Vava & Ors v Anglo American South Africa Ltd

This is my ruling on an issue about costs that arose after my judgment of 24 July 2013, in which I granted the applications of the defendant (“AASA”) challenging the court’s jurisdiction. My judgment was in both what I called the Vava action and the Young action, but this issue arises only in relation to the Vava action. If costs were awarded in accordance with the “general rule” in CPR 44.3, the claimants would be ordered to pay AASA’s costs: AASA were the successful party and the claimants were unsuccessful. However, the claimants submit that there should be no order for costs because of a contract made in correspondence between their solicitors, Leigh Day LLP (“LD”), and AASA’s solicitors, Linklaters LLP (“Linklaters”), or alternatively, if the exchanges do not give rise to an applicable contract, because in view of the correspondence it would not be just to order them to pay costs and I should make no order as to costs. AASA accepts that the claimants should not pay all its costs. It seeks an order for costs limited to the amount of costs that it has previously been ordered to pay to the claimants: by an order of 16 July 2012 Silber J ordered that AASA pay the claimants 60% of their costs of and occasioned by applications for disclosure and information, and in effect AASA seeks to neutralise the effect of that order. Those costs have not been assessed, and nothing has been paid on account of them.

The exchanges that give rise to this issue are these: by a letter to AASA dated 28 October 2011, LD advised that, subject to hearing from AASA within 14 days, they would arrange “After the Event” (“ATE”) insurance cover and notify AASA formally of it “since [AASA had] not agreed to one way costs shifting”. On 23 November 2011 LD wrote to Linklaters that the 14 days period had elapsed and that, unless they heard from Linklaters by the close of business that day “that your client agrees to one way costs shifting”, they would accept an offer of insurance and thereafter serve formal notice of it. In reply on 23 November 2011 Linklaters noted LD’s request that AASA agree to “what you describe as one-way costs shifting by which we assume that you mean that [AASA] would not seek its costs from [the claimants], regardless of the outcome of the litigation”, and wrote that they considered it unnecessary to respond “so far as the substantive litigation is concerned” until AASA’s challenge to the jurisdiction had been resolved. On 25 November 2011 Linklaters wrote that, since AASA did not accept the court’s jurisdiction, “it is neither necessary nor appropriate for [AASA] to engage in discussion regarding costs or other arrangements which will only be relevant if its jurisdictional challenge is unsuccessful and your clients decide to continue an action in the UK”. They said that therefore they would not agree to any “one-way costs-shifting” arrangement at that stage but might consider it if the jurisdictional challenge did not succeed. They complained that LD had not provided information about their proposals. In a reply of 25 November 2011 LD wrote that the claimants’ “one-way costs-shifting proposal is precisely as [Linklaters] set out in [their] letter of 23 November 2011 namely that [AASA] would not seek to enforce costs against [the claimants] regardless of the outcome of (a) the jurisdiction issue (b) the substantive litigation”. They said that ATE insurance cover in respect only of the jurisdictional issue was not available to the claimants. On 30 November 2011 and subsequently the solicitors exchanged views about whether ATE insurance covering only the jurisdiction challenge might be obtained.

On 15 December 2011 LD wrote that “ATE cover has been issued for an amount of £6 million including £500,000 for own disbursements and in conjunction with the case of Young … £600,000 for preliminary issues including jurisdiction”. Apparently they filed a Notice of Funding reflecting this. On 20 December 2011 Linklaters wrote that they considered LD’s conduct and their “approach to the issue of ATE insurance cover to be entirely unreasonable” and required them to cancel the ATE cover within the 14 day “cooling off” period, and they continued, “Upon receipt of your confirmation that you have done so, [AASA] will agree not to seek costs in relation to this litigation (including the jurisdiction issue) from [the claimants], (although it does not waive the right to seek costs from other persons as appropriate)”.

