Group litigation, costs budgeting and costs capping

One of the more interesting and challenging areas of costs, relates to the practice of costs in the context of group litigation, commonly arising out of mass claims for industrial disease or disastrous accidents.

Part 19 of the Civil Procedural Rules 1998 provides a specific set of rules which deal with the making of a Group Litigation Order (GLO) and the case management of claims which give rise to common law related issues of fact or law and the provision for keeping of a group register.  The cases are run through a management court usually supervised by a managing judge.

Costs incurred under a GLO are usually divided first of all into individual costs which are those costs incurred in the pursuit or defence of an individual claim and common costs which are those costs incurred in pursuing or defending the GLO issues. Common costs will include costs incurred by the lead solicitor in administering the group litigation such as the costs of keeping the group register and those elements of generic work, undertaken by panel solicitors to collectively service their individual cases.

GLOs often give rise either to the making of a costs sharing agreement between the various claimants or in default of such an agreement a costs sharing order is typically made. What this means is that if the claimants do not reach accord between themselves which would be unusual but sometimes happens because the solicitors representing them simply assume they are going to win and do not trouble themselves with minutia relating to costs, then Rule 48.6A (4) provides as follows:

The general rule is that where a group litigant is the payment party, he will, in addition to any costs he is liable to pay to the receiving party, be liable for:

(a)The individual costs of his claim; and

(b)An equal proportion, together with all the other group litigants of the common costs. 

This is the general rule that when a litigant is a paying party he is liable not only for the costs of his claim but for a share of the common costs.

Although in some cases, no formal GLO may be made, similar issues will arise in relation to cases advanced as informal test cases: that is that the cases will have both their individual costs and also the common costs attributed to the common issues which it is sought to litigate. The tacit intention of the parties, isto make the test cases carry a very high quantum of costs upon them.In those circumstances it would  be usual for orders to made for case management which will include provisions, which to a large extent mirror the terms of a GLO.

That is, it would provide for individual costs and common costs and also make provision for failed claims, late joiners and settlers and discontinuers, all of which might reasonably be anticipated as the litigation is refined down and issues narrowed in advance of any trial.

GLOs tend to attract claims for higher hourly rates. In any high value litigation whether individually through one large claim or collectively through many thousands of small claims it would be unusual for a court to restrict solicitors to the guidelines hourly rates of the locality where the case is tried. Rather the approach of the Court is to enhance hourly rates by reference to the factors that are contained in Rule 44.5(3). Although guideline hourly rates are expressed in single figures rather than under the old A + B criteria, it is important to note the approach that has been taken by the Court in the past.  Thus in the case of Johnson -v- Reed Corrugated Cases Limited (1992) 1ALL ER 169 at 183, Mr. Justice Evans had this to say:

I approach the assessment on the following basis.  I am advised that the range for normal i.e., none exceptional cases starts at 50%, which the Cost Judge regarded, rightly in my view, as an appropriate figure for run of the mill cases.  The figure increases above 50% so as to reflect the number of possible factors…… but only a small percentage of accident cases results in an allowance over 70%.  To justify a figure of 100% or even on closely approaching 100% there must be some factor or combination of factors which means the cases approaches the exceptional.  A figure above 100% would seem to be appropriate only when the individual case or cases of the particular kind can properly be regarded as exceptional and such cases will be rare.

In the case of Loveday -v- Renton (Number 2) (1991) Cost LR Cor. Vol. 04, Mr. Justice Hobhouse said this:

To justify an uplift of 100% it is necessary….. to demonstrate that the case is exceptional.  There has been a tendency among some firms of solicitors to put forward grossly inflated percentages by way of uplift and a failure to appreciate that to justify an uplift even as high as 100% requires the demonstration that the case is exceptional.

Part 3 of the Civil Procedural Rules 1998 has been heavily amended by the Jackson Reform introduced on the 1st April 2013.  In effect in any case of the kind contemplated there is an armoury of tools now available to the Court which is enjoined to use in order seek to make costs proportionate. In terms of the hierarchy that one would expect to see in a case of this nature those are costs budgeting, costs management and costs capping.

