Masri v Consolidated Contractors International (UK) Ltd & Anor

This is an application made under CPR 44.3(8). It is an application for an order that there be further interim payments of costs on account and an order that certain costs be summarily assessed. The parties have been involved in hard-fought and major litigation concerning a claimed interest in an oil concession in the Yemen. Gloster J upheld the claimant’s claim and judgment has been given for a sum in excess of £60 million.

At the end of that trial, a number of costs orders were made in respect of other hearings which included orders for interim payments. Since January 2006, the claimant has been party to a conditional fee agreement with his solicitors, Simmons & Simmons. Put briefly, under that CFA, the claimant was obliged, whatever the outcome of the litigation, to pay 70 per cent of Simmons & Simmons’ standard costs, but in the event of his claim succeeding, he was obliged to pay a further 30 per cent of the standard costs, plus an uplift.

When the various costs orders to which I have referred were made (or at least in the main part) the question of liability had not finally been determined. Therefore, the interim costs orders were made on the basis of an entitlement to costs representing 70 per cent of Simmons & Simmons’ standard costs. That at least was true in respect of three of the orders; as we shall see, a different approach applied to the other two orders. The short point is that, since the question of liability on the claimant’s case has been finally determined, the claimant has an enlarged claim for costs against the defendants on the indemnity principle. Under the CFA he owes a larger sum to Simmons & Simmons, and that larger sum is recoverable from the defendant. In this application the claimant seeks an interim payment in respect of that increased element.

The costs orders are set out in exhibit ACB/52 to Mr Bartlett’s tenth witness statement. It is unnecessary to recite the detailed figures. The first order was made by Gloster J on 4^th May 2007. She had before her cost schedules which showed a total claimed by the claimant of £1,204,734 odd. She ordered an interim payment of £722,841, which was 60 per cent of the amount claimed. The amount claimed reflected the fact that at this stage, prior to liability finally being determined, the claimant owed 70 per cent of Simmons & Simmons’ standard costs rather than 100 per cent.

The next order was made on 27^th June 2007 in respect of post-judgment proceedings which occurred between 14^th March and 15^th June 2008. Again, the total amount claimed by the claimant reflected the fact that he was obliged at that stage only to pay 70 per cent of his solicitors’ standard costs, and an interim payment of 65 per cent of that total amount was ordered, amounting to £16,247.50.

The next order for costs was an order made by the Court of Appeal. I should say before I go on to the Court of Appeal costs that the interim costs orders to which I have just referred and which related to costs incurred between 14^th March and 15^th June proceeded on the basis of a total amount claimed that represented Simmons & Simmons’ standard charge rather than 70 per cent of the standard charge, so the 65 per cent that can be deduced from the interim payment orders was 65 per cent of Simmons & Simmons' standard charges in respect of those proceedings.

Coming on to the appeal costs, I say at once that I do not think it appropriate for a court of first instance to make a further interim payment order in respect of costs that were incurred in a superior court, in this instance the Court of Appeal. Accordingly, the claimant’s claim for a further interim payment order, parasitic on the appeal costs, fails for that reason.

The fourth costs order relates to enforcement applications. Again, the interim payment was calculated on the basis of Simmons & Simmons’ standard charges rather than 70 per cent thereof.

Mr Salzedo for the claimant recognises that this application is exceptional. In the ordinary way, the detailed assessment of the costs would be proceeded with as ordered, and if a further interim payment were appropriate, application could be made to the costs judge within those detailed assessment proceedings. Mr Salzedo submits that the court has power under CPR 44.3(8) and should in its discretion exercise that power as requested. It is submitted that this is an exceptional case because the defendants have made it plain that they are going to take every step open to them to avoid satisfying the judgment that now exists and are going to take every step to avoid honouring any costs orders made against them.

The defendants, however, remain active litigators in trying to avoid the consequences of the judgment and the orders made against them. This has allowed the claimant to obtain orders that no further step should be taken in satellite litigation unless costs orders are met. In these circumstances, the defendants have had a choice either to pay the cost orders or to abandon the relevant satellite litigation. It is submitted, therefore, that the claimant ought not to be obliged to incur the costs of launching detailed assessment proceedings, the bill of costs for which is estimated would exceed £50,000, but instead they should be allowed to make this application which can be heard and determined in a short time, to put into their hands further interim costs orders which can be used as the basis for applications that further satellite litigation should not proceed until these further cost orders have been satisfied.

I am quite satisfied that the factual background on which the claimants submit that this is an exceptional case does indeed exist. These defendants are indeed taking every opportunity to avoid satisfying the judgment debt and the costs orders made against them, and yet at the same time, they have shown an appetite for duplicative litigation elsewhere in the world in an attempt to overturn the judgment obtained against them in the trial before Gloster J.

