INDEMNITY COSTS AGAINST CLAIMANTS IN GROUP LITIGATION ORDER: INDEMNITY COSTS APPROPRIATE: AN EXHAUSTING READ

The judgment of Master Fontaine in The VW NOx Emissions Group Litigation [2018] EWHC 2308 (QB) is a warning to any litigator thinking of applying for a Group Litigation Order (“GLO”).  The rule is clear basically – get your case in order before applying for a GLO.  The failure to do so in this case led to indemnity costs being awarded against the claimants.  The costs involved are said to be in the region of £450,000.

“I have already indicated that the most likely explanation for the manner in which solicitors for the Relevant Claimants, HS, both issued and pursued the application, was because of their desire to obtain a commercial advantage in the litigation. The motivation need not concern the court, only the conduct which resulted in unnecessary costs and use of court resources. The fact that the conduct was that of the Relevant Claimants’ solicitors does not prevent an indemnity costs order being made”

THE CASE

The claimants were a group who allegedly suffered loss as a result of  Volkswagen emissions being incorrectly altered.  A number of claimants had issued an application for a GLO in 2016. A GLO was made in made in 2018.

THE DEFENDANTS’ APPLICATION

The defendants’ application was very finely tuned. They sought the costs arising from the premature issue of the GLO and the fact that it was pursued when it was obvious that it should have been “put on hold” until it was ready to proceed.

THE ISSUES

  • The claimants failed to consider the impact of a dispute where it was alleged that one of the solicitors acting for the claimants was in breach of a non-disclosure agreement.   This issue was determined by a judgment in 2017. It was clear that the GLO could not proceed until that dispute was resolved.
  • The defendants alleged that there was inadequate coordination by the firms representing the claimants.
  • The GLO was said to be issued prematurely and pursued unreasonably.

THE MASTER’S FINDINGS

In a detailed judgment the Master found the defendants’ application to be  largely well-founded.

THE MASTER’S DECISION TO AWARD INDEMNITY COSTS

The Master accepted the defendants’ submission that indemnity costs should be awarded.

“Indemnity Costs
127. The court has an unfettered discretion in relation to costs, including the basis of assessment, under CPR 44.2 and 44.3, but is required to take into account all the circumstances of the case, which include the conduct of the parties. The court is bound by the well known Court of Appeal decision in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879, where it was said that the making of a costs order on the indemnity basis is appropriate where the facts of the case and/or the conduct of the parties was such as to take the situation away from the norm. That was helpfully interpreted in Esure §25, and approved in Whaleys §20-§23, as “something outside the ordinary and reasonable conduct of proceedings.” See also judgments in Noorani at §8 and Three Rivers at §25. The principles governing indemnity costs in the context of group litigation were also summarised in The Ocensa Pipeline Group Litigation at §19 – 28.
128. It is clear from the matters referred above to that the circumstances are well outside the norm. First, and most significantly, because it led to the consequential costs incurred throughout most of 2017, the GLO application was issued prematurely, pursued inappropriately when it should have been stayed, and in the face of cogently expressed grounds given by the VW Defendants and some of the other Claimant groups. It was apparent from my comments on that day, that what occurred leading up to and at the hearing on 30 January 2017 was exceptional in group litigation. It was thus outside the norm in the sense that it happens rarely, and indeed had never been experienced by me in any of the group litigation I have dealt with, nor am I aware of any occurrences from judgments in similar cases. It was also outside the norm in terms of the description provided in Esure, as set out above, for all the reasons set out in the discussion section of this judgment.
129. I have already indicated that the most likely explanation for the manner in which solicitors for the Relevant Claimants, HS, both issued and pursued the application, was because of their desire to obtain a commercial advantage in the litigation. The motivation need not concern the court, only the conduct which resulted in unnecessary costs and use of court resources. The fact that the conduct was that of the Relevant Claimants’ solicitors does not prevent an indemnity costs order being made: In Training in Compliance at §66; Gladwin v Bogescu at §30-33. I conclude that the conduct described brings the circumstances outside the norm, and therefore that the costs of the VW and Dealer Defendants against the Relevant Claimants should be assessed on the indemnity basis.”