COSTS CAPPING IN THE COURT OF APPEAL: ANOTHER EXAMPLE OF COSTS CAPPING BEING REFUSED
We have looked before at issues relating to costs capping in the Court of Appeal. I am grateful to Claire Darwin of Matrix Chambers for bringing my attention to the case of Black -v- Arriva North East Ltd  EWCA Civ 1115.
The appellant, among with others, appealed a a judgment in a discrimination case. Permission to appeal was granted and the case is due to be heard in November. However there were problems in relation to the recoverability of insurance. The appellants sought an order capping the costs of the Respondent, Arriva, to £50,000.
CPR 3.19(5) provides:
“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.”
CPR 3.19(6) provides:
“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.”
6 On 2 December 2013, Briggs LJ gave permission to appeal upon the oral renewal of the application. The appeal raises questions of some importance to disabled people and to public transport providers such as the Respondent and FirstGroup PLC. On December 2013, Briggs LJ granted a stay to the Appellant to allow further time to try to resolve her funding difficulties and, she then hoped, to await the appeal in Pauley. These difficulties were not resolved.
7 The Appellant has taken out an after the event insurance policy to provide her with costs protection if the appeal fails. The policy is for £50,000 with a premium of £40,931. That sum, the £50,000, was chosen as an estimate by Unity Law, the Appellant’s solicitors, of the level of protection required for the Respondent’s legal fees. On 28 November 2013, Bond Dickinson for the Respondents had indicated that their costs would be significantly in excess of the figure of £40,000 net of VAT which Unity Law had quoted as their fees on 27 November 2013. A later estimate from Unity Law was of a figure of £47,966 excluding VAT. The current estimate of the total is £60,000.
8 Under the law before the passing of the Courts and Legal Services Act 1990 , as amended by the Legal Aid, Sentencing and Punishing of Offenders Act 2013 , the premium would be recoverable from the Respondents if the appeal was successful. But the premium is not now recoverable. Hence the Appellant faced a funding dilemma. What has happened is that Unity Law has agreed that, if the Appellant is successful, they will pay the premium, the effect of which is that, if the Appellant is successful, they will be substantial losers. Were it otherwise, success in the appeal would leave the Appellant very substantially out of pocket.
9 Mr Simon Mallett on behalf of the Appellant submits that this is an exceptional case in which a cost capping order should be made. The Appellant is of limited financial resources. She does not, I am told, qualify for legal aid. But the Respondent is a major public transport provider with extensive financial resources. If an order is not made, the Appellant, according to the statement of Mr Fry from Unity Law, will not be able to pursue the appeal if there is the risk that she will have inadequate insurance in place. I see no reason to disbelieve that statement.
10 It is submitted essentially that she be allowed to continue with her claim and that her case be considered with that of Pauley where the issues overlap, but are not identical. The exceptional nature of the present case is, it is submitted, a combination of two factors; firstly, the need for an order if the case is to continue and, secondly, that the appeal is of importance to a wider group than the two Appellants. Indeed, the successful Respondent in Pauley is supported by the Equality Commission.
11 The fact that, in the absence of a costs capping order, the appeal will founder is relevant when considering the interests of justice, although there are considerations which point the other way. First, it does not seem to me to be the function of costs capping orders to remedy the problems of access to finance for litigation. If, for instance, the Respondent’s anticipated costs were agreed to be proportionate, it would not be possible to exercise any jurisdiction to make a costs capping order simply because without it the appeal would not continue to be financially viable.
12 Secondly, insofar as the reason for appeals failing to be advanced is that after the event premiums are no longer recoverable, that is a circumstance which, as it seems to me, will apply to all claims brought under the Equality Act 2010 , many of which are likely to be brought by persons of limited means who would seek after the event insurance if they could afford it. So the argument could be raised in any appeal brought in respect of a case under that Act. Such a result is difficult to square with the indication in the Practice Direction that an order for costs capping should only be made in exceptional circumstances.
13 Mr Mallett submitted that one aspect of the case which could be regarded as exceptional is that there may be thought to be a lacuna in the provisions of the law in that one way cost shifting is available for a personal injuries action, but is not available for Equality Act complaints. This may be an unintentional lacuna which may hereafter be resolved, so that for that reason, this case may turn out to be an exceptional circumstance justifying the making of an order in this case.
14 It seems to me, however, that I must take the provisions of the Rules as they currently stand. In any event, it is necessary before any order can be made for the Appellant to satisfy all the criteria provided for by the Rule. I am not satisfied that she does so. Firstly, the evidence before me does not cause me to think that there is a substantial risk that, without a costs capping order, costs will be disproportionately incurred.
15 In paragraph 7 of Mr Adam Hedley of Bond Dickinson’s witness statement, he says that:
“Bond Dickinson LLP has a very experienced litigation team and we do not intend to allow costs to be disproportionately or unreasonably incurred on behalf of our client.”
I see no reason to discount that.
16 A comparison is made between the costs that are contemplated by the Appellant to the end of the case of some £60,000 and the costs to the end of the case which are contemplated by the Respondent of £147,000 plus, as I understand it, VAT in each case. However, the case is to last for two and a half days in the Court of Appeal. Leading counsel has been instructed on behalf of the Respondent. It does not seem to me at this stage that I can say that there is a substantial risk that costs will be disproportionately incurred.
