Costs capping orders (CCOs) are a rare beast. Their exceptionality has recently been confirmed in Thomas and others v PGI Group Ltd, in which it was accepted that since the new world for costs began on 1 April 2013, not a single such order under CPR 3.19 has been made.
CCOs were introduced on 6 April 2009. As the name suggests, they limit the amount of future costs which a party may recover pursuant to an order for costs subsequently made. They were designed to be a tool which the courts could employ when there was a concern that that there was a substantial risk that without such an order, costs will be disproportionately incurred, and that this risk could not be controlled by case management directions or the detailed assessment of costs.
Those familiar with the costs management regime in place since 2013 will be able to ascertain why a CCO has not been made since then. The budgeting process provides parties with a relative degree of certainty, from an early stage in proceedings, of their likely costs exposure if they were to lose. It thus follows that in the vast majority of cases, a robust costs management order allowing only costs proportionate to the issues in individual phases provides better protection against disproportionate costs than a blunt CCO.
Yet the rules providing for CCOs remain within CPR 3.19. Their inclusion alongside the costs management rules should serve to emphasise the exceptional nature of a CCO. The question that this poses to litigants is when should a CCO be made or indeed sought by a party?
This was the question put to the court in Thomas. The claimants were Malawian women suing the British owners of a firm which owned tea and macadamia nut plantations in Malawi. Their claims were of systematic sex abuse and discrimination at the hands of their employers. The claimants had brought their claim in England and Wales and there was no dispute from the defendant that there was jurisdiction for these claims to be heard here. It was also common ground between the parties that the likely damages to be awarded to the claimants if they were successful were modest by English standards, likely to be very substantially lower than their own legal costs. The claimants’ claim was argued, however, to be as much about vindication and the acknowledgement of wrongdoing as it was about damages.
The crux of the defendant’s argument was that the claimants had a much cheaper way of obtaining damages and vindication: by suing their employer in Malawi. The likely recoverable costs in Malawi if this were to occur would be in the region of £150,000. With the damages likely to be awarded in the event of the claim’s success in an English court being modest, it would not be appropriate for the claimants to accrue more than this sum of £150,000 in further costs.
By this stage, the parties had exchanged costs budgets, with the claimants’ future costs totalling £1,513,628 and the defendant’s future spend estimated at £1,750,000. The total costs to trial (including pre-budget costs) were in the region of £5,600,000.
The defendant was thus seeking to restrict the claimants’ recoverable costs in the event of their success to 10% of what they anticipated it to cost to run the matter to trial. The inevitable consequence of such a CCO would be that the claimants would be forced to discontinue their claims.
It was accepted by the defendant that the order they sought was exceptional, but it was argued that the facts of the case, namely that the claimants could choose to litigate in Malawi, were also exceptional. The issuing of a CCO was thus appropriate.
This was rejected by the court. It was held that the claimants remained entitled to sue the defendant in England, no attempt had been made to strike out the action as an abuse of process, and that the court was well suited to dealing with disputes involving parties domiciled abroad.
The court also dismissed arguments regarding the proportionality or disproportionality of the costs contained within the budgets, albeit through the lens of whether a CCO was required at all. The court appeared to give considerable weight to the non-monetary aspects of the claim, such as its public importance given its subject matter and the claimants’ quest for vindication, when determining whether costs would be “disproportionate”. The defendant’s argument regarding the likely modest monetary awards did not appear to cut through.
No CCO was thus made at what was likely to be the first attempt at obtaining one in the post-Jackson world. Their status as the hen’s teeth of the costs order arsenal is thus ensured. If this “exceptional” case does not warrant such an order, it is difficult to imagine a scenario where a CCO would be appropriate. To quote an esteemed legal author, referred to in the Thomas judgment: “costs management has done for [costs capping] what video did for the radio star”!
