COSTS CAPPING IN THE COURT OF APPEAL: DON'T BANK ON THE TIDE BEING IN YOUR FAVOUR
In Tidal Energy -v- Bank of Scotland Plc Arden L.J. considered, and rejected, an application for costs capping in relation to a forthcoming Court of Appeal hearing. The Court was keen to discourage satellite litigation in the Court of Appeal. Costs capping is not generally used when the costs can be controlled on assessment.
Tidal Energy had obtained permission to appeal. The respondent bank indicated that it intended to instruct Leading Counsel in the Court of Appeal. Tidal then applied for a costs capping order so that it would not have to pay the costs of leading counsel.
The application was initially made under CPR 52.9A, however as a result of an earlier decision, it could only proceed under the costs capping provisions in the CPR at 3.19.
“(5) The court may at any stage of proceedings make a costs capping order against all or any of the parties, if –
(a) it is in the interests of justice to do so;
(b) there is a substantial risk that without such an order costs will 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.”
THE DECISION IN THE TIDAL ENERGY CASE
The judge considered the criteria in 3.19 and held that it did not apply. The costs of leading counsel could be disallowed on assessment if the court felt it to be an “unnecessary luxury”.
- My starting point is that this provision is a precondition to the exercise of the discretion which is conferred on the court under that rule, because a discretion is only triggered if (a), (b) and (c) are satisfied. I am not concerned with (a) and (b) at this point, only with (c). What is necessary is that if the court is not satisfied that the risk in subparagraph (b) can be adequately controlled by (then this the material part) “detailed assessment of costs”.
- That is the material element of the provision because there is nothing to suggest that if the services of leading counsel turn out to be a luxury, which is unnecessary for the proper hearing of the appeal and which ought not to be laid at the door of the appellant, if the appellant loses the appeal, then it is not disputed but that the court would be able to strip that element of the costs out of the recoverable costs assuming an order for payment of costs is made against the unsuccessful party. Indeed there are cases in the bundle where that has been done. It can be done even on a summary assessment but the rule requires me to consider what would be done on a detailed assessment and to the best of my understanding there is no difference on a detailed assessment. The point can equally well be argued and if the costs judge is convinced that the bank had a separate purpose in employing leading counsel, namely to protect the integrity of its standard form as against other customers then it would discount the costs of representation by counsel accordingly.
- Mr Guy Adams, who appears on this application for Tidal Energy, submits that the true interpretation of subparagraph (5) is that the risk referred to in 5(c) is the substantial risk that without a costs cap costs will be disproportionately incurred and that therefore the only type of exercise within (c)(i) or (c)(ii) that can constitute adequate control is a mechanism for preventing the costs being incurred in the first place. That would lead to the the proposition that a costs cap would prevent leading counsel being instructed, if taken literally, but as I understand it Mr Adam simply means that the cost cap would make it certain at the outset that Tidal Energy would not have to bear the costs referable owing to the instruction of leading counsel.
- In my judgment that interpretation of the rule, however desirable for the reasons Mr Adams pressed on me, is simply not tenable as a matter of interpretation. Paragraph (c) uses advertise words “the risk in subparagraph (b) can be adequately controlled”. In my judgment, it is clear that a mechanism may constitute adequate control if it neutralises or satisfactorily manages the risk. It may not be possible to eliminate a risk but only to manage it. But, to my mind, that must be the interpretation of the rule because otherwise a detailed assessment of costs could never or scarcely ever be a mechanism of control within 5(c). Moreover, as I see it that would reflect a policy decision which the drafter of 3.19 may reasonably have taken, namely that the court should not be troubled by satellite litigation, constituted by cost cap litigation if the long-standing system of assessing costs would provide an adequate mechanism. That is the view that I came to without studying a Eweida v British Airways Plc EWCA Civ 1025. That was a decision about a protective costs order under CPR 44. The critical wording of CPR 44.18 paragraph 5(c)(ii) set out at in paragraph 31 of the judgment of Lloyd LJ is precisely the same as that in CPR 3.19(5). I note that Lloyd LJ, with whom Moses LJ and the Vice-President, Maurice Kay LJ, also agreed considered that the appellant in that case could not satisfy CPR 44.18(5)(c)(ii) because the costs judge would provide the protection to which the appellant is entitled in respect of excessive costs. In that case the question of rates arose. As I say I have reached that conclusion entirely independently of Eweida. That is because risk can be managed either in advance or after the event or, as I put it in argument, apologising for using Latin the mechanism in 5(c)(i) is an ex-ante mechanism and that in 5(c)(ii) a posteriori mechanism after the event to limit costs.
- In those circumstances, while accepting that the courts must interpret the provisions of the CPR with a view to giving effect to the obvious policy of trying to control costs and to ensure, in accordance with the amended overriding objective, that cases are dealt with justly and at proportionate cost. Even accepting that, I am not satisfied that this is a case in which this court can make a costs cap order under CPR 3.19.
DISCOURAGING SATELLITE LITIGATION IN THE COURT OF APPEAL
The judge dealt, robustly, with arguments that satellite litigation was not a major concern at the appeal stage.
- It has been submitted in the appeal court the dangers of inappropriate satellite litigation are not as great as they are at first instance. With respect I do not consider that that is so. This case has been allocated a hearing time of 1 day and this application of itself has taken over an hour to hear. It would increase the sitting time of the court considerably if there were a large number of costs capping applications and in addition that would result in other litigants who want to have their appeals heard being put back.
THERE MAY BE CASES WHERE COSTS CAPPING IS APPROPRIATE
The costs capping rules exist for a reason. The judge was not saying that they could never apply.
- I would add this. The decision that I have made does not mean that in another case a party may not be able to lead evidence from, let us say, a costs drafter that the cost judge could not adequately distinguish between costs reasonably incurred and costs unreasonably incurred, for instance, of very extensive and detailed litigation on a technical matter. In those situations then of course, looking at the case on its specific facts, the court may reach the view that 5(c)(ii) is not a bar to making a costs cap order. However I am clear that on the way this application has been presented that is not this case. Therefore I dismiss the application.