In the recent Court of Appeal decision in Ryder Ltd and Another v MAN SE and Others [2020] Costs LR 2003, the Competition Appeal Tribunal (‘CAT’) was tasked with undertaking a summary assessment of costs incurred in the amount of circa £1.4 million.

Proportionality is a very important factor in the detailed assessment process. The paying party will often raise proportionality as an issue in their Points of Dispute, arguing that the receiving party’s costs are disproportionate to the facts and conduct of the case.

CPR44.3 5:  Ryder Ltd and Another v MAN SE and Others [2020] Costs LR 2003

The case was a significant specific disclosure application spin-off from the main high-value substantive proceedings of [2018] CAT 19, [2020] CAT 3, [2020] CAT 7. The Claimant unsuccessfully made an application for specific disclosure against a considerable number of Defendants, and as such, the Court awarded costs to the Defendants to be summarily assessed by way of an Order dated 11 March 2019. Perhaps, given the likely enormity of the costs and the assistance that might otherwise be provided by written representations, the Court undertook the summary assessment at a subsequent date. 

Rule 104 of the Competition Appeal Tribunal Rules 2015 (‘CAT Rules 2015’) provides the necessary framework for summary assessment. These rules reflect to some degree what can be found in the relevant factors for consideration found in the Civil Procedure Rules, namely CPR 44.3(5) in undertaking a CPR 44.3(2) assessment. The CAT Rules 2015 at 104 state, 

‘Costs

104….

(4) In making an order under paragraph (2) and determining the amount of costs, the Tribunal

may take account of—

(a) the conduct of all parties in relation to the proceedings;

(b) any schedule of incurred or estimated costs filed by the parties;

(c) whether a party has succeeded on part of its case, even if that party has not been wholly successful;

(d) any admissible offer to settle made by a party which is drawn to the Tribunal’s attention, and which is not a Rule 45 Offer to which costs consequences under rules 48 and 49 apply;

(e) whether costs were proportionately and reasonably incurred; and

(f) whether costs are proportionate and reasonable in amount.’

The CAT Rules 2015 further embody the general principle that proceedings should be addressed ‘justly and at proportionate cost’ (e.g. see rule 4(2), 53(1)). This embedding of proportionality into the the substance of the rules is similar to the route taken in CPR 44.3(5) for standard basis assessments,

‘(5) Costs incurred are proportionate if they bear a reasonable relationship to –

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c) the complexity of the litigation;

(d) any additional work generated by the conduct of the paying party,

(e) any wider factors involved in the proceedings, such as reputation or public importance; and

(f) any additional work undertaken or expense incurred due to the vulnerability of a party or any witness.’ [note for the readers – CPR 44.3(5)(f) was not in place at the time of the CAT decision and has since been introduced].

The CAT considered a number of cases before addressing the specifics of the costs claimed. Saliently it was viewed that a party may seek a Rolls Royce service from its lawyers, but it does not necessarily follow that such a considerable amount of costs are recoverable between the parties, see Merricks v Mastercard Inc [2017] CAT 27 at [29], Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm) at [13] and Re RBS Rights Issue Litigation [2017] EWHC 1217 (Ch) at [134]. Leggatt J perhaps best set this out in Kazakhstan Kagazy Plc in stating

‘The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party.’

Informed by these general principles, the Court forensically broke-down the components of the claim for costs and addressed the test of proportionality as follows:

Hourly rates: The 2010 published hourly rates guidance, whilst a starting point, remains in a utility weakened state owing to its failing to ‘keep up’ with the costs of operation. Those rates are now routinely adjusted by the Court, e.g. PLK & Ors (Court of Protection : Costs) [2020] EWHC B28 (Costs) (30 September 2020), Cohen v Fine & Ors [2020] EWHC 3278 (Ch) (01 December 2020). The Civil Justice Council are equally looking to revise said rates. It was further considered by the Court that specialist work equally may invite a rates increase, see Breasley Pillows Ltd v Vita Cellular Foams (UK) Ltd [2016] CAT 9.

Counsel: Given the heavy application for disclosure, and the way in which this application was made, the costs including the instruction of leading and junior counsel was considered reasonable. The number of counsel instructed was considered irrelevant, with focus being placed instead on the fact that the Court is to assess the global fees claimed.

Attendance at hearing: The Court was critical of the great multiplicity of fee earners whom had attended behind counsel, the ‘Rolls Royce’ service being received by the Defendant’s clients likely being overwhelming visible to the Court at the 2019 hearing. The Court was agreeable that attendance of a Partner, Associate and trainee/paralegal for each party would be reasonable.

Work done on documents: For the majority of the Defendants, the work on documents was the lion’s share of the fees claimed and were considered by the Court to be remarkably high. The time charged for witness evidence was considered to be excessive; and furthermore, given the seniority of the fee earners involved, was considered to be unreasonable and disproportionate. Further criticism was made of considerable reviews of work undertaken by counsel, leading to considerable reductions. The Court made it further clear that copying/printing bundles (including electronic) was not generally inter-partes recoverable, Practice Direction 47 para 5.22(5) being clear in this respect.

Foreign/additional lawyers’ fees and Work attributable to the case going forward : The costs of dealing with the application were deemed recoverable in principle; however, the costs of any general co-ordination (e.g. as to the substantive matter) were not . Similarly, any costs of the case going forward which would have been incurred in any event, regardless of the application, were non-recoverable.

The Court reduced the Defendant’s costs to £740,000 [51] in relation to the 1-day application hearing. Whilst considered to be exceptionally high, a final further reduction on the grounds of proportionality was not necessary. It is of interest to note that the Court, whilst undertaking the assessment, had borne proportionality in mind, demonstrating the inextricable nature of reasonableness/necessity/proportionality and highlighting the artificiality of the reasonableness/necessity first, proportionality second, approach.

Is £740,000 a high figure? Absolutely. Are the costs incurred proportionate and do they bear a reasonable relationship to the facts? Possibly. I think that the lasting message of the decision in Ryder Ltd and Another ultimately, should be that, proportionality and individual case facts reign supreme – this was a serious and considerable application in relation to a heavy and complex case and it therefore unsurprising that such a level of costs were incurred. However, an assessment of costs in the region of 50% is still a considerable reduction, perhaps reflecting the reality that Rolls Royce costs are not, in fact, recoverable by truck manufacturers inter-partes.

How Can ARC Costs Assist?

ARC Costs are a group of experienced and independent Costs Draftsmen and Costs Lawyers who regularly advise in costs disputes and proportionality. Our team, who possess in excess of 20 years’ experience, regularly represent Paying and Receiving Parties, to prepare or contest Bills of Costs, Costs Budgets and to conduct costs negotiations (including in respect of budget variation notices) in order to recover costs, or to reduce a party’s burden to pay costs.

If you require any further information or have a costs query, please utilise our free chat facility. Alternatively, speak to one of our experts directly on 01204 397302 or via email at info@arccosts.co.uk.

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