On 21 December 2011 LD wrote that they would investigate whether the ATE cover might be avoided or amended so as to cover only disbursements, and asked Linklaters to confirm that AASA’s “undertaking not to seek costs in relation to the litigation” extended to “the proceedings comprised in Claim Form 1, Claim Form 2 and any other Claim Forms that are issued against [AASA] by [LD] on behalf of gold miners or former gold miners seeking compensation in respect of silicosis and/or silico-tuberculosis”, explaining that the ATE policy covered “all the silicosis claims”. (A second claim form had been issued for other claimants with comparable claims to those in the Vava action and further proceedings were later issued for other claimants. In a letter of 22 December 2011 Linklaters confirmed that when the ATE cover was cancelled AASA would not “seek to enforce any costs orders against [the claimants] in relation to the proceedings commenced by Claim forms 1 and 2”, but declined to give an undertaking in respect of proceedings that had not yet been brought. In the email sent later that day and apparently after a telephone conversation, Linklaters sent this email to LD:

“The other issue you raised in the call this morning related to the cancellation of the ATE cover insurance pursuant to the 14 day “cooling off” provision. In our letter of this morning we confirmed that, on confirmation of cancellation of the policy, [AASA] would not seek to enforce costs orders against [the claimants] in relation to proceedings commenced by Claim forms 1 and 2. As requested, and for avoidance of doubt, this would include claims brought by miners who are subsequently added to claim form 2. It does not extend however to any new claims which are brought and not currently envisaged by claim forms 1 and 2. I thought it also appropriate to point out that we are only considering the costs position at the moment. We make no admissions or concessions in relation to the manner in which you have attempted to start proceedings on behalf of different categories of individuals by use of claim form 2. The issues to which this give rise will be dealt with if the litigation in principle survives the challenge to the jurisdiction.”

Later that afternoon, LD sent Linklaters an email that they had considered the position with the ATE insurers with a view to “terminating the adverse costs risk cover” but retaining disbursements cover, and reported that they understood that this could be achieved by varying the policy rather than cancelling it. They continued,

“Regarding the one way costs shifting undertaking by [AASA], we note that this is limited to current and future claimants included on Claim Forms 1 & 2. While we are not proposing that this concession should apply to any old claim brought against [AASA] in the future, we do require that it should also encompass future silicosis and silico-tuberculosis claims included on further Claim Forms that may be issued and which are based on the same essential allegations as claim form 1 & 2, namely negligent control and/or advice by [AASA]. On receipt of confirmation of [AASA’s] agreement to this further requirement we will attend to the variation of the terms of the policy as indicated above”.

There was a flurry of further emails between LD and Linklaters on 23 December 2011. First Linklaters wrote that AASA had acceded to the request in relation to “one-way costs shifting” in respect of all existing litigation and extending to miners who might be added to “Claim Form 2”. AASA would not commit itself about future litigation but recognised that it might be invited to reach similar arrangements at an appropriate time. Linklaters pointed out that they did not know the precise scope of the ATE cover because LD had not provided a copy of its terms, but said that they could see no basis on which the claimants could proceed with ATE insurance in relation to existing litigation given the concessions made by AASA. They requested cancellation of “the relevant cover”. LD responded that the claimants proposed to proceed as explained in the email of 22 December 2011, “provided [AASA] still agrees to the one-way costs shifting arrangement in respect of present and future Claim form 1 and 2 claimants”, and asked for confirmation of that. Linklaters replied that their position was that set out in their letters of 20 and 22 December 2011 and their email of 22 December 2011. LD sought clarification of Linklaters’ position about cover in respect of the claimants’ disbursements. Linklaters replied that it was a matter for LD and their clients whether they wished to buy or retain cover other than ATE cover in respect of AASA’s costs. LD responded that the policy that had been issued included cover for both “adverse costs (ie your client’s costs)” and for the claimants’ own disbursements, and explained that they proposed to cancel only the former. They sought confirmation that AASA agreed to “the one way costs shifting arrangement” on that basis. Linklaters did so confirm, and on 24 December 2011 LD replied that, if successful, the claimants would seek the cost of the premium for disbursement cover from AASA.

By a letter dated 13 January 2012 LD sent Linklaters a Notice of Funding, which replaced that of 15 December 2011. It reflected the cancellation of the ATE cover other than for the claimants’ own disbursements.