I turn to consider how this will work in practice.

The starting point for costs budgeting is to consider Rules 3.12 to 3.18 of the Civil Procedure Rules and the new Practice Direction 3E together with precedent H and the all important guidance notes on precedent H.

These are tools by which the Court hopes to achieve the new goal set out in the redefined section 1.1 of the Civil Procedure Rules enabling the Court to deal with cases justly and at proportionate costs.

The starting point for consideration is that when putting forward a litigated case there is an obligation now in the context of this sort of litigation to put forward a cost budget.   The cost budget according to Practice Direction 3E must be in precedent H unless the Court orders otherwise being landscape format with an easily legible type face and must be dated and verified by a Statement of Truth signed by a senior legal representative. Precedent H comprises a function that summarises a budget and sections which cover the 10 phases of the litigation which are as follows:

(i) Pre-action costs;

(ii) Issues/pleadings;

(iii)Case management conference;


(v)Witness Statements;

(vi)Expert’s report;

(vii)Pre-trial review;

(viii)Trial preparation;


(x)ADR/Settlement discussions.

Precedent H also splits costs between those costs already incurred and estimated costs for the litigation going forward. Precedent H requires a lawyer to in essence construct a costs matrix for the work they intend to do on the case.  Each section has to be completed giving information about the time cost or the solicitor’s profit costs, the expert and counsel’s fee together with other disbursements. The guidance to precedent H provides assistance in attributing work to the correct phase of the litigation but in order to carry out the task of estimating future work the lawyers must create assumptions about the future shape of litigation both in terms of what work would be required and then that work would be carried out.

The lawyers will need to rely on their knowledge of both the specific case in question and their experience in dealing with other similar litigation to create appropriate high level and phased specific assumptions.

It follows, that in any GLO, there will probably be budget(s). That is a Precedent H, dealing with the common costs to be incurred by the solicitors, and a further precedent H, dealing with the individual costs. One cannot reasonably expect the court to require or to read, say 3000 costs budgets, if the cohort of claimants are 3000 strong. Thus the individual budget will set out typical costs for a typical case. The assumptions and contingencies, will demonstrate how that might be increased, if the cohort actually has several subsets of cases.

An example of a level assumption would be that the claimant will prosecute the claim to a conclusion.  But phase specific assumptions include such details as to whether the parties will obtain separate expert evidence or how many experts the parties will chose to construct.  The assumptions and their formulation is critical because once the assumptions are clearly defined the assumptions help the solicitors to attribute time and cost to each phase.  The assumption should be set out on the front page of precedent H.

Lawyers should not be afraid to state the obvious and of course it will be necessary to obtain input from experts and counsel in the assumptions.

Precedent H also deals with contingencies which are different to assumptions.  Examples of contingencies might be applications for security for costs or applications for specific disclosure or for mediation though it might be contemplated that these particular contingencies may not apply in the context of this sort of case.

It should be noted that the costs management regime does not apply to costs that have already been incurred at the pre-issue stage because those costs incurred cannot be reduced but it is important to note that costs already incurred may influence decisions in relation to cost budgets for the future conduct of the litigation and the court is free to record comments on costs already incurred which may well be influential at any detailed assessment.

There will then be an opportunity at the first case management conference in GLO litigation, to seek either a costs management order or  a costs capping order.  A costs management order will record the extent to which the budgets are agreed between the parties and if they are not agreed record the court’s approval after making appropriate revisions.

The Practice Direction 3E, in particular in paragraph 2.3, notes that this is not a process of detailed assessment but the court must consider whether the budget and costs fall within the range of reasonable and proportionate costs.  After the case management conference the parties will need to refile the budgets in the approved form.  If a costs management order is made, it will enable the to court to control the parties budgets in relation to recoverable costs.

Paragraph 2.6 of Practice Direction 3E provides for a party to submit a revised budget if there are significant developments in the litigation which warrants a revision. It should be noted that mistakes such as self induced inaccuracies in a budget will not be acceptable reasons to revise a budget because the court will expect parties to undertake robust costs budgeting first time round.

