This is the transcript for the Costs Management Conference which took place in open court on 23 October 2019.
It is not the perfected transcript - ie not signed off by the parties yet, but that still means it is likely between 99-100% correct.
If you would like to read my report about being there, you can find it here.
Otherwise, enjoy:
It is not the perfected transcript - ie not signed off by the parties yet, but that still means it is likely between 99-100% correct.
If you would like to read my report about being there, you can find it here.
Otherwise, enjoy:
Wednesday, 23 October 2019
(11.00 am)
MR JUSTICE FRASER: Mr Warwick.
Submissions by MR WARWICK
MR WARWICK: May it please your Lordship, I appear again for
the claimants with Mr Miletic and the Post Office is
represented again by Mr Draper.
Just for the transcript, to make clear that this is
a costs management conference.
In the flurry of activity, my Lord, prior to
the deadline for filing and serving, bar exchanging,
skeleton arguments on Monday, for which both my learned
friend and I are very grateful for the adjustment to,
certain documents were filed and served. I just wanted
to check, my Lord, that your Lordship had the position
as it stands when the dust settles for the purposes of
today so we're all operating on the same basis.
The claimants' draft order that's sought is in fact
the one that appears in the hearing bundle at <Z1/3/1>.
MR JUSTICE FRASER: Now, I don't have, because I've not been
sent, a hard copy application bundle, but I have got my
own hard copy bundle which has got a variety of
different draft orders in it. The one you've just
called up on the screen. (Handed)
Sorry, what's this? Thank you very much.
Have you got a hard copy of the order?
MR WARWICK: I do have a hard copy of the order, which
I could hand up if it would assist.
MR JUSTICE FRASER: It's just I can't navigate through
the common screen myself very quickly while I'm
listening to you. (Handed).
I mean, I can navigate through the common screen,
but ...
MR WARWICK: Yes.
MR JUSTICE FRASER: Right. So this is the one you're
seeking?
MR WARWICK: That's right, my Lord, and the only difference
in fact is that there were rapid negotiations --
MR JUSTICE FRASER: No, I entirely understand and it is not
an issue. I mean, it's --
MR WARWICK: I'm most grateful.
MR JUSTICE FRASER: It's just effectively a logistical
catch-up of where we are following, as I understand it,
the constructive discussions --
MR WARWICK: That's right, my Lord.
MR JUSTICE FRASER: -- so it's not a problem.
MR WARWICK: And also under the umbrella of logistical
catch-ups, there is something in my skeleton that
I should just correct so that it aligns with the current
position. If I could ask Opus to call up <Z1/1/3>, it's
paragraph 9(b) of my skeleton argument, page 3 of that
document.
MR JUSTICE FRASER: Yes.
MR WARWICK: That particular phase, "Group
Litigation/Management", where the negotiations ended was
in fact that £100,000 has been agreed for that phase for
the Post Office's budget, but Post Office has
effectively taken out of that budget the fees of
Herbert Smith Freehills, reserving the right to
re-insert that in budgets relating to later stages.
MR JUSTICE FRASER: Well, the fees of HSF are a live issue
as of this morning, aren't they?
MR WARWICK: Indeed they are.
MR JUSTICE FRASER: So what correction do you want to make
to your skeleton?
MR WARWICK: After the words "Group Litigation/Management",
"if the numbers £100,000 is agreed, but ..." be
inserted, and after the word "costs" in the second line,
the first word in the second line to be inserted "for
HSF".
MR JUSTICE FRASER: All right. Well, why don't you read out
to me what the amendment --
MR WARWICK: It will now read:
"Group Litigation/Management: £100,000 is agreed but
likewise ..." --
MR JUSTICE FRASER: Hold on, "£100,000 is agreed but ..."?
MR WARWICK: -- "... but likewise, Post Office intends to
seek its budgeted costs for HSF in this phase in budgets
relating to later stages of the litigation."
MR JUSTICE FRASER: You went too fast and I lost you
after "HSF".
MR WARWICK: I'm sorry.
MR JUSTICE FRASER: "... Post Office intends to seek its
budgeted costs for HSF ..."
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: Go on.
MR WARWICK: "... in this phase in budgets relating to later
stages of this litigation."
That's the existing words.
MR JUSTICE FRASER: Right. All right. Just pausing there
just one moment, then, Mr Warwick.
So, Mr Draper, that's an accurate summary of where
we are as at today in respect of group
litigation/management; is that right?
MR DRAPER: It is, my Lord. There's an element of costs
falling under that broad heading of "Group
Litigation/Management" that it is agreed does fall to be
budgeted at this stage, has been budgeted and has been
agreed at 100,000.
MR JUSTICE FRASER: And that's in the different summary
documents I've got it, is it?
MR DRAPER: That's right, my Lord. There is another chunk
which it has been agreed is not for now and so will be
dealt with if appropriate in later budgets.
MR JUSTICE FRASER: Is that different to the situation as it
was set out in the letter or one of the letters, which
I think was dated 16 October, which came last week?
I don't have the Opus reference for it, but it was from
Womble Bond Dickinson to my clerk on 16 October
<Z4/10/1>. It's a two-page letter which has a table on
the front of it with category 1, 2, 3, 4, leading to
a total of 16,322,000.
MR DRAPER: I'll have to confirm that, I'm afraid, my Lord.
MR JUSTICE FRASER: It's just that -- in paragraph 5 of that
letter --
MR DRAPER: Oh no, my Lord, those are different entirely.
Those are different again.
MR JUSTICE FRASER: I know, but that's the update
notification, isn't it, that letter?
MR DRAPER: Yes, my Lord. The costs mentioned there are
costs that are being incurred by Post Office, but it
doesn't seek from the claimants -- has no intention to
seek from the claimants. They're effectively costs of
which we're informing your Lordship because they're
costs borne by Post Office but not costs that it will
seek as costs in these proceedings. They're there
effectively for completeness.
MR JUSTICE FRASER: All right. Well, I'm not trying to be
difficult, but just one follow-up question before I come
back to Mr Warwick. That does say, however, in item 5.4
that <Z4/10/1>:
"... costs not included within that update are those
expended in relation to ...
"The engagement by Post Office of
Herbert Smith Freehills to provide legal advice in
respect of the Group Actio ..."
Just pausing there, does the 100,000 form part of
that or is that separate?
MR DRAPER: No, the 100,000 I think is mostly
Womble Bond Dickinson -- it's all Womble Bond Dickinson,
the 100,000.
MR JUSTICE FRASER: I understand.
MR DRAPER: So there is a fairly discrete category of costs
that it is agreed do fall to be budgeted at this stage,
100,000. We've reached agreement --
MR JUSTICE FRASER: And that's in relation to
the heading "Group ...", the heading that's in
Mr Warwick's skeleton?
MR DRAPER: It is, my Lord.
MR JUSTICE FRASER: That's 100,000 in relation to
Womble Bond Dickinson and that falls to be budgeted at
this stage; is that right?
MR DRAPER: Exactly, my Lord.
MR JUSTICE FRASER: And that has been agreed at 100K?
MR DRAPER: It has.
MR JUSTICE FRASER: Thank you very much.
Right Mr Warwick, that's corrected your skeleton.
MR WARWICK: My Lord, if it helps, I wonder if Opus'
assistant could call up <Z2/6/1>. This document,
my Lord, is a summary, specifically the first page of
a Precedent H that was filed by Post Office on Monday at
4.30 pm and, so far as I'm concerned, my Lord,
accurately reflects the position of what's agreed and
what remains outstanding.
MR JUSTICE FRASER: Right, well, just pausing there, because
I have got a document similar to that, when you said
"Monday", I think there's a different version of this
which was sent under cover of an email of Mr Parsons on
22 October, so that's Tuesday, at 16.26 --
MR WARWICK: Yes, my Lord. That was --
MR JUSTICE FRASER: -- which I understood that was the one
that was currently in play because that has the
corrected formula.
MR WARWICK: Indeed, my Lord. The front pages of those two
documents are identical.
MR JUSTICE FRASER: I don't think they are because if you
just look alone at the bottom right-hand corner of this
one, the total is 15.793.
MR WARWICK: I beg your pardon. I should correct myself on
that. That is the recast budget with a correction made
that has been filed -- was filed yesterday, and so it is
the budget in full, so it contains the full claimed
sums. I was quite wrong to suggest the front pages are
identical. They're not.
MR JUSTICE FRASER: You see, when I get two versions of
documents, the first thing I do is look at the front
page to see if they are identical and I can tell you it
wasn't.
MR WARWICK: Indeed, my Lord, yes --
MR JUSTICE FRASER: In fact there is about £2 or £3 million
non-identical.
MR WARWICK: My Lord, what I meant to say -- and I correct
myself -- is the document that I took your Lordship to
a moment ago that remains on the screen now at <Z2/6/1>
reflects what is agreed, so the lower sums that are
agreed, save the ADR phase, which falls to be reviewed
in exercise of your Lordship's powers today.
So this document --
MR JUSTICE FRASER: I don't -- I just don't follow that, I'm
afraid. Looking at the one on the screen --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- which has the 15.793 --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- hold on one second.
MR WARWICK: If I could explain and my learned friend will
correct me if I'm wrong. What Mr Draper's solicitors
have done is used this a little like a budget discussion
report, I suppose, in that what they have done is they
have substituted all the further issues trial incurred
and estimated fees and then correspondingly the totals
that are affected by this with the agreed sums, save for
the ADR sum which remains subject to your Lordship's
discretion today. The reason I mention --
MR JUSTICE FRASER: And that ADR sum that you just
identified is the one that runs all the way across to
the far right-hand column with a total of 1,384,127?
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: Is that right?
MR WARWICK: Yes.
MR JUSTICE FRASER: Well, I -- excuse me one second.
(Pause)
Just for my own rather retentive interest, I added
up some of the figures and that was before I understood
there may or may not be some issues with the formulae
and the underlying spreadsheet, and I'll explain to both
the parties why I did that in a minute.
But in the process of doing that, if you look along
the "Grand total" row on the document that has
the 15.793 total, in other words the one that's up on
the screen of <Z2/6/1> --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- I was interested to add up columns D,
E, F and G --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- which I did before I realised that's
what column H was supposed to be. Having added up those
four figures, I actually got a different total to
the 4.270, which I couldn't immediately understand why
that was because I would have thought it should be
identical.
MR WARWICK: Well, your Lordship's alighted on a problem
which I had not, and without myself performing the same
calculation, I'm probably unable to comment.
But I do have a proposed solution to this which
would allow this to proceed today on figures which are
common ground, and that is that all of the figures in
F and G, both of those entire columns save for the ADR
and settlement figures, are agreed figures and together
with the incurred costs --
MR JUSTICE FRASER: That may very well be the case, but the
ADR settlement lines in columns F and G on the face of
it are nearly £750,000.
MR WARWICK: That's correct.
MR JUSTICE FRASER: When one is considering a costs
management order, there are supposed to be two exercises
performed. One is satisfaction of the individual
elements and one is satisfaction of the overall total.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: It's a bit difficult to approach
the satisfaction of the overall total exercise if there
are such sizeable amounts that fall within the total
which aren't agreed.
So, for example, if one looks across the ADR --
I mean, I'm going to come on to ask Mr Draper a couple
of questions about this anyway, but if one looks along
the line of ADR settlement discussions before we then
turn to the next document, the one which does correct
the formulae, there's £500,000 in column E that is not
agreed -- is that right?
MR WARWICK: Yes, it's not agreed.
MR JUSTICE FRASER: That's not agreed -- there's 22,000 of
disbursements in column F which is not agreed --
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: That's right -- and there's 714,451
which is not agreed.
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: Those figures more or less, with a bit
of juggling, depending on if the formula are right, is
what leads to the total of 1.239 in column H?
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: And that is not agreed out of a total of
4.270?
MR WARWICK: Again that's correct, my Lord, yes.
MR JUSTICE FRASER: Right, so on this particular summary
sheet, I've correctly understood the items in issue,
I think.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: Is that right?
MR WARWICK: Yes.
MR JUSTICE FRASER: Now, before we get to the next one --
and I've got some questions for Mr Draper on
specifically this document so I'm going to ask you to
sit down. I'm just going to explore those questions and
then I'm going to come back to you.
Right, Mr Draper.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: Firstly I want to make it absolutely
clear that none of this is criticism and the degree of
discussion and agreement between the parties is
obviously enormously constructive and very helpful.
I just need to make sure that I've caught up with where
the parties are because of the way the documents have
come in in the last 24/48 hours.
MR DRAPER: I understand, my Lord.
MR JUSTICE FRASER: There are two documents which I'm
effectively using as a summary sheet for the defendant's
costs and I just want to make sure I've got them
correctly.
MR DRAPER: Yes.
MR JUSTICE FRASER: One of them is <Z2/6/1>, which is on
the common screen at the moment and which I've just been
going through with Mr Warwick.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: And that is the one that is dated
21 October.
MR DRAPER: Yes.
MR JUSTICE FRASER: Then there's the other one which came
under the cover of Mr Parsons' email correcting some
issues. I don't know what the reference is for that on
the common screen, but it's got a total of
18.401 million in the bottom right-hand corner.
MR DRAPER: Yes, my Lord, I'll just find that.
MR WARWICK: It's <Z2/5.2/1>.
MR JUSTICE FRASER: Z2/5.2/1. Now it's quite a simple
question, but it's one for you really, not Mr Warwick.
Which of those two should I be using?
MR DRAPER: You should, my Lord, be using the one that is on
the common screen, the one that consists only of
a summary sheet, and that's because --
MR JUSTICE FRASER: Sorry, when you say "on the common
screen", you mean the one with the reference <Z2/6/1>,
the one that Mr Warwick has been taking me to?
MR DRAPER: Yes, entirely, my Lord. The one that totals
7.9 million or you can call it "the Monday document".
MR JUSTICE FRASER: On the basis that the other one came
more recently than that, what is -- do I just ignore
this one? What's the underlying rationale for it?
MR DRAPER: For most purposes you can, my Lord. If
I explain the rationale, it will then be clear why it
was sent to your Lordship.
The full version received by the court yesterday is
a corrected form of Post Office's original budget prior
to agreement with the claimants, so it's the starting
point, corrected for an error in the formula.
The only reason, my Lord, it came after the summary
sheet showing agreement is that by oversight it wasn't
sent to the court at the same time as it was sent to
the claimants when corrected on Monday.
MR JUSTICE FRASER: I understand. So it's an accurate
version of a document that had effectively been
overtaken by events, but it was to correct an inaccuracy
and so it was right to resubmit it.
MR DRAPER: Exactly, my Lord.
MR JUSTICE FRASER: So I don't need to concern myself with
that at all for today.
MR DRAPER: You don't, my Lord.
MR JUSTICE FRASER: Right. So if we then go back to
Mr Warwick's -- and, Mr Draper, I don't know if you've
got a calculator and it is possible that I have made
a mistake but I will do it again. I am now going to add
up for myself columns D, E, F and G across the "Grand
total" line to see what I get to so ... and I'm going to
ignore the pence. (Pause)
All right. Well, that shows that my first exercise
was wrong because the total is correct. For some reason
I got it to 4.147 million before, but it should be
the 4,270,844, shouldn't it?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: That is correct. Well, I'm sorry I set
that hare running.
MR DRAPER: Not at all.
MR JUSTICE FRASER: Looking therefore at <Z2/6/1>, as
I understand it -- and this is just confirmatory for
you -- with the exception of the line across,
"ADR/settlement discussions", that is agreed by the --
it's not approved by the court, but it's agreed by the
claimants?
MR DRAPER: The estimates -- the budgeted costs estimates as
contrasted to incurred are all agreed save for ADR. Of
course incurred costs are in a different category.
They --
MR JUSTICE FRASER: Well, I can't do anything about that
anyway, other than make comment.
MR DRAPER: Any comment, yes. But that's right, my Lord.
MR JUSTICE FRASER: That therefore brings me to the next
point, which is one for you first and then for
Mr Warwick because it relates -- because it does
directly impact on today's exercise. The costs
management order for the common issues trial, which was
however many weeks it was with however much evidence of
fact, was 3.614 million; is that right? I'm taking that
off your column B.
MR DRAPER: It sound right and if it's in column E, I'm sure
it is right.
MR JUSTICE FRASER: At the bottom of column E.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: So that's common issues.
The Horizon trial which started in March and
finished in July and had experts and fact --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- the case management -- sorry, the
costs management order in respect of that is
3.749 million; is that right?
MR DRAPER: That's seems to be right, my Lord.
MR JUSTICE FRASER: So those are two figures which the court
has already approved?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: If we then jump ahead to column H, we
get a figure well north of 4 million just in respect of
the further issues trial; is that right?
MR DRAPER: That is right, my Lord.
MR JUSTICE FRASER: Now, can you remind me -- and I don't
know where this is in the electronic trial bundle --
where is the case management directions order that sets
out what the further issues are and the directions in
respect of the trial?
MR DRAPER: I'll just turn that up, my Lord.
MR WARWICK: I might be able to assist with that.
MR DRAPER: I'm told it's <C6/57/1>, my Lord, and that does
sound right.
MR JUSTICE FRASER: Can we call that up, please. <C6/57/1>.
Right. I'll just have to work out which ...
Right, so that's to deal with one issue only,
I think, which is called "Further issue 2" --
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: -- with a time estimate of three weeks.
MR DRAPER: That's right, my Lord. From that point onwards
there's the slight wrinkle that, of course, until this
hearing it was two issues including settlement, but --
MR JUSTICE FRASER: Until the hearing in July?
MR DRAPER: That's right, my Lord, but since that date it
has been limited to the one of the two.
MR JUSTICE FRASER: That's in the schedule and I'll just
remind myself what that is. And that's supposed to
start on 2 March.
MR DRAPER: Yes, my Lord. If we go through to page 5 of
the <C6/57/5>, that's the schedule.
MR JUSTICE FRASER: That's being done, so I understand it,
on assumed facts, I think; is that right?
MR DRAPER: Where not agreed. I think the expectation is
there will be some facts that can be agreed which may be
of more utility than an assumed fact, but beyond that
the facts will be assumed.
MR JUSTICE FRASER: Yes, because there's a process, I think
in the order, for the parties to agree assumed facts.
If they can't agree all of them, there's going to be
further directions in December and a resolution -- one
of those further directions is going to require
consideration of what we do about facts if there's
a disagreement between the parties about the assumed
facts; is that right?
MR DRAPER: Yes, my Lord. It may not be entirely
straightforward; for example, we might -- one or other
of us might invite the court to approach a particular
sub-issue on the basis of distinct alternative assumed
facts.
MR JUSTICE FRASER: Yes, which is perfectly -- or seems
potentially sensible.
But on the basis that further issue 2 deals with
measure of loss effectively as a matter of legal
analysis and explanation, there's either going to be
assumed facts or potentially some relatively narrow
disputes of fact?
MR DRAPER: Yes, I wouldn't quite say "disputes of fact".
There might be circumstances in which the court is asked
to proceed on alternatives. So if one starts with
a dispute of fact, either we assume one set of facts or
we assume both in the alternative. What we're not going
to do, my Lord, in my submission, is seek to resolve
the difference of fact between the parties principally
because we're not going to have evidence.
MR JUSTICE FRASER: For all the obvious reasons. So there's
not going to be evidence.
MR DRAPER: No.
MR JUSTICE FRASER: In those circumstances, I am struggling
as to why any costs management order in respect of
the further issue trial should be so much in excess
of -- just the global figures which the costs management
orders for further issues and Horizon issues reached for
obvious reasons, both of those -- and I know you've both
been involved substantially and I think you, Mr Draper,
have been involved in both Horizon and common issues.
MR DRAPER: Yes.
MR JUSTICE FRASER: They were very substantial hearings with
enormous ranges of disputed facts and, so far as the
common issues are concerned, wide-ranging disputes of
legal argument as well, and the Horizon issues had two
very detailed expert exercises involved.
MR DRAPER: It did, my Lord.
MR JUSTICE FRASER: Simply in terms of the headline figure,
I would have thought the further issues trial is going
to be narrower in scope than each of those two
mega-trials, but am I approaching it from the wrong
point of view?
MR DRAPER: I think the proposition with which I wouldn't
seek to disagree, my Lord, is that the trial itself one
would anticipate being less heavy than the other two.
That, my Lord, is a proposition I wouldn't quibble with.
If I could take you back to the spreadsheet at
<Z2/6/1>, which is the updated summary page, my Lord.
MR JUSTICE FRASER: Yes.
MR DRAPER: If one looks down in the yellow column, which is
column H, which is the totals for the cost of
the further issues trial, the meat of the difference, my
Lord, is attributable to ADR/settlement. If your
Lordship looks at the total there of 1.239 million and
then if you cast your eye across, my Lord, to
the equivalent figures in the columns for the common
issues trial and the Horizon issues trial, obviously
those are still substantial numbers for Horizon and
the common issues trial, but by comparison they are
extremely small. So that does account, my Lord, for
a great deal of the difference.
MR JUSTICE FRASER: It does and I've just now done
a calculation to remove the sum of £1,239,353 in the ADR
line --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- and to take it out of the 427,844 and
I've got a total of 3,031,491, which you're right, both
of those are -- well, one's 80% and the other's about
75% higher -- sorry, that's 80% or 75% lower than
the corresponding costs for the common issues and
Horizon issues.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: But the problem with approaching it like
that is if -- and I know we're going to get on to the
substantive point this morning anyway, but in a way,
because those settlement figures are for the whole
action, it's misleading, isn't it, to have them in
the further issues costs management order -- or, sorry,
a costs management order that on its face looks as if
it's approving costs for the further issues because, if
those ADR settlement costs are expended and result in
the whole matter going, then the group litigation as
a whole is resolved and not just the further issues.
MR DRAPER: Yes, my Lord. I think it's right to say that it
was the anticipation of the way the cost budgeting has
been arranged that ADR and settlement costs incurred in
the relevant stage would fall within the budget for that
stage and the situation here arises just because of the
peculiarity of timing, that by far the most substantial
efforts towards settlement have fallen within this
stage.
MR JUSTICE FRASER: Now I understand. I understand. All
right. Well, I mean, that -- I do -- I mean, for
example, other ways of comparing like with like, which
I think are perfectly valid comparisons --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- if you look at witness statements
in common issues, there's £500,000 there. Now there
aren't going to be any witness statements for the
further issues, so one would expect, if the two
exercises were broadly the same, that the further issues
trial at the very least would be £500,000 cheaper
because you haven't got the £500,000 on witness
statements --
MR DRAPER: I can see that, my Lord.
MR JUSTICE FRASER: So although some of it is explained by
the sizeable figure for ADR, not all of it is explained
because, if you look at other headline differences, one
would expect the further issues figure to be really
quite a lot lower than it is.
MR DRAPER: It's obviously a comparison between the further
issues trial or one or other or both of the previous
trials does show a -- it is a very mixed picture,
my Lord. We see -- many of the costs that one would
anticipate being higher in the earlier two trials we see
were in fact higher. So, for example, we see the
figures for trial preparation were substantially higher
for those two trials, reflecting your Lordship's point
about simply there being more meat.
MR JUSTICE FRASER: Yes, the nature of the trials.
MR DRAPER: Entirely so, my Lord. I'm not sure I can assist
you much further than saying --
MR JUSTICE FRASER: No, no, I just wanted to explore that
with you first so that I could make sure I was not
missing anything glaringly obvious. I don't think I am.
MR DRAPER: No, my Lord.
MR JUSTICE FRASER: Thank you very much and I'll now hear
from Mr Warwick.
MR WARWICK: My Lord, yes. Might I comment on what's been
said? Just two very short things. First of all there
has been a chronology of orders relating to this stage
of the proceedings. There were CMCs that your Lordship
will recall back on 31 January of this year and
12 February and the original order for directions given
by your Lordship was on 12 February. The proceedings
were then stayed -- these directions were stayed from
12 April onwards. So there's a narrow window at that
stage of compliance with directions. Then of course
came your Lordship's order of 23 July to which reference
has already been made.
The second point to comment on, my Lord, is that in
fact --
MR JUSTICE FRASER: But even before they were stayed, there
were only two further issues.
MR WARWICK: Indeed, my Lord, and in fact the deadlines at
that time for, for example, individual particulars of
claim didn't even bite until 15 May and so on.
MR JUSTICE FRASER: Okay.
MR WARWICK: There is a second point to be made, my Lord, on
what's been said, and that's that the recast budget, if
I may call it that --
MR JUSTICE FRASER: Which one is that one?
MR WARWICK: That is the document at <Z2/5.2/1>.
MR JUSTICE FRASER: This is the one that's been overtaken by
events?
MR WARWICK: Indeed. By agreement it's been overtaken. But
of course that is Post Office's budget.
MR JUSTICE FRASER: That's the one with the 18 million?
MR WARWICK: Indeed my Lord, and I hope to refer --
appreciating fully, my Lord, that in the exercise of
your powers you're not going into rates and approving
specific allocations of time and so on and your exercise
of costs management powers will be impressionistic, but
understanding what is driving costs of such magnitude
for ADR, one has to glance at the page at <Z2/5.2/6>--
MR JUSTICE FRASER: Yes.
MR WARWICK: -- because on that page appears, putting this
neutrally, a cascade of different fee-earner rates and
grades of seniority and estimated hours that do comprise
that figure and that page may be relevant to your
assessment, my Lord, of proportionality/overall
reasonableness.
MR JUSTICE FRASER: When you say "that page", that page
doesn't have all the fee-earners, etc, on. Do you mean
the page that goes after it, page 1 of 6, with all
the HSF fee-earners?
MR WARWICK: That's correct, my Lord, yes.
MR JUSTICE FRASER: In the "Common costs" column?
MR WARWICK: Internally it appears as page 5 of 6 in
the document and it's at the foot of the document that's
on our common screen presently.
MR JUSTICE FRASER: I was looking at page 1 of 6 first
because in the left-hand column there are 17 HSF
fee-earners in that column.
MR WARWICK: Yes, my Lord, and those fee-earners' rates and
so forth are replicated in the page that I took
your Lordship to a moment ago; that's to say page 6.
MR JUSTICE FRASER: All right. So that's page 5 of 6?
MR WARWICK: Yes, my Lord, and the background observation on
this as well is that this was recast because originally
all of those HSF fees appeared quite wrongly as
disbursements.
MR JUSTICE FRASER: No, no, I understand.
MR WARWICK: That's an argument under the bridge.
MR JUSTICE FRASER: That's now been changed.
MR WARWICK: Indeed, my Lord, yes.
MR DRAPER: My Lord, just to interrupt for a small point of
factual correction. There aren't in fact 17 fee-earners
in the sense of persons charging a fee. It's that there
are 17 different rates and in many instances the same
person has two different rates because they have agreed
a discount.
MR JUSTICE FRASER: So "trainee London" and "Trainee London
reduced".
MR DRAPER: Exactly, my Lord.
MR JUSTICE FRASER: But that only happens in a couple of
situations, I think. And also some of them are
e-discovery as well. I think there's three where
there's reduced rates given in brackets immediately
afterwards.
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: "Partner London (London reduced)",
"Associate London (London reduced)" and "Trainee London
(London reduced)".
MR DRAPER: Yes, those are the reduced figures, my Lord.
MR WARWICK: Yes, my Lord. That's fully understood. I'm
not seeking to suggest there are 17 people. In fact
there may well be very many more, and if one glances at
some of the hours allocations, that must be the case.
It's a point I'll come to in a moment, if I may,
my Lord.
So in essence, my Lord, what falls for determination
today then is this ADR phase, but your Lordship will
have seen that comments are also sought on two incurred
costs that appear in the budget. So that your Lord has
them by way of introduction, they are the incurred costs
for statements of case.
Going back, my Lord, to the summary document that we
were looking at a moment ago at <Z2/6/1>, on the second
row --
MR JUSTICE FRASER: These were the comments in your draft
order?
MR WARWICK: Indeed, my Lord, yes.
MR JUSTICE FRASER: So which document are you taking me to
now?
MR WARWICK: Back to what I might propose we refer to as
the "summary", which is the document that summarises
the present position, including the agreed sums filed by
Mr Parsons.
MR JUSTICE FRASER: The one at <Z2/6/1>?
MR WARWICK: That's correct, my Lord, yes.
So the comment is sought -- if one looks under
columns D and E, the combined total of D and E for
issues statement of case, that total is 269,729.
MR JUSTICE FRASER: Right.
MR WARWICK: Comment is sought on that, my Lord, because
that has been incurred up to 3 September, before any
pleadings had been served upon Post Office, and
possibly -- a point I'll come to just in one a second,
my Lord -- a comment in relation to ADR and settlement
incurred costs, which is £502,000.
