Cost Capping Orders

PGI Group Ltd v Thomas & Ors [2022] EWCA Civ 233 is a rare example of a reported decision on an application to appeal and the first published decision on costs capping orders (“CCOs”) since the Jackson reforms introducing costs budgeting came into force.


Coulson LJ heard the Defendant’s application to appeal from Cavanagh J’s order (having sat with Costs Judge Brown) refusing to cap the Claimants’ future costs at £150,000, having subsequently budgeted them at just under £850,000 (£1.5 was million claimed). The decision is a useful reminder of the principles applicable to CCOs.


Kate Boakes of 12 King’s Bench Walk appeared as junior counsel for the Respondents, led by Benjamin Williams QC.

Background
This case arises out of a group claim brought by 31 Malawian women who worked at tea and nut plantations in Malawi, as employees of a Malawian company. They claim to have suffered sexual assault, rape and discrimination perpetrated by their male colleagues. The Applicant, and Defendant, is the parent company of Lujeri. The claim is headed to a trial of two test claims in June this year.

Incurred Costs
At the time of the application, the Respondents’ incurred costs were c. £1.6 million which, together with the £848,140 budgeted costs, gave a total of c. £2.5 million. The Applicant’s incurred costs were £750,000, and its future costs were budgeted by Cavanagh J at £1,750,000, giving the same total of £2.5 million.

The Order Sought to be Appealed
The applicant sought to appeal Cavanagh J’s order of 29 October 2021 refusing a CCO and his subsequent order of 8 December 2021, fixing the respondents’ costs budget in the sum of £848,140. In other words, despite the Claimants’ cost being budgeted at just over half the costs sought, the Defendant submitted the Claimants’ future costs to trial should be reduced to £150,000. This figure was said to be in line with the likely costs of pursuing the claims in Malawi.

The Test for a CCO

CPR r. 3.19(5) requires an applicant seeking a CCO to demonstrate that:
(a) such an order is in the interests of justice; and
(b) that there is a substantial risk that, without such an order, costs would be disproportionately incurred; and
(c) it is not satisfied that the risk in subparagraph (b) can be adequately controlled by –
(i) case management directions or orders made under this Part; and
(ii) detailed assessment of costs.
(6) In considering whether to exercise its discretion under this rule, the court will consider all the circumstances of the case, including –
(a) whether there is a substantial imbalance between the financial position of the parties;
(b) whether the costs of determining the amount of the cap are likely to be proportionate to the overall costs of the litigation;
(c) the stage which the proceedings have reached; and
(d) the costs which have been incurred to date and the future costs.
It was also noted that CCOs are very rare and that per CPR PD 3F at 1.1 they will only be made “in exceptional circumstances”.

The Judgment at First Instance
All three limbs of the test under CPR 3.19(5) must be satisfied for a CCO to be granted. Cavanagh J found that none were satisfied and accordingly refused to grant a CCO.
He noted that according to the Defendant, the maximum damages each Claimant was likely to recover, if successful, was around £10,000 and whilst modest by English standards this sum would be “very significant for poor Malawian plantation workers”. Further, he noted that the claims were about more than money: the Claimants sought vindication. He noted that: “The importance of the matter to the parties is a relevant consideration, in relation to proportionality (see CPR 44.4(3)(c)).” Further, if a CCO were made it would likely “force the claimants to discontinue these proceedings”.

The Grounds of Appeal
The three grounds of appeal were as follows:
Ground 1: The judge applied the wrong proportionality test;
Ground 2: The judge failed properly to take account of the costs already incurred in his analysis;
Ground 3: The judge was wrong to hold that the costs of prosecuting the claims in Malawi was irrelevant to proportionality.

Coulson LJ noted that all three grounds of appeal went only to the second limb of the test under CPR r. 3.19(5)(b), that is to say, whether costs would be disproportionately incurred without a cost capping order for £150,000. It was commented [@18-19] that:


“The grounds do not on their face go either to the first pre-condition (namely that a CCO is not in the interests of justice) or the third (namely 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 it would leave untouched the judge’s conclusions that a CCO was not in the interests of justice and that any risk of costs being disproportionately incurred could be dealt with by costs budgeting (which is what he went on to do).”

Refusal of permission to appeal

Coulson LJ reminded himself that decisions on costs are “pre-eminently matters of discretion and evaluation”. As such, appellate courts will only interfere if the decision is “wrong in principle, or if something was taken into account which should not have been, or was not taken into account which should have been, or is “plainly unsustainable”.

The application to appeal was given short shrift. It was noted that the decision was:

“not only well within the ambit of [the judge’s] discretion, but was also a conclusion which the vast majority of judges would also have reached. In short, that is because: £150,000 was accepted by everyone as being nowhere near the minimum reasonable and necessary costs … It is less than a fifth of the sum which the judge calculated as the appropriate costs budget.”

Comment

Coulson LJ was unimpressed with the Defendant’s application. The application sought to cap the Claimants’ costs at a tenth of the Defendant’s, at an amount that would have stifled the claims. Not only would a CCO of £150,000 amount to strike out by the back door but by setting the amount of the CCO by reference to the costs of litigation in Malawi would amount to a forum non-conveniens decision by the back door as well. Further, the Defendant’s focus on a cost/benefit analysis which did not give due weight to the wider importance of these claims and the desire for “vindication” was again, not well received when the first requirement of a CCO is that it be “in the interests of justice”.

Practical Takeaways

  • In any appeal, if the applicable test is cumulative, and none of the elements were found to be satisfied at first instance, all elements of the test should be expressly challenged in the grounds of appeal;
  • Ensure that a CCO will not amount to strike out via the backdoor, i.e. ensure that the amount of the CCO order does not stifle the claim.
  • Be reasonable – proposing to cap the other side’s costs at less than one tenth of your own is unlikely to be well received! It needs to be at or above the minimum reasonable and necessary costs required to litigate in England and Wales.
  • Arguments attacking proportionality need to not just address quantum but also what is at stake in the litigation;
  • You will need to justify why costs budgeting and or detailed assessment will not adequately control costs: perhaps if the Costs Judge will not be able to adequately distinguish between costs reasonably incurred and costs unreasonably incurred in a complex case, see the judgment [@8].

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