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Costs In Group Litigation

View profile for Mark Holloway
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This practice note will be treated as a live document and updated when developments arise.

Civil Procedure Rules

These rules apply where the court has made a Group Litigation Order (GLO). However they are also standard practice in group litigation claims where there is no GLO.

There are two main types of costs, these are individual costs and common costs.

Individual Costs

 “46.6

(2) In this rule –

‘individual costs’ means costs incurred in relation to an individual claim on the group register;”

Common Costs

“46.6

(2) In this rule –

‘common costs’ means –

(i) costs incurred in relation to the GLO issues;

(ii) individual costs incurred in a claim while it is proceeding as a test claim, and

(iii) costs incurred by the lead legal representative in administering the group litigation; and

‘group litigant’ means a claimant or defendant, as the case may be, whose claim is entered on the group register.”

Third Type of Costs

“46.6

(5) Where the court makes an order about costs in relation to any application or hearing which involved –

(a) one or more GLO issues; and

(b) issues relevant only to individual claims,

the court will direct the proportion of the costs that is to relate to common costs and the proportion that is to relate to individual costs.”

There can be a third category of costs where there can be significant costs associated with an issue that is only relevant to a minority of claimants.

Liability for Costs

“46.6

(3) Unless the court orders otherwise, any order for common costs against group litigants imposes on each group litigant several liability for an equal proportion of those common costs.

(4) The general rule is that a group litigant who is the paying party will, in addition to any liability to pay the receiving party, be liable for –

(a)the individual costs of that group litigant’s claim; and

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

Each group litigant will be responsible for the costs incurred in relation to their individual claim. When their claim is resolved costs of the individual claim will normally follow, whereas common costs normally follow the conclusion of the claim as a whole.

Each group litigant is generally liable for an equal share of the common costs. This is the standard position however it is possible for the group litigants to agree otherwise and produce a costs sharing agreement. The court will not normally go behind the costs sharing agreement. The court may also depart from this starting point if there is a significant difference between the values of the claims as it would be unjust for a party who may potentially recover millions to have an equal share to a party who may only recover thousands, see Greenwood v Goodwin [2014] EWHC 227 (Ch).

Each group litigant is severally liable for the common costs and not jointly liable. This means they are only responsible for their individual costs and an equal proportion of the common costs, this applies even where there is no GLO (group litigation order) as per Russell Young & Co v Brown [2007] EWCA Civ 43. Additionally, if the group litigant is the unsuccessful party, they will be liable for an equal portion of the opponent’s common costs.

Joining and Discontinuing

“46.6

(6) Where common costs have been incurred before a claim is entered on the group register, the court may order the group litigant to be liable for a proportion of those costs.

(7) Where a claim is removed from the group register, the court may make an order for costs in that claim which includes a proportion of the common costs incurred up to the date on which the claim is removed from the group register.”

It is the standard approach that if a group litigant joins the group litigation after the claim has started, the group litigant will be liable for an equal share of the common costs incurred prior to them joining.

If a group litigant leaves the claim, the court may order they pay a proportion of the opponent’s common costs. The group litigant will be liable for their share of the common costs until the last day of the quarter in which they have discontinued their claim. The group litigant discontinuing their claim will also be liable for their individual costs and the other side’s individual costs relating to them as per the usual rule for discontinuing.

This may be the general approach however it may not be the correct approach in every claim where a group litigant discontinues. This point was examined in Afrika v Cape [2001] EWCA Civ 2017 where it was considered that this general approach favoured the defendant. The reasoning was that, given the nature of group litigation where a claimant may discontinue for any number of reasons, this rule would be too blunt an instrument when the claimants as a group could still succeed on the common issues.

“It is… not merely more sensible but also more consonant with justice that both the recoverability of common costs and the liability (if any) of discontinuing claimants for costs of common issues should be determined at the same time as orders for common costs are made in respect of those common issues. The court then has a full picture and can make whatever order is just in all the circumstances.”