This requires just a small amount of introductory
clarification. In my witness statement the possibility
of an adverse comment in respect of witness statements
was canvassed, but that's been clarified now and it's
not sought because it's not included in the budget now
at all. Those costs have been taken out for another day
if Post Office wishes to pursue them. Secondly --
MR JUSTICE FRASER: But these are all in respect of -- these
are comments you're seeking in respect of incurred
costs --
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: -- but we don't get to that yet.
MR WARWICK: Indeed, my Lord, and I was going to propose
that we deal with the ADR position first.
MR JUSTICE FRASER: Right, well, let me just do -- I thought
I had a handle on exactly what was in issue. So far as
today's business is concerned --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- which I think it was possibly a bit
optimistic to reduce the time estimate, actually --
there's a CMO sought by the claimant for its further
issues budget which is agreed by the defendant; is that
right?
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: There's a CMO sought by the defendant
for its further issues budget which is substantially
agreed by the claimant, but there are some non-agreed
items?
MR WARWICK: Just the ADR phase, my Lord, yes.
MR JUSTICE FRASER: Well, it's a non-agreed phase, but it
includes more than one item.
MR WARWICK: Indeed, my Lord.
MR JUSTICE FRASER: Right. And so it's the ADR phase that's
in issue, and the ADR phase, if I can put it like this,
the headline issues are duplication of solicitors --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- so let's call that the
"Herbert Smith Freehills point" --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- together with effectively the overall
total.
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: Are those the two?
MR WARWICK: Those are the two issues, yes.
MR JUSTICE FRASER: Then the third point is you want
comments on incurred costs which are in the budget.
MR WARWICK: That's right, my Lord.
MR JUSTICE FRASER: And I'm permitted to do that under
the costs management regime.
MR WARWICK: Indeed, my Lord, yes.
MR JUSTICE FRASER: And those three are the one you've just
identified to me --
MR WARWICK: They are in fact only two, my Lord, issues
statements of case, 269,729.
MR JUSTICE FRASER: 269,000 ...?
MR WARWICK: ... 729, my Lord.
MR JUSTICE FRASER: Yes, and what's the other one?
MR WARWICK: Incurred for ADR and settlement, total 502,527,
but particularly Herbert Smith's fees of 454,171, my
Lord.
MR JUSTICE FRASER: Yes.
MR WARWICK: Subject to a rider, my Lord, because, of
course, whether making a comment on those incurred costs
is appropriate, my Lord, will depend upon the approach
your Lordship chooses to take --
MR JUSTICE FRASER: Correct.
MR WARWICK: -- to the overall because, of course, you can't
have it twice, both factoring in incurred costs for
the purposes of reducing budgeted costs and an adverse
comment, and that I made clear to my learned friend
yesterday.
MR JUSTICE FRASER: Well, let's take this step by step and
I'm just going to make some introductory comments which
apply to everybody.
The parties agreed to adopt the costs management
regime in this case. It was not imposed on them by
the court. There therefore must be some purpose in
the parties having agreed that and they must want
the involvement of the court insofar as their future
costs are concerned, otherwise they would never have
agreed to adopt the costs management regime. On
the basis I have made costs management orders already,
although I consider as a matter of discretion I would be
entitled not to make a costs management order and to say
to the parties that there's no point in continuing
the costs management regime in this case because of
the way costs are being dealt with, I'm not going to do
that and I am going to make costs management orders.
But I'm afraid the point has come in this case that,
notwithstanding agreements between the parties,
the court is not now simply content to waive through
very substantial sums just because they're agreed.
Having said that, obviously that might come as a bit
of a surprise given the court's approach to cost
management orders already, but one point which gives me
very great concern is that the further issues trial as
now reduced to a single issue is going to be a trial far
narrower in scope than either of what is undoubtedly
properly described as two earlier "heavy trials", one is
common issues and one is Horizon, and I'm just using
the claimants' budget -- I beg your pardon --
the defendant's budget because it's in front of me, but
just as an example. The costs management order in
respect of the common issues trial had a total of
3.614 million; the costs management order for
the Horizon issues trial had a total very slightly less
than 3.75 million.
It seems to me that the global figure for
the further issues, even including settlement, can't
possibly be reasonable and proportionate if it's in
excess of either of those two figures. So that's
the approach I'm adopting.
The claimants' budget is agreed and I'm just going
to check this with Mr Draper. Mr Draper, am I right
that that sum is 2.814640 million?
MR DRAPER: That sounds right, my Lord. If we just call it
up. It's at <Z2/7/1>. These are --
MR JUSTICE FRASER: That's the one I've got. It was sought
in the sum of 2.931 and it was given at 2.814 and that
omitted security for costs, which the parties agreed
won't fall into the costs management regime today at
all. That was going to be dealt with separately; is
that right?
MR DRAPER: Yes, that's right.
MR JUSTICE FRASER: And it has a figure for ADR settlement
of 130K -- is that right?
MR DRAPER: That's right.
MR JUSTICE FRASER: -- which is the total sum that was
sought.
MR DRAPER: Yes, that's right, my Lord. I think I'm right
to say that aside from the removal of the costs security
management figures, there were no figures that were
negotiated down, if your Lordship looks up.
MR JUSTICE FRASER: Right. So you are content for me to
make a costs management order in respect of the further
issues trial on this figure of 2.814, which includes the
130,000 for ADR?
MR DRAPER: There is a slight difference between the two --
the ways the two have been -- the two budgets have been
produced, my Lord. If your Lordship wants the
equivalent for Post Office's figure of the figure you
were looking at, 737, estimated costs for ADR and
settlement --
MR JUSTICE FRASER: Sorry, 737? I don't understand where
you get that from.
MR DRAPER: That's from the updated Post Office summary,
the <Z2/6/1>.
MR JUSTICE FRASER: Yes, which I've got in front of me.
MR DRAPER: I believe it's 737, but if one adds up the two
estimated figures there, disbursements and time costs --
MR JUSTICE FRASER: Oh, that's the 714 and the 22?
MR DRAPER: That's right.
MR JUSTICE FRASER: So what you're saying is 737 for
the Post Office --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- is the comparable figure against
the 130?
MR DRAPER: No, my Lord. This is the point I'm coming to.
We have taken the ADR and settlement element -- phase --
as including ADR and settlement generally, but also the
specific mediation that the parties have agreed should
take place.
If you go back to the claimants' document -- sorry,
our budget discussion report for the claimant's figures,
where they're all shown as being agreed, there is ADR
and settlement about just over halfway down the page at
130,000, but also right at the bottom, the last listed
figure, there's 284,000 for mediation. So one would
need to add those two together to get the equivalent
figure.
MR JUSTICE FRASER: That's a very good point. So in other
words it's not just 130. It's the 130 plus the 284?
MR DRAPER: It is, my Lord.
MR JUSTICE FRASER: Right. Well, let's do that calculation,
please.
MR WARWICK: I have the figure, if it helps my Lord.
MR JUSTICE FRASER: Yes, it does.
MR WARWICK: It's 415,122.
MR JUSTICE FRASER: 415 ...?
MR WARWICK: ... 122.
MR JUSTICE FRASER: And your budget includes within it,
I believe, although it's called the "Further issues
budget" -- your budget includes, because of the timing
of the mediation settlement ADR, all the costs in
respect of which you seek a CMO and the total of those
is 415,122?
MR WARWICK: For ADR, yes, my Lord.
MR JUSTICE FRASER: Well, ADR and mediation, isn't it?
MR WARWICK: Correct, my Lord, yes.
MR JUSTICE FRASER: And settlement discussions?
MR WARWICK: Indeed, my Lord, yes.
MR JUSTICE FRASER: So all of those activities of a like
nature are included within the 415?
MR WARWICK: That's correct.
MR JUSTICE FRASER: You haven't apportioned some bigger
figure and said, "We're putting 415 of it in further
issues"; it's all in there at 415?
MR WARWICK: That's right. I mean, that's not to say that
if discussions aren't successful at later stages of
the trial --
MR JUSTICE FRASER: No, no, no, of course. But just so that
the parties understand why so much time is being taken
doing this, the essential thing is to make sure that I'm
pairing like with like.
MR WARWICK: Yes, my Lord. Well, to assist your Lordship on
that, I think it would be remiss of me not to mention
that of course the sum in the budget discussion report
of 2,814,640, in respect of which a CMO is sought,
my Lord, obviously that doesn't include the claimants'
incurred costs for the further issues trial --
MR JUSTICE FRASER: And any incurred costs for ADR and
mediation?
MR WARWICK: Absolutely, my Lord.
MR JUSTICE FRASER: Well, are there any of those?
MR WARWICK: There are. I wonder if the following document
could be called up. It's <Z2/1/1>. That is the front
page of the claimants' budget. When it was filed, it
still included security for costs.
MR JUSTICE FRASER: Sorry, are we at <Z2/1/1>?
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: Which figure is it you're going to show
me?
MR WARWICK: The total figure at the bottom of column H.
That is the figure that includes incurred costs, but out
of it has to be taken security for costs and the total
is 3,284. So were your Lordship to wish to compare
the claimants' total budget including incurred costs
with the defendant's total budget including incurred
costs --
MR JUSTICE FRASER: No, no, I don't, I don't --
MR WARWICK: -- that would be the sum.
MR JUSTICE FRASER: But if you look in incurred costs in
the left-hand column --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: Well, let's start with ADR settlement
discussions --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- you don't get to any entry at all in
the orange box of column D and E, do you?
MR WARWICK: Well, there's very limited sums, £90 of time
costs and 3,574, so --
MR JUSTICE FRASER: So apart from that tiny wrinkle --
MR WARWICK: That's right.
MR JUSTICE FRASER: So in order -- well, it's not necessary
to add 3,664 of incurred mediation ADR costs. That's
what the total is, isn't it?
MR WARWICK: Yes that's right, my Lord, yes.
MR JUSTICE FRASER: So your figure for further issues
trial --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- excluding ADR and mediation is your
2,814,640 at the bottom --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- take away the 284,860 --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- and take away the 130,262.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: I get that to be £2,399,518 for
the further issues trial, excluding mediation and ADR.
MR WARWICK: Yes, my Lord, but from 3 September --
MR JUSTICE FRASER: I understand that.
MR WARWICK: -- because there are incurred costs behind
that.
MR JUSTICE FRASER: I understand that.
MR WARWICK: Yes.
MR JUSTICE FRASER: And that's not at issue as far as I'm
concerned and you're both agreed that that's the right
date, I think.
MR WARWICK: Absolutely, my Lord, yes.
MR JUSTICE FRASER: So Mr Draper --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- if I were minded to make a costs
management order today, I consider I have two
alternatives so far as the claimants are concerned. One
is a figure of 2,814,640, which includes their mediation
and ADR costs --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- or a similar way of expressing
the same figure would be 2,399,518, excluding mediation
and ADR costs, if I wanted to deal with them separately.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: But on either footing, those totals are
agreed by you --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- and that's just a methodological
difference; is that right?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: Thanks very much.
Mr Warwick, this isn't building up to a great
drum-roll, but it's important I think that this case
proceeds on a like-for-like basis.
MR WARWICK: Yes, my Lord, yes.
MR JUSTICE FRASER: Is there anything you would like to say
to me about which of those two approaches in principle
you would invite me to adopt because it's important that
I compare like with like? I'm not suggesting that
the budget shouldn't include ADR or settlement. All I'm
suggesting is whatever the costs management order that
I make, it needs to deal with both parties in the same
way, doesn't it?
MR WARWICK: Absolutely, my Lord, yes, it does. That's
common ground.
MR JUSTICE FRASER: Right.
MR WARWICK: There are foreseeable benefits to having two
CMOs, a CMO for further issues and a CMO for settlement
and ADR. Actually I think it's within the realms of
possibility that the parties could strip out ADR costs
should, for example, your Lordship make a costs order
with respect to the further issues trial at the end of
the further issues trial. Obviously the effective
rule 318 compels a costs judge to have regard to the
figures that your Lordship has approved, but the figures
that your Lordship is approving are these totals, and so
it would, on my understanding anyway, be permissible for
a costs judge to take those out if your Lordship gave an
order just about the further issues trial at a later
date and so there are benefits to it.
But I'm agnostic on which approach. I think for
ease of methodology, keeping them included in this,
noting that they relate to something different, which is
the group as a whole, would be acceptable, providing
it's acceptable it to my learned friend.
MR JUSTICE FRASER: Right. So you would -- so you're
relatively neutral, but your approach is on the basis
that all -- that's how the budgets have been prepared to
keep them in, but just to recite that they're not
strictly speaking attributable solely to the further
issues --
MR WARWICK: That's right, my Lord.
MR JUSTICE FRASER: -- because they're not, are they?
MR WARWICK: No, by all means. And of course, my Lord, in
recording your Lordship's order, I see no difficulty, if
your Lordship's minded to, to include a comment to that
effect, to which the judge on detailed assessment would
have regard.
MR JUSTICE FRASER: All right. Okay.
Mr Draper, do you have any observations?
MR DRAPER: I respectfully agree, my Lord, for this reason:
there are in fact various elements of the cost budgeting
process for the further issues trial stage that don't
relate specifically to the further issues. There are of
course things like ongoing group management that is just
a cost that rumbles on.
MR JUSTICE FRASER: Understood.
MR DRAPER: That is as true for other things as for
settlement, but we obviously recognise settlement is
a huge chunk here that otherwise might distort
a comparison across the trials. So something in your
Lordship's order merely to draw attention to that fact
may well be sensible.
MR JUSTICE FRASER: All right. Well, in that case you have
both persuaded me then.
Order
I'm going to make a costs management order, so far
as the claimants are concerned, in the overall total of
2,814,640, but I would like the order to include
the following note, which is: although this costs
management order is expressed as being the further
issues costs management order, the budgets and approved
figures include substantial figures for ADR/settlement
discussions/mediation which relate to the group
litigation as a whole and therefore could be seen as
potentially distorting the overall total if one were to
compare the overall total for the further issues
CMO with the overall totals for the CMO for the common
issues trial and for the Horizon issues trial. I'm just
recording that for the benefit of the costs judge.
Right.
MR WARWICK: I'm very grateful, my Lord.
MR JUSTICE FRASER: Right, so that then brings me to CMO for
the Post Office.
MR WARWICK: Yes, my Lord. I should give way.
MR JUSTICE FRASER: Yes.
Mr Draper.
Submissions by MR DRAPER
MR DRAPER: Yes, my Lord, in relation to Post Office there
are two distinct issues. One is whether your Lordship
ought to make any effectively adverse comment under 3.15
in relation to incurred costs and the other is whether
your Lordship -- what figure your Lordship ought to
approve for estimated costs for settlement.
Now, those two principles -- that distinction
becomes blurred somewhat because my learned friend seeks
both a criticism of incurred costs for ADR settlement
and/or that your Lordship reduce the estimated figure
for settlement.
MR JUSTICE FRASER: Right. Well, before we get on to that,
there's also another point, isn't there, which is
whether the court is satisfied that the total excluding
ADR and settlement is a reasonable and proportionate one
for the further issues trial; in other words, just
because it's agreed doesn't mean it's going to be
approved. It still has to be reasonable and
proportionate for me to make a CMO in respect of it
anyway, rather than reduce it down.
MR DRAPER: To make a CMO at all, my Lord?
MR JUSTICE FRASER: No, not to make a CMO at all; to make
a CMO in that figure, in the figure that's sought.
MR DRAPER: My Lord, you are -- in respect of agreed costs,
the position is that the court will note the agreement.
It's in respect of costs that aren't agreed that
the court has a role of reviewing and reducing an
estimate as it may consider appropriate. So there's
a distinction there to be drawn between those costs that
are live --
MR JUSTICE FRASER: Well, there is, but --
MR DRAPER: -- and those that are agreed.
MR JUSTICE FRASER: Well, there is a distinction, but the
court's not bound by an agreement between the parties if
it's not satisfied that they're reasonable and
proportionate. I'm not saying I'm necessarily going to
do it. I'm just saying it's a formal step that still
needs to be considered by the court because the whole
purpose of costs management is that the court --
MR DRAPER: I understand.
MR JUSTICE FRASER: -- becomes directly involved in deciding
what's reasonable and proportionate.
MR DRAPER: Yes, my Lord, but -- I'm just turning up
the rule. I think it's --
MR JUSTICE FRASER: Where are we looking?
MR DRAPER: Yes, my Lord, it's 3.15. If your Lordship looks
at 3.15.2 --
MR JUSTICE FRASER: Could you just give me the page?
MR DRAPER: Someone has stolen my 2019 White Book. It's
page 134 in last year's.
MR JUSTICE FRASER: Don't worry. It's 139 in this one.
3.15.2, yes.
MR DRAPER: Yes, my Lord. The chapeau of 3.15.2 records
the point that your Lordship made at the outset, which
is that your Lordship could choose not to make a CMO,
although that's water under the bridge. It says:
"Where costs budgets have been filed and exchanged,
the court will make a costs management order unless it
is satisfied that a litigation can be conducted justly
and with proportionate costs in accordance with the
overriding objective without such an order being made.
By a costs management order the court will (a) record
the extent to which the budgeted costs are agreed
between the parties and (b) ..."
In my submission only in (b).
"... in respect of the budgeted costs which are not
agreed, record the court's approval after making
appropriate revisions."
Then (c):
"Record the extent, if any, to which incurred costs
are agreed."
MR JUSTICE FRASER: Yes, but if you look at 3.15.3,
the notes over the page, assuming it's the same in last
year's version as it is here, second sentence:
"The court should decline to make a CMO for the time
being if it wishes to urge the parties to reconsider
their budgets, whether or not those budgets are agreed."
MR DRAPER: Oh, of course, my Lord, but that's, if you like,
refraining from making the CMO because the court's view
is that the parties aren't in a position yet to put
a sensible one forward. That's not, my Lord, the same
process as going through and, if you like, editing down
figures, revising them. The court can refrain from
making a CMO --
MR JUSTICE FRASER: Okay, look at the first paragraph,
the next -- sorry, the first sentence of the next
paragraph:
"Circumstances may arise in which the court approves
budgeted costs in part only and neither approves nor
comments upon the rest of it."
So in terms of the costs management order, there's
a wide range of options available. I might be, for
example, perfectly satisfied that your figure for
the pre-trial -- this is just hypothetical --
MR DRAPER: Of course.
MR JUSTICE FRASER: -- that your figure for the pre-trial
review for the further issues trial is unobjectionable,
reasonable and proportionate and I will make a costs
management order in respect of it. That doesn't mean
that, notwithstanding agreements between you on all
the items, you're entitled to the same approach on all
the items, does it, or do you say it does?
MR DRAPER: It slightly depends what your Lordship means
by "the same approach". If we take hypothetical facts
where the parties, if you like, collude together to both
agree obviously disproportionate budgets, so they come
before you and say, "We're each spending £12 million on
pleadings and we're both happy with that", the court
could, in that circumstance, simply refuse to make a CMO
because it would say, "This is not costs management and
I'm not prepared to put the court's name to it".
What the court, in my submission, can't do in
relation to agreed costs -- agreed estimates that come
before the court is to reduce them down and then approve
them as --
MR JUSTICE FRASER: When you say "can't", you mean in
the sense that the court doesn't have the power to do
it?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: I'm not sure that's right. Give me
a moment.
MR DRAPER: Of course. (Pause)
MR JUSTICE FRASER: That's the whole rationale of the
different cases, including CIP, isn't it, Mr Warwick?
MR WARWICK: My Lord, if it helps, declining to grant
a CMO was one of the options considered in CIP, but if
it helps the position, I am with my learned friend on
this point. A CMO should record the extent of
agreement, though it is in your gift, my Lord, not to
make a CMO, as foreshadowed at the beginning of the note
at 3.15.3 in the White Book to which you took my learned
friend.
MR JUSTICE FRASER: Yes, but that's about not making
a CMO at all. I have the ability to -- I mean, we're
getting slightly sidetracked because it's not
necessarily something I'm going to do anyway, but I have
the ability to make a CMO in respect of certain heads of
costs in the budget, whether they're agreed or not, and
not to make a CMO in respect of others. Just because
the parties are agreed I should make a CMO --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- and to take Mr Draper's example of
£12 million for pleadings -- just because the parties
might be agreed, they're not necessarily entitled to
a CMO in respect of that item that they have agreed.
MR WARWICK: Yes, that may well be right, but, my Lord, what
your Lordship -- I respectfully can't do is revise
agreed figures.
MR JUSTICE FRASER: No, no, I see. I see what you mean.
I understand. So I have taken us down a rabbit hole.
All right.
MR WARWICK: Not necessarily, my Lord, because actually it
is worth, while passing through this point, to observe
that Mr Justice Coulson, as he then was, in CIP --
I appreciate it's not an authority that's binding on
this court, but it is useful guidance. It's one of
the earliest cases on this point -- observed the pitfall
of not making a CMO is that what it effectively does is
sidesteps -- allows one body to sidestep costs
management because something that's not subject to
a CMO is later up for grabs on detailed assessment.
MR JUSTICE FRASER: No, I understand that.
MR WARWICK: It might not actually achieve the effect that
on a superficial analysis it might look as though it is
achieving if one considers what a party in that position
might later do with it.
MR JUSTICE FRASER: Although the difference in CIP was all
of the many defendants were lining up to attack
the budget --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- and it was not agreed.
MR WARWICK: That's absolutely right, my Lord, but that
overall effect of declining to give a CMO was considered
by then Mr Justice Coulson and ruled out for that
reason.
MR JUSTICE FRASER: Yes. All right.
Okay. Right, Mr Draper. It looks as if I might
just have just spent ten minutes taking everyone up
a side street.
MR DRAPER: Not at all, my Lord.
MR JUSTICE FRASER: So back to your budget then.
MR DRAPER: Yes, my Lord, I don't know -- I mean there's
a question about what's the most efficient way to
address this, first as to who goes first and in what
order we deal with points.
MR JUSTICE FRASER: Well, one is adverse comment on incurred
costs.
MR DRAPER: Yes.
MR JUSTICE FRASER: I think Mr Warwick's explained that and
also said in his --
MR DRAPER: Fine.
MR JUSTICE FRASER: -- skeleton what the situation is. What
would you like to say about that?
MR DRAPER: That's fine. If we take adverse comment then
first, my Lord.
MR JUSTICE FRASER: On incurred costs?
MR DRAPER: That's right.
MR JUSTICE FRASER: Yes. He says it's the issues statement
of case figure of 269 and the incurred costs on
ADR/settlement of £500,000.
MR DRAPER: Yes, that's right, my Lord. If I could first
address your Lordship on the general approach to be
adopted to any request that the court exercise its
discretion to make a comment. Could I ask you to turn,
please, to the case at tab 4 of the authorities bundle,
which is Richard v BBC. We'll call it the "Cliff
Richard" case. In this case, my Lord, Chief Master
Marsh addressed obviously the request to make a comment
before him on its facts, but also the general approach
that the court should adopt to this jurisdiction. If
your Lordship looks at paragraph 2, he says there:
"The court's power to make a comment about a party's
incurred costs is contained in 3.15 and the power is
repeated in similar form in the practice direction
at 3(e). There is no doubt that it is a discretionary
power and the discretion is a very broad one. Neither
the rule nor the practice direction gives any guidance
about the circumstances in which a comment may be or
should be made."
In the paragraphs that follow, my Lord, Chief Master
Marsh proceeds, in my respectful submission, with a very
impressive piece of reasoning to essentially give
the guidance that is lacking in the practice direction.
He says in paragraph 3:
"A comment about incurred costs is to be taken into
account in any subsequent assessment. Although
a comment must be taken into account, that falls some
way short of it being binding on the costs judge. On
a detailed assessment the costs judge will have far more
information about the costs than the judge at the costs
management conference. It seems to me that a costs
judge is entitled, having taken a comment into account,
to disagree with it or to put it to one side if, on
the detailed assessment, a fuller picture emerges."
Chief Master Marsh then deals in paragraph 4 with
a slightly different point about not carrying out an
assessment at a cost management hearing.
He then comments in paragraph 5, second sentence,
that:
"The exercise at a costs management hearing is
necessarily a summary one that has to be undertaken
briskly."
He says in paragraph 6:
"This leads me to conclude that a degree of caution
is appropriate when the court considers whether to make
a comment about incurred costs. It is asked to do so in
the context of the overall costs management exercise and
the restraints that are clearly stated in practice
direction 3(e), paragraph 7.3. The exercise of
producing budgets and their review is necessarily an
exercise based on limited information. Even in relation
to incurred costs, the amount of information that is to
be included in the budget is very limited indeed."
Paragraph 7, he explains the facts of the case
before him.
At paragraph 8 he records the comment that he was
invited to make.
MR JUSTICE FRASER: Paragraph what? 8?
MR DRAPER: Yes. He records there the comment that
Mr Eardley asked him to make. If I pick it up, my Lord,
at paragraph 10, bearing in mind the nature of
the comment there was to the effect that the costs were
excessive and disproportionate, what Chief Master Marsh
says about that is:
"To my mind there is little or no value in the court
recording a general comment about incurred costs along
the lines that the incurred costs are substantial or
they are too high. If the court wishes to record
a comment that the incurred costs are excessive or they
are unreasonable and disproportionate, it will wish to
be sure that the comment is made on a sound footing
rather than impression because commenting is quite
unlike the exercise of approving a figure per phase for
future costs. The court will also wish to consider the
utility of making a comment unless it is specific and
well founded."
Paragraph 11 then, my Lord, third sentence:
"Making a comment does bear the risk, however, that
on a detailed assessment disproportionate weight might
be given to it, although the comment is based on limited
information."
Paragraph 12, he expands on the point:
"The costs judge on a detailed assessment will have
the benefit of a full review of all the work that has
been carried out. That is a safer basis."
He then says two sentences on:
"I am also concerned that a comment could unfairly
skew a detailed assessment."
Then in the final sentence of that paragraph he
says:
"That consideration, set against there being no real
benefit to the BBC in making such a comment other than
a short-term tactical advantage, leads me to conclude in
the exercise of my discretion that I should reject the
BBC's request."
My Lord, those are the -- I respectfully ask
the court to endorse those remarks as the correct
approach.
MR JUSTICE FRASER: Right.
Before you go on to the figure for estimated costs,
I've got a question on this specific point --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- but I have been asked if
the shorthand writers can have a short break and now is
probably a good time given we started at 11.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: So I'll rise now just until 20 past so
they can have a shorthand writers' break, I'll come back
in and I'll ask you my question and then you can come to
your second point.
MR DRAPER: Yes, my Lord. I was going to deal first with
the specific reasons why the comment here is
inappropriate and then come to estimated costs after
that, if I may.
MR JUSTICE FRASER: Right.
(12.13 pm)
(A short break)
(12.21 pm)
MR JUSTICE FRASER: Right, Mr Draper.
MR DRAPER: Back then, my Lord, on incurred costs.
Unsurprisingly a lot of the points that I make in
relation to incurred costs will apply also to estimated
costs because they're points of fairly broad
application, points about Herbert Smith's involvement
and those kind of general points.
But focusing on the jurisdiction to comment on
incurred costs, what we take from the Cliff Richard case
is it is a broad discretion but it is one where there is
very good reason for the court to be cautious, bearing
in mind the difference between the material before
the court now and the material that will be before
the costs judge --
MR JUSTICE FRASER: Yes.
MR DRAPER: -- and also, in that regard, taking into account
the kind of comment it is that's sought.
I draw a distinction, if I may, between two types of
comment at a fairly high level of generality. One is
the kind of comment considered by Chief Master Marsh,
which is just, "These costs are unreasonable,
disproportionate or look high". In my respectful
submission that's quite a difficult case in which to
seek a comment because essentially you're asking the
court now on a costs management basis to do on a very
summary basis precisely what the costs judge will be
seeking to do on the basis of much more detailed
information and there is a risk of skewing that full
assessment by a remark to which -- it will be hard for
the costs judge to know effectively what to do with it.
MR JUSTICE FRASER: Well, it depends what the remark is,
I suppose.
MR DRAPER: It does, but if I draw a distinction between
that, where it's just I would like the court to say the
costs look high, where Chief Master Marsh says, "Well,
that's quite dangerous because you're effectively doing
the costs judge's job just on very limited information",
and a different kind of case, where there's some point
of overarching principle which the judge at the costs
management hearing can identify.
My Lord, these proceedings provide an example. You
will recall, my Lord, that you commented in relation to
expert costs incurred by Post Office that were not
the costs of their expert for the Horizon issues trial.