I do not understand that there to be any dispute between the parties that the exchanges between solicitors resulted in a contractual agreement about “one way costs shifting”. Mr Layton formulated the issue as follows: “whether the agreement was for AASA ‘not to seek costs in relation to this litigation (including the jurisdiction issue) from [the Claimants]’ or ‘not [to] seek to enforce any costs order’ against the claimants”. He submitted that AASA agreed not to seek any costs or any costs order. He argued that this is implicit in the expression “one-way costs shifting”, invoking the Review of Civil Litigation costs: Final Report (the “Jackson” Report, 2009), which, as Mr Layton pointed out, had been published before the exchanges between LD and Linklaters and the glossary of which included this description of “one way costs shifting”: “A regime under which the defendant pays the claimant’s costs if its claim is successful, but the claimant does not pay the defendant’s costs if the claim is unsuccessful”.

I reject that argument: the Jackson Report does not present this as a definition of the expression “One way costs shifting” but as its “Meaning or description”. I observe in passing that, if it were an exact definition, the order of Silber J would not be in accordance with the agreement: first, it was made before the claim or even the jurisdictional challenge had been decided, and secondly, it was made for only 60% of the claimants’ costs. In reality Mr Layton was not arguing that the parties had agreed to the regime described in the glossary to the Jackson report but to a regime whereby the court might exercise its powers to make costs orders in favour of claimants but not in favour of defendants.

If the question turned on the issue suggested by Mr Layton, I would resolve it in favour of AASA. Mr Layton’s argument was based on Linklaters’ letters of 23 November and 20 and 22 December 2011. The reference to AASA enforcing costs, originally in LD’s letter of 25 November 2011, was adopted by Linklaters in their email of 22 December 2011. The court’s approach to questions about whether and when a contract was concluded in such circumstances as these was authoritatively stated by Lloyd LJ in Pagnan SpA v Feed Products Ltd., [1987] 2 Lloyd's Rep 601:

“(1)

In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole …

(2)

Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary 'subject to contract' case.

(3)

Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed …

(4)

Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled …

(5)

If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.

(6)

It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by [Bingham J, at first instance in that case, [1987] 2 Lloyd’s Rep p.611] 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'heads of agreement'."

As I read the solicitors’ exchanges, the agreement was concluded only when LD cancelled the ATE cover, that is to say at some time between LD’s email of 24 December 2011 and their letter of 13 January 2012. In my judgment, before the cover was cancelled no binding agreement was concluded: throughout the exchanges Linklaters made clear that AASA’s agreement was to be effective only upon the cover being cancelled and, at least until Linklaters’ last email on 23 December 2011, both solicitors were negotiating the terms of a proposed arrangement, specifically about the claims to which it was to apply and what ATE cover the claimants were to cancel. The terms of those negotiations show that neither LD nor Linklaters regarded their clients as contractually committed to anything. Accordingly, there was no binding agreement until after Linklaters had formulated the proposed arrangement in the terms of their email of 22 December 2011, that is to say in terms of not “seek[ing] to enforce costs orders against [the claimants]”. That was the last formulation of the terms to which AASA was subscribing before the contract was concluded, and in my judgment it must be taken to state more specifically than the letters quite what was offered.

It does not follow that I should make an order for costs in AASA’s favour. As I have said, it seeks an order for costs to neutralise Silber J’s order and limited to the amount that he ordered. It recognises that an order for any greater amount should not be made because it has agreed not to enforce it, and therefore an order for more would, at best, be pointless: I need not consider whether AASA would have been in breach of the solicitors’ agreement had it applied for such an order. Could AASA, consistently with the solicitors’ agreement, deploy an order for costs to neutralise the effect of Silber J’s order? I do not find it easy to decide whether, if AASA were to deploy a costs order in this way, it would be seeking to “enforce” the order within the meaning of the agreement. After judgment or a court order, enforcement generally connotes compelling observance of it: in R v Bates, [1982] NSWLR 894, 895 Samuels JA cited this meaning of “enforce” from the Shorter Oxford English Dictionary. For money judgments the main and obvious methods of enforcement are binding and selling goods, third party debt orders, charging orders, attachment of earnings orders, stop orders and insolvency proceedings, but in Pritchett v English & Colonial Syndicate, [1899] 2 QB 428, 434 Lindley MR decided that the term “enforced” in Order XLII r.24 of the Rules of Court 1883 included enforcement by action as well as by execution.

