The following post is a summary of the Construction Industry Vetting Information Group Litigation (‘CIVIG’) Judgement in costs budgeting of the Honourable Mr Justice Supperstone [Neutral Citation Number  EWHC 3543 (QB)]
It is of note that the value and detail of the costs involved required Supperstone J. to sit with Master Leslie (the case managing Master in the QBD) and Senior Costs Judge, Master Gordon-Saker (as Assessor).
Judgement was handed down on 4 December 2015 following the costs management hearing in the managed group litigation.
A schedule of agreed and approved phases and costs was provided with the judgement, however, this summary deals only with points of principle in the main judgment.
Important points of practice arise from this case.
First, the level of fees (over £14 million estimated by the Claimant Group in addition to £8 million incurred) in group litigation for 27 test cases were capable of being subject to costs management.
Secondly, is of note that the Court did not interfere with the budgets agreed between the parties for phases but did mark those agreed phases where it considered the sums agreed to be unreasonable and disproportionate in order that the matters could be reviewed upon detailed assessment.
Thirdly, the Court was prepared to apply the test of proportionality pro-actively in reaching its decision on reasonable and proportionate costs. Although the old test of proportionality was applied (as cases were commenced before 1st April 2015) the Court was prepared to undertake such a review overall at the cost budget stage and, in accordance with the Practice Direction, whether the costs were in the range of being reasonable and proportionate.
- The judgment followed a costs management hearing on 19 and 20 November 2015 and consideration of further written submissions from the parties.
- It was common ground that the claim having commenced before 1 April 2013, this is a case to which the approach laid down by the Court of Appeal in Home Office v Lownds  EWCA Civ 365 applies. It was further agreed between the parties that the appropriate approach is governed by Practice Direction 3E – Costs Management.
- Because of the size of the case Supperstone J and Master Leslie invited the Senior Costs Judge, Chief Master Gordon-Saker, to sit with them as an assessor.
The Factual Background
- The claims relate to the secret vetting of activities carried out by a group of major construction companies over many years, through two organisations. Each of those organisations maintained a secret manual database of information relating to construction workers who were reported to them by members/subscribers as being troublemakers and/or unsuitable for work in the construction industry. It is the Claimants’ case that the list and database functioned as a blacklist.
- Different groups of claimants pursue different causes of action, and different defendants. All pursue claims for unlawful means conspiracy, breach of the Data Protection Act, breach of privacy and misuse of confidential information. Some claimants also pursue defamation claims in respect of the database entries.
- The remedies sought by the Claimants include damages for loss of earnings, general damages and aggravated damages.
- The total value of the Provisional Schedules of Loss, leaving out of account general and aggravated damages, and the non-monetary remedies, is £61,257,627.90.
The Adopted Costs Framework
- CPR Rule 3.15(2) (Costs Management Orders), Practice Direction 3E 7.1 – 7.4 (Costs Management), and CPR Rule 44.4(3) (factors to be taken into account in deciding the amount of costs) apply.
- The two-stage approach in Home Office v Lownds also applies, as the claims are pre-1 April 2013.
- What is of note is that there were phases which were agreed, but in respect of which the court considered the total figure to fall outside the range of reasonable and proportionate costs. The court did not interfere with the agreed figures, but marked those agreed phases where it considered the sums agreed to be unreasonable and disproportionate in order that the matters could be reviewed upon detailed assessment.
- Turning to the approach adopted when considering costs which are not agreed, the court noted that it is common ground that this is an important case for all parties that raises serious allegations and involves complex issues of law and fact. It is of high value in monetary terms and there are issues of reputation and the wider public interest in play.
- The court was concerned with 28 lead or reserved cases. The Claimants’ incurred and estimated costs totalled in the region of £22m, and the Defendants’ in the region of £27m, aggregating just short of £50m. There are in all 570 other claims. The parties did not dissent from the suggestion of Master Gordon-Saker that total costs are likely to be in the region of £100m-150m when adding the costs of the individual claims (incurred and estimated), additional liabilities and VAT.
- In considering budgets for costs after 2 October 2015, the court had regard to (i) the number of counsel and solicitors, and the overall size of each party’s legal team, including the level of counsel and grade of solicitors required at each phase (ii) which firm is said to be leading a particular exercise (iii) the number of hours of work claimed/reasonably required (iv) hourly rates (v) the costs which were incurred before 2 October 2015.
- The court also had regard to the factors set out in Rule 44.4(3) and PD 3E, para 7.3.
- Applying the two-stage approach in Home Office v Lownds (and in accordance with paragraph 7.3 of PD 3E) the court first considered whether the proposed budgeted costs of each party as a whole appeared disproportionate. Recognising that this is a complex case which raises a number of difficult legal and factual issues, nevertheless, in the court’s view, the costs appear to be disproportionate.
- In reaching this conclusion the court had regard not just to the monetary value of the claims, and general and aggravated damages, but also to the important non-monetary remedies. Having taken the view that the costs are disproportionate, the court went on to consider whether the work post-2 October 2015 in relation to each phase in the common costs budget of each firm of solicitors is necessary and whether the total figure for each phase is reasonable.
- In conducting this exercise the court took into account the decision of Pennycuick J in Simpsons Motor Sales (London) Ltd v Hendon BC  1 WLR 112 and his statement at 118 that: “… one must envisage an hypothetical counsel capable of conducting the particular case effectively but unable or unwilling to insist on the particular high fee sometimes demanded by counsel of pre-eminent reputation. Then one must estimate what fee this hypothetical character would be content to take on the brief.”
- The court quoted Leggatt J’s observation in the recent case of Kazakhstan Kagazy plc v Zhunus  EWHC 404 (Comm): “In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judge objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party…”
- The court did not hear submissions in relation to costs incurred pre-2 October 2015, but recorded by way of comment (as it is entitled to do pursuant to PD 3E, paragraph 7.4) that it is of the view that the costs set out in each Precedent H for that period are disproportionately high.
- When considering reasonable and proportionate costs post 2 October 2015 the court into account the costs that have been incurred before that date, and have proceeded on the assumption that of such incurred costs only those which are reasonable and proportionate will be allowed on detailed assessment.
Simon Browne QC ©