You were invited to comment on those. Then you said
effectively, "Well, bearing in mind that they have
experts for the one expert trial, it's not clear to me
that these costs could be recoverable". My Lord, that
is a point of principle. What that's not doing is
effectively doing the costs judge's job on a summary
basis in my submission.
So I then turn to the specific complaints. My
learned friend's point about settlement costs, both
incurred and estimated, is a kind of "Stand back, it all
looks very high" kind of point. But in my submission,
my Lord, if the court does stand back, it's a fairly
strange attack for the claimants to mount.
I say that for two sort of headline reasons:
the first is that if you take the litigation as a whole,
so all stages, the claimants are in fact spending
slightly more than Post Office, so this isn't a kind of
David and Goliath case, where David says, "Look what
Goliath's doing, he's vastly outspending me, isn't this
disproportionate?" This just isn't this kind of case.
Even if your Lordship looks at this stage,
the further issues trial stage, it is true to say the
Post Office costs are higher, but they are not massively
higher. The claimants' costs are very slightly under
80%. So it's a substantial difference, but it's not, my
Lord, chalk and cheese.
So the "Stand back" point, "they just look very
high", is a difficult one for the claimants to make. So
the specific points that they come to -- if I can deal
with ADR and settlement. There is also the pleadings,
but taking ADR and settlement first. There's no shying
away, my Lord, from the fact that Post Office has spent
and proposes to spend a great deal of money seeking to
settle the litigation at this stage. It's seeking to
devote resource proportionate to what it's spending on
fighting the case trying to settle it, trying to resolve
it by compromise. If one puts the costs of settlement
in the context of the total costs of the proceedings,
whilst very substantial, they are not out of line.
MR JUSTICE FRASER: Yes.
MR DRAPER: The question then is: well, what does
Post Office have to do to put itself in a position to
maximise the chance of settlement? What it has to do is
be able to take an informed view on the merits of
the claims, and that doesn't mean merely looking at what
duties were owed, the common issues trial or the general
reliability of Horizon, the Horizon issues trial; it
involves applying those duties and applying general
conclusions about Horizon to specific cases. That is
inherently, for Post Office at least, a document- and
fact-intensive process, to identify what has happened in
relation to a particular claimant.
MR JUSTICE FRASER: Well, the difficulty with that,
Mr Draper, is in a sense any litigant can do whatever
any litigant wants to do in terms of preparation for, in
this case, as I understand it, a mediation.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: The particular characteristic that jumps
out -- and this covers both one of Mr Warwick's points
on incurred costs and adverse comment and also estimated
costs going forward -- is the involvement of a wholly
separate firm of solicitors.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: Now, that is a very unusual situation.
I see you shrug your shoulders and I know that there's
been some correspondence on this, where your instructing
solicitors have said that it's entirely usual. In order
to save time, I can assure you that my point of view is
it's quite unusual. That's not to say it's not
justified, but it is unusual and it does lead, on
the face of it, potentially to the risk of duplication,
which would naturally increase the costs.
MR DRAPER: I entirely take the point, emphasising the
word "potentially". The answer is it depends. You have
to look at what the allegation of duplication is and
whether, on the basis of the material before the court,
the court can be satisfied it's a good one.
I say that because my learned friend's starting
point is to almost make this a point of principle,
"They've got two sets of solicitors so they can't have
the costs of both". But that point put in that way,
my Lord, and not just as an introduction to a point
about duplication is obviously bad.
MR JUSTICE FRASER: Well, I'm not sure it isn't a point of
principle for this reason: in litigation, any party
represented by a firm of solicitors has that firm of
solicitors on the record. They are the entity upon whom
documents are served.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: They have certain roles and duties and
rights and responsibilities and it is unusual to have
two firms. That's not to say, as I've said already,
that it's not justified in certain situations.
MR DRAPER: Yes.
MR JUSTICE FRASER: As I understand, the current situation
is Herbert Smith are dealing with the attempts to appeal
in respect of common issues --
MR DRAPER: That's right. They are the solicitors on record
in relation to that one.
MR JUSTICE FRASER: -- and they are the solicitors on record
for the Court of Appeal --
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: -- and they are also dealing with
settlement/ADR/mediation; is that right?
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: On the face of it, that does lead to --
and I wouldn't say it's an allegation of duplication so
far as the court's concerned. It is more a concern of
duplication.
MR DRAPER: Yes.
MR JUSTICE FRASER: And at the moment, picking up on your
explanation or your point that's it's on the basis of
the material before the court, there's is very little
material before the court in respect of either of those
points, isn't there?
MR DRAPER: There is very little, but I can obviously deal
with the points that are made about duplication and
address them.
MR JUSTICE FRASER: Of course.
MR DRAPER: If you start from the question of to what extent
does it raise concern just in principle, in my
submission it depends on what work it is that's being
done. If, for example, you were using two firms of
solicitors for the pleading stage, there's a high risk
of duplication there, in my submission, just standing
back and looking at it from first principles, because
you would have two sets of solicitors doing what is
likely to be very similar or indeed the same work.
But what we have here is a distinct part of
the case, ie attempts at settlement, that doesn't have
substantial overlap with preparation for the further
issues trial. So Womble Bond Dickinson are doing
the preparation for the further issues trial and all
other aspects and Herbert Smith Freehills are to a very
large degree off doing different work and that different
work is in relation to settlement.
Now, save in the kind of case where, as I said,
there's something inherent about the type of work that
raises a real concern about duplication, in my
respectful submission the fact that there are two firms
of solicitors really doesn't raise much of a red flag at
all for this reason: there is a given amount of work to
do. That work can be done by 20 solicitors in one firm
or it can be done by ten solicitors in one firm and ten
solicitors in another. All else being equal, the costs
will be identical.
So what my learned friend has to say is that there
is something about the facts of this case to indicate
that what you've got is duplication, that what
Herbert Smith Freehills is doing must be duplicative of
work that Womble Bond Dickinson has done or is presently
doing. So that's the persuasive burden that my learned
friend bears.
So if I come on then to look at the points he makes.
It's at paragraph 37 of his skeleton. I don't need you
to turn it up, but he says that by reference to the
points they make there, the court can be satisfied on
this summary basis that there's a big enough red flag
about duplication that your Lordship ought to say
something.
MR JUSTICE FRASER: Well, it's not just say something
because these points go to estimated costs as well,
don't they?
MR DRAPER: They do.
MR JUSTICE FRASER: So that's more than saying something.
MR DRAPER: They do. I would say the obtaining a comment on
incurred costs, all else being equal, is harder for my
learned friend than invoking the ordinary jurisdiction
to assess estimated costs down.
MR JUSTICE FRASER: Right.
MR DRAPER: So his first point is the SOIs. Now, of course,
those help. It would be strange if the solicitors,
looking at settlement, weren't to start from the SOIs
and seek to investigate -- to use them as a jumping off
point for investigation. But, my Lord, that's not
really a point about duplication because if
Womble Bond Dickinson were doing the settlement work,
they'd do the same thing. They'd read the SOIs and use
them as a jumping off point.
So what my learned friend's really saying is, "Well,
you've had the SOIs for a very long time". So on the
hypothesis where Womble Bond Dickinson were doing this
work, they wouldn't need to read them again; they'd just
remember when they read them back in 2017. I'm
caricaturing his case extremely unfairly, but in order
to make the point. The fact that the SOIs exist just
tells you that there's a very helpful first step in
looking at each of the cases. One starts with the SOI
and then seeks to investigate from Post Office's
perspective whether the facts alleged in that document
are true.
MR JUSTICE FRASER: But, Mr Draper, it's a slightly
vernacular phrase, but you will understand what I mean.
Bringing yourself up to speed on a case is a different
process to having already been involved in the case and
coming on to the next phase.
For example, if there's a partner at
Herbert Smith Freehills who's in charge of this
litigation --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- when they were first engaged they
would have known nothing about it at all except possibly
for having noticed an entry in the paper or something
like that.
MR DRAPER: Yes.
MR JUSTICE FRASER: That's very different from the
background knowledge that the partners at
Womble Bond Dickinson will have had who have been
involved in it for three/four years upwards.
MR DRAPER: Yes.
MR JUSTICE FRASER: So I think it's more difficult to say
that there can't be any duplication at all when you take
that into account, isn't it?
MR DRAPER: Yes, well, there will obviously be some costs
that if claimed under this head will be duplicative. If
we could call those sort of reading-in costs, so getting
a feel for litigation -- but that's not claimed --
MR JUSTICE FRASER: Well, finding what it's about.
MR DRAPER: Yes, my Lord. So say the very-high-fee-earning
partner says, "Well, I can't really get involved in
doing any work until I've got a feel for this thing",
and he says he'd like a week to read in, a perfectly
sensible proposal. But that's not what we're talking
about here with ADR settlement. That's not claimed
under this phase of the litigation.
MR JUSTICE FRASER: What's that claimed under then? So are
there HSF fees that have been incurred which are not
included in this budget on the incurred costs?
MR DRAPER: Yes, my Lord. It was in fact indicated in
the update letter to which the court was referred that
HSF actually has a broader role.
MR JUSTICE FRASER: Is that the letter I started with of
the 16th?
MR DRAPER: It was, my Lord, yes.
MR JUSTICE FRASER: Well, I thought you told me that that
was about something completely different.
MR DRAPER: It is partly about -- if we could turn it up
again, my Lord.
MR JUSTICE FRASER: I've got it here, which is why I asked
about it.
MR DRAPER: Trying to find ... oh, I have it.
For the benefit of the screen, it's <Z4/10/1>. If
your Lordship turns again to the second page of that
document, so paragraph 5 is dealing --
MR JUSTICE FRASER: Yes.
MR DRAPER: -- if you look at the head of it, with costs not
included in this update because they're either not
recoverable in the High Court group action or
Post Office isn't seeking to recover them from --
MR JUSTICE FRASER: I understood. But then when you look at
5.4, it says:
"The engagement by Post Office of HSF to provide
legal advice in respect of the group action ..."
That must be the group action generally.
MR DRAPER: That's right.
MR JUSTICE FRASER: "... with the exception of those costs
incurred by HSF in relation to advising on settlement
matters ..."
You can't advise on settlement matters unless
you know what it's about.
MR DRAPER: Exactly, my Lord, but the bit of the sentence
before the comma is HSF generally are not included as
costs that Post Office is seeking to recover.
So Post Office entirely accepts --
MR JUSTICE FRASER: Okay.
MR DRAPER: -- that it has instructed a second set of
solicitors, it bears the cost and does not seek to visit
on the claimants the -- I'm not going to say
the word "luxury" because that's offensive, but the
element of that that would be duplicative. So reading
that new firm in falls within the first part of 5.4.
The fact that Post Office has instructed HSF brings
with it some initial and general costs that aren't
sought in any of these budgets.
So one starts from the point that Herbert Smith
Freehills are read in and they're at that point able to
start doing useful work and it's only when they start
doing -- I'm sure I've just offended them -- but it's
only when they start doing work of direct utility to
settlement -- it's only when they start doing settlement
work that the clock starts.
MR JUSTICE FRASER: Right.
MR DRAPER: If I could return, my Lord, to my learned
friend's paragraph 37, if you have that. So what we're
looking for here is some factual basis to establish that
there must be duplication; not there might be, my Lord,
because if there merely might be duplication, well that
is absolutely classically a point for the costs judge to
interrogate based on all the materials.
My learned friend's points (b) and (c) are
essentially the same point. What is said is that lead
claimants were selected back in November 2017 so
Post Office was able at that stage to identify some
common features across the claims. Well, that's very
difficult from looking to assess the merits of 555
claims for the purposes of settlement. That's obviously
a high-level exercise, <Z1/1/9>.
The suggestion that Post Office must have had
detailed knowledge, which is the point made in that
paragraph, in January 2019 because, if my Lord looks at
(d) and over the page, please, to page <Z1/1/10>:
"... detailed information about claims in the group,
including precise numbers of claims subject to
limitation, waiver and settlement arguments."
My Lord, working out whether or not a claim is
prima facie subject to a limitation complaint doesn't
involve anything like the kind of work we're dealing
with here for settlement. You look at when
the sub-postmaster left the Post Office and assume on
a very rough and ready basis that if that's more than
six years ago, there are going to be arguments.
Similarly estoppel. Well, have they litigated these
issues? It doesn't take very long to work that out.
Have they entered into a settlement agreement? Well,
just check our settlement agreement records.
So these are just points of an entirely different
nature from putting oneself in a position to advance
a position on the merits of the claims for the purposes
of settlement.
MR JUSTICE FRASER: Well, I'm not sure I necessarily follow
that. That's quite a fine distinction. But so far as
Herbert Smith Freehills are concerned, I mean, there's
still the pleading -- let's put the issues statement of
case point off to one side.
MR DRAPER: Of course.
MR JUSTICE FRASER: I take the view, which I'm going to
express to you now and then ask you a question about it,
that there's not really very much information in front
of the court as of today that would enable me to
conclude that the obvious risk of duplication has been
avoided. So what I'm going to do is I'm going to ask
you if you would like to put in -- I'm not ordering you
to do it -- some further material by way of a short
witness statement or something of that nature to explain
after careful reflection exactly how the risk of
duplication has been avoided -- because it's quite
interesting that I started with that passage in
the letter having thought I understood it, then it
appeared to be in relation to something else, then you
and I have effectively been involved in an English
grammatical exercise of trying to construe exactly how
one sentence works and how the other one doesn't and it
does relate to quite a lot of money.
MR DRAPER: Yes.
MR JUSTICE FRASER: Together it's over £1 million, and
I don't want to put you in a difficult position where
you're either having to take instructions on the hoof,
added to which there's always lurking in the background
the risk possibly of straying into privileged areas.
MR DRAPER: Of course.
MR JUSTICE FRASER: So is that an opportunity you would like
to --
MR DRAPER: If I could perhaps clarify what it is the
opportunity is, my Lord? We have --
MR JUSTICE FRASER: All we've got at the moment -- tell me
if I've missed everything. We have got the various
letters, we have the budgets and we have your assertions
in oral submissions that actually there's no duplication
is what it comes down to.
MR DRAPER: There's a fair amount of detail about what work
Herbert Smith Freehills is actually doing in terms of,
you know, the ordinary breakdown one would anticipate.
What we don't have, my Lord, is a detailed explanation
as to sort of conceptually, if I may, why that's not
duplicative, so, for example, why that's not reading in.
MR JUSTICE FRASER: Well, that's great. Tell me what --
the date on which they were instructed, am I allowed to
know that? I don't think that's anywhere because that
was actually the first thing I tried to find out.
MR DRAPER: No.
MR JUSTICE FRASER: How it's defined that the work they're
doing is separate, because, for example, settlement
discussions or advising on settlement, on one view you
can only do that if you've actually read the pleadings,
for example, or possibly in this case you'd have to read
the common issues judgment, you'd have to read
the submissions to the Court of Appeal. You couldn't
sensibly advise on settlement without doing that.
Now, that could be said to be work that would not be
necessary for somebody like, for example, Mr Parsons,
who has probably read the common issues judgment several
times and wouldn't necessarily need to read it again.
MR DRAPER: Yes.
MR JUSTICE FRASER: That, together with the fact that there
are potentially so many different personnel at
Herbert Smith, does, I think, give rise to a prima facie
concern about duplication.
MR DRAPER: Yes, my Lord. May I take instructions briefly
on that?
MR JUSTICE FRASER: Yes of course. (Pause)
MR DRAPER: Well, my Lord, if I could split it into two
things. One is comment on incurred costs --
MR JUSTICE FRASER: Yes.
MR DRAPER: -- but obviously that may well be where more of
the fear about duplication arises, it being earlier in
time.
MR JUSTICE FRASER: Yes.
MR DRAPER: So dealing with that and having regard to
the concerns that your Lordship has raised, we wouldn't
oppose a comment to the effect that the costs judge
should have particular regard to the risk of
duplication, bearing in mind the points that your
Lordship has elaborated, and that would avoid us trying,
through this process, to essentially sort of pre-empt
the more detailed process that would be done on a costs
assessment anyway.
MR JUSTICE FRASER: Well, as far as I'm concerned, the real
issue is in relation to estimated costs because
the costs judge is not bound by the comment anyway.
MR DRAPER: No.
MR JUSTICE FRASER: So do you want to take an opportunity or
be allowed time to reflect on whether to take the
opportunity of putting in some limited further material
on the point I've identified or not?
MR DRAPER: In relation to estimated costs?
MR JUSTICE FRASER: Yes.
MR DRAPER: Well, in relation to estimated costs, my Lord,
sort of taking a step back, the incurred costs are, in
my respectful submission, where most of this concern
about duplication would bite because it's about
Herbert Smith Freehills being put in a position where
they are as well informed to do the exercise as
Womble Bond Dickinson would be. From that point
onwards, different name, different firm, same work.
In relation to estimated costs, my Lord, those
concerns don't really arise so what I would be content
to do is address your Lordship on how --
MR JUSTICE FRASER: So the short answer is you don't want
any time to put in any more material?
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: Right. Okay. That's fine.
MR DRAPER: And that's on the basis I've explained about
a comment one could sensibly be crafted to --
MR JUSTICE FRASER: Well, I'm not negotiating a comment with
you.
MR DRAPER: Of course, my Lord. I'm just indicating the way
in which we think --
MR JUSTICE FRASER: No, no, I've given you the opportunity
and you don't see it as necessary and that's understood
so we'll continue.
Right. So is there anything else you would like to
say in relation to Herbert Smith Freehills before we go
on to the comment sought in respect of incurred costs on
issues and statement of case?
MR DRAPER: Yes, my Lord. So putting to one side the
duplication concern, which we've been through in detail,
what one really has here in relation to estimated costs
is the contention that, because our costs are
700,000-odd and that is much more than my learned
friend's 300,000-odd, that calls for the court to
intervene and approve at a lower figure. I've dealt
with that in a fair bit of detail in my skeleton
argument so I don't propose to take your Lordship
through it as slowly as I otherwise would.
The point is, if one is looking at 300,000 as
contrasted to 700,000 for ADR and settlement, that delta
is explained by the very different burdens placed on
the parties as a result of their different positions.
So the claimants -- and this is no criticism -- each
give their account of what they say happened in the
course of their engagement by Post Office and that may
require a review of such documents as they have. We've
been told in general that they don't have many; whereas
on Post Office's side, as your Lordship knows and has
first-hand experience of from these proceedings,
Post Office has a huge and rather disparate documentary
record that it has to interrogate in order give proper
disclosure and in order to put together the position
based on the contemporaneous documents and the
recollections of the various individuals involved in
dealing with the particular sub-postmaster.
That is just inherently a bigger and more expensive
process than making the allegation in the first place in
this kind of case, my Lord. So when Post Office sets
out to see whether a particular claimants' case looks
like a good one for the purposes of settlement, there's
quite a lot of work to be done in order to form a view.
My Lord, those are my submissions on estimated costs
for settlement.
The other point -- the only point that we skipped
over, my Lord -- is pleadings, where what is sought is
a comment on incurred costs, the estimated costs being
agreed.
MR JUSTICE FRASER: Yes, which I think is 270,000; is that
right?
MR DRAPER: I believe it is, my Lord, yes. So the headline
point -- and I'm sure my learned friend will forgive me
for making it -- is that Post Office's total costs for
the pleading stage are lower than the claimants'.
MR JUSTICE FRASER: Yes.
MR DRAPER: Post Office's total incurred plus estimated,
which are now agreed, is 719,000. The claimants'
equivalent figure is 807,000. So not a promising
starting point for asking your Lordship to say that
the costs are obviously objectionable.
In my respectful submission there's another problem
of principle here with what the claimants are trying to
do in relation to the pleadings, which is a form of
double discounting. So what happens, my Lord, is the
parties agree between them a reasonable figure for
Post Office's future costs, estimated costs of
the pleadings. Obviously part of that process involves
looking at how much has already been spent. You can't
ask "What is reasonable to spend from now on?" without
asking "How much have you spent so far"?
Now, if your Lordship turns to my learned friend's
skeleton argument at paragraph 23, <Z1/1/6>. It's just
a convenient place to take that point from the
authorities.
MR JUSTICE FRASER: Paragraph 23?
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: Yes.
MR DRAPER: So that's a reference to Redfern, the Redfern
case, and that is a fair summary of what one can take
from that case. So (a):
"incurred costs are to be taken into account when
considering whether a proposed costs budget is
reasonable and proportionate ..."
(b):
"the point of departure is to fix a figure that
would be reasonable and proportionate ..."
And (c):
"where incurred costs have been excessive, it is
appropriate to limit estimated costs at figures below
what might otherwise have been approved ..."
Now that's right on the authorities, my Lord, and
it's obviously common sense. If one has already spent
a lot, there's less still to be spent. But that, my
Lord, is the background to the agreement that was
reached in relation to the future estimated costs. And
the reduction that has been agreed, a very substantial
reduction in those estimated costs, as I've said, takes
Post Office's total below the claimants' total.
MR JUSTICE FRASER: Total for what?
MR DRAPER: Pleading stage.
MR JUSTICE FRASER: Right.
MR DRAPER: So having already spent a lot, the Post Office
isn't going to be permitted for budgeting purposes to
spend as much more as it otherwise would have done.
But to then say, having used that process to agree
an estimated cost where the incurred cost was obviously
a relevant part of that consideration -- to then say,
"Well, we'll bank the estimated costs and we'll now go
after the incurred costs", in my respectful submission,
my Lord, that's not an appropriate way to deal with
coming to an overall view on the total. It's
effectively to turn the whole process around. Do it
the right way first by saying, "Let's set the future
figure having regard to the past figure", and then, once
you have the future figure banked, you say, "Well, now
I'm going to start attacking the past figure". In my
respectful submission, if that were the right approach,
it would encourage all sorts of unattractive tactical
playing around from parties.
But looking at the merit of the point, my Lord,
the only real point my learned friend makes about
the fact that Post Office has incurred a substantial
amount on pleadings is: well, they haven't had
the particulars yet. Now, if this were a case where
they were proceedings coming out of the blue and we
don't really know what the case is against us until we
see it, it would obviously be a very forceful point, but
where the court has set down the issues for trial,
the parties have agreed those issues, they have been
properly formulated, it is entirely unsurprising that
the defendant can do a lot of the work preparing for its
pleading before it receives the particulars.
In fact, my Lord, on the timetable set down,
Post Office obviously has to do that because otherwise
it would have only four weeks in order to get up the
entirety of its case in response to the particulars of
claim. In my respectful submission that's entirely
unrealistic and it is to be expected that Post Office
will spend about half of its money before it gets to
particulars.
Those are my submissions in relation to that topic.
MR JUSTICE FRASER: All right. Thank you very much.
Mr Warwick --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- it seems to me we are going to have
to come back.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: On the basis it's only 7 minutes to 1,
I think we'll stop now and give you a clean start at 2.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: I will just give you my provisional
views prior to hearing what you've got to say so you can
focus your submissions. I am going to make a comment in
relation to the incurred costs in respect of ADR and
settlement. I would like to hear from you on the point
about incurred costs relating to issues and statement of
case. I'm obviously going to spend some time over
the short adjournment crafting what that comment is, but
you can address me en passant if you want, and then
I will need to hear from you, but I don't think in
enormous detail, in respect of what you suggest is the
correct approach to adopt on the Herbert Smith figure
for estimated costs.
MR WARWICK: I'm grateful, my Lord.
MR JUSTICE FRASER: All right? So we'll come back at
2 o'clock. Thank you very much.
(12.55 pm)
(The short adjournment)
(2.00 pm)
MR JUSTICE FRASER: Yes.
MR WARWICK: My Lord, shortly prior it the on lunch break,
I'm very grateful indeed for the indications given by
your Lordship, you've asked me to deal with the ADR
settlement comment and also to deal with the approach to
the estimated costs for ADR.
MR JUSTICE FRASER: No, not the ADR comment.
MR WARWICK: I beg your pardon. I'm so sorry, my Lord.
Issues of statement of case, absolutely, and the ADR
estimated costs.
With your leave, my Lord, might I take the second
one first, since it's the more substantial point?
MR JUSTICE FRASER: Yes.
MR WARWICK: In response to a point made by my learned
friend, I wonder if I might just quickly correct
something while passing through here, and that was
a suggestion made that the claimants are spending more
on this litigation than the defendants. They're not,
my Lord. I wonder if we could have on screen <Z4/10/1>.
You'll see, my Lord, that a total was given in
response to your Lordship's direction about costs
reporting in the 23 July order. The total given there
is 16,322,000. But if one turns over the page, please,
<Z4/10/2>, you'll see the first note to that is that
the figures are exclusive of VAT. Adding VAT it comes
to 19.5 million or thereabouts.
MR JUSTICE FRASER: Yes.
MR WARWICK: I think your Lordship has the claimants' total
spend from the letter sent in previously, but that
appears on <Z4/9/2>, and your Lordship will have
the comparable figure of 16,828, which includes VAT.
And that explores in the way that you have asked,
my Lord, the various respects in which that figure has
been reached.
It's also noteworthy, my Lord, that going back to
<Z4/10/2>, where we were a second ago, the second page
of the Womble Bond Dickinson letter reporting to
your Lordship on costs, that of course that excludes
quite a large category of different types of cost,
namely those itemised at point 5 on that letter.
Naturally it excludes the common issues appeal, so do
the claimants' costs, but it also excludes engagement of
Fujitsu and your Lordship will recall from the last
CMC about a year ago that that's quite a substantial
amount of money in respect of which your Lordship made
a comment.
MR JUSTICE FRASER: I can't remember what the amount was.
MR WARWICK: Something approaching £800,000, my Lord.
MR JUSTICE FRASER: Oh, was that the shadow --
MR DRAPER: No, that's a different thing altogether.
MR JUSTICE FRASER: That's shadow experts.
MR DRAPER: It's what they call "shadow experts". That's
a ridiculous misnomer, but --
MR JUSTICE FRASER: I know that, but just in terms of using
the same word for the same thing, that's what
the 800,000 was. That was called "shadow experts" --
MR DRAPER: Yes, experts --
MR JUSTICE FRASER: -- and that's not Fujitsu?
MR DRAPER: It's not Fujitsu. It's experts other than those
instructed for the Horizon issues trial.
MR JUSTICE FRASER: Is that the same as internally appointed
experts in your number 3 on that page? <Z4/10/2>,
point 3.
MR DRAPER: That is very largely the same thing, yes.
MR JUSTICE FRASER: As ...?
MR DRAPER: As shadow experts.
MR JUSTICE FRASER: Right. Okay.
MR WARWICK: Yes, my Lord. Obviously use of
the term "shadow experts", we're not trying to imply
it's shadowy experts, but just an additional set of
experts; but also the wider engagement of
Herbert Smith Freehills, which has been the subject of
submission just before lunch, my Lord, as well.
MR JUSTICE FRASER: So what you're saying is to compare like
with like you look at the 19.5 with that and compare it
to the 16.8 or I suppose you could look at the 16.8 to
8 discounted down to exclude that and compare it with
the --
MR WARWICK: Indeed, my Lord, yes. Yes, absolutely.
MR JUSTICE FRASER: Okay. Well, I've got that point.
MR WARWICK: My Lord, then Herbert Smith's fees
prospectively; that's to say estimated costs for
Herbert Smith's fees.
The difference and difficulty corresponding that
follows from this difference, my Lord, with this set of
fees is that this represents an inflection point in
the costs history, if you like, my Lord, of this case.
The existing legal team for Post Office your Lordship is
familiar with. It includes a team spread across some
four fee-earner grades at Womble Bond Dickinson, for
the Horizon trial leading counsel and four junior
counsel by my count and for other aspects of this case
a further two leading counsel for different applications
or stages.
MR JUSTICE FRASER: I thought it was a further three.
MR WARWICK: Excluding the Court of Appeal.
MR JUSTICE FRASER: Oh, excluding common issues Court of
Appeal.
MR WARWICK: Again, trying to achieve like for like on this
basis.
What the new team comprises of can be seen at
<Z2/5.2/6>, my Lord. This is the document I took
your Lordship to early on in this hearing. It's
the page of Post Office's recast budget that actually
itemises this particular claim, if you like.
MR JUSTICE FRASER: Do you want Z2/5.1 or 5.2?
MR WARWICK: 5.2, please.
THE EPE OPERATOR: (inaudible).
MR WARWICK: I'm sorry, I was informed last night that this
document had been inserted at 5.2. Can I just
double-check?
MR JUSTICE FRASER: Yes. What document is it?
MR WARWICK: It is page 5 of 6 of the recast budget filed by
Mr Parsons on --
MR JUSTICE FRASER: Yesterday.
