Various Claimants v McAlpine & Ors

This judgment follows a costs management hearing on 19 and 20 November 2015 and consideration of further written submissions from the parties.

It is common ground that, the claim having commenced before 1 April 2013, this is a case to which the approach laid down by the Court of Appeal in Home Office v Lownds [2002] EWCA Civ 365 applies. It is further agreed between the parties that the appropriate approach is governed by Practice Direction 3E – Costs Management.

Because of the size of the case we (Supperstone J and Master Leslie) invited the Senior Costs Judge, Chief Master Gordon-Saker, to sit with us as an assessor. We are most grateful for the assistance that he has given us based upon his extensive practical experience of assessing costs.

On 2 October 2015 Master Gordon-Saker ordered, so far as is material, that:

“1.

The solicitors for the parties listed below shall serve costs budgets in respect of common costs only, … such budgets to include incurred costs up to and including 2 October 2015 and thereafter estimated costs up to and including the conclusion of the trial of the lead cases. For the avoidance of doubt, the common costs include the costs relating to the claims of the reserve lead claimants as well as the current lead claimants.

2.

The Claimants’ common costs budgets shall consist of a budget from each of the firms of solicitors representing lead claimants listed below, plus a covering schedule aggregating those costs. The solicitors of the relevant claimants are those in the Claimants’ Solicitors Steering Group [‘CSSG’] representing the lead claimants, namely:

Thompsons Solicitors LLP

Guney, Clarke & Ryan Solicitors

Leigh Day Solicitors

OH Parsons LLP

3.

The Defendants’ common costs budgets shall consist of a budget from each of the firms of solicitors representing the Defendants, namely:

Macfarlanes LLP

Herbert Smith Freehills LLP

Wragge Lawrence Graham & Co

Paul Hastings LLP

CMS CameronMcKenna

Eversheds LLP

4.

The costs budgets shall be prepared in accordance with precedent H of the Practice Direction to Part 47, but include in addition:

(a)

Schedules of hours spent on individual lead cases including reserve cases, and on other common costs work, with brief descriptions of work done to date and anticipated, within each phase.

(b)

The following additional phases (such phases to be included without prejudice to any party contending at the Costs Management Hearing listed on 19/20 November 2015…, that such costs shall not be included in the approved budgets):

(i)

Selection of Lead Cases

(ii)

Preparation of Generic Witness Statement(s) (regarding the common issues as a whole and not lead cases)

(iii)

Group Co-ordination costs

(iv)

Costs Management Hearings

(v)

Historic and Live Applications.

5.

The parties shall meet with a view to agreeing the assumptions of future work, including the trial, … A memorandum of the parties’ assumptions, indicating any areas of agreement or disagreement, shall thereafter be prepared.

6.

Upon service of the costs budgets the parties are to meet with a view to agreeing them. Thereafter the Claimants and Defendants shall each prepare a document stating points of agreement and objection in respect of the other’s costs budget…”

Pursuant to the order of Master Gordon-Saker the parties prepared and served costs budgets in accordance with Precedent H.

At the hearing we were not concerned with costs incurred for any of the parties save to the extent permitted by paragraph 7.4 of the Practice Direction (see para 11 below); nor were we concerned with the budget prepared by CMS CameronMcKenna as shortly before the hearing their clients, Cleveland Bridge UK Ltd, reached an agreement with the Claimants which has led to a settlement of those claims.

A Group Litigation Order was made on 4 August 2014. For the purposes of this hearing Mr Richard Arthur of Thompsons Solicitors LLP, who currently act as Lead Solicitors in the CSSG made his seventh witness statement dated 16 November 2015. He describes the nature of the proceedings as follows:

“5.

These claims relate to the secret vetting of activities carried out by a group of major construction companies over many years, through two organisations: (a) the Services Group of the Economic League (‘SGEL’) between about 1970 and April 1993; and (b) the ‘Consulting Association’ (‘TCA’) from April 1993 until February 2009 when its premises were raided by the Information Commissioner. During their respective periods of operation, each of those organisations maintained a secret manual database of information relating to construction workers who were reported to them by members/subscribers as being troublemakers and/or unsuitable for work in the construction industry. Members/subscribers were (for a fee) able to carry out checks of potential employees/workers to find out whether they were on the list and, if so, whether information was held, in order to decide whether to employ them. It is the Claimants’ case that the list and database functioned as a blacklist.”

