COST BITES 89: A SUPREME COURT ORDER FOR COSTS CONSTRUED: COSTS WERE (ESSENTIALLY) RESTRICTED TO PAYMENT OF ONE PARTY, TWO SILKS AND ONE JUNIOR

I am grateful to  Nicholas Lee Paragon of Costs Solutions for sending me details of the decision in Micula and others v Romania [2023] UKSC 2018/0177 (23 May 2023) where Costs Judge Leonard and Costs Officer Sewell considered the specific wording of a Supreme Court Order in relation to costs.  Nicholas has written on this case and the useful article can be found here.

THE CASE

The receiving parties had obtained an order for costs against Romania, at the appeal there were a number of parties who were separately represented, with two legal teams being used. There was an order for costs made against the paying party. That  order for costs, however, reflected the fact that the Supreme Court was concerned that the successful parties had been separately represented and there were two sets of costs involved.

THE ORDER MADE IN THE SUPREME COURT

“Romania pay the Micula Parties’ costs in the Supreme Court and below, to be assessed on the standard basis if not agreed and limited to one set of costs to be shared between the Micula teams in proportion to their actual costs expenditure, equal to one set of costs (being the higher set of costs claimed) but with allowance for two KCs and one junior between them.”

THE DIFFERING CONTENTIONS ON ASSESSMENT

On assessment the two firms representing the receiving parties each produced a bill of costs. They then produced a master bill of costs, eacy seeking to recover, the higher costs figure incurred.  This meant the receiving parties were attempting to recover some 81% of their combined costs.

The paying party argued that this is not what the Supreme Court had meant. Rather the Court intended that the receiving parties could claim between them one or other set of costs, whichever was the higher, but not the combination that was being attempted here.

THE JUDGMENT

On assessment the court agreed with the receiving party’s argument.  The costs order made it clear that the Supreme Court did not think it reasonable for each of the receiving parties to be represented on the appeal.  The first receiving party, having incurred the higher costs, was able to recover his costs and the fees of two leaders and one junior.

Conclusions on the correct interpretation of the Order of 11 November 2020

91. We have concluded that the Receiving Parties’ formulation of their costs claim is
not justified by the wording of the Costs Order; that the Costs Order is not the same as
the costs orders made either in Bristol-Myers Squibb Co v Baker Norton or in Ong v
Ping; that it cannot have the same effect as the orders made in those cases; that the
Receiving Parties’ formulation of their costs claim is not in any event consistent with
Bristol-Myers Squibb Co v Baker Norton or Ong v Ping; and that the practical and
financial consequences of the Receiving Party’s approach, as highlighted by Mr
Carpenter’s examples, supports the conclusion that their interpretation of the Costs
Order is not sustainable. We have reached those conclusions for the following reasons.

Conclusions: the wording of the Costs Order

92. We accept Mr Carpenter’s interpretation of the phrase “set of costs”. It was
employed not only in Bolton but in Bristol-Myers Squibb Co v Baker Norton and by
Morgan J in Ong v Ping (in which he referred to both of those authorities) to describe
the costs of a single legal team instructed by particular party or group of parties.

93. Mr Bacon submits that there is no reason why the phrase “set of costs” could
not refer to a combined set of costs. Hypothetically the phrase might be employed in
that way (although we have not been offered an example), but that is not its obvious
meaning: “a set of costs” is not the same as “a combined set of costs”.

94. One would, accordingly, expect any order that makes provision for multiple
receiving parties or groups of receiving parties to receive a “combined set of costs” to
say so in clear terms, and the Costs Order does not.

95. We have also concluded that Mr Carpenter must be right in saying that the
phrase “the higher set of costs claimed” used in the Costs Order would makes no sense
if the purpose of the order were to allow the Receiving Parties to recover one set of
combined costs.

96. That difficulty cannot be overcome, as the Receiving Parties have attempted to
do, by choosing and blending the higher of each group of Receiving Parties’ costs
within categories to which the Costs Order makes no reference. If it had been the
intention of the Supreme Court, when making the Costs Order, to permit the Receiving
Parties to divide two sets of costs into categories and then to claim against Romania
the higher figure from each category one would expect the Costs Order to say so, and
it does not. This is unsurprising, given that no such exercise was mooted in the parties’
costs submissions.

97. The artificiality of the Receiving Parties’ approach is underlined by the fact that
they have, in claiming the highest figures they can identify within given categories,
expanded upon the work categories provided for in Supreme Court Form 5, the
required form of bill (Supreme Court Practice Direction 13, paragraph 7.1) for
assessments in the Supreme Court. There are obvious difficulties in favouring any
interpretation of the Costs Order which requires the reformatting of prescribed forms,
over one which does not.