MR WARWICK: Yesterday.
MR JUSTICE FRASER: Are you sure that's not the document on
the screen?
MR WARWICK: That is the document on the screen. It's
<Z2/5.1/6> and that's my mistake, my Lord.
MR JUSTICE FRASER: Don't worry. I've got mine in hard
copy, which makes life a bit easier. But I've already
got that document. We've already looked at it once to
see the list of Herbert Smith people.
MR WARWICK: We have indeed, my Lord, but one can see
quickly from a glance at this that there are
20 different fee-earner grades.
MR JUSTICE FRASER: Across both?
MR WARWICK: Across both firms, 17 of which -- that's from
below row 4 to just above row 5 -- are Herbert Smith
partners, senior associates, associates, trainees,
managers, solicitors in Belfast, legal analysts in
Belfast and e-discovery personnel.
We'll spare your Lordship adjectives, but a very
significant increase in the size of its team dedicated
to this case. One has to bear in mind, my Lord, that
previous budgets have not been put on this basis. The
existing team has been considered acceptable for both
the common issues trial, the Horizon issues trial and
even at an early stage when the GLO application was made
and for other CMCs and the like. So there is
a significant change here.
What we know about this work -- your Lordship has
already been referred in my skeleton argument to
the letter that gave some explanation; that's to say
the letter of 16 October from Womble Bond Dickinson.
But I wonder if we could just glance for a moment at my
learned friend's skeleton because the detail of this is
quite informative. If we could turn to <Z1/2/3>, this
is the review that Herbert Smith is undertaking.
By my learned friend's skeleton argument,
Post Office makes clear at 10(2) that they want to
investigate, with respect to each of the 555 claimants,
training materials, accounts, correspondence; at 10(3)
they want to investigate whether each has been subject
to a bug or error that caused a lasting shortfall, so
they want to look at Horizon data date by date
presumably.
Overleaf at paragraph 12, <Z1/2/4>, it's made clear
that this "... covers decades, different contracts and
many different types of alleged breach of duty". So
breach is to be looked at as well.
At paragraph 13 it's made clear that this is going
to come to a cost of £1,328 per claimant, a matter I'll
return to in a moment, my Lord, as to the character of
this type of cost.
MR JUSTICE FRASER: But all of these -- whether they're done
in this way or not, you're at risk, aren't you, of
re-inventing the wheel on the basis that I have already
explained my view on duplication to Mr Draper --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- and he, on instruction, has declined
the opportunity to provide any further information.
MR WARWICK: That's fully understood and I don't wish to
re-invent that wheel or indeed any wheel, but there are
three submissions that come from this, if I may,
my Lord. The first is -- and it's obvious -- this is
group litigation. The normal approach -- there's an
element of crystal-ball gazing and I appreciate in this
setting it's not going to be appropriate to look at
the specifics of what might happen in a mediation -- but
just viewed at a level of abstraction, the approach to
be taken by parties is top down.
MR JUSTICE FRASER: Well --
MR WARWICK: It's to look --
MR JUSTICE FRASER: Mr Warwick, that doesn't really help
because there are a number of different ways that cases,
group litigation and individual cases, can be settled.
MR WARWICK: Yes.
MR JUSTICE FRASER: Whether it's decided to do it top down,
bottom up, pick off each one of the 550 one by one or do
it globally is not really the issue for today.
MR WARWICK: My Lord, I fully agree it's not, and in fact
Post Office's approach is up to Post Office, and
I should stress so it's heard in all corners of this
room --
MR JUSTICE FRASER: No, no, that's absolutely right.
MR WARWICK: -- that there's no criticism of its particular
approach. The question is whether it's recoverable
costs and whether, by seeking a CMO in respect of it,
the Post Office is asking for your endorsement of those
as recoverable costs.
MR JUSTICE FRASER: I understand and I have got the point
predominantly based on what Mr Draper explained to
the court about the way in which they are approaching
it.
MR WARWICK: Yes. Well, that's fully understood.
MR JUSTICE FRASER: Whether that necessarily helps him or
not is something that everyone's going to find out in
about 20 minutes probably.
MR WARWICK: Well, that may well be the case, but suffice it
to say, my Lord, that any settlement discussion should
and following the scheme of part 19 at least take into
account and take the benefits of the fact that this is
group litigation in the way that issues track down as
decided and ruled on by your Lordship in the first --
sorry, the third judgment that you gave and as will be
seen from the taxonomy of losses in pleadings to be
served later this week and on the Horizon issues when
those are determined.
So to look at this the other way, as if it is 555
unitary claims -- the Post Office may wish to do that
but for these to be recoverable costs in this group
litigation, that's a surprising suggestion.
MR JUSTICE FRASER: Understood.
MR WARWICK: And on the definition of "common costs", as
that's found in rule 46(6), these are highly unlikely to
be regarded necessarily as common costs because they're
costs of investigating cases.
The second submission, my Lord, is that on one view
at least, one respectable view, much of this following
your Lordship's judgment number 3 is overhead because
your Lordship has found what the true construction of,
for example, section 12, clause 12 of the SPMC means and
therefore does, which is impose a contractual burden of
proof on Post Office, and your Lordship has found in
that judgment a number of implied terms. Implied term
H, for example, requires contractually Post Office to
make "reasonable requirements" and so forth with respect
to "reasonable losses and shortfalls". The common issue
on implied terms also led to a ruling by you, my Lord,
on implied term L, which is reasonably and fairly to
investigate shortfalls.
The risk here, my Lord, is whether the court can be
satisfied at all that this is not simply something that
this business has to undertake anyway as business cost
following the judgment that you have given on the common
issues.
MR JUSTICE FRASER: Understood, yes.
MR WARWICK: The third submission, my Lord -- and
I appreciate that your Lordship is astute to this -- is
on duplication and so I won't re-invent the wheel on
that particular point. I've given a summary of
the points taken.
The essence of this is that the only decision that
can be reached on this is on what is before
your Lordship presently for this hearing.
MR JUSTICE FRASER: Understood.
MR WARWICK: I've given a summary at paragraphs 35 to 38 of
my skeleton for reference. The only thing that that
misses is what the situation was even pre-action,
my Lord. If your Lordship will indulge me, I could
refer your Lordship to the letter of response, which
makes plain that exhaustive investigation was carried
out.
MR JUSTICE FRASER: I don't think you need to. I'm very
familiar with that particular --
MR WARWICK: I'm grateful.
MR JUSTICE FRASER: -- with all the pre-action --
MR WARWICK: So it's not said that I've overstated
the point, that was with a more limited group of
claimants that had issued a claim form at that time --
as I understand it, some 90, my Lord.
MR JUSTICE FRASER: Yes.
MR WARWICK: So, my Lord, whether viewed through that lens,
that's to say the nature and character of these
particular costs, or viewed on an impressionistic basis
as to what's reasonable, the claim made to estimated
costs just can't be sustained as satisfactory for
the purposes of this exercise, my Lord, and those are my
submission on this point.
MR JUSTICE FRASER: And you're inviting me to disallow it?
MR WARWICK: I'm inviting you to disallow it, my Lord --
that's our primary case -- but if not doing so, reduce
them so as to render the phase as a whole
a proportionate and reasonable sum, my Lord.
The second issue then, numbered the first in your
helpful summary shortly before the break, my Lord, is
the comment with respect to issues -- issues and
statements of case.
I just want to make sure that this isn't put too
high. The point taken is that £269,000 or thereabouts,
just under 270, has been incurred before pleadings have
been served. Now, the claimants fully accept that quite
a lot of analysis might be done before pleadings have
been served that might go in to later inform how one
pleads. But one has to remember what this exercise is.
This is a trail of assumed facts which can't be assumed
yet because we haven't pleaded what our assumed facts
are and there is a mechanism within the order for
agreeing them after that.
Assumed breaches, even causation, my Lord, is
assumed on the wording of schedule 1 to your Lordship's
order of 23 July. What has to happen from this point,
my Lord, is the claimant has to set out, particularise,
what the heads of loss are that they say are in
principle recoverable and what the measures are that are
applicable to those heads of loss, my Lord, on assumed
facts and breaches.
So how it is that £270,000 has been incurred -- and
I point out while passing through, my Lord, that most of
that is time cost, not counsel's fees, and counsel might
reasonably be expected to draft these pleadings -- is
a very burning question. It's for that reason that
I ask the court to look at those incurred costs askance
and record, if it is with me on this point, an adverse
comment with respect to them.
My learned friend takes a point about us having
agreed on one basis and then turning round and seeking
something extra for a sort of two bites at the cherry.
That, I'm afraid, is not correct. Our budget discussion
report, which appears in the bundle, made clear that we
always reserved the right to seek this type of order and
that's at <Z2/3/1> and the page that's relevant to that
is the second one, <Z2/3/2>. It's the second row,
"Issue/statements of case". The offer made there was an
earlier offer, but it has been agreed at 450, my Lord.
MR JUSTICE FRASER: Sorry, what's been agreed at 450?
The --
MR WARWICK: Absolutely, my Lord. So the first sentence
reads:
"Case not yet fully pleaded as per budgeted date
(03/09/19) and Cs invite the Court to make a note on the
court file about the £238,489.30 incurred costs which
are not understood - see also Preliminary Point 1 (P1)."
And above the preliminary point P1 is about
proportionality, my Lord.
MR JUSTICE FRASER: Yes.
MR WARWICK: Finally on this, my Lord, some submissions have
been made about the right approach. I don't take any
issue with the approach taken by the chief master in
the BBC case. What I would take issue with is putting
that too high. It's specific to the facts of that case.
He did make some comments of wide of application, but I,
with the greatest respect to my learned friend, think he
puts the authority too high. It's not binding on this
court and, if taken to its logical conclusion, it would
almost never be relevant or appropriate to make any sort
of comment at this stage and that's just not right.
MR JUSTICE FRASER: What is the situation as at today so far
as pleading is concerned in further issues?
MR WARWICK: The deadline for pleadings is 4 pm on Friday,
my Lord.
MR JUSTICE FRASER: What pleadings are those then?
MR WARWICK: For the further issues trial, individual
particulars of claim in four lead cases.
MR JUSTICE FRASER: And they haven't been served yet?
MR WARWICK: No, the deadline for that is Friday, my Lord.
MR JUSTICE FRASER: So the incurred costs of 31,000 for
disbursements plus 238 time costs, which comes to 269,
I think --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- is in relation to an exercise
which -- one step of which, which is normally seen as
the early step, service of the individual particulars of
claim hasn't yet happened?
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: Is that right? Okay.
MR WARWICK: Unless I can assist you further on those
points, my Lord --
MR JUSTICE FRASER: Well, you can in one thing. What's
the date of this Friday?
MR WARWICK: It's 25 October, my Lord.
MR JUSTICE FRASER: Thanks very much.
Mr Draper, is there anything that you would like
to --
MR DRAPER: Just a very short point, if I may, my Lord, on
the like-for-like comparison of total costs, whether
one's got apples and apples or apples and pears. In my
submission, my Lord, one can only compare apples with
apples if you're looking at costs recoverable or sought
to be recovered in these proceedings from the other
side. It's not a meaningful comparison to say, "What
are they spending in total?", even where those things
aren't sought to be recovered. I say that, my Lord,
because if one were to adopt my learned friend's
approach of saying, "Let's puts everything in", then
we'd have their funding costs and that would mean they
are spending vastly more than Post Office if one were to
include those.
VAT, of course, we won't recover from the claimants.
So the fact that we're incurring it is neither here nor
there for these purposes. That's the only point
I wanted to make.
MR JUSTICE FRASER: In terms of recoverability of the VAT,
though, would they recover that from you?
MR DRAPER: Yes, in principle they would as individuals.
MR JUSTICE FRASER: And then you would deal with that as an
output --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- if you're VAT registered?
MR DRAPER: Yes.
MR JUSTICE FRASER: So far then as a real cost --
MR DRAPER: Forgive me, my Lord, I entirely misled you
there. In relation to -- we can't recover the VAT we
are spending on our legal services from the claimants
because it's an input for Post Office's operation so we
already get it back by our own VAT calculations.
MR JUSTICE FRASER: Yes, so your costs bill to you is
VAT-neutral?
MR DRAPER: Yes, which means when we -- if we were to obtain
costs from the claimants applying the indemnity
principle, we don't recover the VAT because we already
compensated for it through our own processes.
MR JUSTICE FRASER: Whereas they do pay VAT on their costs?
MR DRAPER: Yes, so if we were to come to indemnify them,
VAT would be part of what we would pay to them and that
would be a cost to Post Office --
MR JUSTICE FRASER: I understand.
MR DRAPER: -- so that wouldn't be cancelled out.
MR JUSTICE FRASER: But one point where, in my judgment, an
absolutely clear and accurate comparison can be made,
completely putting VAT to one side, is the amount of
the total both for incurred as at today -- I'm sorry,
incurred as at the date in September that you agreed and
estimated ADR/settlement/mediation costs.
MR DRAPER: My Lord, yes.
MR JUSTICE FRASER: There is a pure obvious comparison.
MR DRAPER: That's like with like, yes.
MR JUSTICE FRASER: I think, based on the CMO I made just
before the short adjournment, the claimants' figure for
that is 415,000 and to get to yours one needs to look in
column H, I think, and it's 1.239353.
MR DRAPER: That's like for like.
MR JUSTICE FRASER: Is that right? That is a like-for-like
comparison.
MR DRAPER: That is, my Lord.
MR JUSTICE FRASER: And of that 1.239, you've already spent
502,000, I think --
MR DRAPER: Exactly.
MR JUSTICE FRASER: -- in respect of which I can only record
a comment.
MR DRAPER: Yes.
MR JUSTICE FRASER: I can also take it into account -- if
I'm not with Mr Warwick on not making a CMO at all in
with respect of that line item and I'm persuaded by you,
which I am, that I should make -- I should include that
line item in the CMO that I'm about to make, I can take
the 502 into account when deciding what figure for
estimated costs is reasonable and proportionate; is that
right?
MR DRAPER: Entirely right. That's what Redfern says and we
are agreed that that's the right approach.
My Lord, just to complete that picture, 300,000 of
the estimated costs are agreed.
MR JUSTICE FRASER: 300,000 are agreed?
MR DRAPER: Well, we have had -- I think it's fair to say
it's an offer. Yes, the BDR offer was 300,000. Sorry,
I mis-spoke. That's just to complete the picture of
what all the numbers at play are. That's what was
offered.
MR JUSTICE FRASER: But the 300 is in respect of -- well,
Mr Warwick is inviting me today not to make an order in
respect of that line item at all, so far as I understand
it; is that right?
MR DRAPER: I think that's his primary position.
MR JUSTICE FRASER: Do you want to just show me where
the 300 is so I can see what I can compare it with?
MR DRAPER: Yes, my Lord. Forgive me. I'll just turn it
up.
My Lord, if we could get up <Z2/3/1> --
MR JUSTICE FRASER: Which I've got open.
MR DRAPER: -- this is the budget discussion report. You
can see the claimed figure there under "ADR settlement"
and next to it an offered figure of 331,215. That's
just to complete the picture as to what the claimant was
contending was an acceptable figure.
MR WARWICK: Yes, my Lord, but it's also relevant -- if
the screen could go on to page 3 of that document
<Z2/3/3> -- that the comment -- and I'm looking at
the top row, my Lord -- also made clear that the point
made above, to which I've taken your Lordship a moment
ago with respect to another phase, from "... the
incurred costs [48,000 and so on] ...", and in
particular disbursements is repeated; meaning that that
offer was made, but of course the claimants reserve
the right to seek relief such as the adverse comment
that's sought by me today, my Lord, in respect of
the incurred costs.
MR JUSTICE FRASER: Right, but in respect of the 756, you --
MR WARWICK: Offered 331, my Lord, yes, indeed.
MR JUSTICE FRASER: Mr Draper, is there anything you want to
add?
MR DRAPER: No, my Lord.
Order
MR JUSTICE FRASER: I'm just going to explain what I'm going
to do. I'm about to make a costs management order in
respect of defendant's costs. There are three items
that are not agreed. The items that are agreed should
be taken as being the subject of this costs management
order and the three separate items I am going to deal
with as follows:
I am invited by the claimants to record a comment in
respect of incurred costs for the further issues trial
concerning issues/statements of case. Disbursements are
included in column D-- I'm going off the summary --
which is at <Z2/6/1> of £31,240 and the time costs are
included as £238,489.30. This is in the circumstances
where, so far as the further issues are concerned,
the individual points of claim in the four lead cases
that are going to be the subject of the further issues
trial have not yet been served and will not be served
until 25 October 2019.
I have taken account of the approach identified both
in a case called Redfern v Corby City Council [2014]
EWHC 4526 (QB) and also in particular an authority that
Mr Draper has drawn to my attention, which is a decision
of Chief Master Marsh in the Cliff Richard litigation
against the BBC and Chief Constable of South Yorkshire
Police. The neutral citation for that judgment is
[2017] EWHC 1666 (CH).
Chief Master Marsh said, having analysed
the situation in that particular case, looking at his
paragraph 10, which I'm going to quote -- he says:
"To my mind there is little or no value in the court
recording a general comment about incurred costs along
the lines that the incurred costs are substantial or
they are too high. If the court wishes to record
a comment that the incurred costs are 'excessive' or
they are 'unreasonable and disproportionate', it will
wish to be sure that the comment is made on a sound
footing rather than an impression because commenting is
quite unlike the exercise of approving a figure per
phase for future costs. The court will also wish to
consider the utility of making a comment unless it is
specific and well founded."
I do wish to record a comment in respect of incurred
costs or issues in statement of case. That comment is
as follows: that the total of time costs appears to be
excessive based on the fact that the individual
particulars of claim in the four lead cases have not yet
been served. That's the end of the comment. It is
a matter for the costs judge what and how they deal with
that comment and that is not to say on a detailed
assessment that the defendant would not necessarily be
able to justify expenditure of that figure.
Turning to the next item, which also is in relation
to incurred costs, there is an overlap between this and
the third item, which is estimated costs, because they
both substantially concern the same issue. The line
item is "ADR/settlement discussions". In column E in
the summary, the expended or incurred costs against this
line item as at the date in September that the parties
agreed would be the cut-off, which I believe is
3 September 2019, is £502,527.27 and going forward
estimated costs as disbursements of £22,375 and time
costs of £714,451.
Both of these different types of costs, both
incurred and estimated, arise in the following
circumstances: the Post Office are currently represented
in this litigation, the group litigation, by
Womble Bond Dickinson, who are the solicitors on
the record, except for the attempt to obtain permission
to appeal from the Court of Appeal in respect of
the common issues trial judgment where the solicitors on
the record are Herbert Smith Freehills.
Herbert Smith Freehills are also the solicitors that
the Post Office are using to advise them and act for
them in what I'm told is a forthcoming mediation.
There is a dearth of material before court to
explain how or what steps have been taken to avoid
duplication of costs on the part of Herbert Smith
Freehills and Womble Bond Dickinson. The Post Office
have sought to persuade me that it is entirely usual in
large litigation or complex litigation to have two firms
of solicitors acting for the same party. I have
difficulty in accepting that submission. In my judgment
it's very unusual.
I did offer the Post Office this morning the
opportunity to put in some further material, whether by
way of a short witness statement or something else, to
explain what steps, if any, had been taken in respect of
avoiding duplication and that was not an invitation
which they wished to take up. I am therefore in
the position that I have to make the best of the
material that's before the court and, as I've said,
there isn't really a great deal. There are some
letters, some entries in budgets and Mr Draper's
extremely able submissions, but in terms of factual
content, the available material is somewhat light.
I do consider in all the circumstances that
a comment is justified in respect of the incurred costs
of over £500,000 for ADR and settlement discussions.
That comment is, however, as follows: the incurred costs
for this line item appear on their face to be extremely
high. However, there are the following particular
aspects of this case that may have affected this level
of costs. They are: 1, the nature of the particular
group litigation, including the number of claimants; 2,
the length of time that the disputes have gone on
between the individual claimants and the Post Office;
and 3, the involvement of Herbert Smith Freehills as
a second firm of solicitors and potential duplication.
It is a matter for detailed assessment whether there is
any duplication and that is a matter which the costs
judge may wish to consider and review. That's the end
of the comment.
Turning now to the costs management order which I'm
prepared to make in terms of estimated costs going
forward. I'm very much aware of the need to compare
like with like. The sum which the Post Office seek to
have included in the costs management order going
forward against ADR settlement discussions is the
addition of 714,451 together with 22,375. I make
the total of those two sums to be approximately
£736,800.
The figure in the approved claimants' cost budget
which I have made a costs management order in respect of
this morning is £415,000. However, the claimants have
incurred hardly any costs at all and in order to compare
like with like it's necessary to take account of the
Post Office's incurred costs together with the
£736,000-odd of costs going forwards, which gives a very
sizeable total of £1.239 million for the
ADR/settlement/mediation phase.
There are two important points. The first is it's
obviously not necessarily immediately attractive to
disapprove costs that are going to be incurred in
potentially settling the whole litigation. However, on
the other hand and reading from the dicta of
Mr Justice Leggatt, as he then was, in
Kazakhstan Kagazy plc v Zhunus [2015] 158 Con Law
Reports 253 at paragraph 13, which in that case was in
the context of an application for an interim payment on
account of costs, he said the following:
"What is reasonable and proportionate in that
context must be judged objectively. The touchstone of
reasonable and proportionate costs 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."
It plainly is in the Post Office's best interests to
incur whatever the necessary expenditure of costs is
going forward through what would undoubtedly be an
important phase of the litigation. However, that of
itself does not mean that the total is reasonable and
proportionate, and I am entitled -- and do -- take into
account the incurred cost of 502,000 when assessing what
the correct figure is going forward.
In assessing -- when I say "the correct figure"
I mean the reasonable and proportionate figure, I take
account of the fact that the overall expenditure by
the claimants on this phase is going to be approximately
£415,000. The amount which I am prepared to include in
today's costs management order, which takes account of
the 502, is whatever the balance is required to take
the total up to £900,000, which in my judgment, based on
my somewhat inapt mental arithmetic, is going to be
approximately £397,500-odd. I will leave counsel to
agree the mathematics between them. That means
the total sum, both for incurred and estimated costs,
for the AVR settlement discussion/mediation phase is
going to be £900,000.
Does that deal with everything?
MR WARWICK: My Lord, I believe it does.
MR JUSTICE FRASER: Mr Draper, does that deal with
everything?
MR DRAPER: It does, my Lord.
MR JUSTICE FRASER: You'll have to draw up the order,
obviously. If you could extract the comments from Opus
and put them in the order, or in a schedule to
the order.
MR WARWICK: Yes, by all means, my Lord.
MR JUSTICE FRASER: And then obviously, if there's any
tweaking required, I'll do that myself when you submit
the order.
Other than something I have to address both of you
about, is there anything else, so far as the costs
management order is concerned?
MR DRAPER: No, my Lord.
MR JUSTICE FRASER: Okay. Just give me a second to organise
my papers. (Pause)
The only thing I wanted to say to the parties is it
would be somewhat artificial, given that you're all
here, to ignore the fact that you're waiting for
a judgment, so I thought I would give you an update.
The judgment, at one point I had hoped to be able to
send that by the very end of October in draft. That is
not now going to be possible, but it won't be much past
the early days of November.
The judgment is in two parts. There is a judgment
and what I have called a "technical appendix" which
deals with some of the more technical computer aspects,
which an average reader won't necessarily need or want
to read. Both of those documents are going to be of
equivalent standing, but you might get them separately,
so you can make a start on typographical error review,
etc, on one of the documents before you get the other
one. But I won't send them out in draft until they're
both finished. So that's just to give you an idea.
MR DRAPER: My Lord, if I may, there's a point arising out
of that that may be a problem or may not be. I think
your Lordship is aware from correspondence between
the parties that the court has seen that Fujitsu have
identified to Post Office some old versions of KELs that
were before the court on the Horizon issues trial.
MR JUSTICE FRASER: Older versions?
MR DRAPER: Older versions.
MR JUSTICE FRASER: Of the same KEL?
MR DRAPER: Of the same KEL.
MR JUSTICE FRASER: I had seen in the foothills a bit of
toing and froing about KEL disclosure, but I hadn't
looked at it in any detail.
MR DRAPER: That's right. Well, I'll just explain it very
briefly. What we have discovered are not new KELs in
the sense that they are documents never before the court
in any form, they are just back versions of existing
KELs.
MR JUSTICE FRASER: So they're different in content to the
ones that were in the trial bundle, are they?
MR DRAPER: Some of them, my Lord.
MR JUSTICE FRASER: Right.
MR DRAPER: My understanding is some of them differ in tiny
and immaterial respects, like a typo has been corrected.
MR JUSTICE FRASER: Understood.
MR DRAPER: Others -- if your Lordship recalls how some KELs
at least are structured, there will be an initial block
of text relating to the first instance of the problem
and then it will be updated with further entries. So my
understanding is that some of these earlier versions
will just be less complete versions of the final one.
But we're obviously conscious that, without
reviewing them, neither side can form a view as to
whether they are material in any way to any of
the issues your Lordship is addressing. So they are
almost in a position, I think --
MR JUSTICE FRASER: So have they been disclosed?
MR DRAPER: No, they are being gathered to make sure we've
got them all essentially.
MR JUSTICE FRASER: How many are there?
MR DRAPER: We think low hundreds, but, as I've said,
because they are earlier versions, you may, for example,
find that there are ten very similar versions of an
existing KEL.
MR JUSTICE FRASER: Why do they need to be gathered though?
Why can't the ones you've got just be sent over
straightaway?
MR DRAPER: The process is essentially one of extraction.
I don't know if your Lordship recalls that Fujitsu
actually originally said, "We're not sure we can even
get them off", and then they devised a piece of coding
to do it. We want to make sure that that extraction has
been done properly so that we then don't disclose two
tranches where there's overlap, for example, or
potential overlap.
MR JUSTICE FRASER: All right. So there's more disclosure
coming and the claimants know about this?
MR DRAPER: The claimants know about it, but they don't yet
have it.
MR JUSTICE FRASER: And what is the date projected on your
side for when they will have it?
MR DRAPER: By the end of the week, my Lord.
I only raise it because your Lordship said that we
may be talking as little as slightly over a week and
the claimants may find them entirely innocuous when they
review them or they may say, "There are three on which
we want to make submissions". Well, I'm guessing,
my Lord, but it is not impossible that one or other side
or both sides might say, "Could we deal with this before
your Lordship has done a draft judgment?"
MR JUSTICE FRASER: Understood. Thank you very much,
Mr Draper.
Mr Warwick, have you got anything to say?
MR WARWICK: Just very briefly, if I may, my Lord. I was
not myself --
MR JUSTICE FRASER: No, no, I know that.
MR WARWICK: I didn't appear in the Horizon trial and
I hadn't anticipated this topic arising. In fact
the claimants would very likely have quite a lot to say
about these particular --
MR JUSTICE FRASER: Well, there has already been some
correspondence.
MR WARWICK: There has been some correspondence and the
present status is that a full explanation has been
requested, I believe, in open correspondence and that is
awaited, but obviously I think it awaits some extraction
activity that it sounds as though is presently taking
place, which is reassuring to know. I'm afraid I simply
can't --
MR JUSTICE FRASER: No, well, I will tell you what I'm going
to do.
MR WARWICK: -- accept the explanation given.
MR JUSTICE FRASER: I have read the letters. I was taking
the view that -- I didn't realise that disclosure hadn't
been given. I assumed from the letters that disclosure
had been given and the fact I hadn't heard anything
meant it was not an issue. I will keep ploughing my own
furrow. This judgment is not going to be distributed in
draft by the end of this week. If the Post Office can
give disclosure of those or at least a substantial
number of those by the end of this week, so let's say
5 o'clock on whatever the date is on Friday --
the 25th -- then that gives the claimants enough leeway
to raise a point with me if a point has to be raised,
and what I will do is, before I distribute the draft
judgment or 24 hours before I distribute the draft
judgment, I'll just notify the parties that I'm about to
distribute the draft judgment and if either party wants
to saying anything to me about it along the lines of,
"Please don't do that yet. We'd like to come and speak
to you about it", to raise a particularly important
point", then they can. I'm not encouraging that. I'm
just saying it's sensible to have provision.
MR DRAPER: I'm grateful, my Lord. If we may, my Lord, we'd
like to keep your Lordship informed of roughly where we
are.
MR JUSTICE FRASER: That's what has been being done on
the disclosure point generally, but obviously, because
I'm at the point where, so far as I was concerned,
the trial has ended --
MR DRAPER: Of course.