Mr Arthur continues:

“9.

Different groups of claimants pursue different causes of action, and different defendants. All pursue claims for unlawful means conspiracy, breach of the Data Protection Act, breach of privacy and misuse of confidential information. The great majority of claimants represented by Thompsons and OH Parson also pursue claims in defamation, based on specific meanings attributed to the database entries in respect of them. Some claimants represented by Leigh Day and OH Parsons also pursue defamation claims in respect of their personal database entries.

10.

The defendants pursued for each group of Claimants is also different. The claimants represented by Guney Clark & Ryan pursue only Sir Robert McAlpine Ltd. The claimants represented by Thompsons pursue Defendants represented by Macfarlanes, which include individuals who were employees of those companies and Chairmen of the Consulting Association from time to time, and in the case of four such claimants, members of the AMEC group of companies. The claimants represented by Leigh Day pursue (or have pursued) Defendants represented by Macfarlanes, members of the AMEC group of companies, Cleveland Bridge UK Ltd, BAM Nuttall Ltd and Lend Lease Ltd. The Claimants represented by OH Parsons pursue Defendants represented by Macfarlanes, members of the AMEC group of companies, BAM Nuttall Ltd and Lend Lease Ltd…

11.

The remedies sought by the Claimants include damages for loss of earnings, general damages and aggravated damages…

12.

However the remedies sought by the Claimants are not confined to damages. They also seek orders for (i) an injunction to restrain the Defendants from publishing and/or causing to be published the defamatory words complained of; (ii) delivery up on oath of all documents concerning the particular claimant and the SGEL, the Consulting Association and/or other vetting information held by the Defendants; and (iii) the identities of the employees or agents of the Defendants who made use of the vetting information, and the uses to which it was put.

…

28.

Almost all current claimants have provided Provisional Schedules of Loss. The total value of the Provisional Schedules of Loss, leaving out of account general and aggravated damages, and the non-monetary remedies, is £61,257,627.90.”

In summary, Thompsons and Leigh Day have nine lead or reserve claimants each; Guney, Clarke & Ryan have six; and OH Parsons have four. A Macfarlanes Defendant is a Defendant to each one of these claims. AMEC and Lend Lease face one lead claimant each. BAM faces no lead claimant, but as a defendant to a number of claims and as a party to the stayed Part 20 proceedings they are of course concerned with the generic issues.

Rule 3.15 (Costs Management Orders) provides in sub-rule (2) that:

“The court may at any time make a ‘costs management order’. 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 cost in accordance with the overriding objective without such an order being made. By a costs management order the court will—

(a)

record the extent to which the budgets are agreed between the parties;

(b)

in respect of budgets or parts of budgets which are not agreed, record the court’s approval after making appropriate revisions.”

The relevant parts of PD 3E are as follows:

“7.1

Where costs budgets are filed and exchanged, the court will generally make a costs management order under Rule 3.15. If the court makes a costs management order under rule 3.15 the following paragraphs shall apply.

7.2

Save in exceptional circumstances—

(a)

the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved or agreed budget; and

(b)

all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved or agreed budget.

7.3

If the budgets or parts of the budgets are agreed between all parties, the court will record the extent of such agreement. In so far as the budgets are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgets. The court’s approval will relate only to the total figures for each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.

7.4

As part of the costs management process the court may not approve costs incurred before the date of any budget. The court may, however, record its comments on those costs, and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs.”

The relevant parts of Rule 44.4(3) provide:

“The court will also have regard to—

(a)

the conduct of all the parties, including in particular—

(i)

conduct before, as well as during, the proceedings; …

(b)

the amount or value of any money or property involved;

(c)

the importance of the matter to all the parties;

(d)

the particular complexity of the matter or the difficulty or novelty of the questions raised;

(e)

the skill, effort, specialised knowledge and responsibility involved;

(f)

the time spent on the case;

(g)

the place where and the circumstances in which work or any part of it was done; …”

Lord Woolf CJ, delivering the judgment of the court, stated at paragraph 31 that in assessing costs the CPR required “a two-stage approach”. He said:

“There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This in turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner.”

