“OUR CASE WAS SO HOPELESS YOU SHOULD HAVE APPLIED TO STRIKE US OUT”: LOSING PARTY SHOULD PAY THE COSTS OF CLAIMANTS PURSUING SPECULATIVE CLAIM: YOU CAN’T HAVE YOUR CAKE AND EAT IT

The judgment of Mrs Justice Lambert today in  Bailey & Anorv Glaxosmithkline UK Ltd [2020] EWHC 1766 (QB) reflected the normal rule that the losing party should pay the costs of an action.  In this case the losing party was also ordered to pay part of those costs on an indemnity basis.  This was in litigation that had a “long and chequered history”

“…there is no authority for the proposition that the Defendant should be penalised for failing to make an application for summary disposal of a weak claim. The case law is however replete with authorities for the contrary proposition, that claimants who continue to prosecute a weak or thin or speculative claim do so at the risk of incurring the penalty of indemnity costs”

THE CASE

The claimants were test claimants in an action where it was alleged that  that drugs supplied by the defendant  were harmful.  The action had started in 2008  and been stayed, it had then been “resurrected” in 2015. The trial of the action was adjourned in order that the claimants could appeal a finding that the claimants’ pleadings did not enable it to run wider arguments.  The appeal was unsuccessful and the claimants consented to judgment being entered for the defendant.

COSTS

The action was not subject to the QOCS regime.   However the claimants argued that they should not have to pay the defendant’s costs.

The claimants’ argument was, in essence, that their case was so bad that the defendant should have applied for summary judgment and/or to strike it out. The claimants’ liability for costs should be limited to the costs that would be associated with such a strike out.

1. 1. “The Claimants acknowledge that the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. The Claimants however seek a different order: no order as to costs (save for payment of a sum of £250,000 representing the Defendant’s costs of an application for summary disposal).

   2. Mr Fetto’s argument can be put shortly. He submits that the general rule should not apply in this case because neither party has complied with the obligation to give effect to the overriding objective to deal with cases justly and at proportionate cost. From the outset of the litigation the Defendant’s consistent position has been that the Claimants’ approach to the assessment of defect was flawed and not legally tenable. However, at no stage, before issuing the application in December 2019, did the Defendant try to resolve the issue by making an application for summary judgment or to strike out the action, in spite of the Defendant’s case that it would be dispositive of the entire case. Mr Fetto acknowledges that the Claimants likewise did nothing to resolve once and for all the question mark raised by the Defendant over the legal basis for the claim, but submits that this is reflected in the order which he seeks, namely, no order for costs: in short, both parties are equally at fault in failing to deal with the case proportionately.

   3. Mr Fetto does not suggest that there was a duty on the Defendant to make an application for summary disposal. Rather he suggests that the failure to do so is conduct which I should take into account when I exercise my discretion in making the fair costs order. He described the “catalogue of prompts and opportunities” afforded to the Defendant to make the application over the course of the litigation since its revival in 2015. He drew my attention to the many occasions when the legal basis for the claim had been challenged by the Defendant in submissions and when the issue of summary disposal had been raised. For example:

i) in 2015, at the two case management hearings before Foskett J which led to his judgment of February 2016, one of the major planks of the Defendant’s submission that the claim should not be permitted to be revived was its poor prospects of success. There had however been no application for summary disposal, rather the Defendant had submitted that the Court should exercise its case management powers to either stay the action permanently or to strike it out.

ii) In July 2016, the Court referred expressly to the Defendant making an application for summary judgment and Foskett J anticipated that the directions he was making may lead to an assessment by the Defendant about whether it would apply for summary judgment or not.

iii) The Order made by Foskett J in September 2016 provided for the possibility of the Defendant making a summary judgment application.