MR JUSTICE FRASER: -- I was taking what could be described
as a passing mental note of it and not really paying too
much attention.
MR DRAPER: Yes.
MR JUSTICE FRASER: All right. So, Mr Warwick, you've got
your solicitors here with you, I can see.
MR WARWICK: Yes, my Lord, yes.
MR JUSTICE FRASER: So that was the Horizon issue team --
well, actually --
MR WARWICK: Mr Miletic was present.
MR JUSTICE FRASER: Mr Miletic was on it anyway --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- so none of this is going to be
a secret.
MR WARWICK: No. Suffice to say, my Lord, that the
explanation given of the nature and number of those
documents is not necessarily accepted at all, but I just
don't have full instructions on that.
MR JUSTICE FRASER: No, well, that's a different matter.
MR WARWICK: Thank you.
MR JUSTICE FRASER: I'm not going to say anything else
about it, other than it's obviously a point that's
currently being addressed by both parties and it will be
kept under review. All right. Anything else?
NEW SPEAKER: No, my Lord.
MR JUSTICE FRASER: So if any of you do have children of
half-term age who have half-term holidays next week, you
won't be getting the draft judgment during half-term,
which is purely coincidental.
Thank you all very much.
(2.47 pm)
(The hearing adjourned)
(11.00 am)
MR JUSTICE FRASER: Mr Warwick.
Submissions by MR WARWICK
MR WARWICK: May it please your Lordship, I appear again for
the claimants with Mr Miletic and the Post Office is
represented again by Mr Draper.
Just for the transcript, to make clear that this is
a costs management conference.
In the flurry of activity, my Lord, prior to
the deadline for filing and serving, bar exchanging,
skeleton arguments on Monday, for which both my learned
friend and I are very grateful for the adjustment to,
certain documents were filed and served. I just wanted
to check, my Lord, that your Lordship had the position
as it stands when the dust settles for the purposes of
today so we're all operating on the same basis.
The claimants' draft order that's sought is in fact
the one that appears in the hearing bundle at <Z1/3/1>.
MR JUSTICE FRASER: Now, I don't have, because I've not been
sent, a hard copy application bundle, but I have got my
own hard copy bundle which has got a variety of
different draft orders in it. The one you've just
called up on the screen. (Handed)
Sorry, what's this? Thank you very much.
Have you got a hard copy of the order?
MR WARWICK: I do have a hard copy of the order, which
I could hand up if it would assist.
MR JUSTICE FRASER: It's just I can't navigate through
the common screen myself very quickly while I'm
listening to you. (Handed).
I mean, I can navigate through the common screen,
but ...
MR WARWICK: Yes.
MR JUSTICE FRASER: Right. So this is the one you're
seeking?
MR WARWICK: That's right, my Lord, and the only difference
in fact is that there were rapid negotiations --
MR JUSTICE FRASER: No, I entirely understand and it is not
an issue. I mean, it's --
MR WARWICK: I'm most grateful.
MR JUSTICE FRASER: It's just effectively a logistical
catch-up of where we are following, as I understand it,
the constructive discussions --
MR WARWICK: That's right, my Lord.
MR JUSTICE FRASER: -- so it's not a problem.
MR WARWICK: And also under the umbrella of logistical
catch-ups, there is something in my skeleton that
I should just correct so that it aligns with the current
position. If I could ask Opus to call up <Z1/1/3>, it's
paragraph 9(b) of my skeleton argument, page 3 of that
document.
MR JUSTICE FRASER: Yes.
MR WARWICK: That particular phase, "Group
Litigation/Management", where the negotiations ended was
in fact that £100,000 has been agreed for that phase for
the Post Office's budget, but Post Office has
effectively taken out of that budget the fees of
Herbert Smith Freehills, reserving the right to
re-insert that in budgets relating to later stages.
MR JUSTICE FRASER: Well, the fees of HSF are a live issue
as of this morning, aren't they?
MR WARWICK: Indeed they are.
MR JUSTICE FRASER: So what correction do you want to make
to your skeleton?
MR WARWICK: After the words "Group Litigation/Management",
"if the numbers £100,000 is agreed, but ..." be
inserted, and after the word "costs" in the second line,
the first word in the second line to be inserted "for
HSF".
MR JUSTICE FRASER: All right. Well, why don't you read out
to me what the amendment --
MR WARWICK: It will now read:
"Group Litigation/Management: £100,000 is agreed but
likewise ..." --
MR JUSTICE FRASER: Hold on, "£100,000 is agreed but ..."?
MR WARWICK: -- "... but likewise, Post Office intends to
seek its budgeted costs for HSF in this phase in budgets
relating to later stages of the litigation."
MR JUSTICE FRASER: You went too fast and I lost you
after "HSF".
MR WARWICK: I'm sorry.
MR JUSTICE FRASER: "... Post Office intends to seek its
budgeted costs for HSF ..."
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: Go on.
MR WARWICK: "... in this phase in budgets relating to later
stages of this litigation."
That's the existing words.
MR JUSTICE FRASER: Right. All right. Just pausing there
just one moment, then, Mr Warwick.
So, Mr Draper, that's an accurate summary of where
we are as at today in respect of group
litigation/management; is that right?
MR DRAPER: It is, my Lord. There's an element of costs
falling under that broad heading of "Group
Litigation/Management" that it is agreed does fall to be
budgeted at this stage, has been budgeted and has been
agreed at 100,000.
MR JUSTICE FRASER: And that's in the different summary
documents I've got it, is it?
MR DRAPER: That's right, my Lord. There is another chunk
which it has been agreed is not for now and so will be
dealt with if appropriate in later budgets.
MR JUSTICE FRASER: Is that different to the situation as it
was set out in the letter or one of the letters, which
I think was dated 16 October, which came last week?
I don't have the Opus reference for it, but it was from
Womble Bond Dickinson to my clerk on 16 October
<Z4/10/1>. It's a two-page letter which has a table on
the front of it with category 1, 2, 3, 4, leading to
a total of 16,322,000.
MR DRAPER: I'll have to confirm that, I'm afraid, my Lord.
MR JUSTICE FRASER: It's just that -- in paragraph 5 of that
letter --
MR DRAPER: Oh no, my Lord, those are different entirely.
Those are different again.
MR JUSTICE FRASER: I know, but that's the update
notification, isn't it, that letter?
MR DRAPER: Yes, my Lord. The costs mentioned there are
costs that are being incurred by Post Office, but it
doesn't seek from the claimants -- has no intention to
seek from the claimants. They're effectively costs of
which we're informing your Lordship because they're
costs borne by Post Office but not costs that it will
seek as costs in these proceedings. They're there
effectively for completeness.
MR JUSTICE FRASER: All right. Well, I'm not trying to be
difficult, but just one follow-up question before I come
back to Mr Warwick. That does say, however, in item 5.4
that <Z4/10/1>:
"... costs not included within that update are those
expended in relation to ...
"The engagement by Post Office of
Herbert Smith Freehills to provide legal advice in
respect of the Group Actio ..."
Just pausing there, does the 100,000 form part of
that or is that separate?
MR DRAPER: No, the 100,000 I think is mostly
Womble Bond Dickinson -- it's all Womble Bond Dickinson,
the 100,000.
MR JUSTICE FRASER: I understand.
MR DRAPER: So there is a fairly discrete category of costs
that it is agreed do fall to be budgeted at this stage,
100,000. We've reached agreement --
MR JUSTICE FRASER: And that's in relation to
the heading "Group ...", the heading that's in
Mr Warwick's skeleton?
MR DRAPER: It is, my Lord.
MR JUSTICE FRASER: That's 100,000 in relation to
Womble Bond Dickinson and that falls to be budgeted at
this stage; is that right?
MR DRAPER: Exactly, my Lord.
MR JUSTICE FRASER: And that has been agreed at 100K?
MR DRAPER: It has.
MR JUSTICE FRASER: Thank you very much.
Right Mr Warwick, that's corrected your skeleton.
MR WARWICK: My Lord, if it helps, I wonder if Opus'
assistant could call up <Z2/6/1>. This document,
my Lord, is a summary, specifically the first page of
a Precedent H that was filed by Post Office on Monday at
4.30 pm and, so far as I'm concerned, my Lord,
accurately reflects the position of what's agreed and
what remains outstanding.
MR JUSTICE FRASER: Right, well, just pausing there, because
I have got a document similar to that, when you said
"Monday", I think there's a different version of this
which was sent under cover of an email of Mr Parsons on
22 October, so that's Tuesday, at 16.26 --
MR WARWICK: Yes, my Lord. That was --
MR JUSTICE FRASER: -- which I understood that was the one
that was currently in play because that has the
corrected formula.
MR WARWICK: Indeed, my Lord. The front pages of those two
documents are identical.
MR JUSTICE FRASER: I don't think they are because if you
just look alone at the bottom right-hand corner of this
one, the total is 15.793.
MR WARWICK: I beg your pardon. I should correct myself on
that. That is the recast budget with a correction made
that has been filed -- was filed yesterday, and so it is
the budget in full, so it contains the full claimed
sums. I was quite wrong to suggest the front pages are
identical. They're not.
MR JUSTICE FRASER: You see, when I get two versions of
documents, the first thing I do is look at the front
page to see if they are identical and I can tell you it
wasn't.
MR WARWICK: Indeed, my Lord, yes --
MR JUSTICE FRASER: In fact there is about £2 or £3 million
non-identical.
MR WARWICK: My Lord, what I meant to say -- and I correct
myself -- is the document that I took your Lordship to
a moment ago that remains on the screen now at <Z2/6/1>
reflects what is agreed, so the lower sums that are
agreed, save the ADR phase, which falls to be reviewed
in exercise of your Lordship's powers today.
So this document --
MR JUSTICE FRASER: I don't -- I just don't follow that, I'm
afraid. Looking at the one on the screen --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- which has the 15.793 --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- hold on one second.
MR WARWICK: If I could explain and my learned friend will
correct me if I'm wrong. What Mr Draper's solicitors
have done is used this a little like a budget discussion
report, I suppose, in that what they have done is they
have substituted all the further issues trial incurred
and estimated fees and then correspondingly the totals
that are affected by this with the agreed sums, save for
the ADR sum which remains subject to your Lordship's
discretion today. The reason I mention --
MR JUSTICE FRASER: And that ADR sum that you just
identified is the one that runs all the way across to
the far right-hand column with a total of 1,384,127?
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: Is that right?
MR WARWICK: Yes.
MR JUSTICE FRASER: Well, I -- excuse me one second.
(Pause)
Just for my own rather retentive interest, I added
up some of the figures and that was before I understood
there may or may not be some issues with the formulae
and the underlying spreadsheet, and I'll explain to both
the parties why I did that in a minute.
But in the process of doing that, if you look along
the "Grand total" row on the document that has
the 15.793 total, in other words the one that's up on
the screen of <Z2/6/1> --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- I was interested to add up columns D,
E, F and G --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- which I did before I realised that's
what column H was supposed to be. Having added up those
four figures, I actually got a different total to
the 4.270, which I couldn't immediately understand why
that was because I would have thought it should be
identical.
MR WARWICK: Well, your Lordship's alighted on a problem
which I had not, and without myself performing the same
calculation, I'm probably unable to comment.
But I do have a proposed solution to this which
would allow this to proceed today on figures which are
common ground, and that is that all of the figures in
F and G, both of those entire columns save for the ADR
and settlement figures, are agreed figures and together
with the incurred costs --
MR JUSTICE FRASER: That may very well be the case, but the
ADR settlement lines in columns F and G on the face of
it are nearly £750,000.
MR WARWICK: That's correct.
MR JUSTICE FRASER: When one is considering a costs
management order, there are supposed to be two exercises
performed. One is satisfaction of the individual
elements and one is satisfaction of the overall total.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: It's a bit difficult to approach
the satisfaction of the overall total exercise if there
are such sizeable amounts that fall within the total
which aren't agreed.
So, for example, if one looks across the ADR --
I mean, I'm going to come on to ask Mr Draper a couple
of questions about this anyway, but if one looks along
the line of ADR settlement discussions before we then
turn to the next document, the one which does correct
the formulae, there's £500,000 in column E that is not
agreed -- is that right?
MR WARWICK: Yes, it's not agreed.
MR JUSTICE FRASER: That's not agreed -- there's 22,000 of
disbursements in column F which is not agreed --
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: That's right -- and there's 714,451
which is not agreed.
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: Those figures more or less, with a bit
of juggling, depending on if the formula are right, is
what leads to the total of 1.239 in column H?
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: And that is not agreed out of a total of
4.270?
MR WARWICK: Again that's correct, my Lord, yes.
MR JUSTICE FRASER: Right, so on this particular summary
sheet, I've correctly understood the items in issue,
I think.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: Is that right?
MR WARWICK: Yes.
MR JUSTICE FRASER: Now, before we get to the next one --
and I've got some questions for Mr Draper on
specifically this document so I'm going to ask you to
sit down. I'm just going to explore those questions and
then I'm going to come back to you.
Right, Mr Draper.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: Firstly I want to make it absolutely
clear that none of this is criticism and the degree of
discussion and agreement between the parties is
obviously enormously constructive and very helpful.
I just need to make sure that I've caught up with where
the parties are because of the way the documents have
come in in the last 24/48 hours.
MR DRAPER: I understand, my Lord.
MR JUSTICE FRASER: There are two documents which I'm
effectively using as a summary sheet for the defendant's
costs and I just want to make sure I've got them
correctly.
MR DRAPER: Yes.
MR JUSTICE FRASER: One of them is <Z2/6/1>, which is on
the common screen at the moment and which I've just been
going through with Mr Warwick.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: And that is the one that is dated
21 October.
MR DRAPER: Yes.
MR JUSTICE FRASER: Then there's the other one which came
under the cover of Mr Parsons' email correcting some
issues. I don't know what the reference is for that on
the common screen, but it's got a total of
18.401 million in the bottom right-hand corner.
MR DRAPER: Yes, my Lord, I'll just find that.
MR WARWICK: It's <Z2/5.2/1>.
MR JUSTICE FRASER: Z2/5.2/1. Now it's quite a simple
question, but it's one for you really, not Mr Warwick.
Which of those two should I be using?
MR DRAPER: You should, my Lord, be using the one that is on
the common screen, the one that consists only of
a summary sheet, and that's because --
MR JUSTICE FRASER: Sorry, when you say "on the common
screen", you mean the one with the reference <Z2/6/1>,
the one that Mr Warwick has been taking me to?
MR DRAPER: Yes, entirely, my Lord. The one that totals
7.9 million or you can call it "the Monday document".
MR JUSTICE FRASER: On the basis that the other one came
more recently than that, what is -- do I just ignore
this one? What's the underlying rationale for it?
MR DRAPER: For most purposes you can, my Lord. If
I explain the rationale, it will then be clear why it
was sent to your Lordship.
The full version received by the court yesterday is
a corrected form of Post Office's original budget prior
to agreement with the claimants, so it's the starting
point, corrected for an error in the formula.
The only reason, my Lord, it came after the summary
sheet showing agreement is that by oversight it wasn't
sent to the court at the same time as it was sent to
the claimants when corrected on Monday.
MR JUSTICE FRASER: I understand. So it's an accurate
version of a document that had effectively been
overtaken by events, but it was to correct an inaccuracy
and so it was right to resubmit it.
MR DRAPER: Exactly, my Lord.
MR JUSTICE FRASER: So I don't need to concern myself with
that at all for today.
MR DRAPER: You don't, my Lord.
MR JUSTICE FRASER: Right. So if we then go back to
Mr Warwick's -- and, Mr Draper, I don't know if you've
got a calculator and it is possible that I have made
a mistake but I will do it again. I am now going to add
up for myself columns D, E, F and G across the "Grand
total" line to see what I get to so ... and I'm going to
ignore the pence. (Pause)
All right. Well, that shows that my first exercise
was wrong because the total is correct. For some reason
I got it to 4.147 million before, but it should be
the 4,270,844, shouldn't it?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: That is correct. Well, I'm sorry I set
that hare running.
MR DRAPER: Not at all.
MR JUSTICE FRASER: Looking therefore at <Z2/6/1>, as
I understand it -- and this is just confirmatory for
you -- with the exception of the line across,
"ADR/settlement discussions", that is agreed by the --
it's not approved by the court, but it's agreed by the
claimants?
MR DRAPER: The estimates -- the budgeted costs estimates as
contrasted to incurred are all agreed save for ADR. Of
course incurred costs are in a different category.
They --
MR JUSTICE FRASER: Well, I can't do anything about that
anyway, other than make comment.
MR DRAPER: Any comment, yes. But that's right, my Lord.
MR JUSTICE FRASER: That therefore brings me to the next
point, which is one for you first and then for
Mr Warwick because it relates -- because it does
directly impact on today's exercise. The costs
management order for the common issues trial, which was
however many weeks it was with however much evidence of
fact, was 3.614 million; is that right? I'm taking that
off your column B.
MR DRAPER: It sound right and if it's in column E, I'm sure
it is right.
MR JUSTICE FRASER: At the bottom of column E.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: So that's common issues.
The Horizon trial which started in March and
finished in July and had experts and fact --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- the case management -- sorry, the
costs management order in respect of that is
3.749 million; is that right?
MR DRAPER: That's seems to be right, my Lord.
MR JUSTICE FRASER: So those are two figures which the court
has already approved?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: If we then jump ahead to column H, we
get a figure well north of 4 million just in respect of
the further issues trial; is that right?
MR DRAPER: That is right, my Lord.
MR JUSTICE FRASER: Now, can you remind me -- and I don't
know where this is in the electronic trial bundle --
where is the case management directions order that sets
out what the further issues are and the directions in
respect of the trial?
MR DRAPER: I'll just turn that up, my Lord.
MR WARWICK: I might be able to assist with that.
MR DRAPER: I'm told it's <C6/57/1>, my Lord, and that does
sound right.
MR JUSTICE FRASER: Can we call that up, please. <C6/57/1>.
Right. I'll just have to work out which ...
Right, so that's to deal with one issue only,
I think, which is called "Further issue 2" --
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: -- with a time estimate of three weeks.
MR DRAPER: That's right, my Lord. From that point onwards
there's the slight wrinkle that, of course, until this
hearing it was two issues including settlement, but --
MR JUSTICE FRASER: Until the hearing in July?
MR DRAPER: That's right, my Lord, but since that date it
has been limited to the one of the two.
MR JUSTICE FRASER: That's in the schedule and I'll just
remind myself what that is. And that's supposed to
start on 2 March.
MR DRAPER: Yes, my Lord. If we go through to page 5 of
the <C6/57/5>, that's the schedule.
MR JUSTICE FRASER: That's being done, so I understand it,
on assumed facts, I think; is that right?
MR DRAPER: Where not agreed. I think the expectation is
there will be some facts that can be agreed which may be
of more utility than an assumed fact, but beyond that
the facts will be assumed.
MR JUSTICE FRASER: Yes, because there's a process, I think
in the order, for the parties to agree assumed facts.
If they can't agree all of them, there's going to be
further directions in December and a resolution -- one
of those further directions is going to require
consideration of what we do about facts if there's
a disagreement between the parties about the assumed
facts; is that right?
MR DRAPER: Yes, my Lord. It may not be entirely
straightforward; for example, we might -- one or other
of us might invite the court to approach a particular
sub-issue on the basis of distinct alternative assumed
facts.
MR JUSTICE FRASER: Yes, which is perfectly -- or seems
potentially sensible.
But on the basis that further issue 2 deals with
measure of loss effectively as a matter of legal
analysis and explanation, there's either going to be
assumed facts or potentially some relatively narrow
disputes of fact?
MR DRAPER: Yes, I wouldn't quite say "disputes of fact".
There might be circumstances in which the court is asked
to proceed on alternatives. So if one starts with
a dispute of fact, either we assume one set of facts or
we assume both in the alternative. What we're not going
to do, my Lord, in my submission, is seek to resolve
the difference of fact between the parties principally
because we're not going to have evidence.
MR JUSTICE FRASER: For all the obvious reasons. So there's
not going to be evidence.
MR DRAPER: No.
MR JUSTICE FRASER: In those circumstances, I am struggling
as to why any costs management order in respect of
the further issue trial should be so much in excess
of -- just the global figures which the costs management
orders for further issues and Horizon issues reached for
obvious reasons, both of those -- and I know you've both
been involved substantially and I think you, Mr Draper,
have been involved in both Horizon and common issues.
MR DRAPER: Yes.
MR JUSTICE FRASER: They were very substantial hearings with
enormous ranges of disputed facts and, so far as the
common issues are concerned, wide-ranging disputes of
legal argument as well, and the Horizon issues had two
very detailed expert exercises involved.
MR DRAPER: It did, my Lord.
MR JUSTICE FRASER: Simply in terms of the headline figure,
I would have thought the further issues trial is going
to be narrower in scope than each of those two
mega-trials, but am I approaching it from the wrong
point of view?
MR DRAPER: I think the proposition with which I wouldn't
seek to disagree, my Lord, is that the trial itself one
would anticipate being less heavy than the other two.
That, my Lord, is a proposition I wouldn't quibble with.
If I could take you back to the spreadsheet at
<Z2/6/1>, which is the updated summary page, my Lord.
MR JUSTICE FRASER: Yes.
MR DRAPER: If one looks down in the yellow column, which is
column H, which is the totals for the cost of
the further issues trial, the meat of the difference, my
Lord, is attributable to ADR/settlement. If your
Lordship looks at the total there of 1.239 million and
then if you cast your eye across, my Lord, to
the equivalent figures in the columns for the common
issues trial and the Horizon issues trial, obviously
those are still substantial numbers for Horizon and
the common issues trial, but by comparison they are
extremely small. So that does account, my Lord, for
a great deal of the difference.
MR JUSTICE FRASER: It does and I've just now done
a calculation to remove the sum of £1,239,353 in the ADR
line --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- and to take it out of the 427,844 and
I've got a total of 3,031,491, which you're right, both
of those are -- well, one's 80% and the other's about
75% higher -- sorry, that's 80% or 75% lower than
the corresponding costs for the common issues and
Horizon issues.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: But the problem with approaching it like
that is if -- and I know we're going to get on to the
substantive point this morning anyway, but in a way,
because those settlement figures are for the whole
action, it's misleading, isn't it, to have them in
the further issues costs management order -- or, sorry,
a costs management order that on its face looks as if
it's approving costs for the further issues because, if
those ADR settlement costs are expended and result in
the whole matter going, then the group litigation as
a whole is resolved and not just the further issues.
MR DRAPER: Yes, my Lord. I think it's right to say that it
was the anticipation of the way the cost budgeting has
been arranged that ADR and settlement costs incurred in
the relevant stage would fall within the budget for that
stage and the situation here arises just because of the
peculiarity of timing, that by far the most substantial
efforts towards settlement have fallen within this
stage.
MR JUSTICE FRASER: Now I understand. I understand. All
right. Well, I mean, that -- I do -- I mean, for
example, other ways of comparing like with like, which
I think are perfectly valid comparisons --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- if you look at witness statements
in common issues, there's £500,000 there. Now there
aren't going to be any witness statements for the
further issues, so one would expect, if the two
exercises were broadly the same, that the further issues
trial at the very least would be £500,000 cheaper
because you haven't got the £500,000 on witness
statements --
MR DRAPER: I can see that, my Lord.
MR JUSTICE FRASER: So although some of it is explained by
the sizeable figure for ADR, not all of it is explained
because, if you look at other headline differences, one
would expect the further issues figure to be really
quite a lot lower than it is.
MR DRAPER: It's obviously a comparison between the further
issues trial or one or other or both of the previous
trials does show a -- it is a very mixed picture,
my Lord. We see -- many of the costs that one would
anticipate being higher in the earlier two trials we see
were in fact higher. So, for example, we see the
figures for trial preparation were substantially higher
for those two trials, reflecting your Lordship's point
about simply there being more meat.
MR JUSTICE FRASER: Yes, the nature of the trials.
MR DRAPER: Entirely so, my Lord. I'm not sure I can assist
you much further than saying --
MR JUSTICE FRASER: No, no, I just wanted to explore that
with you first so that I could make sure I was not
missing anything glaringly obvious. I don't think I am.
MR DRAPER: No, my Lord.
MR JUSTICE FRASER: Thank you very much and I'll now hear
from Mr Warwick.
MR WARWICK: My Lord, yes. Might I comment on what's been
said? Just two very short things. First of all there
has been a chronology of orders relating to this stage
of the proceedings. There were CMCs that your Lordship
will recall back on 31 January of this year and
12 February and the original order for directions given
by your Lordship was on 12 February. The proceedings
were then stayed -- these directions were stayed from
12 April onwards. So there's a narrow window at that
stage of compliance with directions. Then of course
came your Lordship's order of 23 July to which reference
has already been made.
The second point to comment on, my Lord, is that in
fact --
MR JUSTICE FRASER: But even before they were stayed, there
were only two further issues.
MR WARWICK: Indeed, my Lord, and in fact the deadlines at
that time for, for example, individual particulars of
claim didn't even bite until 15 May and so on.
MR JUSTICE FRASER: Okay.
MR WARWICK: There is a second point to be made, my Lord, on
what's been said, and that's that the recast budget, if
I may call it that --
MR JUSTICE FRASER: Which one is that one?
MR WARWICK: That is the document at <Z2/5.2/1>.
MR JUSTICE FRASER: This is the one that's been overtaken by
events?
MR WARWICK: Indeed. By agreement it's been overtaken. But
of course that is Post Office's budget.
MR JUSTICE FRASER: That's the one with the 18 million?
MR WARWICK: Indeed my Lord, and I hope to refer --
appreciating fully, my Lord, that in the exercise of
your powers you're not going into rates and approving
specific allocations of time and so on and your exercise
of costs management powers will be impressionistic, but
understanding what is driving costs of such magnitude
for ADR, one has to glance at the page at <Z2/5.2/6>--
MR JUSTICE FRASER: Yes.
MR WARWICK: -- because on that page appears, putting this
neutrally, a cascade of different fee-earner rates and
grades of seniority and estimated hours that do comprise
that figure and that page may be relevant to your
assessment, my Lord, of proportionality/overall
reasonableness.
MR JUSTICE FRASER: When you say "that page", that page
doesn't have all the fee-earners, etc, on. Do you mean
the page that goes after it, page 1 of 6, with all
the HSF fee-earners?
MR WARWICK: That's correct, my Lord, yes.
MR JUSTICE FRASER: In the "Common costs" column?
MR WARWICK: Internally it appears as page 5 of 6 in
the document and it's at the foot of the document that's
on our common screen presently.
MR JUSTICE FRASER: I was looking at page 1 of 6 first
because in the left-hand column there are 17 HSF
fee-earners in that column.
MR WARWICK: Yes, my Lord, and those fee-earners' rates and
so forth are replicated in the page that I took
your Lordship to a moment ago; that's to say page 6.
MR JUSTICE FRASER: All right. So that's page 5 of 6?
MR WARWICK: Yes, my Lord, and the background observation on
this as well is that this was recast because originally
all of those HSF fees appeared quite wrongly as
disbursements.
MR JUSTICE FRASER: No, no, I understand.
MR WARWICK: That's an argument under the bridge.
MR JUSTICE FRASER: That's now been changed.
MR WARWICK: Indeed, my Lord, yes.
MR DRAPER: My Lord, just to interrupt for a small point of
factual correction. There aren't in fact 17 fee-earners
in the sense of persons charging a fee. It's that there
are 17 different rates and in many instances the same
person has two different rates because they have agreed
a discount.
MR JUSTICE FRASER: So "trainee London" and "Trainee London
reduced".
MR DRAPER: Exactly, my Lord.
MR JUSTICE FRASER: But that only happens in a couple of
situations, I think. And also some of them are
e-discovery as well. I think there's three where
there's reduced rates given in brackets immediately
afterwards.
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: "Partner London (London reduced)",
"Associate London (London reduced)" and "Trainee London
(London reduced)".
MR DRAPER: Yes, those are the reduced figures, my Lord.
MR WARWICK: Yes, my Lord. That's fully understood. I'm
not seeking to suggest there are 17 people. In fact
there may well be very many more, and if one glances at
some of the hours allocations, that must be the case.
It's a point I'll come to in a moment, if I may,
my Lord.
So in essence, my Lord, what falls for determination
today then is this ADR phase, but your Lordship will
have seen that comments are also sought on two incurred
costs that appear in the budget. So that your Lord has
them by way of introduction, they are the incurred costs
for statements of case.
Going back, my Lord, to the summary document that we
were looking at a moment ago at <Z2/6/1>, on the second
row --
MR JUSTICE FRASER: These were the comments in your draft
order?
