INTERIM COSTS AWARD OF £8 MILLION: THE COURT IS WARY WHEN THE PAYING PARTY DOES NOT SHOW THEIR HAND…

Our final look at the judgment of Mr Justice Turner in Municipio De Mariana & Ors v BHP Group PLC & Anor [2021] EWHC 146 (TCC). The judge had to determine the appropriate award for interim costs.  One interesting point here is that the claimants, paying party, sought to object to the defendants’ costs, without disclosing details of their own figures for costs. This led the judge to be “more circumspect” about the claimants’ submissions.

“It is also appropriate for me to note that although the claimants have mounted focussed attacks on particular areas of the defendants’ expenditure, they have chosen not to reveal the headline figures in their own costs bill. This, of course, they are fully entitled to do although it inevitably means that the Court is likely to be more circumspect about the overall weight to be applied to the challenges applied to narrower fronts.”

THE CASE

The defendants had been successful in striking out the claimants’ case.  The defendant sought an interim costs award of the costs of the application ( said to be some £16 million). The judge held that the claimants were liable to pay the entirety of the defendants’s costs.  An issue arose as to the appropriate amount.

THE JUDGMENT ON THE INTERIM PAYMENT AS TO COSTS

INTERIM PAYMENT ON ACCOUNT

1. 1. CPR 44.2(8) provides:

“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”

1. 1. The defendants seek an interim payment in the sum of £9,640,168.58 which represents 60% of the total costs of the action which they have incurred.

   2. The claimants do not dispute the fact that a sum on account of costs falls to be awarded but contend that the reasonable sum in this case should be £2,410,042.15. This figure is based upon the assumption that the Court would award the defendants’ only half of their costs. I have ruled that they defendants are entitled to the whole of their costs and so the conceded figure falls to be doubled to £4,820,084.30 before any further analysis comes into play. This sum amounts to about 30% of the defendants’ estimate.

   3. The proper approach to assessment is set out in the notes at 44.2.12 in the White Book 2020 which provides:

“Necessarily, the determination of “a reasonable sum” involves the court in arriving at some estimation of the costs that the receiving party is likely to be awarded by the costs judge in the detailed assessment proceedings or as a result of a compromise of those proceedings. In a case of any complexity, the evidence and submissions arguably relevant to that exercise may be extensive. The court has to guard against the risk that it may be drawn into costly and time-consuming “satellite” litigation. There is no rule that the amount ordered to be paid on account should be the “irreducible minimum” of what may be awarded on detailed assessment (Gollop v Pryke, (Warren J)). The relevant authorities were reviewed in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm), (Christopher Clarke LJ), where the judge concluded that what is “a reasonable sum on account of costs” will have to be an estimate dependent on the circumstances, the chief of which is that there will, by definition, have been no detailed assessment and thus an element of uncertainty, the extent of which may differ widely from case to case as to what will be allowed on detailed assessment. The judge explained (paras 23 and 24) that a reasonable sum would often be one that was an estimate of the likely level of recovery subject, to an appropriate margin to allow for error in the estimation. This can be done by taking the lowest figure in a likely range or making a deduction from a single estimated figure or perhaps from the lowest figure in the range if the range itself is not very broad. In determining whether to order any payment and its amount, account needs to be taken of all relevant factors including the likelihood (if it can be assessed) of the claimants being awarded the costs that they seek or a lesser and if so what proportion of them; the difficulty, if any, that may be faced in recovering those costs; the likelihood of a successful appeal; the means of the parties; the imminence of any assessment; any relevant delay and whether the paying party will have any difficulty in recovery in the case of any overpayment.”

1. 1. At first blush, the sum spent by the defendants’ on costs would appear to be extremely high. I commented in my substantive judgment that I had witnessed a forensic arms race. I must certainly bear this consideration in mind as a factor which introduces greater than usual breadth of argument over the proper assessment of an interim award. A breakdown of the bill is set out in paragraphs 34 to 85 of the ninth witness statement of Efstathios Michael to which is appended a detailed schedule of costs. No purpose would be served by rehearsing the contents here. Suffice it to say that the general picture painted by the accumulation of primary facts therein identified is a plausible one.

   2. On the other hand, the following points can validly be made:

(i) The scale of the litigation was unique involving as it did nearly a quarter of a million claimants;

(ii) The claimants did not comprise a homogenous group but were made up of individuals, small, businesses, large businesses, members of the indigenous Krenek community, municipalities, churches and utility companies all claiming different and wide ranging remedies;

(iii) The applicable law was that of Brazil and much of the relevant documentation was in Portuguese;

(iv) The state of the many and various parallel proceedings in Brazil was extremely complex and necessarily involved a major investigation. These proceedings did not remain static but were subject to significant developments over the period leading up to the hearing which gave rise to inevitable additional expenses involved in tracking a moving target;

(v) The defendants faced vast volumes of material from the claimants in response to the applications and, at least to some extent, were justified in descending to some level of precautionary detail in order to deal with it;

(vi) The potential value of the claims in the event of success may have been in the region of several billion pounds;

(vii) The costs of litigating the substantive claims, in the event that the application to strike out had been unsuccessful, would have been extremely high;

(viii) The figure claimed by the defendants relates to the costs of and occasioned by the action and not simply the applications.

1. It is also appropriate for me to note that although the claimants have mounted focussed attacks on particular areas of the defendants’ expenditure, they have chosen not to reveal the headline figures in their own costs bill. This, of course, they are fully entitled to do although it inevitably means that the Court is likely to be more circumspect about the overall weight to be applied to the challenges applied to narrower fronts. It is to be noted that the claimants have pointed out that over 1,000 lawyers and paralegals were involved in investigating, considering and pleading the claims and a team of nearly 50 English barristers were deployed on the case. Of course, the magnitude of the work involved in making claims, as opposed to responding, to them is likely to be greater but these statistics are, at least, illustrative of the scale of the conflict.

2. I have, once again, taken into account the matters relied upon by Mr Goodhead in his tenth witness statement, and in all the circumstances, I am satisfied that the interim payment should be assessed at a lower percentage of the claimed costs than would usually be the case in the general run of cases. This case is not in the general run. In the exercise of my discretion, I would award 50% of the total bill thereafter modestly rounded down to give a figure £8,000,000. This sum is to be paid by 4:00pm on 12 February 2021.