Greenwood & Ors v Goodwin & Ors

In group litigation, the default equal sharing of common costs may be varied where substantial differences in claim value make it unfair. The court should seek a fair alignment between each claimant’s costs risk and potential recovery. Subscription cost may provide a practical proxy where loss or recovery is uncertain. Costs liability should ordinarily remain several, personal and enforceable against each claimant, rather than being imposed on an informal claimant group.

All claimants, including passive or late-joining claimants, should generally bear their proportionate share of adverse and claimants’ common costs. A GLO should not confer risk-free observer status. Cost-sharing arrangements should offer reasonable certainty and normally require a material and substantial change of circumstances, or another compelling reason, before variation.

The judgment concerned the third case management conference in proceedings arising from the Royal Bank of Scotland rights issue. The claimants sought statutory remedies under the Financial Services and Markets Act 2000 and related claims against former directors. The litigation was subject to a group litigation order and involved claimant groups with substantially different numbers of members and claim values.

The court was asked to determine how defendants’ common costs and claimants’ common costs should be shared, whether future or passive claimants should contribute, whether payments should be made during the litigation, whether the existing cut-off date should remain, and whether costs budgeting and pleadings on causation and loss should be ordered.

1. Costs allocation. The default rules in CPR 46.6 were the starting point, but fairness justified departure from equal sharing because claim values varied greatly. Adverse common costs were therefore to be borne severally by each claimant in proportion to the acquisition or subscription cost of the relevant shares. That measure was a practical proxy for potential reward and was preferable to attempting to quantify eventual compensation or loss.
2. The court rejected allocation by claimant group. Groups were informal agglomerations without separate legal standing or enforceability, and group-based allocation could produce a serious mismatch between risk and potential recovery. Personal responsibility for costs was fairer than allocation by reference to control of the litigation.
3. The existing agreement under which the BB and SL Lead Litigating Groups would bear their own common costs was approved. Subject to that agreement and any special arrangement within a group, present and future claimants were to bear claimants’ common costs, including the lead solicitor’s costs, on the same several and proportionate basis.
4. Passive, stayed and late-joining claimants should generally remain subject to the same adverse and own-costs regime. The proposed risk-free “parked” or observer status was rejected because it would encourage free riding, undermine the objectives of a GLO and potentially frustrate limitation policy.
5. The court substantially endorsed “Pay as You Go”, but deferred implementation until the claimant groups and collection process were clearer. Cost-sharing directions would be varied only for a material and substantial change of circumstances or another compelling reason. The GLO cut-off date was set aside, while case management would still require stragglers to catch up.
6. Formal costs budgeting was premature. The budgeting application was dismissed without prejudice to a later application, while the parties were directed to exchange updated costs and expert-evidence information. The defendants were required to plead to causation and loss because the procedural landscape had changed and the pleadings would assist consideration of a split trial.