MR WARWICK: Indeed, my Lord, yes.
MR JUSTICE FRASER: So which document are you taking me to
now?
MR WARWICK: Back to what I might propose we refer to as
the "summary", which is the document that summarises
the present position, including the agreed sums filed by
Mr Parsons.
MR JUSTICE FRASER: The one at <Z2/6/1>?
MR WARWICK: That's correct, my Lord, yes.
So the comment is sought -- if one looks under
columns D and E, the combined total of D and E for
issues statement of case, that total is 269,729.
MR JUSTICE FRASER: Right.
MR WARWICK: Comment is sought on that, my Lord, because
that has been incurred up to 3 September, before any
pleadings had been served upon Post Office, and
possibly -- a point I'll come to just in one a second,
my Lord -- a comment in relation to ADR and settlement
incurred costs, which is £502,000.
This requires just a small amount of introductory
clarification. In my witness statement the possibility
of an adverse comment in respect of witness statements
was canvassed, but that's been clarified now and it's
not sought because it's not included in the budget now
at all. Those costs have been taken out for another day
if Post Office wishes to pursue them. Secondly --
MR JUSTICE FRASER: But these are all in respect of -- these
are comments you're seeking in respect of incurred
costs --
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: -- but we don't get to that yet.
MR WARWICK: Indeed, my Lord, and I was going to propose
that we deal with the ADR position first.
MR JUSTICE FRASER: Right, well, let me just do -- I thought
I had a handle on exactly what was in issue. So far as
today's business is concerned --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- which I think it was possibly a bit
optimistic to reduce the time estimate, actually --
there's a CMO sought by the claimant for its further
issues budget which is agreed by the defendant; is that
right?
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: There's a CMO sought by the defendant
for its further issues budget which is substantially
agreed by the claimant, but there are some non-agreed
items?
MR WARWICK: Just the ADR phase, my Lord, yes.
MR JUSTICE FRASER: Well, it's a non-agreed phase, but it
includes more than one item.
MR WARWICK: Indeed, my Lord.
MR JUSTICE FRASER: Right. And so it's the ADR phase that's
in issue, and the ADR phase, if I can put it like this,
the headline issues are duplication of solicitors --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- so let's call that the
"Herbert Smith Freehills point" --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- together with effectively the overall
total.
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: Are those the two?
MR WARWICK: Those are the two issues, yes.
MR JUSTICE FRASER: Then the third point is you want
comments on incurred costs which are in the budget.
MR WARWICK: That's right, my Lord.
MR JUSTICE FRASER: And I'm permitted to do that under
the costs management regime.
MR WARWICK: Indeed, my Lord, yes.
MR JUSTICE FRASER: And those three are the one you've just
identified to me --
MR WARWICK: They are in fact only two, my Lord, issues
statements of case, 269,729.
MR JUSTICE FRASER: 269,000 ...?
MR WARWICK: ... 729, my Lord.
MR JUSTICE FRASER: Yes, and what's the other one?
MR WARWICK: Incurred for ADR and settlement, total 502,527,
but particularly Herbert Smith's fees of 454,171, my
Lord.
MR JUSTICE FRASER: Yes.
MR WARWICK: Subject to a rider, my Lord, because, of
course, whether making a comment on those incurred costs
is appropriate, my Lord, will depend upon the approach
your Lordship chooses to take --
MR JUSTICE FRASER: Correct.
MR WARWICK: -- to the overall because, of course, you can't
have it twice, both factoring in incurred costs for
the purposes of reducing budgeted costs and an adverse
comment, and that I made clear to my learned friend
yesterday.
MR JUSTICE FRASER: Well, let's take this step by step and
I'm just going to make some introductory comments which
apply to everybody.
The parties agreed to adopt the costs management
regime in this case. It was not imposed on them by
the court. There therefore must be some purpose in
the parties having agreed that and they must want
the involvement of the court insofar as their future
costs are concerned, otherwise they would never have
agreed to adopt the costs management regime. On
the basis I have made costs management orders already,
although I consider as a matter of discretion I would be
entitled not to make a costs management order and to say
to the parties that there's no point in continuing
the costs management regime in this case because of
the way costs are being dealt with, I'm not going to do
that and I am going to make costs management orders.
But I'm afraid the point has come in this case that,
notwithstanding agreements between the parties,
the court is not now simply content to waive through
very substantial sums just because they're agreed.
Having said that, obviously that might come as a bit
of a surprise given the court's approach to cost
management orders already, but one point which gives me
very great concern is that the further issues trial as
now reduced to a single issue is going to be a trial far
narrower in scope than either of what is undoubtedly
properly described as two earlier "heavy trials", one is
common issues and one is Horizon, and I'm just using
the claimants' budget -- I beg your pardon --
the defendant's budget because it's in front of me, but
just as an example. The costs management order in
respect of the common issues trial had a total of
3.614 million; the costs management order for
the Horizon issues trial had a total very slightly less
than 3.75 million.
It seems to me that the global figure for
the further issues, even including settlement, can't
possibly be reasonable and proportionate if it's in
excess of either of those two figures. So that's
the approach I'm adopting.
The claimants' budget is agreed and I'm just going
to check this with Mr Draper. Mr Draper, am I right
that that sum is 2.814640 million?
MR DRAPER: That sounds right, my Lord. If we just call it
up. It's at <Z2/7/1>. These are --
MR JUSTICE FRASER: That's the one I've got. It was sought
in the sum of 2.931 and it was given at 2.814 and that
omitted security for costs, which the parties agreed
won't fall into the costs management regime today at
all. That was going to be dealt with separately; is
that right?
MR DRAPER: Yes, that's right.
MR JUSTICE FRASER: And it has a figure for ADR settlement
of 130K -- is that right?
MR DRAPER: That's right.
MR JUSTICE FRASER: -- which is the total sum that was
sought.
MR DRAPER: Yes, that's right, my Lord. I think I'm right
to say that aside from the removal of the costs security
management figures, there were no figures that were
negotiated down, if your Lordship looks up.
MR JUSTICE FRASER: Right. So you are content for me to
make a costs management order in respect of the further
issues trial on this figure of 2.814, which includes the
130,000 for ADR?
MR DRAPER: There is a slight difference between the two --
the ways the two have been -- the two budgets have been
produced, my Lord. If your Lordship wants the
equivalent for Post Office's figure of the figure you
were looking at, 737, estimated costs for ADR and
settlement --
MR JUSTICE FRASER: Sorry, 737? I don't understand where
you get that from.
MR DRAPER: That's from the updated Post Office summary,
the <Z2/6/1>.
MR JUSTICE FRASER: Yes, which I've got in front of me.
MR DRAPER: I believe it's 737, but if one adds up the two
estimated figures there, disbursements and time costs --
MR JUSTICE FRASER: Oh, that's the 714 and the 22?
MR DRAPER: That's right.
MR JUSTICE FRASER: So what you're saying is 737 for
the Post Office --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- is the comparable figure against
the 130?
MR DRAPER: No, my Lord. This is the point I'm coming to.
We have taken the ADR and settlement element -- phase --
as including ADR and settlement generally, but also the
specific mediation that the parties have agreed should
take place.
If you go back to the claimants' document -- sorry,
our budget discussion report for the claimant's figures,
where they're all shown as being agreed, there is ADR
and settlement about just over halfway down the page at
130,000, but also right at the bottom, the last listed
figure, there's 284,000 for mediation. So one would
need to add those two together to get the equivalent
figure.
MR JUSTICE FRASER: That's a very good point. So in other
words it's not just 130. It's the 130 plus the 284?
MR DRAPER: It is, my Lord.
MR JUSTICE FRASER: Right. Well, let's do that calculation,
please.
MR WARWICK: I have the figure, if it helps my Lord.
MR JUSTICE FRASER: Yes, it does.
MR WARWICK: It's 415,122.
MR JUSTICE FRASER: 415 ...?
MR WARWICK: ... 122.
MR JUSTICE FRASER: And your budget includes within it,
I believe, although it's called the "Further issues
budget" -- your budget includes, because of the timing
of the mediation settlement ADR, all the costs in
respect of which you seek a CMO and the total of those
is 415,122?
MR WARWICK: For ADR, yes, my Lord.
MR JUSTICE FRASER: Well, ADR and mediation, isn't it?
MR WARWICK: Correct, my Lord, yes.
MR JUSTICE FRASER: And settlement discussions?
MR WARWICK: Indeed, my Lord, yes.
MR JUSTICE FRASER: So all of those activities of a like
nature are included within the 415?
MR WARWICK: That's correct.
MR JUSTICE FRASER: You haven't apportioned some bigger
figure and said, "We're putting 415 of it in further
issues"; it's all in there at 415?
MR WARWICK: That's right. I mean, that's not to say that
if discussions aren't successful at later stages of
the trial --
MR JUSTICE FRASER: No, no, no, of course. But just so that
the parties understand why so much time is being taken
doing this, the essential thing is to make sure that I'm
pairing like with like.
MR WARWICK: Yes, my Lord. Well, to assist your Lordship on
that, I think it would be remiss of me not to mention
that of course the sum in the budget discussion report
of 2,814,640, in respect of which a CMO is sought,
my Lord, obviously that doesn't include the claimants'
incurred costs for the further issues trial --
MR JUSTICE FRASER: And any incurred costs for ADR and
mediation?
MR WARWICK: Absolutely, my Lord.
MR JUSTICE FRASER: Well, are there any of those?
MR WARWICK: There are. I wonder if the following document
could be called up. It's <Z2/1/1>. That is the front
page of the claimants' budget. When it was filed, it
still included security for costs.
MR JUSTICE FRASER: Sorry, are we at <Z2/1/1>?
MR WARWICK: That's correct, my Lord.
MR JUSTICE FRASER: Which figure is it you're going to show
me?
MR WARWICK: The total figure at the bottom of column H.
That is the figure that includes incurred costs, but out
of it has to be taken security for costs and the total
is 3,284. So were your Lordship to wish to compare
the claimants' total budget including incurred costs
with the defendant's total budget including incurred
costs --
MR JUSTICE FRASER: No, no, I don't, I don't --
MR WARWICK: -- that would be the sum.
MR JUSTICE FRASER: But if you look in incurred costs in
the left-hand column --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: Well, let's start with ADR settlement
discussions --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- you don't get to any entry at all in
the orange box of column D and E, do you?
MR WARWICK: Well, there's very limited sums, £90 of time
costs and 3,574, so --
MR JUSTICE FRASER: So apart from that tiny wrinkle --
MR WARWICK: That's right.
MR JUSTICE FRASER: So in order -- well, it's not necessary
to add 3,664 of incurred mediation ADR costs. That's
what the total is, isn't it?
MR WARWICK: Yes that's right, my Lord, yes.
MR JUSTICE FRASER: So your figure for further issues
trial --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- excluding ADR and mediation is your
2,814,640 at the bottom --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- take away the 284,860 --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- and take away the 130,262.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: I get that to be £2,399,518 for
the further issues trial, excluding mediation and ADR.
MR WARWICK: Yes, my Lord, but from 3 September --
MR JUSTICE FRASER: I understand that.
MR WARWICK: -- because there are incurred costs behind
that.
MR JUSTICE FRASER: I understand that.
MR WARWICK: Yes.
MR JUSTICE FRASER: And that's not at issue as far as I'm
concerned and you're both agreed that that's the right
date, I think.
MR WARWICK: Absolutely, my Lord, yes.
MR JUSTICE FRASER: So Mr Draper --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- if I were minded to make a costs
management order today, I consider I have two
alternatives so far as the claimants are concerned. One
is a figure of 2,814,640, which includes their mediation
and ADR costs --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- or a similar way of expressing
the same figure would be 2,399,518, excluding mediation
and ADR costs, if I wanted to deal with them separately.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: But on either footing, those totals are
agreed by you --
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: -- and that's just a methodological
difference; is that right?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: Thanks very much.
Mr Warwick, this isn't building up to a great
drum-roll, but it's important I think that this case
proceeds on a like-for-like basis.
MR WARWICK: Yes, my Lord, yes.
MR JUSTICE FRASER: Is there anything you would like to say
to me about which of those two approaches in principle
you would invite me to adopt because it's important that
I compare like with like? I'm not suggesting that
the budget shouldn't include ADR or settlement. All I'm
suggesting is whatever the costs management order that
I make, it needs to deal with both parties in the same
way, doesn't it?
MR WARWICK: Absolutely, my Lord, yes, it does. That's
common ground.
MR JUSTICE FRASER: Right.
MR WARWICK: There are foreseeable benefits to having two
CMOs, a CMO for further issues and a CMO for settlement
and ADR. Actually I think it's within the realms of
possibility that the parties could strip out ADR costs
should, for example, your Lordship make a costs order
with respect to the further issues trial at the end of
the further issues trial. Obviously the effective
rule 318 compels a costs judge to have regard to the
figures that your Lordship has approved, but the figures
that your Lordship is approving are these totals, and so
it would, on my understanding anyway, be permissible for
a costs judge to take those out if your Lordship gave an
order just about the further issues trial at a later
date and so there are benefits to it.
But I'm agnostic on which approach. I think for
ease of methodology, keeping them included in this,
noting that they relate to something different, which is
the group as a whole, would be acceptable, providing
it's acceptable it to my learned friend.
MR JUSTICE FRASER: Right. So you would -- so you're
relatively neutral, but your approach is on the basis
that all -- that's how the budgets have been prepared to
keep them in, but just to recite that they're not
strictly speaking attributable solely to the further
issues --
MR WARWICK: That's right, my Lord.
MR JUSTICE FRASER: -- because they're not, are they?
MR WARWICK: No, by all means. And of course, my Lord, in
recording your Lordship's order, I see no difficulty, if
your Lordship's minded to, to include a comment to that
effect, to which the judge on detailed assessment would
have regard.
MR JUSTICE FRASER: All right. Okay.
Mr Draper, do you have any observations?
MR DRAPER: I respectfully agree, my Lord, for this reason:
there are in fact various elements of the cost budgeting
process for the further issues trial stage that don't
relate specifically to the further issues. There are of
course things like ongoing group management that is just
a cost that rumbles on.
MR JUSTICE FRASER: Understood.
MR DRAPER: That is as true for other things as for
settlement, but we obviously recognise settlement is
a huge chunk here that otherwise might distort
a comparison across the trials. So something in your
Lordship's order merely to draw attention to that fact
may well be sensible.
MR JUSTICE FRASER: All right. Well, in that case you have
both persuaded me then.
Order
I'm going to make a costs management order, so far
as the claimants are concerned, in the overall total of
2,814,640, but I would like the order to include
the following note, which is: although this costs
management order is expressed as being the further
issues costs management order, the budgets and approved
figures include substantial figures for ADR/settlement
discussions/mediation which relate to the group
litigation as a whole and therefore could be seen as
potentially distorting the overall total if one were to
compare the overall total for the further issues
CMO with the overall totals for the CMO for the common
issues trial and for the Horizon issues trial. I'm just
recording that for the benefit of the costs judge.
Right.
MR WARWICK: I'm very grateful, my Lord.
MR JUSTICE FRASER: Right, so that then brings me to CMO for
the Post Office.
MR WARWICK: Yes, my Lord. I should give way.
MR JUSTICE FRASER: Yes.
Mr Draper.
Submissions by MR DRAPER
MR DRAPER: Yes, my Lord, in relation to Post Office there
are two distinct issues. One is whether your Lordship
ought to make any effectively adverse comment under 3.15
in relation to incurred costs and the other is whether
your Lordship -- what figure your Lordship ought to
approve for estimated costs for settlement.
Now, those two principles -- that distinction
becomes blurred somewhat because my learned friend seeks
both a criticism of incurred costs for ADR settlement
and/or that your Lordship reduce the estimated figure
for settlement.
MR JUSTICE FRASER: Right. Well, before we get on to that,
there's also another point, isn't there, which is
whether the court is satisfied that the total excluding
ADR and settlement is a reasonable and proportionate one
for the further issues trial; in other words, just
because it's agreed doesn't mean it's going to be
approved. It still has to be reasonable and
proportionate for me to make a CMO in respect of it
anyway, rather than reduce it down.
MR DRAPER: To make a CMO at all, my Lord?
MR JUSTICE FRASER: No, not to make a CMO at all; to make
a CMO in that figure, in the figure that's sought.
MR DRAPER: My Lord, you are -- in respect of agreed costs,
the position is that the court will note the agreement.
It's in respect of costs that aren't agreed that
the court has a role of reviewing and reducing an
estimate as it may consider appropriate. So there's
a distinction there to be drawn between those costs that
are live --
MR JUSTICE FRASER: Well, there is, but --
MR DRAPER: -- and those that are agreed.
MR JUSTICE FRASER: Well, there is a distinction, but the
court's not bound by an agreement between the parties if
it's not satisfied that they're reasonable and
proportionate. I'm not saying I'm necessarily going to
do it. I'm just saying it's a formal step that still
needs to be considered by the court because the whole
purpose of costs management is that the court --
MR DRAPER: I understand.
MR JUSTICE FRASER: -- becomes directly involved in deciding
what's reasonable and proportionate.
MR DRAPER: Yes, my Lord, but -- I'm just turning up
the rule. I think it's --
MR JUSTICE FRASER: Where are we looking?
MR DRAPER: Yes, my Lord, it's 3.15. If your Lordship looks
at 3.15.2 --
MR JUSTICE FRASER: Could you just give me the page?
MR DRAPER: Someone has stolen my 2019 White Book. It's
page 134 in last year's.
MR JUSTICE FRASER: Don't worry. It's 139 in this one.
3.15.2, yes.
MR DRAPER: Yes, my Lord. The chapeau of 3.15.2 records
the point that your Lordship made at the outset, which
is that your Lordship could choose not to make a CMO,
although that's water under the bridge. It says:
"Where costs budgets have been filed and exchanged,
the court will make a costs management order unless it
is satisfied that a litigation can be conducted justly
and with proportionate costs in accordance with the
overriding objective without such an order being made.
By a costs management order the court will (a) record
the extent to which the budgeted costs are agreed
between the parties and (b) ..."
In my submission only in (b).
"... in respect of the budgeted costs which are not
agreed, record the court's approval after making
appropriate revisions."
Then (c):
"Record the extent, if any, to which incurred costs
are agreed."
MR JUSTICE FRASER: Yes, but if you look at 3.15.3,
the notes over the page, assuming it's the same in last
year's version as it is here, second sentence:
"The court should decline to make a CMO for the time
being if it wishes to urge the parties to reconsider
their budgets, whether or not those budgets are agreed."
MR DRAPER: Oh, of course, my Lord, but that's, if you like,
refraining from making the CMO because the court's view
is that the parties aren't in a position yet to put
a sensible one forward. That's not, my Lord, the same
process as going through and, if you like, editing down
figures, revising them. The court can refrain from
making a CMO --
MR JUSTICE FRASER: Okay, look at the first paragraph,
the next -- sorry, the first sentence of the next
paragraph:
"Circumstances may arise in which the court approves
budgeted costs in part only and neither approves nor
comments upon the rest of it."
So in terms of the costs management order, there's
a wide range of options available. I might be, for
example, perfectly satisfied that your figure for
the pre-trial -- this is just hypothetical --
MR DRAPER: Of course.
MR JUSTICE FRASER: -- that your figure for the pre-trial
review for the further issues trial is unobjectionable,
reasonable and proportionate and I will make a costs
management order in respect of it. That doesn't mean
that, notwithstanding agreements between you on all
the items, you're entitled to the same approach on all
the items, does it, or do you say it does?
MR DRAPER: It slightly depends what your Lordship means
by "the same approach". If we take hypothetical facts
where the parties, if you like, collude together to both
agree obviously disproportionate budgets, so they come
before you and say, "We're each spending £12 million on
pleadings and we're both happy with that", the court
could, in that circumstance, simply refuse to make a CMO
because it would say, "This is not costs management and
I'm not prepared to put the court's name to it".
What the court, in my submission, can't do in
relation to agreed costs -- agreed estimates that come
before the court is to reduce them down and then approve
them as --
MR JUSTICE FRASER: When you say "can't", you mean in
the sense that the court doesn't have the power to do
it?
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: I'm not sure that's right. Give me
a moment.
MR DRAPER: Of course. (Pause)
MR JUSTICE FRASER: That's the whole rationale of the
different cases, including CIP, isn't it, Mr Warwick?
MR WARWICK: My Lord, if it helps, declining to grant
a CMO was one of the options considered in CIP, but if
it helps the position, I am with my learned friend on
this point. A CMO should record the extent of
agreement, though it is in your gift, my Lord, not to
make a CMO, as foreshadowed at the beginning of the note
at 3.15.3 in the White Book to which you took my learned
friend.
MR JUSTICE FRASER: Yes, but that's about not making
a CMO at all. I have the ability to -- I mean, we're
getting slightly sidetracked because it's not
necessarily something I'm going to do anyway, but I have
the ability to make a CMO in respect of certain heads of
costs in the budget, whether they're agreed or not, and
not to make a CMO in respect of others. Just because
the parties are agreed I should make a CMO --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- and to take Mr Draper's example of
£12 million for pleadings -- just because the parties
might be agreed, they're not necessarily entitled to
a CMO in respect of that item that they have agreed.
MR WARWICK: Yes, that may well be right, but, my Lord, what
your Lordship -- I respectfully can't do is revise
agreed figures.
MR JUSTICE FRASER: No, no, I see. I see what you mean.
I understand. So I have taken us down a rabbit hole.
All right.
MR WARWICK: Not necessarily, my Lord, because actually it
is worth, while passing through this point, to observe
that Mr Justice Coulson, as he then was, in CIP --
I appreciate it's not an authority that's binding on
this court, but it is useful guidance. It's one of
the earliest cases on this point -- observed the pitfall
of not making a CMO is that what it effectively does is
sidesteps -- allows one body to sidestep costs
management because something that's not subject to
a CMO is later up for grabs on detailed assessment.
MR JUSTICE FRASER: No, I understand that.
MR WARWICK: It might not actually achieve the effect that
on a superficial analysis it might look as though it is
achieving if one considers what a party in that position
might later do with it.
MR JUSTICE FRASER: Although the difference in CIP was all
of the many defendants were lining up to attack
the budget --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- and it was not agreed.
MR WARWICK: That's absolutely right, my Lord, but that
overall effect of declining to give a CMO was considered
by then Mr Justice Coulson and ruled out for that
reason.
MR JUSTICE FRASER: Yes. All right.
Okay. Right, Mr Draper. It looks as if I might
just have just spent ten minutes taking everyone up
a side street.
MR DRAPER: Not at all, my Lord.
MR JUSTICE FRASER: So back to your budget then.
MR DRAPER: Yes, my Lord, I don't know -- I mean there's
a question about what's the most efficient way to
address this, first as to who goes first and in what
order we deal with points.
MR JUSTICE FRASER: Well, one is adverse comment on incurred
costs.
MR DRAPER: Yes.
MR JUSTICE FRASER: I think Mr Warwick's explained that and
also said in his --
MR DRAPER: Fine.
MR JUSTICE FRASER: -- skeleton what the situation is. What
would you like to say about that?
MR DRAPER: That's fine. If we take adverse comment then
first, my Lord.
MR JUSTICE FRASER: On incurred costs?
MR DRAPER: That's right.
MR JUSTICE FRASER: Yes. He says it's the issues statement
of case figure of 269 and the incurred costs on
ADR/settlement of £500,000.
MR DRAPER: Yes, that's right, my Lord. If I could first
address your Lordship on the general approach to be
adopted to any request that the court exercise its
discretion to make a comment. Could I ask you to turn,
please, to the case at tab 4 of the authorities bundle,
which is Richard v BBC. We'll call it the "Cliff
Richard" case. In this case, my Lord, Chief Master
Marsh addressed obviously the request to make a comment
before him on its facts, but also the general approach
that the court should adopt to this jurisdiction. If
your Lordship looks at paragraph 2, he says there:
"The court's power to make a comment about a party's
incurred costs is contained in 3.15 and the power is
repeated in similar form in the practice direction
at 3(e). There is no doubt that it is a discretionary
power and the discretion is a very broad one. Neither
the rule nor the practice direction gives any guidance
about the circumstances in which a comment may be or
should be made."
In the paragraphs that follow, my Lord, Chief Master
Marsh proceeds, in my respectful submission, with a very
impressive piece of reasoning to essentially give
the guidance that is lacking in the practice direction.
He says in paragraph 3:
"A comment about incurred costs is to be taken into
account in any subsequent assessment. Although
a comment must be taken into account, that falls some
way short of it being binding on the costs judge. On
a detailed assessment the costs judge will have far more
information about the costs than the judge at the costs
management conference. It seems to me that a costs
judge is entitled, having taken a comment into account,
to disagree with it or to put it to one side if, on
the detailed assessment, a fuller picture emerges."
Chief Master Marsh then deals in paragraph 4 with
a slightly different point about not carrying out an
assessment at a cost management hearing.
He then comments in paragraph 5, second sentence,
that:
"The exercise at a costs management hearing is
necessarily a summary one that has to be undertaken
briskly."
He says in paragraph 6:
"This leads me to conclude that a degree of caution
is appropriate when the court considers whether to make
a comment about incurred costs. It is asked to do so in
the context of the overall costs management exercise and
the restraints that are clearly stated in practice
direction 3(e), paragraph 7.3. The exercise of
producing budgets and their review is necessarily an
exercise based on limited information. Even in relation
to incurred costs, the amount of information that is to
be included in the budget is very limited indeed."
Paragraph 7, he explains the facts of the case
before him.
At paragraph 8 he records the comment that he was
invited to make.
MR JUSTICE FRASER: Paragraph what? 8?
MR DRAPER: Yes. He records there the comment that
Mr Eardley asked him to make. If I pick it up, my Lord,
at paragraph 10, bearing in mind the nature of
the comment there was to the effect that the costs were
excessive and disproportionate, what Chief Master Marsh
says about that is:
"To my mind there is little or no value in the court
recording a general comment about incurred costs along
the lines that the incurred costs are substantial or
they are too high. If the court wishes to record
a comment that the incurred costs are excessive or they
are unreasonable and disproportionate, it will wish to
be sure that the comment is made on a sound footing
rather than impression because commenting is quite
unlike the exercise of approving a figure per phase for
future costs. The court will also wish to consider the
utility of making a comment unless it is specific and
well founded."
Paragraph 11 then, my Lord, third sentence:
"Making a comment does bear the risk, however, that
on a detailed assessment disproportionate weight might
be given to it, although the comment is based on limited
information."
Paragraph 12, he expands on the point:
"The costs judge on a detailed assessment will have
the benefit of a full review of all the work that has
been carried out. That is a safer basis."
He then says two sentences on:
"I am also concerned that a comment could unfairly
skew a detailed assessment."
Then in the final sentence of that paragraph he
says:
"That consideration, set against there being no real
benefit to the BBC in making such a comment other than
a short-term tactical advantage, leads me to conclude in
the exercise of my discretion that I should reject the
BBC's request."
My Lord, those are the -- I respectfully ask
the court to endorse those remarks as the correct
approach.
MR JUSTICE FRASER: Right.
Before you go on to the figure for estimated costs,
I've got a question on this specific point --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- but I have been asked if
the shorthand writers can have a short break and now is
probably a good time given we started at 11.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: So I'll rise now just until 20 past so
they can have a shorthand writers' break, I'll come back
in and I'll ask you my question and then you can come to
your second point.
MR DRAPER: Yes, my Lord. I was going to deal first with
the specific reasons why the comment here is
inappropriate and then come to estimated costs after
that, if I may.
MR JUSTICE FRASER: Right.
(12.13 pm)
(A short break)
(12.21 pm)
MR JUSTICE FRASER: Right, Mr Draper.
MR DRAPER: Back then, my Lord, on incurred costs.
Unsurprisingly a lot of the points that I make in
relation to incurred costs will apply also to estimated
costs because they're points of fairly broad
application, points about Herbert Smith's involvement
and those kind of general points.
But focusing on the jurisdiction to comment on
incurred costs, what we take from the Cliff Richard case
is it is a broad discretion but it is one where there is
very good reason for the court to be cautious, bearing
in mind the difference between the material before
the court now and the material that will be before
the costs judge --
MR JUSTICE FRASER: Yes.
MR DRAPER: -- and also, in that regard, taking into account
the kind of comment it is that's sought.
I draw a distinction, if I may, between two types of
comment at a fairly high level of generality. One is
the kind of comment considered by Chief Master Marsh,
which is just, "These costs are unreasonable,
disproportionate or look high". In my respectful
submission that's quite a difficult case in which to
seek a comment because essentially you're asking the
court now on a costs management basis to do on a very
summary basis precisely what the costs judge will be
seeking to do on the basis of much more detailed
information and there is a risk of skewing that full
assessment by a remark to which -- it will be hard for
the costs judge to know effectively what to do with it.