Mr Raphael for the defendants submitted that this court has no power to order the further interim payments sought. In his submission, CPR 44.3(8) envisages that it is only the original court making the primary costs order that can be applied to to make a subsequent interim payment order. CPR 44.3(8) reads:

“Where the court has ordered a party to pay costs, it may order an amount to be paid on account before the costs are assessed.”

Mr Raphael argues that the word “it” in that paragraph means the court that has ordered a party to pay costs. Accordingly, he contends that since I was not the judge who made the original costs order, I do not have jurisdiction to make further interim payment orders.

In support of his submission, he drew my attention to CPR 44.7 and told me that in a hearing before Langley J in which he appeared, that learned judge held that the word “it” in that provision meant the same judge who had made the previous order. CPR 44.7 is a provision that relates to summary assessment of costs. In my judgment, the court which is contemplated in paragraph 8, is a generic concept. It is the court, generically speaking, which made the costs orders originally. I believe I am right in saying that, except for the hearings in the Court of Appeal, all the other hearings were conducted in the Queen’s Bench Division of the High Court. This application is made in the Queen’s Bench Division of the High Court, and in my judgment, the court of the Queen's Bench Division has jurisdiction to make the further orders applied for. In coming to this view I bear in mind that paragraph 8 confers a discretion. Mr Raphael submitted that if the court had jurisdiction, there could be most unfortunate consequences and the Commercial Court may find itself embroiled in hearings that ought to be before the costs judge and which involve the expertise and experience that a costs judge may have, but which a Commercial Court Judge would not have.

Bearing in mind that the court has a discretion, it is open to the court only to exercise its discretion in highly exceptional circumstances and thereby avoid the unfortunate consequences that Mr Raphael said would flow from the construction at paragraph 8 that Mr Salzedo invited me to adopt.

Mr Raphael further contended that the discretion ought not to be exercised in favour of further interim cost orders on grounds of fairness. At the beginning of the application, no copy of any part of the CFA had been provided to the defendants in the evidence. Instead, there had been an offer that the defendant’s counsel and solicitors could see the document on a strict undertaking that they did not disclose its contents to any third party, including their client and used the document only for the purposes of this hearing. That offer was refused. Responding to judicial pressure, copies of various paragraphs in the CFA were provided in the course of the hearing, with parts thereof redacted.

Mr Raphael said that what had been provided still did not secure fairness because, for instance, it could not be determined whether or not interlocutory applications were applications that were within or without the conditional fee provisions. In fact, Mr Bartlett, a partner in Simmons & Simmons, whose witness statement I have already referred to, deposes in that statement that all of the costs orders which are the basis of this application, were orders within the CFA.

I asked to be provided with an unredacted copy of the CFA to satisfy myself that, with the exception of the risk assessment provisions, all that was relevant to this application had been provided. That request was met. I looked at the document and I am satisfied that, with the exception of the risk assessment provisions, copies of all the parts that were relevant were provided.

The claimant declined to produce the risk assessment on the grounds that there was a real risk that, notwithstanding expressed or implied restrictions on the defendants from use of that information for any purpose other than this application, the provision would be referred to in foreign duplicative litigation pursuant to the defendant’s strategy of seeking to outflank the claimant’s victory in an English court in foreign proceedings.

The court has a number of matters to weigh here. Can an interim payment order be made without the defendants seeing the risk assessment provisions and is there a good reason why they ought not to see the risk assessment provisions? I say at once that I do not propose to make any order on the basis that the uplift provisions are appropriate in the light of the risks that were perceivable at the time the agreement was entered into. In my judgment, that involves an enquiry that ought not to be undertaken in this sort of an application made before a Commercial Judge, without the assistance of a costs judge. Accordingly, the importance of the risk assessment is to that extent diminished because I propose to proceed on a cautious basis, recognising the possibility that, on a detailed assessment, it might be held that the full uplift is not appropriate given the perceivable risk.

I also bear in mind paragraph 37 of Mr Bartlett’s witness statement in which he sets out the risks that were perceived at the time of the CFA. It is true that the witness statement does not replicate word for word the risk assessment in the CFA, but Mr Bartlett must be taken at his word. He says that the 30 per cent uplift was determined to be appropriate by Simmons & Simmons at the time the CFA was agreed by reference to the risks involved in the claimant’s case on liability, which he then lists.

In my judgment, bearing in mind that I do not propose to make any order predicated upon the appropriateness of the uplift specified in the agreement, and given the evidence of Mr Bartlett, it is not unfair for the court to proceed to exercise its discretion in these exceptional circumstances and make a further interim payment order in light of the fact that questions of liability had been concluded.

