22 November, 2013
Filed UnderLegal Costs
The recent case of Vitol Bahrain EC v Nasdec General Trading LLC and others  All ER (D) 38 (Nov) provides an interesting insight into how the courts may interpret proportionality under the new test.
The matter related to an interim anti-suit injunction to prevent the defendants from pursuing any application to join the claimant to proceedings in the United Arab Emirates. The issue was whether the question of title of two oil cargoes should be litigated in England or in the UAE. The Commercial Court held the anti-suit injunction should not continue and awarded costs to the defendants to be summarily assessed on the standard basis. The value of the cargoes was some US $119m, but the hearing was not about who had title to the oil, it was about whether an injunction should be granted to restrain the defendants from joining the claimant into existing proceedings in the UAE.
The claimant’s statement of costs sought a total sum of £242,760.48, which included the costs of the without notice application as well as the costs of the return date hearing. The defendants’ statement of costs sought a total of £165,421.80.
Males J held that the amounts claimed were grossly disproportionate. He commented that the message should go out loud and clear that the Commercial Court would not assess costs summarily in such disproportionate amounts merely because the figures on both sides were broadly comparable. Control would be exercised to ensure that the costs claimed from the unsuccessful party were reasonable and proportionate. Having considered the defendants’ statement of costs, his lordship assessed their costs summarily in the amount of £75,000.
This decision envisages the interesting prospect of paying parties arguing that the receiving party’s costs are disproportionate notwithstanding that they themselves have incurred costs at a level as high or higher.
It is not clear from the case summary available how the judge reached the figure of £75,000. I suspect that this was not as a result of a line-by-line analysis of the Defendants' statement of costs.
The note at 44.5.3 of the White Book, admittedly dealing with the pre-1 April 2013 rules, states:
“The judge in a trademark dispute summarily assessed the costs at the end of the trial at £10,000 as against the £38,000 claimed. In carrying out the summary assessment the judge had not gone into any sort of detailed analysis of the objector’s statement of costs but appeared to have applied his own tariff as to what costs were appropriate for a one day paper only appeal. That approach was wrong in principle: 1-800 Flowers Inc v Phonenames Ltd  EWCA Civ 721; The Times, July 9, 2001.”
It is questionable whether this still represents good law as the new proportionality rules specifically state: “Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred”. There seems little purpose in undertaking a item-by-item assessment if the end figure will then be knocked down further to produce a proportionate amount. Of course, that is exactly the same issue that will arise on detailed assessment. Lord Justice Jackson seems to envisage that the item-by-item approach is still the first step in the process. No doubt that sometimes will be appropriate but there must be other cases where it must be preferable for the judge to say to advocates at the outset: “The damages were £x and I’m not going to allow costs of more than £y at the conclusion of the assessment. Do I need to hear from either of you further?”