Ministry of Defence v AB & Ors

Where an appellate court reverses a substantial interim costs payment, repayment may be ordered promptly while permission to appeal is pending, with a stay limited to the balance if fairness requires. The court may adopt a broad-brush costs approach where issue-based assessment would be disproportionate, reflecting substantial success, failures on subsidiary issues and procedural shortcomings. Interest on repayment is discretionary and should reflect current economic conditions. A successful party may receive a proportionate interim payment on account of costs where the schedules appear reasonable.

The Ministry of Defence appealed from orders made by Foskett J in the High Court concerning limitation and strike out or summary judgment in nine lead claims and related group litigation. On appeal, the Ministry succeeded on limitation but failed to obtain strike out or summary judgment for procedural reasons, while one lead claimant’s claim remained alive. This supplementary judgment addressed permission to appeal, costs below and on appeal, repayment of a £7.5 million interim costs payment, interest, and a further payment on account. The central questions concerned the appropriate costs allocation and whether repayment should be stayed pending a possible Supreme Court appeal.

The Court gave a supplementary judgment unanimously through Lady Justice Smith to explain and implement its consequential orders.

1. Permission to appeal. The respondents’ applications for permission to appeal were refused. The Court stated that its conclusions on each topic were unanimous, while leaving it to the Supreme Court to determine whether the Court had erred or the law required further elucidation.
2. Costs below. Because the Ministry had succeeded on limitation, Foskett J’s order awarding the claimants their costs was substantially reversed. The Ministry was awarded 90% of its costs below. A broad-brush order was preferred to expensive issue-based assessment. The Court took account of the Ministry’s failure on strike out or summary judgment, its unsuccessful contention that delay made a fair trial impossible, the claimants’ unsuccessful section 14 submission, and the Ministry’s failure to issue formal application notices for summary judgment.
3. Costs of the appeal. The Ministry was awarded its costs of the appeal. No reduction was made for the procedural failure concerning summary judgment or for time spent on the Sinfield case, which was trivial in the context of the appeal and substantially concerned causation that required consideration in any event.
4. Repayment and interest. Repayment of the £7.5 million interim costs award was ordered unless the Supreme Court allowed an appeal. Half was payable within 28 days and the balance two months later. Payment of the second instalment was stayed pending the Supreme Court’s decision on permission and, if permission were granted, pending determination of the appeal subject to any different order. Interest was awarded at 2% above base rate because the rate was discretionary and 1% was unrealistic in current economic conditions.
5. Further payment on account. The Ministry was awarded £2.25 million on account of its costs below and on appeal, representing about 40% of the approximate bill. The draft schedules appeared reasonable, and the respondents’ after-the-event insurance indicated that payment should not create cash-flow difficulties.

• Court of Appeal (Civil Division): On appeal from orders of Foskett J in the High Court, the Ministry succeeded on limitation, failed on strike out or summary judgment for procedural reasons, obtained 90% of its costs below and all its appeal costs, and obtained repayment and a further payment on account. The respondents’ applications for permission to appeal to the Supreme Court were refused.
• High Court, Queen’s Bench Division: Foskett J had awarded the claimants their costs of and incidental to the hearing and had ordered the Ministry to pay Rosenblatt £7.5 million on account of costs.