The significance of costs budgets will come into their own when a costs management order has been made and a detailed assessment is undertaken.  For rule 3.18 says as follows:

In any case where a costs management order has been made, when assessing costs on the standard basis, the Court will:

(a)Have regard to the receiving parties last approved or agreed budget for each phrase of the proceedings; and

(b)Not depart from such approved or agreed unless satisfied that there is good reason to do so.

Thus in effect costs budgets with costs management orders should function as a de facto cap upon costs but do not in fact do so: that is because there is plenty of “wriggle room” contained in the rules and also cases such as the decision of the Court of Appeal in Henry -v- News Street Newspapers Limited (2013) EWCA Civ 19, where the Court of Appeal allowed an appeal permitting a departure from a costs budget albeit that that was in the context of the defamation pilot scheme.

I turn therefore what represents the potentially more potent weapon in the arsenal for controlling costs, which is the costs capping order.  Rule 3.19 provides that a costs capping order is an order limiting the amount of future costs, including disbursements, which a party may recover pursuant to an order to costs subsequently made and future costs mean costs incurred in respect of work done after the date of the costs capping order. A costs capping order can be made in respect of the whole litigation or any issue which are ordered to be tried separately.

The test provided by Rule 3.19(5) is as follows:

The court may at any stage of proceedings make a costs capping order against all of any of the parties, if –

 (a)It is in the interest of justice of to do so;

(b)There is a substantial risk that without such an order costs will be disproportionately incurred; and

(c)It is not satisfied that the risk in sub-paragraph B can be adequately controlled by –

(i)Case management directions for orders made under this part; and

(ii)Detailed assessment of costs.

The rule goes on to say at 3.19(6):

In considering whether to exercise its discretion under this rule, the court will consider all the circumstances of the case, including –

(a)Whether there is a substantial imbalance between the financial position of the parties;

(b)Whether the cost of determining the amount of the cap are likely to proportionate to the overall cost of the litigation;

(c)The stage which  the proceedings have reached; and

(d)The costs which have been  incurred to date and future costs.

There is an interesting provision in Rule 3.19(7) which says this:

A costs capping order, once made, will limit the costs recoverable by the parties subject to the order unless a party successfully applies to vary the order.  No such variation will be made unless:-

(a)There has a been a material and substantial change of circumstances since the date when the order was made; or

(b)There is some other compelling reason why a variation should be made.

I have to say that there is something of a curate’s egg in the different tests which apply to departure from a costs management order and an actual costs capping order. That is that one can readily envisage that it might in certain circumstances be easier to satisfy the test to vary a costs capping order than it will be to show good reason to depart from a costs management order.

One also notes that the very existence of costs management orders may be thought to render costs capping orders otiose. Having said that the benefit of a costs capping order which it should be noted would be applied for with a costs management order in the alternative is that it would represent a line in the sand over which costs could not creep unless something exceptional occurred.

This is of particularly acute concern given the tension between the existence of the rules and the fact that the judiciary in such cases as Barr -v- Biffa Waste Services Limited (Number 2) (2010) 3 Costs LR 317, have been reluctant to make costs capping orders.  In that case the High Court Judge dealing with the former rules which were contained in Rule 44.18 took a restrictive approach to costs capping and took the view that such a case had to be exceptional applying earlier case law, such as the decision in Peacock -v- MGM Limited (2009) EWHC 769. The High Court Judge took the view that the crucial issue was whether there is a risk that costs would be disproportionately incurred and that a costs capping order should not be made if the disproportionate costs being incurred almost always by claimants, could be contained by case management or detailed assessment.

The defendant did not establish that case management directions and costs assessment did not between control any risk that base costs would be disproportionately incurred and so a costs capping order was refused.

Given the new emphasis on controlling costs prospectively, one awaits with interest to see whether the judges are now prepared to more readily “cap” costs, in advance of the determination of the litigation.

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