The purpose of the solicitors’ agreement was to provide the claimants with protection equivalent to that which they would have obtained from ATE insurance. It might affect my interpretation of the agreement if conventionally ATE insurance protects against any order for costs or against a net liability for costs subject to any set off. However, neither the claimants nor AASA presented any evidence (or offered any information) about that: it might be that there is no conventional form of ATE cover in that regard. Of course, the terms of the ATE cover issued to the claimants cannot inform the interpretation of the agreement: Linklaters and AASA did not know the terms, and the claimants and LD knew that they did not know them.

I have considered whether the proper interpretation of the agreement might be informed by consideration of other situations in which it might have been applied. If Silber J had reserved the costs of the applications before him to the judge determining the jurisdiction challenge, I could have made an order for costs to achieve, in effect, the result for which AASA contends and it could not, I think, be argued (and Mr Layton did not argue) that the solicitors’ agreement would prevent this. On the other hand, had the claimants had the costs of the applications before Silber J assessed and 60% of them paid before I resolved the jurisdiction challenge, there would have been no question of setting off costs orders. On either interpretation of the agreement fine distinctions arise, and I do not find assistance here about its meaning.

If I had had to decide this question of contractual interpretation, I would have concluded that AASA could not consistently with the solicitors’ agreement seek to deploy an order for costs against Silber J’s order: it would be seeking to “enforce” a costs order against the claimants within the meaning of the agreement. When LD first on 25 November 2011 used the expression “seek to enforce costs”, they apparently did not intend this to mean anything far removed from “seek … costs”, the expression used by Linklaters on 23 November 2012; and on 22 December 2011 Linklaters too are to be taken to have intended little difference between “seek to enforce any costs orders” and seek any costs orders. The difference is minimised by giving the concept of enforcing a costs order a wide interpretation. However, there is, to my mind, another route to the conclusion that I should make no order as to costs that does not turn directly upon this nice question of construction, and which I prefer to adopt as my ratio for this ruling.

The courts have long recognised that one judgment or order for payment of a sum may be set-off against another. (According to Denham on the Law of Set-Off (4th Ed, 2010) para 2.98 fn 349, the practice dates from about 1750, and before then the courts refused to allow judgments to be set off.) This extends to orders for costs (Reid v Cooper, [1915] 2 KB 147), and is reflected in CPR 44.12. However, the right to set off judgments and orders is not a form of equitable set-off. Scott LJ so characterised it in Lockley v National Blood Transfusion Service, [1992] 1 WLR 492, 496-7, but in R (on the application of Burkett) v LB of Hammersmith and Fulham, [2004] EWCA Civ 1342 at paras 44 to 48 Brooke LJ, while agreeing with Scott LJ about the discretionary nature of the right of set-off, did not regard it as equitable. As Denham (loc cit at para 2-103, 104) points out, it cannot be because the practice was developed in the common law courts long before the Judicature Acts and “The true basis of set off is the court’s inherent jurisdiction”, its purpose being “to do what is fair”.

I do consider that it would be unfair for AASA to set off an order for costs in its favour against its liability under Silber J’s order, and therefore I decline to make any order for costs because it would be pointless to do so. I conclude that it would be unfair for two reasons, either of which is, to my mind, sufficient to decide this question in the claimants’ favour. First, it does not seem to me fair that AASA should set off liability under an order that it agreed should not be enforced against an enforceable order. Secondly, had the claimants proceeded to an immediate assessment of their costs, AASA’s liability would probably have accrued and been paid before my decision about jurisdiction. As I have said, in those circumstances AASA could not properly have sought a costs order. It does not seem fair that the claimants should be worse off because they sensibly did not rush to have their costs assessed with the risk of a series of separate costs assessments between the parties. I appreciate that they could have gone some way to protect themselves by seeking from Silber J an order for a payment on account, but this does not alter my view of the fairness of the matter.

I therefore conclude, despite the general rule (and despite Mr. Midwinter’s attractively presented argument), that I should not make any order for costs in the Vava action.