COSTS NOT REDUCED BECAUSE OF THE WAY A DEFENDANT CONDUCTED ITS CASE: THE PRAGMATIC PRUNING OF A CASE SHOULD NOT BE DETERRED

We are returning again (and not for the last time) to the judgment of Mr Justice Turner in Municipio De Mariana & Ors v BHP Group PLC & Anor [2021] EWHC 146 (TCC). This time we are looking at  the claimants’ argument that the defendant’s costs should be reduced by 50%.  The arguments were not successful.

“…it will often be the case that a party may perfectly reasonably present both a primary and an alternative case on any given issue to a court and, for legitimate and pragmatic reasons, elect to limit its reliance to the former as the hearing progresses. … where, as here, it has been abandoned as an act of pragmatism which lightens the burden on the court then it would normally be inappropriate to deter such a procedural choice.”

THE CASE

The defendants had been successful in striking out the claimants’ case.  The defendant sought the costs of the application (some £16 million). The claimants argued that the defendants’ costs should be reduced because the defendants had not been successful on every issue and had not pursued some matters.

THE JUDGMENT ON THIS ISSUE

The judge considered, and rejected, the claimants’ contentions that the defendants’ costs should be reduced by 50% because of the manner in which the defendants had conducted the application.

COSTS

1. 1. Three issues arise for determination:

(i) Are the defendants entitled to an order that the claimants should pay all or, alternatively, only a proportion of the costs of the action?

(ii) What sum should the claimants be ordered to pay on account of such costs?

(iii) What disclosure should the claimants be ordered to make regarding the funding of the litigation?

1. 1. I propose to deal with each in turn.

THE COSTS ORDER

1. 1. The claimants concede that the defendants are entitled to their costs of and occasioned by the action but contend that only 50% of these should be awarded on the grounds that the defendants have only succeeded on some but not all of the grounds they relied upon. The sums at stake are, potentially, very high. Subject to detailed assessment, the defendants total claim for costs incurred is in the sum of £16,066,947.64.

   2. The claimants’ stance is based on the contention that the defendants were not successful on all of the issues raised upon their applications. In this regard, and also with respect to the other issues relating to costs, I have considered carefully the matters set out in the tenth witness statement of Mr Goodhead the central points of which I will outline but the details which I will not repeat in this judgment.

   3. The starting point is CPR 44(2) which provides insofar as is material:

“44.2— Court’s discretion as to costs

(1) The court has discretion as to—

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs—

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order…

(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including—

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful;…”

1. 1. As to the proper approach to the application of these rules to the circumstances of any given case, the guidance given by Gloster J (as she then was) in HLB Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm) requires no further embellishment:

“10. The principles applicable as to costs were not in contention. The court’s discretion as to costs is a wide one. The aim always is to “make an order that reflects the overall justice of the case” (Travellers’ Casualty v Sun Life [2006] EWHC 2885 (Comm) at paragraph 11 per Clarke J). As Mr. Kealey submitted, the general rule remains that costs should follow the event, i.e. that “the unsuccessful party will be ordered to pay the costs of the successful party”: CPR 44.3(2). In Kastor Navigation v Axa Global Risks [2004] 2 Lloyd’s Rep 119, the Court of Appeal affirmed the general rule and noted that the question of who is the “successful party” for the purposes of the general rule must be determined by reference to the litigation as a whole; see paragraph 143, per Rix LJ. The court may, of course, depart from the general rule, but it remains appropriate to give “real weight” to the overall success of the winning party: Scholes Windows v Magnet (No 2) [2000] ECDR 266 at 268. As Longmore LJ said in Barnes v Time Talk [2003] BLR 331 at paragraph 28, it is important to identify at the outset who is the “successful party”. Only then is the court likely to approach costs from the right perspective. The question of who is the successful party “is a matter for the exercise of common sense“: BCCI v Ali (No 4) 149 NLJ 1222 , per Lightman J. Success, for the purposes of the CPR , is “not a technical term but a result in real life” ( BCCI v Ali (No 4) ( supra )). The matter must be looked at “in a realistic … and … commercially sensible way”: Fulham Leisure Holdings v Nicholson Graham & Jones [2006] EWHC 2428 (Ch) at paragraph 3 per Mann J.

