Tidal Energy Ltd v Bank of Scotland Plc

Under CPR 3.19(5), a costs-capping order requires all three prescribed conditions to be met. Adequate control of the risk of disproportionate costs does not require that risk to be eliminated before costs are incurred. Detailed assessment may provide adequate control after the event by excluding or reducing costs that were not reasonably incurred or are disproportionate. The potential for satellite litigation is a relevant consideration. An exceptional case might arise where evidence shows that detailed assessment could not distinguish reasonably incurred costs from unreasonable costs.

Tidal Energy Ltd appealed from an order of HHJ Havelock-Allen QC dated 6 November 2013, which dismissed its claim for repayment of £217,781.57 transferred through CHAPS into the wrong account and then removed. In the appeal, the Bank of Scotland proposed to instruct leading and junior counsel. Tidal Energy applied for a costs-capping order, principally in respect of leading counsel’s costs.

The central issue was whether the risk of disproportionate costs could be adequately controlled by detailed assessment under CPR 3.19(5)(c), and whether CPR 52.9A applied.

The application for a costs-capping order was dismissed.

1. CPR 52.9A did not apply. The appeal was not proceedings in which costs recovery was normally limited or excluded at first instance. The same interpretation had recently been adopted in JE (Jamaica) v Secretary of State for the Home Department [2014] EWCA Civ 192.

2. CPR 3.19(5) contains cumulative preconditions to the exercise of the discretion. The court considered only condition (c): whether the risk of disproportionate costs could be adequately controlled by case-management measures or detailed assessment.

3. “Adequately controlled” did not mean eliminated in advance. A mechanism could neutralise or satisfactorily manage the risk. Case-management directions operated before costs were incurred, while detailed assessment operated afterwards. Detailed assessment could remove costs attributable to unnecessary leading counsel, or discount them where counsel had been instructed for a separate purpose.

4. This interpretation was consistent with the reasoning in Eweida v British Airways Plc [2009] EWCA Civ 1025, where detailed assessment was treated as capable of protecting against excessive costs. The court also considered that a policy of avoiding unnecessary satellite litigation supported reliance on the established costs-assessment process.

5. On the facts, the application had already taken over an hour in an appeal listed for one day. The material did not show that detailed assessment would be inadequate. In an exceptional case, evidence from a costs drafter might establish that a costs judge could not distinguish reasonably incurred costs from unreasonable costs. That possibility did not arise here.

1. Court of Appeal (Civil Division): Lady Justice Arden dismissed the costs-capping application on 30 April 2014: [2014] EWCA Civ 847.
2. High Court, Queen’s Bench Division: HHJ Havelock-Allen QC dismissed the underlying repayment claim by order dated 6 November 2013. No citation for that decision was stated in the judgment.