At paragraph 36 Lord Woolf added:

“Based on their experience costs judges will be well equipped to assess which approach a particular case requires. In a case where proportionality is likely to be an issue, a preliminary judgment as to the proportionality of the costs as a whole must be made at the outset.”

Mr Benjamin Williams QC, in his written and oral submissions, advanced arguments in support of the Claimants’ case in relation to the common costs budgets from each of the firms of solicitors representing lead claimants. In addition when making submissions in relation to the Defendants’ common costs budgets from each of the firms of solicitors representing the Defendants he indicated the figures that the Claimants considered it would be reasonable for solicitors representing the Defendants to charge in respect of each phase of the proceedings. He also responded to figures put forward on behalf of the Defendants as to what they considered would be reasonable for the firms of solicitors representing the Claimants to charge.

Mr Simon Browne QC, who appeared for the Macfarlanes Defendants, conducted a similar exercise in his oral and written submissions. In addition we have received both oral and written submissions from Mr Michael Bloch QC for the Lend Lease Defendants, Ms Clare Reffin for the AMEC Defendants, and Mr James Farrell for the BAM Defendants. They each made submissions in support of the common costs budgets presented by the firms of solicitors representing their individual clients and responded to the submissions made by Mr Williams as to the costs that he contended would be reasonable for their clients to incur.

An issue arose during the course of the hearing as to whether the costs of the Defendants that had not been challenged by the Claimants in advance of the hearing had been agreed, and should be treated as agreed costs for the purposes of CPR Rule 3.15(2)(a). Mr Bloch drew to the court’s attention paragraph 7 of a document entitled “Claimant Solicitors’ Steering Group Objections to the Costs Budgets ‘Precedent H’ served by the Defendants” (“the Claimants’ Objections”) which states:

“Where an objection has not been raised in respect of the Defendants’ anticipated costs, it may be assumed the same is agreed for the purposes of the costs management exercise. However the Claimants reserve the right to raise further objections on detailed assessment. The absence of dispute in the table below is therefore subject to the Claimants’ rights on detailed assessment to challenge unreasonable or disproportionate costs.”

When asked about this statement Mr Williams responded:

“Our position is that where we don’t challenge something we don’t challenge it. That means we don’t invite your Lordship to make a reduction but nor do we formally agree it…” (Transcript Day 2/152/13-16).

Mr Williams added that what is said in paragraph 7 does not amount to an agreement for the purposes of Rule 3.15(2)(a).

Mr Bloch in his post-hearing written submissions refers to paragraph 6 of the order of Master Gordon-Saker (see para 4 above) which he submits supports his contention that on any objective reading of paragraph 7 of the Claimants’ Objections the concession made is not to be interpreted as Mr Williams suggests. He adds that even if it were not the case that the Claimants have agreed the budget the court would still not be in a good position to make revisions to those parts of the costs budgets in respect of which no objections have been raised. However Mr Bloch accepts that any agreement between the parties does not bind the court (Transcript Day 2/92/22). Ultimately, as Mr Williams observed, “the court has a free-standing duty … to only allow costs which are proportionate” (Transcript Day 2/11/16-18).

In our view paragraph 7 of the Claimants’ Objections is clear. Where the Claimants have not objected to the Defendants’ anticipated costs they will be treated as agreed costs for the purposes of this costs management exercise. Accordingly it is necessary to consider with care what has been agreed between the parties. The purpose of costs budgeting is to reach a figure for each phase of the budget in respect of estimated costs for the future (see CPR 3.15 and 3.18, and PD 3E, para 7.3). That being so agreement for the purposes of Rule 3.15(2)(a) must mean agreement as to the total figure for each phase. It follows that agreement as to all constituent elements of a phase is necessary to constitute agreement of that phase for the purposes of Rule 3.15(2)(a). Conversely if there is no agreement as to any particular constituent element of the phase, there can be no agreement as to the total figure for that phase. Where a phase for whatever reason has not been agreed the court may then record its approval of the total figure for that phase after making appropriate revisions (Rule 3.15(2)(b)).