 

Settlement and Deciding Who Has Won

Jones v SS for Energy and Climate Change [2012] EWHC 3647 (QB), [2013] 2 Costs LR 230

Mrs Justice Swift held that there was no reason to depart from the general rule as set out in CPR 44.2 that the successful party should be awarded their costs. In this claim the claimants were able to prove breach of duty but failed to establish causation in a number of the leading cases. It was decided that the claimant was the successful party, however some form of reduction needed to be applied. It was agreed that an issue-based costs order would be complex and lead to increased detailed assessment costs and therefore a percentage reduction was utilised. When deciding on the percentage reduction, it was necessary to take into account the issues that the claimants’ had lost in relation to the litigation as a whole and not just time spent at trial on those issues. A 20% reduction was applied.

British Coal Chronic Obstructive Pulmonary Disease Litigation

It may not always be appropriate to apply a reduction to the common costs in a claim where the claimants were the successful party, even though a number of the claimants may not win on their individual cases. Below is an extract from Afrika regarding this claim:

“Turner J ordered the defendants to pay the costs of claimants, who had not discontinued and persevered to the end of litigation, but lost their cases on their own individual facts. No doubt any such order as that would be highly exceptional but it shows the wisdom of not having any a priori rule for discontinuing claimants in group actions which takes effect before the outcome of common issues is known.”

Kupeli v Kibris Turk Hava Yollari Sirketi (trading as Cyprus Turkish Airlines) [2018] EWCA Civ 1264

There were 838 claimants that for the purposes of a preliminary trial were split into 3 categories. Lead claimants were chosen and there were 16 issues identified to be addressed. By the time the trial was due to start only 1 issue remained to be decided. It was decided the claims under categories 2 and 3 had failed. There were a remaining 76 claims to be decided upon in category 1. The claims settled for a modest sum. The claimants’ were found to be the successful party as ‘they will receive a cheque from the defendant’. The claimants were awarded 33% of their costs.

The decision was appealed on several basis including the argument that given c.94% of the claims had failed the award off 33% was wrong. It was considered that the litigation should be looked at as a whole, it was clear that there was success on both sides and therefore the decision was overturned and no order for costs was made.

‘where the concept of overall "success" may be a necessarily ambivalent concept (as in a complex group claim trial, in which opposing parties each have considerable success), a search for an overall "winner" may be a largely fruitless exercise. In any event, it is clear from CPR Rule 44.2 that, in assessing costs as between parties, the court must first determine whether to make a costs order at all’.

 

Practical Considerations

Payments on account

It is standard practice in group litigation that there is a preliminary hearing on the group issues before the individual claims are concluded. There is a presumption that a payment on account of costs should be made following this. See Claimants appearing on the Register of the Corby Group Litigation v Corby Borough Council [2009] All ER (D) 107.

Enhanced Hourly Rates

It is normal that group litigation attracts an enhanced hourly rate by reference to the factors as per CPR 44.4(3). It is important to ensure your retainer allows for this.

Conditional Fee Agreements

If the claim is truly on a no win no fee agreement and the individual claimant loses their claim or discontinues you will may not be able to recover their severable share of the common costs as it would offend then indemnity principle. It is important to ensure the CFA is worded in such a way to account for this.

Routine Communication

When sending routine communications, you will not be able to recover a unit per letter/email. In the age of technology mail shots can be organised and an update letter can be sent to 1000’s of claimants instantaneously.

Administrative Tasks

There are likely to be a lot of IT and administrative tasks that are required in group litigation, to include the IT costs and administrative costs of setting up a portal, organising mail shots, setting up websites, marketing the claim and sorting out funding. These costs are not recoverable from the other side, however this additional work is reflected in the enhanced hourly rates. It is important to establish good working practices to minimise the strain of these tasks.

Security for Costs

The claimants’ liability for adverse costs is often severable and therefore, if unsuccessful, the defendant will need to recover fees against all claimants separately. Given there may be a risk that not all claimants will be able to make payment, an application for security for costs should be considered. A security for costs application may succeed even where the claimants have the benefit of an ATE policy see Rowe and others v Ingenious Media Holdings plc and others—Barness and others v Ingenious Media Ltd and others—Ahearne and others v McKenna and others [2020] EWHC 235 (Ch).

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