being used for costs management is that a party will find when they come to assessment at the end of the day that they are, at any rate, facing a likelihood that their total assessed costs would be limited by the agreed or approved budgets. I accept that there is bound to be a cost involved in requiring a budget to be drawn up.

I also accept that the requiring of a budget is not necessarily going to be the end of the process and that, if a costs management order is in due course made, that means that that the budget will have to be revised and agreed or approved at every stage at which there are developments in the litigation. Indeed, even without a costs management order being made, there is not much point in requiring budgets to be provided if they are not revised from time to time in accordance with the litigation as it develops. So I accept that there are pros and cons in making an order.

It does not seem to me that the various factors point strongly one way or the other but I have decided that the appropriate thing to do in this case is to require budgets to be exchanged but I want to add two comments to that. Firstly, it by no means follows in this case that a costs management order will be required. It is true that the effect of rule 3.15, which confers a discretion on the court, is to suggest that the normal position is that a cost management order will follow from budgeting because it provides, as I have already read, that where costs budgets have been filed and exchanged "the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate costs in accordance with the overriding objective without such an order". It does seem to me, however, that in the circumstances of this case, where, as I have said, the considerations of proportionality are much less to the fore than they are in smaller claims, that it may very well be that if the budgets that are exchanged reveal that both parties are proposing to conduct the case in a way which is not obviously out of line with the issues at stake and the amounts in issue, the court may think it unnecessary to make a costs management order. I certainly do not regard the order which I will make for budgets to be filed and exchanged as leading to any presumption or prima facie conclusion that this is an appropriate case for costs management order. I regard this as a case where the purpose of budgeting is to enable the parties to keep an eye on whether the costs that have been incurred, and are expected to be incurred, are reasonable and proportionate, with a view to asking for a costs management order if they can make out a case that they are not. But if they are reasonable and proportionate, it by no means follows that the court would require a costs management order.

The second comment I wish to make is that one thing that has concerned me particularly is that, as I have become very well aware, the next major step in this litigation is an application for summary judgment and strike out, which is likely to be heard next term and which may affect, whether successful or not, the shape of the issues to be determined at trial. In those circumstances, although no doubt the court could require budgets to be filed and exchanged before that has been resolved, in which case they would have to be done on two alternative bases, that seems to me to be unnecessarily duplicative of effort and not likely to be very helpful to anybody. So I will hear submissions as to when budgets should be prepared, but my intention is that there should be no need to file and exchange budgets until after the court (which I suspect means me) has ruled on the summary judgment and strike out applications and it is, therefore, clear what issues survive for trial.

One other matter was ventilated briefly in argument, which is whether the next question, which is, after the exchange of budgets, whether there should be a costs management order, is something that should be sent down to the Master's level, in this case the Chief Chancery Master, or whether it should remain with me. It does not seem to me to be necessary for me to make a decision on that today, but I will say that I think it is probably appropriate that I should make a decision under rule 3.15(2) as to whether a costs management order should be made or not. If a costs management order is made, it may be more efficient and more useful for the parties for that to be dealt with by the Chief Chancery Master, whose practical experience of costs management is much greater than my own.