1. Mr Fetto submitted that by the time of the hearing in February 2017, the judgment of Hickinbottom J in Wilkes v DePuy International Limited [2018] QB 627 had been handed down and whatever doubt there may have been as to the lawful approach to the assessment of defect following the decision of Burton J in A and Ors v National Blood Authority [2001] EWHC QB 446 had been substantially resolved. Wilkes supported the Defendant’s case that only a holistic assessment was an appropriate approach to safety under s.3 CPA. On the question of whether risk/benefit is a relevant circumstance Hickinbottom J had held that “any assessment of its safety will necessarily require the risks involved in use of that product to be balanced against its potential benefits including its potential utility” and that “risk-benefit may lie at the heart of the question of appropriate level of safety of a medicinal product for the purposes of the Act.” Although armed with both this judgment and Foskett J’s ruling on the scope of the Claimants’ case, the Defendant still did not make an application for summary disposal.

2. Mr Fetto makes two supplemental submissions. First, he draws my attention to the very substantial costs which had been incurred by the Defendant since 2015, making a comparison between the time, effort and cost involved in defending the case to trial and the time, effort and cost involved in making an application for summary disposal. He submits that the Court should take into account the vast saving that could have been made but was not. Second, he observes that although a formal application for the resolution of the issue was not made until after the judgment of the Court of Appeal had been handed down, the Defendant had invited me to resolve the issue as a preliminary point on Day 2 of the trial in May 2019.

3. I do not set out Mr Sheehan’s submissions in detail here as they are largely woven into my conclusions. However, the central points which he made were (a) the responsibility for bringing a case and continuing to prosecute a case is upon the party who brings it, not his opponent (b) there is no authority for the proposition that a party facing a weak claim must make an application for summary determination, or else risk an adverse costs order and there are good reasons why no such authority exists and (c) the Claimants’ submission does not reflect the reality of the case which they presented throughout this litigation (until finally submitting to judgment at the eleventh hour) which was that the Defendant’s argument over the legal basis of the claim was without traction.”

THE JUDGMENT ON THIS ISSUE

The judge did not accept the claimants’ submissions and held that the claimants should pay the costs.

1. 1. “The question for me in determining the Claimants’ application is whether, in complying with its duty (under CPR 1.3) to help the Court to further the overriding objective the Defendant ought to have made an application for summary disposal of the claim. Although Mr Fetto was careful to emphasise that he was not suggesting that the Defendant was under a duty, as such, to make the application, nonetheless he identified the Defendant’s failure to do so as conduct sufficient to justify the displacement of the general rule concerning recovery for costs and to penalise the Defendant by depriving it of the lion’s share of its costs. Whether couched in terms of a duty, or a factor that the Court should examine critically and take into account, seems to me to make no difference or, if there is a difference, it is one without significance. The Claimants submit that the Defendant culpably failed to make the application and that this failure should be the subject of a penalty.

   2. Viewed in this way and, notwithstanding the low-key and attractive way in which Mr Fetto presented his submissions, I have no difficulty in concluding that, in this case, the general rule should apply and there should be an order that the Claimants bear the costs of the Defendant. I reach this conclusion for the three main reasons advanced by Mr Sheehan.

   3. First, the duty to run the Claimants’ case rests, and has rested throughout, on the shoulders of the Claimants’ legal team. Throughout the lifetime of the resurrected action the Claimants have had the benefit of leading counsel, and in the period running up to trial, two leading counsel. The Claimants’ solicitor has been involved in the action throughout its course and, as I understand the position, moved from the firm of solicitors originally instructed to Fortitude Law in 2015 (the firm having been recently recognised by the Solicitors Regulation Authority). As Foskett J explained in his judgment of February 2016, Fortitude Law is a claimant-based law firm with a civil litigation portfolio including product liability and professional negligence. Foskett J concluded that the firm had been created as a vehicle by which this litigation could be continued. There was therefore no shortage of expertise on the Claimants’ legal team.

   4. It was the responsibility of that team to evaluate and re-evaluate the merits of the action as the litigation unfolded and make decisions accordingly. In this case, the merits evaluation would no doubt take into account that public funding had been withdrawn in 2011 on the basis that the legal team then instructed had been unable to provide advice that the action justified public funding to trial. Whether the Defendant’s argument that the approach taken by the Claimants was legally flawed was well founded, or mere sabre rattling, was a matter for that team’s careful consideration. If the Claimants’ legal team had considered that, following the judgment of Foskett J of March 2017, the scope of the pleadings as defined in that judgment coupled with the judgment in Wilkes presented an insuperable obstacle to the success of the claim, then it was the Claimants’ responsibility to seek to determine the action, not the Defendant’s.

