Vava & Ors v Anglo American South Africa Ltd

A contractual costs-protection agreement may arise from solicitors’ correspondence, but its scope depends on the correspondence as a whole and the parties’ objectively expressed intention. A court may decline to make a costs order where setting it off against an existing costs liability would be unfair or pointless. The jurisdiction to set off one judgment or costs order against another is inherent in the court and is exercised to achieve fairness. The fact that the general rule ordinarily requires the unsuccessful party to pay costs does not prevent a different order where the circumstances justify it.

The ruling concerned costs after the court had granted the defendant’s jurisdictional challenge in the Vava action. The claimants argued that correspondence between the parties’ solicitors created a contractual agreement that the defendant would not seek costs from them. Alternatively, they argued that, in light of the correspondence, it would be unjust to order them to pay costs.

The defendant accepted that it should not recover all its costs, but sought an order limited to the amount of costs previously awarded to the claimants, so that the two liabilities would be neutralised. The court therefore had to determine the effect of the correspondence and whether a costs order should be made despite the general rule in CPR 44.3.

1. Contractual agreement. The correspondence, read as a whole, showed that no binding agreement arose until the claimants cancelled or varied the relevant adverse-costs ATE cover. The final formulation adopted by the defendant’s solicitors was that the defendant would not seek to enforce costs orders against the claimants. The agreement therefore took effect only when the condition concerning the insurance cover was fulfilled.
2. The expression “one-way costs shifting” did not, without more, establish an agreement that the court could never make a costs order in favour of the defendant. The contractual meaning depended on the parties’ correspondence and objectively expressed intentions, applying the approach in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601.
3. Set-off and fairness. The court’s power to set off one judgment or order for payment against another extends to costs orders. That jurisdiction is discretionary and arises from the court’s inherent jurisdiction. It is not properly characterised as equitable set-off. The court preferred the reasoning in R (on the application of Burkett) v LB of Hammersmith and Fulham [2004] EWCA Civ 1342 to the broader characterisation in Lockley v National Blood Transfusion Service [1992] 1 WLR 492.
4. It would be unfair to permit the defendant to use a costs order to neutralise its liability under an earlier order which it had agreed not to enforce. The claimants should not be disadvantaged because they had sensibly refrained from obtaining an immediate assessment of their costs. The proposed order would therefore be pointless or unfair.
5. Despite the general rule in CPR 44.3, the court made no order for costs in the Vava action.

This was a first-instance ruling on costs following the court’s judgment of 24 July 2013, which had upheld the defendant’s challenge to jurisdiction. The present ruling concerned only the Vava action.