11. There is no automatic rule requiring reduction of a successful party’s costs if he loses on one or more issues. In any litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case. As Simon Brown LJ said in Budgen v Andrew Gardner Partnership [2002] EWCA Civ 1125 at paragraph 35: “the court can properly have regard to the fact that in almost every case even the winner is likely to fail on some issues”. Likewise in Travellers’ Casualty (supra), Clarke J said at paragraph 12:

“If the successful Claimant has lost out on a number of issues it may be inappropriate to make separate orders for costs in respect of issues upon which he has failed, unless the points were unreasonably taken. It is a fortunate litigant who wins on every point.””

1. 1. In the circumstance of this case, there can be no doubt that the defendants were the successful parties and it is against this background that I must approach the issue of costs.

   2. The first ground upon which the claimants urge me to depart from the general rule is that during the course of the hearing the defendants elected to narrow the basis upon which they sought to present their case with respect to the application of Article 34.

   3. In short, the defendants had relied upon about 70 group actions (referred to as CPAs) progressing in Brazil as giving rise to the risk of inconsistent decisions in England and Brazil. As I noted in the judgement at paragraph 55:

“For the purposes of this case, BHP Plc, during the course of the hearing, narrowed its case so as to identify the 155bn CPA (of which the Priority Axes and Local Commission Proceedings were to be treated as part) as the sole action upon which it relies for the purposes of Article 34 . I did not consider it necessary in reaching my central conclusions to determine the controversial issue as to whether the Priority Axes and Local Commission Proceedings formed part of the 155bn CPA. There remains no need for me therefore to consider the status of these, the other CPAs or legal proceedings.”

1. In my view, this was a pragmatic and welcome decision. I am thoroughly unpersuaded that it should redound to the defendants’ disadvantage on the issue of costs.

2. In particular, the defendants had always presented the 155bn CPA as a proper and freestanding basis upon which the Court could make a finding about inconsistent judgments which, if successful, would render the consideration of the others CPAs unnecessary.

3. The defendants’ decision to focus exclusively upon the 115bn CPA was not because it had become clear that reliance upon the other CPAs would have been doomed to failure but that by distilling the thrust of their contentions the Court would thus be best equipped to deal with the point proportionately. Thus was, as I considered at the time, a helpful step. It is not one which is apt to attract adverse costs consequences.

4. It will often be the case that a party may perfectly reasonably present both a primary and an alternative case on any given issue to a court and, for legitimate and pragmatic reasons, elect to limit its reliance to the former as the hearing progresses. Of course, where for example, the alternative case is seen to have been unmeritorious from the start then adverse consequences may well follow. However, where, as here, it has been abandoned as an act of pragmatism which lightens the burden on the court then it would normally be inappropriate to deter such a procedural choice. As it happened, the defendants did not need to succeed on the alternative argument because they were successful on their central contention. The defendant did not lose the alternative argument. I simply did not have to consider its merits.

5. Furthermore, at least some work was necessary on the broad range of CPAs to assist the Court in understanding the background to the claims in Brazil in general and to provide a useful context for the abuse application. In the scheme of things, I am satisfied that the expenditure on this issue, although by no means insignificant in absolute terms, was, in relative terms, modest.

6. In conclusion, I am satisfied that it would be wrong to penalise the defendants in costs for the work done in this area.

7. The second ground relied upon by the claimants relates to the issue as to whether there was a legal obligation on the part of Renova and the Brazilian companies to make full redress under the TTAC/GTAC. This was a heavily fought-over issue between the parties but one which it became unnecessary for me to resolve because I was satisfied, in the light of my other findings in favour of the defendants that the matter was academic. The issue was not, however, determined against the defendants and it was entirely reasonable for them to expend costs in meeting the claimants’ case on the point. It would be wrong to make an adverse costs order against them in these circumstances.

8. Finally, the claimants seek to argue that the success of the defendants on the Article 34 issue was based on a “wait and see” rather than a consolidation basis and so they should face an adverse costs consequence in respect of the latter. It must be remembered, however, that the determination of the Article 34 issue was, in itself, already an academic exercise as a result of the claimant’s failure on the abuse of process point. In the event, I did not find that consolidation was neither a jurisprudential nor practicable possibility but that the issue had been rendered otiose by the claimants’ firm intention not to commence proceedings against the defendant in Brazil in any event. Paragraphs 208-218 of the judgment set out my reasoning. Ultimately, the defendants were successful in surmounting all of the necessary hurdles to win on the Article 34 issue and, in the circumstances of this case, there arises no justification for penalising them in costs by reason of the route by which such success was achieved.

9. In my view, the claimants did not even come close to establishing any basis upon which the general rule in CPR 44(2) should be displaced. The defendants will therefore be awarded their costs of the action to be the subject of detailed assessment.