Conclusions: Ong v Ping

98. In awarding one set of costs for these proceedings, the Supreme Court has
taken a different approach from that adopted in either Bristol-Myers Squibb Co v Baker
Norton or Ong v Ping. In Bristol-Myers Squibb Co v Baker Norton the court, in setting
aside an order for two parties between them to recover one set of costs, simply
substituted an order for each of the two parties to recover their costs in the usual way,
and left it to a costs judge to determine the extent to which separate representation
had led to costs being unreasonably incurred. In Ong v Ping Morgan J identified a date
up to which separate representation was reasonable, but from the point that separate
representation ceased to be reasonable left it to the costs judge to determine the
extent to which costs had been unreasonably incurred as a result.

99. From that point, Morgan J identified the limit of reasonably incurred costs as
the costs which would have been incurred if the claimants had used one firm of
solicitors rather than two, but he did not limit the costs recovery of two sets of parties
to one set of costs. He plainly intended (as did the court in Bristol-Myers Squibb Co v
Baker Norton) to allow the recovery of two sets of costs, but only to the extent that
they had not been unreasonably incurred as a result of separate representation.
100. It would seem to follow that any provision in a costs order to the effect that
multiple parties are to recover only one set of costs is inconsistent with the approach
taken in Bristol-Myers Squibb Co v Baker Norton and Ong v Ping, which was to allow
the recovery of two sets of costs subject to the normal principles of reasonableness set
out in the rules and Practice Directions to which we have referred.

101. Any provision for two parties, or for two sets of parties, to recover the higher of
two sets of costs is equally inconsistent with the Bristol-Myers Squibb Co v Baker
Norton and Ong v Ping approach. That is because any such provision would run directly
contrary to the court’s evident intention in those cases to allow the process of detailed
assessment to determine the overall level of reasonable costs. In fact it would impede
the assessing judge’s ability to do so in accordance with the relevant rules.
102. In summary, any order for multiple parties to recover one set of costs, or for
two sets of parties between them to recover the higher of two sets of costs, is
different in substance and must produce a different outcome to that of either Bristol

Myers Squibb Co v Baker Norton or Ong v Ping.

103. The thrust of Mr Bacon’s submissions is largely based upon the proposition that
for any court to depart from the Ong v Ping approach would be wrong in principle. The
difficulty with that as an aid to interpretation is that it is clearly open to the court to
make a different order if it considers that to be appropriate in the circumstances of the
case. The Receiving Parties’ costs submissions did not suggest that it would be
unlawful or contrary to established principle to provide for the Receiving Parties to
recover one set of costs: only that it would be right, in the circumstances, for them to
receive two sets of costs.

104. One example (albeit superseded by the Costs Order) of an order that does not
take the Ong v Ping approach is the order made by the Court of Appeal in this case,
which provided in straightforward terms for the recovery by the Receiving Parties of
one set of costs. Evidently the Court of Appeal did not consider the making of such an
order (Bristol-Myers Squibb Co v Baker Norton notwithstanding) to be wrong in
principle, and was not persuaded by any submissions that might have been made by
the Receiving Parties as to the efficient division of work, to adopt the Ong v Ping
approach.

105. Nor, for the reasons we have given, can it be right to conclude that the Supreme
Court chose to adopt the Ong v Ping approach. The court may, when considering the
parties’ cost submissions, have considered whether to do so (Ong v Ping having been
mentioned briefly in early correspondence appended to Romania’s submissions). As
Mr Carpenter says, it is impossible to tell. What is clear is that the court did not do so.

106. If it had, the Costs Order would not have limited the recovery of the Receiving
Parties’ costs in the way it did. It would have provided rather for the limit to be
determined on detailed assessment and (if entirely consistent with Ong v Ping)
incorporated a provision to the effect that on assessment the costs recoverable by the
Receiving Parties should not exceed the costs which would have been incurred if they
had used one legal team, rather than two.

107. The Costs Order is not, however, worded in that way. It provides rather that the
Receiving Parties shall recover one set of costs, so establishing that the Supreme Court
was not persuaded that it was reasonable for the First Receiving Party and the Second
to Fifth Receiving Parties to be separately represented, notwithstanding their
submissions about the efficient division of work.

108. It also provides that the set of costs in question will be the higher (which may be
a partial concession to those submissions) and that that higher set of costs will be
shared between the First Receiving Party and the Second to Fifth Receiving Parties in
proportion to their actual expenditure. This last provision is again inconsistent with
Bristol-Myers Squibb Co v Baker Norton and Ong v Ping, in which the division of
recovered costs fell to be determined either on assessment or following assessment.

Conclusions: practicalities

109. The Receiving Parties’ formulation of their costs claim creates other problems.
The figures set out by Mr Carpenter illustrate that they have produced a total claim for
costs which is higher than either of the two sets of costs incurred, respectively, by the
First Receiving Party and the Second to Fifth Receiving Parties. This, and the
consequent recovery of up to 81% of the Receiving Parties’ combined costs, is not
consistent with the provisions of the Costs Order for the Receiving Parties to recover
only one set of costs.

