COST BITES 16: THE CARE NEEDED WHEN QUANTIFYING “COSTS THROWN AWAY”: 45% OF CLAIMED COSTS TO BE PAID ON ACCOUNT

September 6, 2022 · by · in Adjournments, Assessment of Costs, Costs

In  Cabo Concepts Ltd v MGA Entertainment (UK) Ltd & Anor [2022] EWHC 2024 (Pat) Mrs Justice Joanna Smith considered the amount that should be ordered on account when costs were “thrown away” after an action was adjourned shortly before trial.   It was necessary to proceed with some care because not all the costs incurred would necessarily be “thrown away”.  This led to a cautious approach with an order being made for 45% of the claimed costs being ordered.

“… “costs thrown away” does not, as a matter of principle, mean the costs of the entirety of the work done to date, or in all of the preparations for the trial. On the contrary, it is only the cost of the work that has been done and which will have to be repeated for the relisted trial which will be recoverable … If an element of costs incurred remains for the benefit of a party at a subsequent hearing it will not have been thrown away.”

THE CASE

The case was listed for trial in June 2022. Three weeks before the trial the Defendants informed the court that they had missed some 84,000 documents during the data collection process.    A hearing was held and the matter is relisted form October 2024.

COSTS THROWN AWAY

The judge had to consider who should pay the costs thrown away as a result of the adjournment and quantification of those costs.

THE JUDGMENT ON THE INTERIM ORDER FOR COSTS

The judge ordered that defendants should pay 45% of the claimant’s costs arising from the adjournment.