I heard a submission from Mr Raphael that questions of liability had not been concluded, because the defendants have petitioned the European Court of Justice following the failure of a petition for leave to appeal to the House of Lords against the strike-out of an appeal by the Court of Appeal. The Court of Appeal struck out the defendants' appeal because they failed to satisfy a condition requiring them to pay various costs awards. Mr Raphael says that if the Court of Human Rights accedes to that claim, the Court of Appeal and the House of Lords would be bound to reconsider the order they made and it was conceivable that they would allow an appeal to proceed.

In my judgment, it all comes back to the true construction and meaning of clauses 5.1 and 5.2 of the CFA which provide so far as material:

“5.1

"Win" for the purposes of this agreement” means

(A)

that liability against any of the defendants in the case has been finally decided in Mr Masri’s favour; or

(B)

the case has been settled in Mr Masri’s favour at a total figure greater than …”

The figure has been redacted.

“5.2

"Finally" means that the party against whom the decision has been made

(A)

is refused permission to appeal and has no further right to request permission, or

(B)

has not appealed or requested permission to appeal within the relevant time limits, or

(C)

has lost the appeal and has no further right to appeal.”

In my judgment, it is plain that this agreement proceeds on the basis that a decision is "final" when there are no further rights of appeal on questions of liability within the English domestic legal system applying conventional English procedure. On that construction, there has been a final determination of liability in favour of Mr Masri, and accordingly those parts of the agreement that require him to pay an uplift are engaged.

Mr Raphael further submitted that I should not exercise the discretion conferred by paragraph (8) because, by the time Gloster J made her costs orders, the House of Lords had dismissed the petition seeking leave to appeal the Court of Appeal strike out. I see nothing in that point. It is plain that the costs orders, including the interim costs orders made by Gloster J, were made on the basis that conditions had not been met that triggered the uplift provisions in the CFA. Mr Raphael also prayed in aid the claimant's breach of the three month time limit during which detailed assessment proceedings should have been begun before the costs judge. Looking at the relevant provisions, there is no scope in my judgment for that submission. The fact that the claimant has not begun detailed assessment proceedings within the time specified is not a reason why, in the exceptional circumstances in this case, the application for further interim costs orders should be refused.

Mr Raphael also made some detailed submissions based on the mathematics lying behind the figures set out in exhibit ACB/52. He contended that his clients were unable to check one or two of the figures and drew my attention to the fact that the figure of £879,172.67 included applications that were made both before the CFA was executed and after the final determination of the liability issue. He also suggested that it was not plain that the percentages which have been identified by Mr Bartlett were the percentages that were applied by the court making the interim payment orders. I accept Mr Salzedo’s submission that I should infer that percentages were used by the courts in making the relevant interim payment orders. It was further contended that it may be that within the costs claimed by Simmons & Simmons there are large figures for disbursements and, if so, that may distort the mathematical significance of the percentages.

This application was issued and served on 15^th May and the defendants filed no evidence whatsoever and had every opportunity to raise the sort of questions that Mr Raphael raised, but instead, raised them only very late in the day. It would appear that a number of them can be satisfactorily answered by detailed reference to underlying figures.

In my judgment, these submissions as to mathematics are no reason for making no order at all in favour of the claimant. Instead, I bear in mind these submissions when determining the quantum of the interim payments I am going to order. I am of the view that I can take into account the fact that if, doing the best I can, I make an order for an interim payment which in fact exceeds what might be determined in the detailed cost proceedings, such excess can be set off against the £60 million (plus) judgment debt which is owed by these defendants. So if there is a relatively small over-estimation made in the making of further interim payment orders, I can see no real injustice to these defendants who owe this huge sum of money and who could deduct from that sum, which plainly they have no intention of paying, any excess which is determined in the detailed assessment proceedings.

The application for further interim payments seeks the same percentage that can be inferred as applying when the first interim payment orders were made. The additional liability figures are predicated upon the uplift percentages being appropriate percentages in light of the perceivable risks. As I have already said, I propose to proceed on a basis that allows for some discount recognising the possibility that the costs judge may find that the stated uplifts are too high given the perceivable risks.

What I propose to do is to order interim payments of the sums in the column “additional liability incurred by the claimant” in respect of all the costs orders identified in exhibit ACB/52, save for the appeal cost, but that instead of a percentage equivalent to six-sevenths, the percentage should be equivalent to five-sevenths of that sum.

I turn to the application for a summary assessment which it is said ought now to be made further to summary assessments previously conducted on the basis that only 70 per cent of the standard costs is payable by Mr Masri. This application again proceeds on the basis that I am finally determining that the stated uplift is appropriate. I declined to proceed in that way and instead I propose to make further interim payment orders in respect of the outstanding issues of assessment to the extent of 60 per cent of the sums claimed in the schedule provided by Mr Bartlett.

Accordingly, for the reasons that I have given, this application succeeds to the extent indicated.