17 My attention has been drawn to the fact that after some three days of hearing in 2012, Unity Law made an offer of settlement in relation to the claim at first instance where the now Appellant was represented by leading and junior counsel and put forward a figure for their fees of £270,000, counsel’s fees of £248,000 and disbursements of £30,000. Their fees and counsel’s fees included a 100 per cent success fee, but even removing the 100 per cent success fee, the figures in question exceeded £260,000.
18 I recognise, of course, that this was the case as at first instance and that the Court of Appeal is different, but I find it difficult to say in the light of those sort of figures that the costs contemplated by the Respondents are disproportionate. Even if I am wrong on that and that view is a too generous approach, I am not satisfied that any risk of disproportionate costs cannot be adequately controlled by either case management directions or a detailed assessment of costs.
19 Mr Mallett emphasised the word “adequately” and submitted that in this case there cannot be adequate control in that the Appellant should not be put at the risk of exposure to such a level of costs as would mean that the appeal did not proceed. That does not, however, seem to me to be the test. The question under CPR 3.19(5)(c) is whether the level of costs that the Respondent incurs can be adequately controlled by one or other of the measures specified; that is to say case management directions or orders or detailed assessment.
20 There seems to me no sound basis upon which I could conclude that if and to the extent that costs are disproportionate, that is not a matter that could be dealt with upon a detailed assessment. I would echo in this respect the observations of Coulson J in Barr and Others v Biffa Waste Services Ltd (No 2)  3 Costs LR 327 at paragraph 50.
21 I am also unpersuaded that the interests of justice require the making of the order sought. Of course, it is desirable from the Appellant’s point of view that her case should be heard. There are public interest considerations as well, but it does not follow that it is in the interests of justice that it should be heard on terms that the Respondent can recover no more than £50,000 even though it may have reasonably incurred more in successfully resisting what may be something of a test claim.
22 I also bear in mind that the judge assessed the value of the Appellant’s claim, if well founded, at £2,850, a sum which, if the claim had been pursued in the small claims tract, would have meant that there was costs protection in the County Court and also that she may have benefited from costs protection in the Court of Appeal under CPR 54.8(a) .
23 In addition, I take into account the timing of the application. Judgment was given on 1 May 2013. In her statement of 22 November 2013 seeking permission to appeal, the Appellant asked the court to stay the appeal pending an application for a protective costs order or a costs capping order. On 2 December 2013, Briggs LJ granted a stay until the beginning of the following term which he thought should be sufficient time to enable any costs application to be launched. On 4 December, Bond Dickinson said that they were instructed not to incur significant further costs during December and asked for confirmation that they would receive the Appellant’s application for a costs protection as soon as possible and, in any event, before the Christmas break. The stay expired on 13 January 2014. The application was made on 6 March.
24 Between those dates, the Respondent incurred costs, including those of the skeleton argument which was lodged on 24 February. The Appellant delayed making the application pending receipt of the skeleton upon the basis that it was only shortly before then that she learned of the Respondent’s estimate of the costs and thought it appropriate to wait until the skeleton was received to see the nature of the matters that would be argued in the Court of Appeal.
25 The effect of what I have described is that by the time of the application, the major part of the solicitor’s costs of the appeal had been incurred. The effect of the order sought would, therefore, be that the Respondents will have already have spent what is, if a costs capping order is made, in substance a budget laid down by the court without knowing that it had to stick to that insofar as it sought to recover its costs. In principle, the person who is the subject of the costs capping order ought, so far as possible, to know the budget to which he must work in advance.
26 I have, of course, taken account of the fact that there is a substantial imbalance between the financial position of the parties, but taking all the factors together, I am not persuaded that the interests of justice require an order. In any event, as I have said, the conditions provided for by CPR 3.19(b) and (c)are not, in my judgment, satisfied. Accordingly, despite the helpful and excellent argument of Mr Mallett, I decline to make the order sought.
27 Before parting with this case, I would observe this. I understand that the Equality Commission has agreed to fund leading and junior counsel on the appeal in the Pauley case where it is, as it were, the Respondent, but has declined to finance the Appellant in this case. That may no doubt be upon the basis that it thought that the necessary contentions could be put before the court by one set of counsel.
28 I observe, however, that when the question arose as to whether or not the two appeals should be heard together, the Respondent arguing in support of the proposition that they should, stated that the court would benefit from hearing the broader spectrum of legal arguments that a joined hearing of the two cases and the differing overlapping grounds of appeal would allow, and that the court would benefit from having before it a broader spectrum of factual scenarios and evidence of the policies and practices of the respective bus operating companies. That wider evidential base would enable the court to reach a fuller decision concerning the interpretation of the same statutory and regulatory framework.
29 I apprehend that in ordering that the appeals be heard together, the court may have taken account of those submissions. It may be that in the light of that and in order that the full range of matters is considered at the hearing that the Commission it may wish to address again the question whether it should support the now Appellant in this case in the Court of Appeal rather than let this appeal fall by the way side.
POINTS TO NOTE
All the requirements in the rules must be satisfied before any order can be made.
- The interests of justice.
- A substantial risk that costs will be disproportionately incurred without a costs cap.
- The risks cannot be controlled by case management and/or assessment. Note Note also the importance of the timing of the application. The court will rarely entertain an application that is, in effect, retrospective. It is clear that any application must be made promptly.
OTHER POSTS ON THIS ISSUE
- Cost capping in the Court of Appeal: Don’t bank on the tide being in your favour
- Can you get an order for QOCS to apply on an appeal?