Motto & Ors v Trafigura Ltd & Anor (Rev 3)

On a standard-basis assessment, costs which appear disproportionate overall must be assessed item by item. Each item is recoverable only if necessarily incurred and reasonable in amount. Necessity is a higher threshold than reasonableness, although it does not bear its strictest meaning.

Costs attributable to unsuccessful heads of damage are not automatically irrecoverable. They may be recovered while pleading, investigating or pursuing those heads remained necessary, reasonable and proportionate. Costs of implementing and distributing a settlement may likewise form part of the proceedings.

By contrast, solicitors’ costs of establishing and advising upon conditional fee and after-the-event insurance arrangements are costs of obtaining business or funding, not costs of the litigation. Communications with insurers concerning the conduct of the litigation are collateral and are also irrecoverable.

Nearly 30,000 claimants brought group personal injury proceedings concerning chemical waste discharged around Abidjan. The proceedings settled for £30 million, with the defendants ordered to pay costs on the standard basis. The claimants then presented a bill exceeding £104 million, including 100% success fees and an after-the-event insurance premium exceeding £9 million.

The Senior Costs Judge determined more than 20 preliminary issues before detailed assessment. The defendants appealed rulings concerning proportionality, vetting, pre-action conduct, medical reports, abandoned claims, settlement and distribution, funding costs, the success fee and the insurance premium. The claimants cross-appealed the distribution cut-off date and the success-fee determination.

The central questions were which categories of expenditure were recoverable in principle and what standards the costs judge must apply during detailed assessment.

1. The defendants’ appeal and the claimants’ cross-appeal were each allowed in part. Because the base costs appeared disproportionate overall, the approach in Home Office v Lownds required every item in the bill to satisfy the higher test of necessity. An item must also be reasonable in amount. Necessity does not carry its strictest meaning.

2. Vetting and medical-report costs were recoverable in principle, subject to necessity, reasonableness and proportionality. A claimant-specific item was recoverable only if covered by that claimant’s conditional fee agreement. Generic work undertaken for all actual or potential claimants could be recoverable irrespective of the date on which an individual claimant joined the register.

3. No reduction was justified for non-compliance with pre-action procedures. The urgent issue of securing the English jurisdiction made prompt commencement reasonable. The claimants subsequently supplied information and agreed a stay. The defendants would in any event have defended vigorously, so the limited non-compliance did not significantly increase costs.

4. Costs concerning heads of damage later abandoned were not automatically excluded. A successful claimant may recover the necessary, reasonable and proportionate costs of pleading and investigating a bona fide head of damage. Costs incurred after the head should reasonably or necessarily have been abandoned must be disallowed.

5. Necessary, reasonable and proportionate costs of implementing and distributing a settlement are ordinarily costs of the proceedings. The settlement agreement did not exclude them. The fixed cut-off date of 26 October 2009 was discharged because it had not been properly argued and could exclude work necessarily incurred after that date.

6. Costs of preparing and advising upon conditional fee agreements and arranging after-the-event insurance were irrecoverable. Before engagement, the solicitors were negotiating with prospective clients and acting in their own business interests. Such expenditure formed part of their overheads. Later discussions with insurers and the taking of insurers’ instructions were collateral funding costs rather than costs of conducting the litigation.

7. The Senior Costs Judge was entitled to fix a 58% success fee for both solicitors and counsel. Assessment depended on the risk reasonably apparent when the fee was agreed and involved an overall evaluative judgment, not mechanical multiplication of ostensibly precise risk percentages. The recoverable insurance premium of £9,677,554, based on a 65% prospect of success, was also upheld because no evidence established equivalent cover at a lower market price or a defect in its calculation.

Maurice Kay and Hughes LJJ agreed with the Master of the Rolls.

1. Court of Appeal (Civil Division): By [2011] EWCA Civ 1150 , allowed the defendants’ appeal in part and the claimants’ cross-appeal in part. It varied the preliminary rulings governing the detailed assessment.
2. Senior Courts Costs Office: The Senior Costs Judge determined more than 20 preliminary costs issues in three judgments. The principal judgment was delivered on 15 February 2011. No neutral citation is stated.