Costs on Account
    1. Finally I now turn to set out my reasons for ordering that Cabo should have its costs on account in the sum of 45% of its total legal costs incurred in preparation for the trial.
    1. It is common ground that the Court should not undertake a summary assessment of Cabo’s costs thrown away under CPR 44.6(1)(a). If the Court orders a detailed assessment under CPR 44.6(1)(b), then rule 44.2(8) provides that the court will order MGA “to pay a reasonable sum on account of costs, unless there is good reason not to do so”. There is accordingly a presumption that a payment on account of a reasonable sum will be made, subject to an exception.
    1. It was accepted by Mr Bacon on behalf of Cabo during the hearing that “costs thrown away” does not, as a matter of principle, mean the costs of the entirety of the work done to date, or in all of the preparations for the trial. On the contrary, it is only the cost of the work that has been done and which will have to be repeated for the relisted trial which will be recoverable (Fern Trading v Greater Lane [2021] EWHC 1939 (Comm) per HHJ Pelling QC at [28]). If an element of costs incurred remains for the benefit of a party at a subsequent hearing it will not have been thrown away.
    1. The assessment of the quantum of costs thrown away will ordinarily be an exercise for a costs judge who will have before him or her the information necessary to decide which element of the costs has been thrown away by the adjournment of the trial. However, CPR 44.2(8) requires me to order the payment of a reasonable sum unless there is a good reason not to do so.
    1. Cabo advanced evidence in Mr Spector’s seventh statement in support of this application, which asserted that its total wasted costs amounted to £1,285,431.49, being £977,000 for counsel’s brief fees, £245,290 for SCW’s fees of trial preparation and £63,141.49 for miscellaneous disbursements including expert fees, Veritas witness training and Opus2 bundling. Mr Spector said in terms in his statement that all of these costs incurred in the lead up to trial “are now thrown away because the trial has had to be vacated”. However, as I have already indicated, this stance was not (perhaps unsurprisingly) maintained at the hearing. Indeed Mr Bacon acknowledged the principles I have referred to above and accepted in terms that the full quantum of Cabo’s costs should not be the benchmark for an order. He also indicated that Mr Spector now accepts that he has overstated the position in his statement.
    1. Against that background, Ms Wakefield says that were it not for the approach adopted by Cabo, she would have accepted the principle of a payment on account and the argument would have been only as to the appropriate amount. However, she takes great exception to Mr Spector’s seventh statement, pointing out that it is “simply not true”, that Cabo should have known it was not true and that it is difficult not to form the view that its purpose was as an “opening gambit” in a negotiation rather than as realistic and credible evidence. She submits that this is inappropriate in the context of an application of this sort, that it has the effect of inflating the quantum of the payment on account that Cabo is seeking to recover from MGA (Cabo seeks 75% of the total costs incurred in its skeleton argument) and that this is itself “a good reason” not to award costs on account.
    1. I have considered this submission with care, and there is no doubt that (as has been accepted) Mr Spector’s seventh statement overstates the position. This should not have occurred. It means that the court does not have a genuine or realistic estimate from Cabo as to the level of costs that have been wasted by reason of the adjournment of the trial.
    1. However, on balance, in circumstances where Mr Spector has acknowledged his error, and given that his evidence does at least establish the total amount of costs incurred by Cabo in the lead up to trial, I do not consider that I should take the approach of refusing to make any order. It seems to me that this would be contrary to the overriding objective of dealing with cases justly, including compensating innocent parties who are not to blame for the adjournment of a trial. A refusal to make an order for costs on account at this stage would mean that Cabo would be kept out of those wasted costs for at least another two years. In circumstances where the adjournment of the trial has occurred by reason of events that are not of Cabo’s making, I consider that would be an extremely harsh outcome.
    1. Furthermore, I consider that where the rules require me to identify “a reasonable sum”, I am in a position to do that having regard to the evidence.
    1. Cabo has incurred very substantial costs in the lead up to trial (as evidenced by Mr Spector’s statement) and where that trial was adjourned with less than three weeks to go before it was due to commence and a new trial will not be taking place for a further two years, it is plainly inevitable that a substantial proportion of those costs (which I have determined should be awarded on an indemnity basis) will be wasted:
i) I accept Mr Spector’s evidence that (in respect of three members of Cabo’s counsel team) brief fees were fully incurred and that (in respect of one member of Cabo’s counsel team) two tranches were fully incurred. I also accept that new brief fees will need to be negotiated afresh before the relisted trial. MGA served no evidence to suggest that its brief fees had not also been incurred by the date of the adjournment and indeed it is of some note that in his reply evidence, Mr Pimlott took issue only with the fact that Cabo’s brief fees were one third greater than MGA’s brief fees, but made no point whatever about the remainder of Mr Spector’s evidence on brief fees. While it is to be expected that some of counsels’ work in preparing for trial will remain of value (for example work on skeleton arguments and cross examination) nevertheless the substantial task of getting to grips with the documents and familiarising themselves with the case so as to be in a position properly to present that case at trial, will (at least in large part) need to be done again. Counsel cannot be expected to retain information they have gleaned when preparing for the original trial in the context of their preparations for the re-listed trial some two years later and I have no doubt that new brief fees will have to be negotiated to reflect the fact that much of the preparation will need to be redone.
ii) Equally I accept that while some work done by the experts and solicitors in preparing for trial (such as work on trial bundles, in the case of solicitors, and work to narrow the issues, in the case of the experts) will not have been wasted, a considerable amount of work (including getting on top of the case with a view to the giving of expert evidence or to operating as part of the legal team running a trial) will have to be undertaken a second time. Mr Pimlott did not see the need to provide any evidence at all in response on this aspect of Mr Spector’s statement. Furthermore, by reason of my decision that costs should be awarded on an indemnity basis, Cabo’s application for costs will not be subject to reduction for proportionality.
iii) MGA does not appear to dispute the wasted figure spent on Opus.
    1. Doing the best I can in all the circumstances, which include that there has been no detailed assessment such that there is a significant degree of uncertainty as to the amount of costs that have been wasted by reason of the adjournment, any sum I identify will have to be an estimate. Christopher Clarke LJ arrived at a similar conclusion in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) at [23]-[24]:
“[23]…Any sum will have to be an estimate. 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
[24] 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. Having regard to that guidance, I consider that a payment on account of 45% of the total sum incurred in costs by Cabo in respect of the aborted trial, namely £578,444.17, being 45% of £1,285,431.49, is a reasonable sum.
    1. In particular I have regard to the fact that the costs of taking this case to trial were considerable and that it is inevitable that a very substantial part of those costs, which I have awarded on an indemnity basis, has been wasted by reason of the late adjournment (as discussed above). Owing to the nature of Cabo’s evidence I have been forced to estimate the full extent of the wasted costs but I have little doubt that they will exceed, probably to a significant extent, the figure of £578,444.17 that I have ordered. For convenience I have taken a percentage of the total costs figure, but I have done so only with a view to identifying a reasonable figure having regard to the likely level of recovery of wasted costs. MGA is well able to pay that figure by way of costs and no concerns have been expressed by MGA as to the potential for it to be unable to recover those costs in the unlikely event of an overpayment. Whilst an attempt might be made to appeal my decision on indemnity costs, MGA has accepted the principle that it is required to compensate Cabo for the costs thrown away by the adjournment and I consider that the figure I have ordered provides an appropriate margin for error.
  1. I would like to express my gratitude to all counsel for their extremely helpful written and oral submissions.