110. Mr Carpenter also seems to us to be correct in saying that the approach
adopted by the Receiving Parties does create anomalies and practical difficulties for
assessment which could not have been intended when the Costs Order was made. Mr
Bacon argues that some costs orders do, of necessity, lead to complicated detailed
assessments, but there are obvious reasons for preferring an interpretation of the
Costs Order which does not increase the difficulty, time and expense involved in
undertaking the assessment of costs to one which does.

Conclusions: the indemnity principle

111. For all the above reasons we accept, as Mr Carpenter contends, that the Costs
Order provides for the Receiving Parties between them to share, in proportion to their
actual expenditure, the amount recovered on the assessment of the costs incurred by
the First Receiving Party, that being the higher of the two sets of costs with which the
court was concerned when the Costs Order was made.

112. We do not accept that this approach offends the indemnity principle. Mr
Carpenter suggests that the Costs Order simply provides for the First Receiving Party to
recover his costs and to then share the recovery with the Second to Fifth Receiving
Parties. That is one viable interpretation which avoids any difficulty with the indemnity
principle.

113. Our own view would however be that the Costs Order provides for all of the
Receiving Parties to recover their costs, but for the amount recovered to be limited to
the assessed amount of the First Receiving Party’s costs (with additional refinements in
relation to counsel’s fees, discussed below). One could demonstrate that this results in
no breach of the indemnity principle by assessing both sets of Receiving Parties’ costs
and setting off the sum payable to the Second to Fifth Receiving Parties against

individual items allowed in their bill, but that exercise would be entirely redundant.

114. If our interpretation of the Costs Order would, as Mr Bacon contends, lead to
the Second to Fifth Receiving Parties recovering the First Receiving Party’s costs, it is
difficult to see how the Receiving Parties’ preferred approach (in which both groups of
Receiving Parties claim some of the other group’s costs and some of their own) could
avoid similar difficulties. Our conclusion is however that Mr Carpenter is right in saying
that the indemnity principle is not engaged at all.

COUNSEL’S FEES UNDER THE ORDER

Conclusions on the recovery of counsel’s fees under the Costs Order

115. The Costs Order provides for one set of costs (the higher) to be submitted for
assessment by the Receiving Parties, but also provides that they may recover the fees
of two leading counsel and one junior between them. In doing so, the order creates an
exception to Practice Direction 6.3.7 (as provided for in the Practice Direction itself).

116. As we have observed, it is clear from the terms of the Costs Order that the
Supreme Court did not consider it reasonable for the First Receiving Party and the
Second to Fifth Receiving Parties to be separately represented. It would be consistent
with that, as regards the recovery of counsel’s fees, for the Receiving Parties (insofar as
achievable) to be in the same position as they would have been in had they instructed
a single legal team advised and represented by two KCs.

117. Bearing that in mind, along with the fact that the Costs Order (as Mr Carpenter
points out) contains an overarching provision for the recovery of the higher of the two
sets of costs incurred by the Receiving Parties, it would seem to follow that the
Receiving Parties are entitled to claim the fees of the two leading counsel instructed by
the First Receiving Party.

118. If in fact the First Receiving Party had instructed only one leading counsel, then
the position would (as Mr Carpenter concedes) be different. The Second to Fifth
Receiving Parties would be able to recover the fees of their own leading counsel, even
though it falls outside the higher set of costs provided for in the Costs Order, because
the order makes express provision for the Receiving Parties between them to recover
the fees of two leading counsel.

119. That is not, however, the position. Because the First Receiving Party instructed
two leading counsel, and their fees fall within the higher set of costs provided for by
the Costs Order, those are the fees that can be recovered.

120. With regard to junior counsel, for the same reasons, we have concluded that
the Costs Order provides for the recovery of the junior instructed by the First Receiving
Party. With regard to the number of juniors, the position appears to be relatively
straightforward. The Costs Order provides for the recovery of the costs of one junior. It
need not be the same junior at all times, because (as was in fact the case) there may
be a change of junior counsel. It does not however provide for the recovery of more
than one junior instructed at the same time. That is the position regardless of whether
one or two leading Counsel was also instructed at the relevant time.

121. For those reasons, our conclusion is that the Receiving Parties are, under the
terms of the Costs Order, entitled to submit for assessment (within the costs of the
First Receiving Party) the fees of Patrick Green KC, Professor Sir Alan Dashwood KC,
Matthieu Gregoire and (from the point when Mr Gregoire ceased to act and he took
over) Jonathan Worboys. They are not entitled to claim the costs of other counsel.