Pursuant to paragraph 6 of the order of Master Gordon-Saker (see para 4 above) the parties have set out in writing their points of agreement and objection to each others’ budgets. We are therefore in a position to identify which phases have been agreed and which have not been agreed. In a Schedule of approved or agreed costs budgets, which we annex to this judgment, we have (1) recorded any agreed figures, and (2) where no figure has been agreed, set out the total figure for the phase we consider to be reasonable and proportionate. In some instances the figures are less than the sum offered or indicated by the opposing parties.

In relation to the phases which have been agreed, but in respect of which we consider the total figure to fall outside the range of reasonable and proportionate costs we have recorded that by an asterisk against the relevant figure in the Schedule. On the detailed assessment of costs in due course careful consideration will no doubt be given as to whether there will be good reason to depart from the agreed figures (Rule 3.18(b)) in respect of the costs which we consider to be disproportionate or unreasonable.

Turning then to the approach we have adopted when considering costs which are not agreed, we note that it is common ground that this is an important case for all parties, that raises serious allegations and involves complex issues of law and fact. It is of high value in monetary terms and there are issues of reputation and the wider public interest in play.

The court is presently concerned with 28 lead or reserve cases. The Claimants’ incurred and estimated costs total in the region of £22m, and the Defendants’ in the region of £27m, aggregating just short of £50m. There are in all approximately 570 claims. The parties did not dissent from the suggestion of Master Gordon-Saker that total costs are likely to be in the region of £100m-150m when adding the costs of the individual claims (incurred and estimated), additional liabilities and VAT.

Further, in considering budgets for costs after 2 October 2015 we have had regard to the following:

Applying the two-stage approach in Home Office v Lownds (and in accordance with paragraph 7.3 of PD 3E) we have first considered whether the proposed budgeted costs of each party as a whole appear disproportionate. Recognising that this is a complex case which raises a number of difficult legal and factual issues, nevertheless, in our view, the costs appear to be disproportionate. In reaching this conclusion we have had regard not just to the monetary value of the claims, and general and aggravated damages, but also to the important non-monetary remedies. Having taken the view that the costs are disproportionate, accordingly we have gone on to consider whether the work post-2 October 2015 in relation to each phase in the common costs budget of each firm of solicitors is necessary and whether the total figure for each phase is reasonable.

In conducting this exercise we have borne in mind the decision of Pennycuick J in Simpsons Motor Sales (London) Ltd v Hendon BC [1965] 1 WLR 112 and his statement at 118 that:

“… one must envisage an hypothetical counsel capable of conducting the particular case effectively but unable or unwilling to insist on the particular high fee sometimes demanded by counsel of pre-eminent reputation. Then one must estimate what fee this hypothetical character would be content to take on the brief.”

In the recent case of Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm) Leggatt J, in a ruling on applications for payments on account of costs pursuant to CPR 44.2(8), made observations at paragraph 13 that we consider to be equally apt in the present case governed by the old rules:

“In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party…”

We have not heard submissions in relation to costs incurred pre-2 October 2015, but nevertheless we consider, having regard to the figures that we have seen and our knowledge of this case, that we should record by way of comment (as we are entitled to do pursuant to PD 3E, paragraph 7.4, see para 11 above) that we are of the view that the costs set out in each Precedent H for that period are disproportionately high.

When considering reasonable and proportionate costs post 2 October 2015 we have taken into account the costs that have been incurred before that date, and have proceeded on the assumption that of such incurred costs only those which are reasonable and proportionate will be allowed on detailed assessment.

For the reasons we have given we make a costs management order in accordance with Rule 3.15(2) in the terms set out in the Schedule annexed hereto.

THOMPSONS

O H PARSONS

LEIGH DAY

GUNEY CLARK RYAN

MACFARLANES

HERBERT SMITH FREEHILLS (BAM)

WRAGGE LAWRENCE GRAHAM (AMEC)

EVERSHEDS (LEND LEASE)

PAUL HASTINGS LLP (EMCOR)