   5. Mr Fetto acknowledges that the Claimants could have made an application to the Court for a trial of the Defendant’s objection to the claim as a matter of legal principle as a preliminary issue but did not do so. His point in response is that that is reflected in the order which he seeks, that is, no order for costs. He reminds me that he is not seeking an order that the Defendant bears the Claimants’ costs.

   6. However, this response fails to acknowledge or to acknowledge sufficiently that it was the duty of the Claimants’ legal team to manage the litigation from their perspective as they considered it appropriate and proportionate. The Claimants were aware from an early stage of the revived litigation that the Defendant’s costs were likely to be very substantial indeed.

   7. Further, Foskett J could have, in exercising his case management powers, directed that the point be dealt with as a preliminary issue but did not think it right to do so, absent an application for summary disposal by the Defendant. The duty to further the overriding objective rests not only with the parties, but also with the Court and I have no doubt that, from the outset, Foskett J was attuned to the issues in the case, as he was also aware of the costs involved. The fact that he did not consider it necessary in dealing with the case proportionately to order that the Defendant’s issue of principle be litigated as a preliminary issue, choosing rather to leave that management decision to the Defendant, reflects an appreciation that there may be a number of good reasons why the Defendant might not wish to make an application for summary disposal. For example:

i) Although the approach to defect under s. 3 of the CPA was addressed by Hickinbottom J in Wilkes, I was told by Mr Sheehan (and accept) that all involved in the world of product liability were aware that the case of Gee was due to come on for trial in the autumn of 2017 and that it was possible that Andrews J may have disagreed with the approach of the Court in Wilkes, or added a gloss which may have assisted the Claimants. There was therefore (until Gee was handed down) at least an element of uncertainty or fluidity as to the lawful approach to defect militating against the Defendant making an application for summary disposal.

ii) As Mr Gibson informed me in the first pre-trial review, his client wanted to have all of the issues in this long-running litigation dealt with by the Court once and for all. Mr Fetto relies upon the fact that on Day 2 of the trial in April 2019, Mr Gibson apparently invited me to deal with Question 1 of the list of issues as a preliminary point. Having re-read the transcript, I am by no means certain that Mr Gibson was inviting me to proceed in this way. It is not clear. However even if he was, it would be scarcely surprising given that, by this stage, Ms Perry had, in her opening, accepted that if the Claimants’ case was as characterised by the Defendant, it was doomed to failure or, as she put it “Can I say at the start here we say we agree. Just because the product is per se the worst of five comparators doesn’t of itself make it a defective product… that can’t be right“.

iii) Also, again as Mr Gibson informed me in autumn 2018, the Defendant had chosen to buttress its legal argument with expert evidence touching upon the logic of the Claimants’ pleaded approach to defect. As I understood the position running up to trial, the Defendant was submitting that the Claimants’ approach to defect was wrong as a matter of law, logic and evidence.

1. I move on then to the second main reason why I am against Mr Fetto in his submission that the general rule should not apply. As Mr Sheehan correctly observes, there is no authority for the proposition that the Defendant should be penalised for failing to make an application for summary disposal of a weak claim. The case law is however replete with authorities for the contrary proposition, that claimants who continue to prosecute a weak or thin or speculative claim do so at the risk of incurring the penalty of indemnity costs (see below). There is good reason for the court not penalising a defendant for failing to make an application for summary disposal not least as it may lead to unsatisfactory results. For example: the claimant with a reasonable case but who is nonetheless unsuccessful at trial would bear the defendant’s costs in accordance with the general rule; whereas the claimant with a weak case who fails at trial may be able to avoid most of the costs of the action simply because the defendant did not try to obtain summary judgment against the claim which the claimant decided to prosecute despite its weaknesses. Also, if the court were to deprive parties of some or all of the costs to which they would otherwise be entitled because of a deemed failure to apply for summary disposal, this may lead parties to feel obliged to use court time and resources to make summary disposal applications to try to protect their position on costs, an outcome wholly inconsistent with the overriding objective.