MR JUSTICE FRASER: Well, it depends what the remark is,
I suppose.
MR DRAPER: It does, but if I draw a distinction between
that, where it's just I would like the court to say the
costs look high, where Chief Master Marsh says, "Well,
that's quite dangerous because you're effectively doing
the costs judge's job just on very limited information",
and a different kind of case, where there's some point
of overarching principle which the judge at the costs
management hearing can identify.
My Lord, these proceedings provide an example. You
will recall, my Lord, that you commented in relation to
expert costs incurred by Post Office that were not
the costs of their expert for the Horizon issues trial.
You were invited to comment on those. Then you said
effectively, "Well, bearing in mind that they have
experts for the one expert trial, it's not clear to me
that these costs could be recoverable". My Lord, that
is a point of principle. What that's not doing is
effectively doing the costs judge's job on a summary
basis in my submission.
So I then turn to the specific complaints. My
learned friend's point about settlement costs, both
incurred and estimated, is a kind of "Stand back, it all
looks very high" kind of point. But in my submission,
my Lord, if the court does stand back, it's a fairly
strange attack for the claimants to mount.
I say that for two sort of headline reasons:
the first is that if you take the litigation as a whole,
so all stages, the claimants are in fact spending
slightly more than Post Office, so this isn't a kind of
David and Goliath case, where David says, "Look what
Goliath's doing, he's vastly outspending me, isn't this
disproportionate?" This just isn't this kind of case.
Even if your Lordship looks at this stage,
the further issues trial stage, it is true to say the
Post Office costs are higher, but they are not massively
higher. The claimants' costs are very slightly under
80%. So it's a substantial difference, but it's not, my
Lord, chalk and cheese.
So the "Stand back" point, "they just look very
high", is a difficult one for the claimants to make. So
the specific points that they come to -- if I can deal
with ADR and settlement. There is also the pleadings,
but taking ADR and settlement first. There's no shying
away, my Lord, from the fact that Post Office has spent
and proposes to spend a great deal of money seeking to
settle the litigation at this stage. It's seeking to
devote resource proportionate to what it's spending on
fighting the case trying to settle it, trying to resolve
it by compromise. If one puts the costs of settlement
in the context of the total costs of the proceedings,
whilst very substantial, they are not out of line.
MR JUSTICE FRASER: Yes.
MR DRAPER: The question then is: well, what does
Post Office have to do to put itself in a position to
maximise the chance of settlement? What it has to do is
be able to take an informed view on the merits of
the claims, and that doesn't mean merely looking at what
duties were owed, the common issues trial or the general
reliability of Horizon, the Horizon issues trial; it
involves applying those duties and applying general
conclusions about Horizon to specific cases. That is
inherently, for Post Office at least, a document- and
fact-intensive process, to identify what has happened in
relation to a particular claimant.
MR JUSTICE FRASER: Well, the difficulty with that,
Mr Draper, is in a sense any litigant can do whatever
any litigant wants to do in terms of preparation for, in
this case, as I understand it, a mediation.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: The particular characteristic that jumps
out -- and this covers both one of Mr Warwick's points
on incurred costs and adverse comment and also estimated
costs going forward -- is the involvement of a wholly
separate firm of solicitors.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: Now, that is a very unusual situation.
I see you shrug your shoulders and I know that there's
been some correspondence on this, where your instructing
solicitors have said that it's entirely usual. In order
to save time, I can assure you that my point of view is
it's quite unusual. That's not to say it's not
justified, but it is unusual and it does lead, on
the face of it, potentially to the risk of duplication,
which would naturally increase the costs.
MR DRAPER: I entirely take the point, emphasising the
word "potentially". The answer is it depends. You have
to look at what the allegation of duplication is and
whether, on the basis of the material before the court,
the court can be satisfied it's a good one.
I say that because my learned friend's starting
point is to almost make this a point of principle,
"They've got two sets of solicitors so they can't have
the costs of both". But that point put in that way,
my Lord, and not just as an introduction to a point
about duplication is obviously bad.
MR JUSTICE FRASER: Well, I'm not sure it isn't a point of
principle for this reason: in litigation, any party
represented by a firm of solicitors has that firm of
solicitors on the record. They are the entity upon whom
documents are served.
MR DRAPER: Yes, my Lord.
MR JUSTICE FRASER: They have certain roles and duties and
rights and responsibilities and it is unusual to have
two firms. That's not to say, as I've said already,
that it's not justified in certain situations.
MR DRAPER: Yes.
MR JUSTICE FRASER: As I understand, the current situation
is Herbert Smith are dealing with the attempts to appeal
in respect of common issues --
MR DRAPER: That's right. They are the solicitors on record
in relation to that one.
MR JUSTICE FRASER: -- and they are the solicitors on record
for the Court of Appeal --
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: -- and they are also dealing with
settlement/ADR/mediation; is that right?
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: On the face of it, that does lead to --
and I wouldn't say it's an allegation of duplication so
far as the court's concerned. It is more a concern of
duplication.
MR DRAPER: Yes.
MR JUSTICE FRASER: And at the moment, picking up on your
explanation or your point that's it's on the basis of
the material before the court, there's is very little
material before the court in respect of either of those
points, isn't there?
MR DRAPER: There is very little, but I can obviously deal
with the points that are made about duplication and
address them.
MR JUSTICE FRASER: Of course.
MR DRAPER: If you start from the question of to what extent
does it raise concern just in principle, in my
submission it depends on what work it is that's being
done. If, for example, you were using two firms of
solicitors for the pleading stage, there's a high risk
of duplication there, in my submission, just standing
back and looking at it from first principles, because
you would have two sets of solicitors doing what is
likely to be very similar or indeed the same work.
But what we have here is a distinct part of
the case, ie attempts at settlement, that doesn't have
substantial overlap with preparation for the further
issues trial. So Womble Bond Dickinson are doing
the preparation for the further issues trial and all
other aspects and Herbert Smith Freehills are to a very
large degree off doing different work and that different
work is in relation to settlement.
Now, save in the kind of case where, as I said,
there's something inherent about the type of work that
raises a real concern about duplication, in my
respectful submission the fact that there are two firms
of solicitors really doesn't raise much of a red flag at
all for this reason: there is a given amount of work to
do. That work can be done by 20 solicitors in one firm
or it can be done by ten solicitors in one firm and ten
solicitors in another. All else being equal, the costs
will be identical.
So what my learned friend has to say is that there
is something about the facts of this case to indicate
that what you've got is duplication, that what
Herbert Smith Freehills is doing must be duplicative of
work that Womble Bond Dickinson has done or is presently
doing. So that's the persuasive burden that my learned
friend bears.
So if I come on then to look at the points he makes.
It's at paragraph 37 of his skeleton. I don't need you
to turn it up, but he says that by reference to the
points they make there, the court can be satisfied on
this summary basis that there's a big enough red flag
about duplication that your Lordship ought to say
something.
MR JUSTICE FRASER: Well, it's not just say something
because these points go to estimated costs as well,
don't they?
MR DRAPER: They do.
MR JUSTICE FRASER: So that's more than saying something.
MR DRAPER: They do. I would say the obtaining a comment on
incurred costs, all else being equal, is harder for my
learned friend than invoking the ordinary jurisdiction
to assess estimated costs down.
MR JUSTICE FRASER: Right.
MR DRAPER: So his first point is the SOIs. Now, of course,
those help. It would be strange if the solicitors,
looking at settlement, weren't to start from the SOIs
and seek to investigate -- to use them as a jumping off
point for investigation. But, my Lord, that's not
really a point about duplication because if
Womble Bond Dickinson were doing the settlement work,
they'd do the same thing. They'd read the SOIs and use
them as a jumping off point.
So what my learned friend's really saying is, "Well,
you've had the SOIs for a very long time". So on the
hypothesis where Womble Bond Dickinson were doing this
work, they wouldn't need to read them again; they'd just
remember when they read them back in 2017. I'm
caricaturing his case extremely unfairly, but in order
to make the point. The fact that the SOIs exist just
tells you that there's a very helpful first step in
looking at each of the cases. One starts with the SOI
and then seeks to investigate from Post Office's
perspective whether the facts alleged in that document
are true.
MR JUSTICE FRASER: But, Mr Draper, it's a slightly
vernacular phrase, but you will understand what I mean.
Bringing yourself up to speed on a case is a different
process to having already been involved in the case and
coming on to the next phase.
For example, if there's a partner at
Herbert Smith Freehills who's in charge of this
litigation --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- when they were first engaged they
would have known nothing about it at all except possibly
for having noticed an entry in the paper or something
like that.
MR DRAPER: Yes.
MR JUSTICE FRASER: That's very different from the
background knowledge that the partners at
Womble Bond Dickinson will have had who have been
involved in it for three/four years upwards.
MR DRAPER: Yes.
MR JUSTICE FRASER: So I think it's more difficult to say
that there can't be any duplication at all when you take
that into account, isn't it?
MR DRAPER: Yes, well, there will obviously be some costs
that if claimed under this head will be duplicative. If
we could call those sort of reading-in costs, so getting
a feel for litigation -- but that's not claimed --
MR JUSTICE FRASER: Well, finding what it's about.
MR DRAPER: Yes, my Lord. So say the very-high-fee-earning
partner says, "Well, I can't really get involved in
doing any work until I've got a feel for this thing",
and he says he'd like a week to read in, a perfectly
sensible proposal. But that's not what we're talking
about here with ADR settlement. That's not claimed
under this phase of the litigation.
MR JUSTICE FRASER: What's that claimed under then? So are
there HSF fees that have been incurred which are not
included in this budget on the incurred costs?
MR DRAPER: Yes, my Lord. It was in fact indicated in
the update letter to which the court was referred that
HSF actually has a broader role.
MR JUSTICE FRASER: Is that the letter I started with of
the 16th?
MR DRAPER: It was, my Lord, yes.
MR JUSTICE FRASER: Well, I thought you told me that that
was about something completely different.
MR DRAPER: It is partly about -- if we could turn it up
again, my Lord.
MR JUSTICE FRASER: I've got it here, which is why I asked
about it.
MR DRAPER: Trying to find ... oh, I have it.
For the benefit of the screen, it's <Z4/10/1>. If
your Lordship turns again to the second page of that
document, so paragraph 5 is dealing --
MR JUSTICE FRASER: Yes.
MR DRAPER: -- if you look at the head of it, with costs not
included in this update because they're either not
recoverable in the High Court group action or
Post Office isn't seeking to recover them from --
MR JUSTICE FRASER: I understood. But then when you look at
5.4, it says:
"The engagement by Post Office of HSF to provide
legal advice in respect of the group action ..."
That must be the group action generally.
MR DRAPER: That's right.
MR JUSTICE FRASER: "... with the exception of those costs
incurred by HSF in relation to advising on settlement
matters ..."
You can't advise on settlement matters unless
you know what it's about.
MR DRAPER: Exactly, my Lord, but the bit of the sentence
before the comma is HSF generally are not included as
costs that Post Office is seeking to recover.
So Post Office entirely accepts --
MR JUSTICE FRASER: Okay.
MR DRAPER: -- that it has instructed a second set of
solicitors, it bears the cost and does not seek to visit
on the claimants the -- I'm not going to say
the word "luxury" because that's offensive, but the
element of that that would be duplicative. So reading
that new firm in falls within the first part of 5.4.
The fact that Post Office has instructed HSF brings
with it some initial and general costs that aren't
sought in any of these budgets.
So one starts from the point that Herbert Smith
Freehills are read in and they're at that point able to
start doing useful work and it's only when they start
doing -- I'm sure I've just offended them -- but it's
only when they start doing work of direct utility to
settlement -- it's only when they start doing settlement
work that the clock starts.
MR JUSTICE FRASER: Right.
MR DRAPER: If I could return, my Lord, to my learned
friend's paragraph 37, if you have that. So what we're
looking for here is some factual basis to establish that
there must be duplication; not there might be, my Lord,
because if there merely might be duplication, well that
is absolutely classically a point for the costs judge to
interrogate based on all the materials.
My learned friend's points (b) and (c) are
essentially the same point. What is said is that lead
claimants were selected back in November 2017 so
Post Office was able at that stage to identify some
common features across the claims. Well, that's very
difficult from looking to assess the merits of 555
claims for the purposes of settlement. That's obviously
a high-level exercise, <Z1/1/9>.
The suggestion that Post Office must have had
detailed knowledge, which is the point made in that
paragraph, in January 2019 because, if my Lord looks at
(d) and over the page, please, to page <Z1/1/10>:
"... detailed information about claims in the group,
including precise numbers of claims subject to
limitation, waiver and settlement arguments."
My Lord, working out whether or not a claim is
prima facie subject to a limitation complaint doesn't
involve anything like the kind of work we're dealing
with here for settlement. You look at when
the sub-postmaster left the Post Office and assume on
a very rough and ready basis that if that's more than
six years ago, there are going to be arguments.
Similarly estoppel. Well, have they litigated these
issues? It doesn't take very long to work that out.
Have they entered into a settlement agreement? Well,
just check our settlement agreement records.
So these are just points of an entirely different
nature from putting oneself in a position to advance
a position on the merits of the claims for the purposes
of settlement.
MR JUSTICE FRASER: Well, I'm not sure I necessarily follow
that. That's quite a fine distinction. But so far as
Herbert Smith Freehills are concerned, I mean, there's
still the pleading -- let's put the issues statement of
case point off to one side.
MR DRAPER: Of course.
MR JUSTICE FRASER: I take the view, which I'm going to
express to you now and then ask you a question about it,
that there's not really very much information in front
of the court as of today that would enable me to
conclude that the obvious risk of duplication has been
avoided. So what I'm going to do is I'm going to ask
you if you would like to put in -- I'm not ordering you
to do it -- some further material by way of a short
witness statement or something of that nature to explain
after careful reflection exactly how the risk of
duplication has been avoided -- because it's quite
interesting that I started with that passage in
the letter having thought I understood it, then it
appeared to be in relation to something else, then you
and I have effectively been involved in an English
grammatical exercise of trying to construe exactly how
one sentence works and how the other one doesn't and it
does relate to quite a lot of money.
MR DRAPER: Yes.
MR JUSTICE FRASER: Together it's over £1 million, and
I don't want to put you in a difficult position where
you're either having to take instructions on the hoof,
added to which there's always lurking in the background
the risk possibly of straying into privileged areas.
MR DRAPER: Of course.
MR JUSTICE FRASER: So is that an opportunity you would like
to --
MR DRAPER: If I could perhaps clarify what it is the
opportunity is, my Lord? We have --
MR JUSTICE FRASER: All we've got at the moment -- tell me
if I've missed everything. We have got the various
letters, we have the budgets and we have your assertions
in oral submissions that actually there's no duplication
is what it comes down to.
MR DRAPER: There's a fair amount of detail about what work
Herbert Smith Freehills is actually doing in terms of,
you know, the ordinary breakdown one would anticipate.
What we don't have, my Lord, is a detailed explanation
as to sort of conceptually, if I may, why that's not
duplicative, so, for example, why that's not reading in.
MR JUSTICE FRASER: Well, that's great. Tell me what --
the date on which they were instructed, am I allowed to
know that? I don't think that's anywhere because that
was actually the first thing I tried to find out.
MR DRAPER: No.
MR JUSTICE FRASER: How it's defined that the work they're
doing is separate, because, for example, settlement
discussions or advising on settlement, on one view you
can only do that if you've actually read the pleadings,
for example, or possibly in this case you'd have to read
the common issues judgment, you'd have to read
the submissions to the Court of Appeal. You couldn't
sensibly advise on settlement without doing that.
Now, that could be said to be work that would not be
necessary for somebody like, for example, Mr Parsons,
who has probably read the common issues judgment several
times and wouldn't necessarily need to read it again.
MR DRAPER: Yes.
MR JUSTICE FRASER: That, together with the fact that there
are potentially so many different personnel at
Herbert Smith, does, I think, give rise to a prima facie
concern about duplication.
MR DRAPER: Yes, my Lord. May I take instructions briefly
on that?
MR JUSTICE FRASER: Yes of course. (Pause)
MR DRAPER: Well, my Lord, if I could split it into two
things. One is comment on incurred costs --
MR JUSTICE FRASER: Yes.
MR DRAPER: -- but obviously that may well be where more of
the fear about duplication arises, it being earlier in
time.
MR JUSTICE FRASER: Yes.
MR DRAPER: So dealing with that and having regard to
the concerns that your Lordship has raised, we wouldn't
oppose a comment to the effect that the costs judge
should have particular regard to the risk of
duplication, bearing in mind the points that your
Lordship has elaborated, and that would avoid us trying,
through this process, to essentially sort of pre-empt
the more detailed process that would be done on a costs
assessment anyway.
MR JUSTICE FRASER: Well, as far as I'm concerned, the real
issue is in relation to estimated costs because
the costs judge is not bound by the comment anyway.
MR DRAPER: No.
MR JUSTICE FRASER: So do you want to take an opportunity or
be allowed time to reflect on whether to take the
opportunity of putting in some limited further material
on the point I've identified or not?
MR DRAPER: In relation to estimated costs?
MR JUSTICE FRASER: Yes.
MR DRAPER: Well, in relation to estimated costs, my Lord,
sort of taking a step back, the incurred costs are, in
my respectful submission, where most of this concern
about duplication would bite because it's about
Herbert Smith Freehills being put in a position where
they are as well informed to do the exercise as
Womble Bond Dickinson would be. From that point
onwards, different name, different firm, same work.
In relation to estimated costs, my Lord, those
concerns don't really arise so what I would be content
to do is address your Lordship on how --
MR JUSTICE FRASER: So the short answer is you don't want
any time to put in any more material?
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: Right. Okay. That's fine.
MR DRAPER: And that's on the basis I've explained about
a comment one could sensibly be crafted to --
MR JUSTICE FRASER: Well, I'm not negotiating a comment with
you.
MR DRAPER: Of course, my Lord. I'm just indicating the way
in which we think --
MR JUSTICE FRASER: No, no, I've given you the opportunity
and you don't see it as necessary and that's understood
so we'll continue.
Right. So is there anything else you would like to
say in relation to Herbert Smith Freehills before we go
on to the comment sought in respect of incurred costs on
issues and statement of case?
MR DRAPER: Yes, my Lord. So putting to one side the
duplication concern, which we've been through in detail,
what one really has here in relation to estimated costs
is the contention that, because our costs are
700,000-odd and that is much more than my learned
friend's 300,000-odd, that calls for the court to
intervene and approve at a lower figure. I've dealt
with that in a fair bit of detail in my skeleton
argument so I don't propose to take your Lordship
through it as slowly as I otherwise would.
The point is, if one is looking at 300,000 as
contrasted to 700,000 for ADR and settlement, that delta
is explained by the very different burdens placed on
the parties as a result of their different positions.
So the claimants -- and this is no criticism -- each
give their account of what they say happened in the
course of their engagement by Post Office and that may
require a review of such documents as they have. We've
been told in general that they don't have many; whereas
on Post Office's side, as your Lordship knows and has
first-hand experience of from these proceedings,
Post Office has a huge and rather disparate documentary
record that it has to interrogate in order give proper
disclosure and in order to put together the position
based on the contemporaneous documents and the
recollections of the various individuals involved in
dealing with the particular sub-postmaster.
That is just inherently a bigger and more expensive
process than making the allegation in the first place in
this kind of case, my Lord. So when Post Office sets
out to see whether a particular claimants' case looks
like a good one for the purposes of settlement, there's
quite a lot of work to be done in order to form a view.
My Lord, those are my submissions on estimated costs
for settlement.
The other point -- the only point that we skipped
over, my Lord -- is pleadings, where what is sought is
a comment on incurred costs, the estimated costs being
agreed.
MR JUSTICE FRASER: Yes, which I think is 270,000; is that
right?
MR DRAPER: I believe it is, my Lord, yes. So the headline
point -- and I'm sure my learned friend will forgive me
for making it -- is that Post Office's total costs for
the pleading stage are lower than the claimants'.
MR JUSTICE FRASER: Yes.
MR DRAPER: Post Office's total incurred plus estimated,
which are now agreed, is 719,000. The claimants'
equivalent figure is 807,000. So not a promising
starting point for asking your Lordship to say that
the costs are obviously objectionable.
In my respectful submission there's another problem
of principle here with what the claimants are trying to
do in relation to the pleadings, which is a form of
double discounting. So what happens, my Lord, is the
parties agree between them a reasonable figure for
Post Office's future costs, estimated costs of
the pleadings. Obviously part of that process involves
looking at how much has already been spent. You can't
ask "What is reasonable to spend from now on?" without
asking "How much have you spent so far"?
Now, if your Lordship turns to my learned friend's
skeleton argument at paragraph 23, <Z1/1/6>. It's just
a convenient place to take that point from the
authorities.
MR JUSTICE FRASER: Paragraph 23?
MR DRAPER: That's right, my Lord.
MR JUSTICE FRASER: Yes.
MR DRAPER: So that's a reference to Redfern, the Redfern
case, and that is a fair summary of what one can take
from that case. So (a):
"incurred costs are to be taken into account when
considering whether a proposed costs budget is
reasonable and proportionate ..."
(b):
"the point of departure is to fix a figure that
would be reasonable and proportionate ..."
And (c):
"where incurred costs have been excessive, it is
appropriate to limit estimated costs at figures below
what might otherwise have been approved ..."
Now that's right on the authorities, my Lord, and
it's obviously common sense. If one has already spent
a lot, there's less still to be spent. But that, my
Lord, is the background to the agreement that was
reached in relation to the future estimated costs. And
the reduction that has been agreed, a very substantial
reduction in those estimated costs, as I've said, takes
Post Office's total below the claimants' total.
MR JUSTICE FRASER: Total for what?
MR DRAPER: Pleading stage.
MR JUSTICE FRASER: Right.
MR DRAPER: So having already spent a lot, the Post Office
isn't going to be permitted for budgeting purposes to
spend as much more as it otherwise would have done.
But to then say, having used that process to agree
an estimated cost where the incurred cost was obviously
a relevant part of that consideration -- to then say,
"Well, we'll bank the estimated costs and we'll now go
after the incurred costs", in my respectful submission,
my Lord, that's not an appropriate way to deal with
coming to an overall view on the total. It's
effectively to turn the whole process around. Do it
the right way first by saying, "Let's set the future
figure having regard to the past figure", and then, once
you have the future figure banked, you say, "Well, now
I'm going to start attacking the past figure". In my
respectful submission, if that were the right approach,
it would encourage all sorts of unattractive tactical
playing around from parties.
But looking at the merit of the point, my Lord,
the only real point my learned friend makes about
the fact that Post Office has incurred a substantial
amount on pleadings is: well, they haven't had
the particulars yet. Now, if this were a case where
they were proceedings coming out of the blue and we
don't really know what the case is against us until we
see it, it would obviously be a very forceful point, but
where the court has set down the issues for trial,
the parties have agreed those issues, they have been
properly formulated, it is entirely unsurprising that
the defendant can do a lot of the work preparing for its
pleading before it receives the particulars.
In fact, my Lord, on the timetable set down,
Post Office obviously has to do that because otherwise
it would have only four weeks in order to get up the
entirety of its case in response to the particulars of
claim. In my respectful submission that's entirely
unrealistic and it is to be expected that Post Office
will spend about half of its money before it gets to
particulars.
Those are my submissions in relation to that topic.
MR JUSTICE FRASER: All right. Thank you very much.
Mr Warwick --
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: -- it seems to me we are going to have
to come back.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: On the basis it's only 7 minutes to 1,
I think we'll stop now and give you a clean start at 2.
MR WARWICK: Yes, my Lord.
MR JUSTICE FRASER: I will just give you my provisional
views prior to hearing what you've got to say so you can
focus your submissions. I am going to make a comment in
relation to the incurred costs in respect of ADR and
settlement. I would like to hear from you on the point
about incurred costs relating to issues and statement of
case. I'm obviously going to spend some time over
the short adjournment crafting what that comment is, but
you can address me en passant if you want, and then
I will need to hear from you, but I don't think in
enormous detail, in respect of what you suggest is the
correct approach to adopt on the Herbert Smith figure
for estimated costs.
MR WARWICK: I'm grateful, my Lord.
MR JUSTICE FRASER: All right? So we'll come back at
2 o'clock. Thank you very much.
(12.55 pm)
(The short adjournment)
(2.00 pm)
MR JUSTICE FRASER: Yes.
MR WARWICK: My Lord, shortly prior it the on lunch break,
I'm very grateful indeed for the indications given by
your Lordship, you've asked me to deal with the ADR
settlement comment and also to deal with the approach to
the estimated costs for ADR.
MR JUSTICE FRASER: No, not the ADR comment.
MR WARWICK: I beg your pardon. I'm so sorry, my Lord.
Issues of statement of case, absolutely, and the ADR
estimated costs.
With your leave, my Lord, might I take the second
one first, since it's the more substantial point?
MR JUSTICE FRASER: Yes.
MR WARWICK: In response to a point made by my learned
friend, I wonder if I might just quickly correct
something while passing through here, and that was
a suggestion made that the claimants are spending more
on this litigation than the defendants. They're not,
my Lord. I wonder if we could have on screen <Z4/10/1>.
You'll see, my Lord, that a total was given in
response to your Lordship's direction about costs
reporting in the 23 July order. The total given there
is 16,322,000. But if one turns over the page, please,
<Z4/10/2>, you'll see the first note to that is that
the figures are exclusive of VAT. Adding VAT it comes
to 19.5 million or thereabouts.
MR JUSTICE FRASER: Yes.
MR WARWICK: I think your Lordship has the claimants' total
spend from the letter sent in previously, but that
appears on <Z4/9/2>, and your Lordship will have
the comparable figure of 16,828, which includes VAT.
And that explores in the way that you have asked,
my Lord, the various respects in which that figure has
been reached.
It's also noteworthy, my Lord, that going back to
<Z4/10/2>, where we were a second ago, the second page
of the Womble Bond Dickinson letter reporting to
your Lordship on costs, that of course that excludes
quite a large category of different types of cost,
namely those itemised at point 5 on that letter.
Naturally it excludes the common issues appeal, so do
the claimants' costs, but it also excludes engagement of
Fujitsu and your Lordship will recall from the last
CMC about a year ago that that's quite a substantial
amount of money in respect of which your Lordship made
a comment.
MR JUSTICE FRASER: I can't remember what the amount was.
MR WARWICK: Something approaching £800,000, my Lord.
MR JUSTICE FRASER: Oh, was that the shadow --
MR DRAPER: No, that's a different thing altogether.
MR JUSTICE FRASER: That's shadow experts.
MR DRAPER: It's what they call "shadow experts". That's
a ridiculous misnomer, but --
MR JUSTICE FRASER: I know that, but just in terms of using
the same word for the same thing, that's what
the 800,000 was. That was called "shadow experts" --
MR DRAPER: Yes, experts --
MR JUSTICE FRASER: -- and that's not Fujitsu?
MR DRAPER: It's not Fujitsu. It's experts other than those
instructed for the Horizon issues trial.
MR JUSTICE FRASER: Is that the same as internally appointed
experts in your number 3 on that page? <Z4/10/2>,
point 3.
MR DRAPER: That is very largely the same thing, yes.
MR JUSTICE FRASER: As ...?
MR DRAPER: As shadow experts.
MR JUSTICE FRASER: Right. Okay.
MR WARWICK: Yes, my Lord. Obviously use of
the term "shadow experts", we're not trying to imply
it's shadowy experts, but just an additional set of
experts; but also the wider engagement of
Herbert Smith Freehills, which has been the subject of
submission just before lunch, my Lord, as well.
MR JUSTICE FRASER: So what you're saying is to compare like
with like you look at the 19.5 with that and compare it
to the 16.8 or I suppose you could look at the 16.8 to
8 discounted down to exclude that and compare it with
the --
MR WARWICK: Indeed, my Lord, yes. Yes, absolutely.
MR JUSTICE FRASER: Okay. Well, I've got that point.
MR WARWICK: My Lord, then Herbert Smith's fees
prospectively; that's to say estimated costs for
Herbert Smith's fees.
The difference and difficulty corresponding that
follows from this difference, my Lord, with this set of
fees is that this represents an inflection point in
the costs history, if you like, my Lord, of this case.
The existing legal team for Post Office your Lordship is
familiar with. It includes a team spread across some
four fee-earner grades at Womble Bond Dickinson, for
the Horizon trial leading counsel and four junior
counsel by my count and for other aspects of this case
a further two leading counsel for different applications
or stages.
