Costs in the Court of Appeal create unique challenges

The Court of Appeal’s decision in Jofa Ltd & Anor v Benherst Finance Ltd & Anor principally concerned the costs applicable where pre-action disclosure is ordered against someone who is not anticipated to be a party to proceedings – a Norwich Pharmacal order. The court reversed a first instance decision by which costs had been ordered against the innocent respondent on the basis that it was a departure from what was described as the usual position, namely that ordinarily there would be no order for costs. The court held that to have been a mistake of law, since ordinarily costs are ordered against the applicant for such relief, even if successful. 

The case has, however, attracted a great deal of attention for its post script which concerned the costs of the appeal itself.

The appellants’ solicitors had presented a costs schedule describing costs in the appeal of around £71,000. Lord Justice Leggatt described these costs as ‘manifestly unreasonable’ and, whilst accepting Counsel’s fees as reasonable and proportionate, allowed a total of 20 hours at £225ph for the work done by solicitors.

The hearing itself lasted no more than two hours and, of course, costs of hearings less than one day are ordinarily assessed summarily at the conclusion unless there is good reason not to do so (CPR44PD.9.2(b)).

The appellate court has power to make a costs order (CPR52.20(2)(e)). The court’s costs discretion is broad (CPR44.2) and the unsuccessful party will usually pay the successful party’s costs, including in any appeal. The exercise of a court’s discretion is difficult to challenge save where, as in the principal issue in Jofa itself, the court has simply and manifestly misapplied the law, rules and established principles.

Costs in the Court of Appeal, however, create unique challenges.

Costs submissions are usually made at the conclusion of a short hearing before the judge who has given his/her decision. This process does not arise, however, where judgment has been reserved and a draft judgment is circulated to the parties inviting observations on typographical errors and the order which should follow. Here, CPR40EPD is engaged, and particularly CPR40EPD4.5(a) which provides that 'where judgment is to be given by an appeal court, the application [for costs] will be determined without a hearing'.

Ordinarily, if a party’s costs schedule is challenged, that party is able to explain (or at least seek to explain) how time was spent on various attendances, in correspondence or on documents. Where, however, submissions in relation to the proposed order are simultaneous and not sequential, the successful receiving party has no such opportunity to engage with the paying party’s objections.

In the present case, the successful appellant had sought detailed assessment on the basis that the amount sought did not merely represent preparation for a short hearing, but 15 months’ work in considering a 40 page witness statement plus voluminous exhibits, the appeal application and permission stages as well as the appeal itself, at which the appellants’ solicitors were responsible for the bundles.

The Court of Appeal moved straight to summary assessment on the basis that this was a short hearing. Without the benefit of observations by the appellant in response to the respondent’s submissions, it dramatically reduced the appellants’ solicitors recoverable costs whilst making trenchant criticism of the approach taken by that firm. With respect to the Court of Appeal, this was regrettable. This was, however, primarily indicative of a flawed procedure at CPR40E which the rules committee ought swiftly to revisit.

Graeme Kirk, barrister, LAMB Chambers