2. Third, although not put in quite this way by Mr Sheehan, there was more than an air of unreality to Mr Fetto’s submissions. Throughout the litigation, the Claimants’ consistent position has been that the action should proceed to trial where the Claimants would be successful, notwithstanding the Defendant’s objection to the way in which the case was formulated in the pleadings. Even following the handing down of the judgment of the Court of Appeal in November 2019, the Claimants’ position (at least front of stage) was that the claim remained arguable. It was only two working days before the hearing of the first issue in May 2020 that the Claimants submitted to judgment: several months after the ruling of the Court of Appeal. As Mr Sheehan pithily puts it, this application is an application by the Claimants to have their cake and eat it. I agree.

3. For these reasons and recognising that my discretion as to the appropriate and fair costs order is broad, I refuse the Claimants’ application that the general rule should be displaced in this case. There must be an order that the unsuccessful Claimants pay the Defendant’s costs in the usual way.

THE CLAIMANTS ORDERED TO PAY INDEMNITY COSTS

Further it was held that the costs should be paid on an indemnity basis from the date on which it should have been clear that the case had become speculative and weak.

1. 1. I start by stating the appropriate test which I should apply in considering the question of indemnity costs. Given the way in which the case for indemnity costs is put by the Defendant, that is, the pursuit of a weak or thin or speculative claim, the appropriate question for me is that posed by Coulson LJ in Lejonvarn: whether at any time following the commencement of the proceedings a reasonable claimant would have concluded that the claim was so speculative or weak or thin that it should no longer be pursued. I bear in mind also that pursuing a weak, but arguable, claim would not in itself usually justify the penalty of indemnity costs. I see no tension between the test as formulated in Lejonvarn and that in Kiam, albeit the test is described in different ways in different contexts: pursuing a claim which the reasonable claimant would conclude was weak, in the sense referred to by Coulson LJ, would in my view connote unreasonableness to a high degree. I recognise that even if I find that the litigation was pursued beyond the point when it was arguable, or that the conduct of the litigation was at any stage unreasonable to a high degree, I still have a discretion as to whether indemnity costs should be ordered.

   2. I find the issue a straightforward one to determine. Whether the pleadings bear the interpretation which Mr Kent sought to impress upon me and the Court of Appeal is incidental. The Claimants’ difficulty here is the same difficulty which led the Court of Appeal to dismiss the appeal. In his judgment of March 2017, Foskett J set out his analysis of the pleadings, making clear that the Claimants’ case was limited to the “worst in class” case and making equally clear that he would not permit the case to be expanded or amplified by any means. Foskett J identified the “high point” of the Claimants’ case as that set out in the GLO and the GLO made no reference to any analysis of relative risks or benefits (other than the risks upon discontinuation). The judgment is crystal clear. It bears no ambiguity. It is wholly misplaced to suggest that the judgment should not be taken to be decisive of the scope of the Claimants’ case because it was made within the context of a case management hearing when the topic in question was the admissibility of sections of the substituted expert’s report. As the Court of Appeal remarked, the judge required (and demonstrated) a thorough understanding of the parties’ respective cases.

   3. Having, whether advisedly or not, made the decision not to appeal that ruling the Claimants’ legal team was left with that judgment as the definitive statement of the limit of their case. Even if it is correct that the Claimants’ lawyers wished to appeal Foskett J’s decision and considered that they could not do so because the scope issue was not reflected in the Order, the Claimants still took no steps to bring their concerns to the attention of the Court or to inform the Defendant that they disputed Foskett J’s (mis)characterisation of their case. Once Andrews J had handed down her judgment in Gee, which underscored the need for a holistic assessment of defect under s 3 of the CPA, then the Claimants were pursuing a case which was, quite simply, unarguable. Allowing for some time to take stock, it should have been discontinued within a short time following Gee or steps taken to attempt to compromise the litigation on favourable terms (if possible).

   4. It is therefore against this short analysis that I pose the question of whether a reasonable claimant would or should have concluded in May/June 2018 that the claim was so speculative or weak or thin that it should be stopped. The answer to that is, yes, and compellingly so and from, at the latest, shortly after the handing down of the judgment in Gee. If I were to pose the question of whether the decision to pursue the litigation beyond 21 June 2018 was unreasonable to a high degree, again the answer is yes, and compellingly so. I have no doubt that taking all of the circumstances into account, the Claimants’ conduct beyond this point was out of the norm.

