After the flood

In Municipio de Mariana & Others v BHP Group PLC and BHP Group Ltd [2021] EWHC 146 (TCC) the High Court struck out a claim, brought in England by more than 200,000 Brazilian claimants in relation to the collapse of the Fundao Dam in Brazil in 2015. The case is believed (at least in terms of the number of parties involved) to have been the largest action ever brought in an English court.

In brief, the existence of parallel proceedings concerning the same matters in Brazil rendered the English proceedings an abuse of process.

Issues based order

The Court set out the principles applying to Issues based orders noting inter alia that the Court’s aim is to “make an order that reflects the overall justice of the case” and that, while costs should follow the event, 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, any winning party is likely to fail on one or more issues in the case.

In the present case, the defendants narrowed the scope, and abandoned part, of the case which they were presenting. The Judge said that this came about not because the abandoned part was doomed to fail – rather, the defendants were “distilling the thrust of their contentions [so that] the Court would thus be best equipped to deal with the point proportionately”.

The defendants were entitled to their costs per the general rule in CPR 44(2) – “that the unsuccessful party will be ordered to pay the costs of the successful party”.

Interim payment on account

The court assessed an interim payment on account of costs (per CPR 44.2(8), noting the “proper approach” as set out in the guidance notes in the White Book that:

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

and noting that this is not “the “irreducible minimum” of what may be awarded on detailed assessment” but “would often be … an estimate of the likely level of recovery subject, to an appropriate margin to allow for error in the estimation”.

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Costs caps at CPR 3.15(5) are exclusive of VAT

In Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs) (10 July 2020) Senior Costs Judge Gordon-Saker clarified an issue which arises on inter-partes assessments: whether or not the caps formerly at paragraph 7.2 of the CPR Practice Direction 3E (now at CPR 3.15(5)) include VAT.

By way of a reminder, CPR 3.15(5) provides:

“Save in exceptional circumstances—

(a) the recoverable costs of initially completing Precedent H (the form to be used for a costs budget) shall not exceed the higher of—

(i) £1,000; or

(ii) 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and

(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs”.

Senior Costs Judge Gordon-Saker found that “To my mind the caps provided by paragraph 7.2 cannot include VAT because they are expressed as percentages of figures which do not include VAT. All of the figures set out in a budget exclude VAT – as Precedent H makes clear. 2% of £100,000 excluding VAT, would be £2,000 excluding VAT.”

Senior Costs Judge Gordon-Saker also derived assistance from Friston on Costs (3rd Edition) at paragraph 12.133: “While there is no authority on the point, it is likely that the percentage limits are exclusive of VAT. This is because Precedent H is designed in such a way as to discourage VAT being recorded therein, so it would seem odd if the costs were payable on a VAT-inclusive basis. Moreover, if it were not a VAT-exclusive limit, then a VAT-registered litigant would have the advantage over a non-VAT registered litigant – and that would be a curious state of affairs.”

Benefits of Part 36 do not apply to detailed assessment costs

In Natalie Best v Luton & Dunstable Hospital NHS Foundation [2021] EWHC B2 (Costs) (29 January 2021) the court considered whether a Claimant can rely upon the additional rewards for beating a Part 36 offer in detailed assessment proceedings.

Costs Judge Leonard concluded that the costs of detailed assessment proceedings do not, for the purposes of CPR 36.17(4), fall within “any issue that arises in the claim”, therefore the Claimant could not claim any uplift.

Despite the Claimant beating her Part 36 offer (£52,000.00) for costs of assessment by a substantial amount (£6,119.80), the Judge concluded that Part 36 had no application because CPR 47.20(7) “does not provide that the determination of the costs of detailed assessment proceedings is itself to be regarded as an independent claim”.

If the Claimant was correct then acceptance of a Part 36 offer for costs of the detailed assessment would result in a deemed order for costs under CPR 44.9(1)(b) which could result in a further Bill of costs dealing with the costs of the detailed assessment. This could create “an indefinite cycle of Part 36 offers and new detailed assessment proceedings”.

Underspend is not a ‘good reason’ to depart

In Utting v City College Norwich [2020] EWHC B20 (Costs) 22 May 2020 the question at large was whether an underspend in respect of the budgeted sum is a ‘good reason’ to depart from the budget (so as to allow a line-by-line assessment).

The parties settled the substantive claim without the involvement of the Court but Master Brown was asked to provide judgment on this issue.

The Defendant relied upon Salmon v Bart Health [2019] while the Claimant relied on Chapman v Norfolk and Norwich University Hospital NHS Foundation Trust, March 2020.

Master Brown favoured the approach in Chapman and determined that if an underspend were to be good reason for departing from the budget it would be liable to undermine the effectiveness of costs budgeting, in that solicitors who come-in under budget would be subject to a detailed assessment whereas those who exceed the budget would receive the budgeted sum and avoid detailed assessment.