   5. My conclusion above would be a sufficient basis for an award of indemnity costs. However, the Claimants’ conduct after June 2018 and the associated delay until May 2020 in submitting to judgment compounds the problem. Rather than discontinuing, the Claimants sought to persuade me (in February 2019) that they were entitled to run a free-standing case on defect, shorn of any consideration of relative risks upon discontinuation. On the pleadings, this was another non-starter. The Claimants then argued (in February 2019) their analysis of the pleadings, requiring me to re-state that whether there are, or not, particular benefits associated with Seroxat, this issue would not feature at trial. Notwithstanding this ruling (and Foskett J’s ruling of March 2017) the Claimants, again no doubt advisedly, opened the case in a way which was eye-catchingly inconsistent with two prior and unappealed rulings resulting in the waste of the trial costs. The Court of Appeal expressed its view that this course of action was “plainly impermissible.” It described the Claimants using the “level playing field” as a “guise” to introduce the issue of risks and benefits, when “it is obvious that any issue of relative risk/benefits would raise a wide ranging factual and expert inquiry, which all parties accepted had not been carried out.”

   6. Mr Fetto invited me to consider Mr Kent’s submissions to the Court of Appeal in support of his argument that the Claimants’ interpretation of the case, although wrong, was nonetheless reasonable in the circumstances. I have read those submissions with care but, having done so, am unable to conclude that the Claimants’ approach to the litigation was reasonable, or even understandable, given its history. I need express no view as to whether the Claimants’ conduct at any stage in this litigation has involved a cynical disregard for the rulings of the Court and/or a wilfully strained misinterpretation of the pleaded case in order to maintain the litigation in the face of the clearest indication that no amendment would be possible. The award of indemnity costs does not require me to find conduct worthy of moral disapprobation: all that I need find is conduct which is out of the norm. Mr Fetto accepted that the conduct of the Claimants following Foskett J’s ruling of March 2017 was misguided, to which I add my own conclusion that the conduct was also both unreasonable to a high degree and out of the norm.

   7. In the light of the features I have set out above, I have stood back and considered whether, taking all of the circumstances into account, it would, in the exercise of what is acknowledged to be a very broad discretion, be fair and just to make an order that the Claimants pay costs assessed on an indemnity basis from 21 June 2018. Having done so, I have no doubt at all that such would be the fair and just order. The Claimants will therefore pay the Defendant’s costs to be assessed on the standard basis until 21 June 2018 and on the indemnity basis thereafter, save for the appeal costs which are to be assessed on the standard basis.

£4.5 MILLION ORDERED TO BE PAID ON ACCOUNT

Some idea of the costs involved can be seen by the size of the payment on account.

Payment of Costs on Account

1. The Defendant seeks the sum of £5 million by way of payment on account of costs. Again, the Defendant does not seek immediate payment of that sum but wishes the question of payment be adjourned generally with liberty to restore, no doubt to tie up with any application for a third party costs order in due course.

2. I remind myself that under CPR 44.2(8) the Court will order a party to pay a reasonable sum on account of costs unless there is a good reason not to. Mr Fetto submits that there is a good reason, as the purpose of a payment on account is so that the Defendant is not kept out of its money. Here, pending the involvement of the third party funder, the Defendant does not seek payment and so the purpose of the payment on account is absent.

3. I make an order that there should be a payment on account of costs in the sum of £4.5 million. I accept Mr Sheehan’s submission that the existence of a third party funder should not lead the Court to be deflected from the usual course of making such an interim payment; further that, in future dealings with the third party funder, there is a real practical advantage in a sum having been quantified by way of an interim payment. I award a sum rather less than that sought by Mr Sheehan and representing just under 50% of the figure in the costs schedule. I have adjusted the sum sought to reflect only that the award of indemnity costs is from a date rather later than that originally proposed by the Defendant in its written submissions and that it is acknowledged that the appeal costs are to be paid by the Claimants to the Defendant on the standard basis.