MR JUSTICE FRASER: I thought it was a further three.
MR WARWICK: Excluding the Court of Appeal.
MR JUSTICE FRASER: Oh, excluding common issues Court of
Appeal.
MR WARWICK: Again, trying to achieve like for like on this
basis.
What the new team comprises of can be seen at
<Z2/5.2/6>, my Lord. This is the document I took
your Lordship to early on in this hearing. It's
the page of Post Office's recast budget that actually
itemises this particular claim, if you like.
MR JUSTICE FRASER: Do you want Z2/5.1 or 5.2?
MR WARWICK: 5.2, please.
THE EPE OPERATOR: (inaudible).
MR WARWICK: I'm sorry, I was informed last night that this
document had been inserted at 5.2. Can I just
double-check?
MR JUSTICE FRASER: Yes. What document is it?
MR WARWICK: It is page 5 of 6 of the recast budget filed by
Mr Parsons on --
MR JUSTICE FRASER: Yesterday.
MR WARWICK: Yesterday.
MR JUSTICE FRASER: Are you sure that's not the document on
the screen?
MR WARWICK: That is the document on the screen. It's
<Z2/5.1/6> and that's my mistake, my Lord.
MR JUSTICE FRASER: Don't worry. I've got mine in hard
copy, which makes life a bit easier. But I've already
got that document. We've already looked at it once to
see the list of Herbert Smith people.
MR WARWICK: We have indeed, my Lord, but one can see
quickly from a glance at this that there are
20 different fee-earner grades.
MR JUSTICE FRASER: Across both?
MR WARWICK: Across both firms, 17 of which -- that's from
below row 4 to just above row 5 -- are Herbert Smith
partners, senior associates, associates, trainees,
managers, solicitors in Belfast, legal analysts in
Belfast and e-discovery personnel.
We'll spare your Lordship adjectives, but a very
significant increase in the size of its team dedicated
to this case. One has to bear in mind, my Lord, that
previous budgets have not been put on this basis. The
existing team has been considered acceptable for both
the common issues trial, the Horizon issues trial and
even at an early stage when the GLO application was made
and for other CMCs and the like. So there is
a significant change here.
What we know about this work -- your Lordship has
already been referred in my skeleton argument to
the letter that gave some explanation; that's to say
the letter of 16 October from Womble Bond Dickinson.
But I wonder if we could just glance for a moment at my
learned friend's skeleton because the detail of this is
quite informative. If we could turn to <Z1/2/3>, this
is the review that Herbert Smith is undertaking.
By my learned friend's skeleton argument,
Post Office makes clear at 10(2) that they want to
investigate, with respect to each of the 555 claimants,
training materials, accounts, correspondence; at 10(3)
they want to investigate whether each has been subject
to a bug or error that caused a lasting shortfall, so
they want to look at Horizon data date by date
presumably.
Overleaf at paragraph 12, <Z1/2/4>, it's made clear
that this "... covers decades, different contracts and
many different types of alleged breach of duty". So
breach is to be looked at as well.
At paragraph 13 it's made clear that this is going
to come to a cost of £1,328 per claimant, a matter I'll
return to in a moment, my Lord, as to the character of
this type of cost.
MR JUSTICE FRASER: But all of these -- whether they're done
in this way or not, you're at risk, aren't you, of
re-inventing the wheel on the basis that I have already
explained my view on duplication to Mr Draper --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- and he, on instruction, has declined
the opportunity to provide any further information.
MR WARWICK: That's fully understood and I don't wish to
re-invent that wheel or indeed any wheel, but there are
three submissions that come from this, if I may,
my Lord. The first is -- and it's obvious -- this is
group litigation. The normal approach -- there's an
element of crystal-ball gazing and I appreciate in this
setting it's not going to be appropriate to look at
the specifics of what might happen in a mediation -- but
just viewed at a level of abstraction, the approach to
be taken by parties is top down.
MR JUSTICE FRASER: Well --
MR WARWICK: It's to look --
MR JUSTICE FRASER: Mr Warwick, that doesn't really help
because there are a number of different ways that cases,
group litigation and individual cases, can be settled.
MR WARWICK: Yes.
MR JUSTICE FRASER: Whether it's decided to do it top down,
bottom up, pick off each one of the 550 one by one or do
it globally is not really the issue for today.
MR WARWICK: My Lord, I fully agree it's not, and in fact
Post Office's approach is up to Post Office, and
I should stress so it's heard in all corners of this
room --
MR JUSTICE FRASER: No, no, that's absolutely right.
MR WARWICK: -- that there's no criticism of its particular
approach. The question is whether it's recoverable
costs and whether, by seeking a CMO in respect of it,
the Post Office is asking for your endorsement of those
as recoverable costs.
MR JUSTICE FRASER: I understand and I have got the point
predominantly based on what Mr Draper explained to
the court about the way in which they are approaching
it.
MR WARWICK: Yes. Well, that's fully understood.
MR JUSTICE FRASER: Whether that necessarily helps him or
not is something that everyone's going to find out in
about 20 minutes probably.
MR WARWICK: Well, that may well be the case, but suffice it
to say, my Lord, that any settlement discussion should
and following the scheme of part 19 at least take into
account and take the benefits of the fact that this is
group litigation in the way that issues track down as
decided and ruled on by your Lordship in the first --
sorry, the third judgment that you gave and as will be
seen from the taxonomy of losses in pleadings to be
served later this week and on the Horizon issues when
those are determined.
So to look at this the other way, as if it is 555
unitary claims -- the Post Office may wish to do that
but for these to be recoverable costs in this group
litigation, that's a surprising suggestion.
MR JUSTICE FRASER: Understood.
MR WARWICK: And on the definition of "common costs", as
that's found in rule 46(6), these are highly unlikely to
be regarded necessarily as common costs because they're
costs of investigating cases.
The second submission, my Lord, is that on one view
at least, one respectable view, much of this following
your Lordship's judgment number 3 is overhead because
your Lordship has found what the true construction of,
for example, section 12, clause 12 of the SPMC means and
therefore does, which is impose a contractual burden of
proof on Post Office, and your Lordship has found in
that judgment a number of implied terms. Implied term
H, for example, requires contractually Post Office to
make "reasonable requirements" and so forth with respect
to "reasonable losses and shortfalls". The common issue
on implied terms also led to a ruling by you, my Lord,
on implied term L, which is reasonably and fairly to
investigate shortfalls.
The risk here, my Lord, is whether the court can be
satisfied at all that this is not simply something that
this business has to undertake anyway as business cost
following the judgment that you have given on the common
issues.
MR JUSTICE FRASER: Understood, yes.
MR WARWICK: The third submission, my Lord -- and
I appreciate that your Lordship is astute to this -- is
on duplication and so I won't re-invent the wheel on
that particular point. I've given a summary of
the points taken.
The essence of this is that the only decision that
can be reached on this is on what is before
your Lordship presently for this hearing.
MR JUSTICE FRASER: Understood.
MR WARWICK: I've given a summary at paragraphs 35 to 38 of
my skeleton for reference. The only thing that that
misses is what the situation was even pre-action,
my Lord. If your Lordship will indulge me, I could
refer your Lordship to the letter of response, which
makes plain that exhaustive investigation was carried
out.
MR JUSTICE FRASER: I don't think you need to. I'm very
familiar with that particular --
MR WARWICK: I'm grateful.
MR JUSTICE FRASER: -- with all the pre-action --
MR WARWICK: So it's not said that I've overstated
the point, that was with a more limited group of
claimants that had issued a claim form at that time --
as I understand it, some 90, my Lord.
MR JUSTICE FRASER: Yes.
MR WARWICK: So, my Lord, whether viewed through that lens,
that's to say the nature and character of these
particular costs, or viewed on an impressionistic basis
as to what's reasonable, the claim made to estimated
costs just can't be sustained as satisfactory for
the purposes of this exercise, my Lord, and those are my
submission on this point.
MR JUSTICE FRASER: And you're inviting me to disallow it?
MR WARWICK: I'm inviting you to disallow it, my Lord --
that's our primary case -- but if not doing so, reduce
them so as to render the phase as a whole
a proportionate and reasonable sum, my Lord.
The second issue then, numbered the first in your
helpful summary shortly before the break, my Lord, is
the comment with respect to issues -- issues and
statements of case.
I just want to make sure that this isn't put too
high. The point taken is that £269,000 or thereabouts,
just under 270, has been incurred before pleadings have
been served. Now, the claimants fully accept that quite
a lot of analysis might be done before pleadings have
been served that might go in to later inform how one
pleads. But one has to remember what this exercise is.
This is a trail of assumed facts which can't be assumed
yet because we haven't pleaded what our assumed facts
are and there is a mechanism within the order for
agreeing them after that.
Assumed breaches, even causation, my Lord, is
assumed on the wording of schedule 1 to your Lordship's
order of 23 July. What has to happen from this point,
my Lord, is the claimant has to set out, particularise,
what the heads of loss are that they say are in
principle recoverable and what the measures are that are
applicable to those heads of loss, my Lord, on assumed
facts and breaches.
So how it is that £270,000 has been incurred -- and
I point out while passing through, my Lord, that most of
that is time cost, not counsel's fees, and counsel might
reasonably be expected to draft these pleadings -- is
a very burning question. It's for that reason that
I ask the court to look at those incurred costs askance
and record, if it is with me on this point, an adverse
comment with respect to them.
My learned friend takes a point about us having
agreed on one basis and then turning round and seeking
something extra for a sort of two bites at the cherry.
That, I'm afraid, is not correct. Our budget discussion
report, which appears in the bundle, made clear that we
always reserved the right to seek this type of order and
that's at <Z2/3/1> and the page that's relevant to that
is the second one, <Z2/3/2>. It's the second row,
"Issue/statements of case". The offer made there was an
earlier offer, but it has been agreed at 450, my Lord.
MR JUSTICE FRASER: Sorry, what's been agreed at 450?
The --
MR WARWICK: Absolutely, my Lord. So the first sentence
reads:
"Case not yet fully pleaded as per budgeted date
(03/09/19) and Cs invite the Court to make a note on the
court file about the £238,489.30 incurred costs which
are not understood - see also Preliminary Point 1 (P1)."
And above the preliminary point P1 is about
proportionality, my Lord.
MR JUSTICE FRASER: Yes.
MR WARWICK: Finally on this, my Lord, some submissions have
been made about the right approach. I don't take any
issue with the approach taken by the chief master in
the BBC case. What I would take issue with is putting
that too high. It's specific to the facts of that case.
He did make some comments of wide of application, but I,
with the greatest respect to my learned friend, think he
puts the authority too high. It's not binding on this
court and, if taken to its logical conclusion, it would
almost never be relevant or appropriate to make any sort
of comment at this stage and that's just not right.
MR JUSTICE FRASER: What is the situation as at today so far
as pleading is concerned in further issues?
MR WARWICK: The deadline for pleadings is 4 pm on Friday,
my Lord.
MR JUSTICE FRASER: What pleadings are those then?
MR WARWICK: For the further issues trial, individual
particulars of claim in four lead cases.
MR JUSTICE FRASER: And they haven't been served yet?
MR WARWICK: No, the deadline for that is Friday, my Lord.
MR JUSTICE FRASER: So the incurred costs of 31,000 for
disbursements plus 238 time costs, which comes to 269,
I think --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- is in relation to an exercise
which -- one step of which, which is normally seen as
the early step, service of the individual particulars of
claim hasn't yet happened?
MR WARWICK: That's right, my Lord, yes.
MR JUSTICE FRASER: Is that right? Okay.
MR WARWICK: Unless I can assist you further on those
points, my Lord --
MR JUSTICE FRASER: Well, you can in one thing. What's
the date of this Friday?
MR WARWICK: It's 25 October, my Lord.
MR JUSTICE FRASER: Thanks very much.
Mr Draper, is there anything that you would like
to --
MR DRAPER: Just a very short point, if I may, my Lord, on
the like-for-like comparison of total costs, whether
one's got apples and apples or apples and pears. In my
submission, my Lord, one can only compare apples with
apples if you're looking at costs recoverable or sought
to be recovered in these proceedings from the other
side. It's not a meaningful comparison to say, "What
are they spending in total?", even where those things
aren't sought to be recovered. I say that, my Lord,
because if one were to adopt my learned friend's
approach of saying, "Let's puts everything in", then
we'd have their funding costs and that would mean they
are spending vastly more than Post Office if one were to
include those.
VAT, of course, we won't recover from the claimants.
So the fact that we're incurring it is neither here nor
there for these purposes. That's the only point
I wanted to make.
MR JUSTICE FRASER: In terms of recoverability of the VAT,
though, would they recover that from you?
MR DRAPER: Yes, in principle they would as individuals.
MR JUSTICE FRASER: And then you would deal with that as an
output --
MR DRAPER: Yes.
MR JUSTICE FRASER: -- if you're VAT registered?
MR DRAPER: Yes.
MR JUSTICE FRASER: So far then as a real cost --
MR DRAPER: Forgive me, my Lord, I entirely misled you
there. In relation to -- we can't recover the VAT we
are spending on our legal services from the claimants
because it's an input for Post Office's operation so we
already get it back by our own VAT calculations.
MR JUSTICE FRASER: Yes, so your costs bill to you is
VAT-neutral?
MR DRAPER: Yes, which means when we -- if we were to obtain
costs from the claimants applying the indemnity
principle, we don't recover the VAT because we already
compensated for it through our own processes.
MR JUSTICE FRASER: Whereas they do pay VAT on their costs?
MR DRAPER: Yes, so if we were to come to indemnify them,
VAT would be part of what we would pay to them and that
would be a cost to Post Office --
MR JUSTICE FRASER: I understand.
MR DRAPER: -- so that wouldn't be cancelled out.
MR JUSTICE FRASER: But one point where, in my judgment, an
absolutely clear and accurate comparison can be made,
completely putting VAT to one side, is the amount of
the total both for incurred as at today -- I'm sorry,
incurred as at the date in September that you agreed and
estimated ADR/settlement/mediation costs.
MR DRAPER: My Lord, yes.
MR JUSTICE FRASER: There is a pure obvious comparison.
MR DRAPER: That's like with like, yes.
MR JUSTICE FRASER: I think, based on the CMO I made just
before the short adjournment, the claimants' figure for
that is 415,000 and to get to yours one needs to look in
column H, I think, and it's 1.239353.
MR DRAPER: That's like for like.
MR JUSTICE FRASER: Is that right? That is a like-for-like
comparison.
MR DRAPER: That is, my Lord.
MR JUSTICE FRASER: And of that 1.239, you've already spent
502,000, I think --
MR DRAPER: Exactly.
MR JUSTICE FRASER: -- in respect of which I can only record
a comment.
MR DRAPER: Yes.
MR JUSTICE FRASER: I can also take it into account -- if
I'm not with Mr Warwick on not making a CMO at all in
with respect of that line item and I'm persuaded by you,
which I am, that I should make -- I should include that
line item in the CMO that I'm about to make, I can take
the 502 into account when deciding what figure for
estimated costs is reasonable and proportionate; is that
right?
MR DRAPER: Entirely right. That's what Redfern says and we
are agreed that that's the right approach.
My Lord, just to complete that picture, 300,000 of
the estimated costs are agreed.
MR JUSTICE FRASER: 300,000 are agreed?
MR DRAPER: Well, we have had -- I think it's fair to say
it's an offer. Yes, the BDR offer was 300,000. Sorry,
I mis-spoke. That's just to complete the picture of
what all the numbers at play are. That's what was
offered.
MR JUSTICE FRASER: But the 300 is in respect of -- well,
Mr Warwick is inviting me today not to make an order in
respect of that line item at all, so far as I understand
it; is that right?
MR DRAPER: I think that's his primary position.
MR JUSTICE FRASER: Do you want to just show me where
the 300 is so I can see what I can compare it with?
MR DRAPER: Yes, my Lord. Forgive me. I'll just turn it
up.
My Lord, if we could get up <Z2/3/1> --
MR JUSTICE FRASER: Which I've got open.
MR DRAPER: -- this is the budget discussion report. You
can see the claimed figure there under "ADR settlement"
and next to it an offered figure of 331,215. That's
just to complete the picture as to what the claimant was
contending was an acceptable figure.
MR WARWICK: Yes, my Lord, but it's also relevant -- if
the screen could go on to page 3 of that document
<Z2/3/3> -- that the comment -- and I'm looking at
the top row, my Lord -- also made clear that the point
made above, to which I've taken your Lordship a moment
ago with respect to another phase, from "... the
incurred costs [48,000 and so on] ...", and in
particular disbursements is repeated; meaning that that
offer was made, but of course the claimants reserve
the right to seek relief such as the adverse comment
that's sought by me today, my Lord, in respect of
the incurred costs.
MR JUSTICE FRASER: Right, but in respect of the 756, you --
MR WARWICK: Offered 331, my Lord, yes, indeed.
MR JUSTICE FRASER: Mr Draper, is there anything you want to
add?
MR DRAPER: No, my Lord.
Order
MR JUSTICE FRASER: I'm just going to explain what I'm going
to do. I'm about to make a costs management order in
respect of defendant's costs. There are three items
that are not agreed. The items that are agreed should
be taken as being the subject of this costs management
order and the three separate items I am going to deal
with as follows:
I am invited by the claimants to record a comment in
respect of incurred costs for the further issues trial
concerning issues/statements of case. Disbursements are
included in column D-- I'm going off the summary --
which is at <Z2/6/1> of £31,240 and the time costs are
included as £238,489.30. This is in the circumstances
where, so far as the further issues are concerned,
the individual points of claim in the four lead cases
that are going to be the subject of the further issues
trial have not yet been served and will not be served
until 25 October 2019.
I have taken account of the approach identified both
in a case called Redfern v Corby City Council [2014]
EWHC 4526 (QB) and also in particular an authority that
Mr Draper has drawn to my attention, which is a decision
of Chief Master Marsh in the Cliff Richard litigation
against the BBC and Chief Constable of South Yorkshire
Police. The neutral citation for that judgment is
[2017] EWHC 1666 (CH).
Chief Master Marsh said, having analysed
the situation in that particular case, looking at his
paragraph 10, which I'm going to quote -- he says:
"To my mind there is little or no value in the court
recording a general comment about incurred costs along
the lines that the incurred costs are substantial or
they are too high. If the court wishes to record
a comment that the incurred costs are 'excessive' or
they are 'unreasonable and disproportionate', it will
wish to be sure that the comment is made on a sound
footing rather than an impression because commenting is
quite unlike the exercise of approving a figure per
phase for future costs. The court will also wish to
consider the utility of making a comment unless it is
specific and well founded."
I do wish to record a comment in respect of incurred
costs or issues in statement of case. That comment is
as follows: that the total of time costs appears to be
excessive based on the fact that the individual
particulars of claim in the four lead cases have not yet
been served. That's the end of the comment. It is
a matter for the costs judge what and how they deal with
that comment and that is not to say on a detailed
assessment that the defendant would not necessarily be
able to justify expenditure of that figure.
Turning to the next item, which also is in relation
to incurred costs, there is an overlap between this and
the third item, which is estimated costs, because they
both substantially concern the same issue. The line
item is "ADR/settlement discussions". In column E in
the summary, the expended or incurred costs against this
line item as at the date in September that the parties
agreed would be the cut-off, which I believe is
3 September 2019, is £502,527.27 and going forward
estimated costs as disbursements of £22,375 and time
costs of £714,451.
Both of these different types of costs, both
incurred and estimated, arise in the following
circumstances: the Post Office are currently represented
in this litigation, the group litigation, by
Womble Bond Dickinson, who are the solicitors on
the record, except for the attempt to obtain permission
to appeal from the Court of Appeal in respect of
the common issues trial judgment where the solicitors on
the record are Herbert Smith Freehills.
Herbert Smith Freehills are also the solicitors that
the Post Office are using to advise them and act for
them in what I'm told is a forthcoming mediation.
There is a dearth of material before court to
explain how or what steps have been taken to avoid
duplication of costs on the part of Herbert Smith
Freehills and Womble Bond Dickinson. The Post Office
have sought to persuade me that it is entirely usual in
large litigation or complex litigation to have two firms
of solicitors acting for the same party. I have
difficulty in accepting that submission. In my judgment
it's very unusual.
I did offer the Post Office this morning the
opportunity to put in some further material, whether by
way of a short witness statement or something else, to
explain what steps, if any, had been taken in respect of
avoiding duplication and that was not an invitation
which they wished to take up. I am therefore in
the position that I have to make the best of the
material that's before the court and, as I've said,
there isn't really a great deal. There are some
letters, some entries in budgets and Mr Draper's
extremely able submissions, but in terms of factual
content, the available material is somewhat light.
I do consider in all the circumstances that
a comment is justified in respect of the incurred costs
of over £500,000 for ADR and settlement discussions.
That comment is, however, as follows: the incurred costs
for this line item appear on their face to be extremely
high. However, there are the following particular
aspects of this case that may have affected this level
of costs. They are: 1, the nature of the particular
group litigation, including the number of claimants; 2,
the length of time that the disputes have gone on
between the individual claimants and the Post Office;
and 3, the involvement of Herbert Smith Freehills as
a second firm of solicitors and potential duplication.
It is a matter for detailed assessment whether there is
any duplication and that is a matter which the costs
judge may wish to consider and review. That's the end
of the comment.
Turning now to the costs management order which I'm
prepared to make in terms of estimated costs going
forward. I'm very much aware of the need to compare
like with like. The sum which the Post Office seek to
have included in the costs management order going
forward against ADR settlement discussions is the
addition of 714,451 together with 22,375. I make
the total of those two sums to be approximately
£736,800.
The figure in the approved claimants' cost budget
which I have made a costs management order in respect of
this morning is £415,000. However, the claimants have
incurred hardly any costs at all and in order to compare
like with like it's necessary to take account of the
Post Office's incurred costs together with the
£736,000-odd of costs going forwards, which gives a very
sizeable total of £1.239 million for the
ADR/settlement/mediation phase.
There are two important points. The first is it's
obviously not necessarily immediately attractive to
disapprove costs that are going to be incurred in
potentially settling the whole litigation. However, on
the other hand and reading from the dicta of
Mr Justice Leggatt, as he then was, in
Kazakhstan Kagazy plc v Zhunus [2015] 158 Con Law
Reports 253 at paragraph 13, which in that case was in
the context of an application for an interim payment on
account of costs, he said the following:
"What is reasonable and proportionate in that
context must be judged objectively. The touchstone of
reasonable and proportionate costs 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."
It plainly is in the Post Office's best interests to
incur whatever the necessary expenditure of costs is
going forward through what would undoubtedly be an
important phase of the litigation. However, that of
itself does not mean that the total is reasonable and
proportionate, and I am entitled -- and do -- take into
account the incurred cost of 502,000 when assessing what
the correct figure is going forward.
In assessing -- when I say "the correct figure"
I mean the reasonable and proportionate figure, I take
account of the fact that the overall expenditure by
the claimants on this phase is going to be approximately
£415,000. The amount which I am prepared to include in
today's costs management order, which takes account of
the 502, is whatever the balance is required to take
the total up to £900,000, which in my judgment, based on
my somewhat inapt mental arithmetic, is going to be
approximately £397,500-odd. I will leave counsel to
agree the mathematics between them. That means
the total sum, both for incurred and estimated costs,
for the AVR settlement discussion/mediation phase is
going to be £900,000.
Does that deal with everything?
MR WARWICK: My Lord, I believe it does.
MR JUSTICE FRASER: Mr Draper, does that deal with
everything?
MR DRAPER: It does, my Lord.
MR JUSTICE FRASER: You'll have to draw up the order,
obviously. If you could extract the comments from Opus
and put them in the order, or in a schedule to
the order.
MR WARWICK: Yes, by all means, my Lord.
MR JUSTICE FRASER: And then obviously, if there's any
tweaking required, I'll do that myself when you submit
the order.
Other than something I have to address both of you
about, is there anything else, so far as the costs
management order is concerned?
MR DRAPER: No, my Lord.
MR JUSTICE FRASER: Okay. Just give me a second to organise
my papers. (Pause)
The only thing I wanted to say to the parties is it
would be somewhat artificial, given that you're all
here, to ignore the fact that you're waiting for
a judgment, so I thought I would give you an update.
The judgment, at one point I had hoped to be able to
send that by the very end of October in draft. That is
not now going to be possible, but it won't be much past
the early days of November.
The judgment is in two parts. There is a judgment
and what I have called a "technical appendix" which
deals with some of the more technical computer aspects,
which an average reader won't necessarily need or want
to read. Both of those documents are going to be of
equivalent standing, but you might get them separately,
so you can make a start on typographical error review,
etc, on one of the documents before you get the other
one. But I won't send them out in draft until they're
both finished. So that's just to give you an idea.
MR DRAPER: My Lord, if I may, there's a point arising out
of that that may be a problem or may not be. I think
your Lordship is aware from correspondence between
the parties that the court has seen that Fujitsu have
identified to Post Office some old versions of KELs that
were before the court on the Horizon issues trial.
MR JUSTICE FRASER: Older versions?
MR DRAPER: Older versions.
MR JUSTICE FRASER: Of the same KEL?
MR DRAPER: Of the same KEL.
MR JUSTICE FRASER: I had seen in the foothills a bit of
toing and froing about KEL disclosure, but I hadn't
looked at it in any detail.
MR DRAPER: That's right. Well, I'll just explain it very
briefly. What we have discovered are not new KELs in
the sense that they are documents never before the court
in any form, they are just back versions of existing
KELs.
MR JUSTICE FRASER: So they're different in content to the
ones that were in the trial bundle, are they?
MR DRAPER: Some of them, my Lord.
MR JUSTICE FRASER: Right.
MR DRAPER: My understanding is some of them differ in tiny
and immaterial respects, like a typo has been corrected.
MR JUSTICE FRASER: Understood.
MR DRAPER: Others -- if your Lordship recalls how some KELs
at least are structured, there will be an initial block
of text relating to the first instance of the problem
and then it will be updated with further entries. So my
understanding is that some of these earlier versions
will just be less complete versions of the final one.
But we're obviously conscious that, without
reviewing them, neither side can form a view as to
whether they are material in any way to any of
the issues your Lordship is addressing. So they are
almost in a position, I think --
MR JUSTICE FRASER: So have they been disclosed?
MR DRAPER: No, they are being gathered to make sure we've
got them all essentially.
MR JUSTICE FRASER: How many are there?
MR DRAPER: We think low hundreds, but, as I've said,
because they are earlier versions, you may, for example,
find that there are ten very similar versions of an
existing KEL.
MR JUSTICE FRASER: Why do they need to be gathered though?
Why can't the ones you've got just be sent over
straightaway?
MR DRAPER: The process is essentially one of extraction.
I don't know if your Lordship recalls that Fujitsu
actually originally said, "We're not sure we can even
get them off", and then they devised a piece of coding
to do it. We want to make sure that that extraction has
been done properly so that we then don't disclose two
tranches where there's overlap, for example, or
potential overlap.
MR JUSTICE FRASER: All right. So there's more disclosure
coming and the claimants know about this?
MR DRAPER: The claimants know about it, but they don't yet
have it.
MR JUSTICE FRASER: And what is the date projected on your
side for when they will have it?
MR DRAPER: By the end of the week, my Lord.
I only raise it because your Lordship said that we
may be talking as little as slightly over a week and
the claimants may find them entirely innocuous when they
review them or they may say, "There are three on which
we want to make submissions". Well, I'm guessing,
my Lord, but it is not impossible that one or other side
or both sides might say, "Could we deal with this before
your Lordship has done a draft judgment?"
MR JUSTICE FRASER: Understood. Thank you very much,
Mr Draper.
Mr Warwick, have you got anything to say?
MR WARWICK: Just very briefly, if I may, my Lord. I was
not myself --
MR JUSTICE FRASER: No, no, I know that.
MR WARWICK: I didn't appear in the Horizon trial and
I hadn't anticipated this topic arising. In fact
the claimants would very likely have quite a lot to say
about these particular --
MR JUSTICE FRASER: Well, there has already been some
correspondence.
MR WARWICK: There has been some correspondence and the
present status is that a full explanation has been
requested, I believe, in open correspondence and that is
awaited, but obviously I think it awaits some extraction
activity that it sounds as though is presently taking
place, which is reassuring to know. I'm afraid I simply
can't --
MR JUSTICE FRASER: No, well, I will tell you what I'm going
to do.
MR WARWICK: -- accept the explanation given.
MR JUSTICE FRASER: I have read the letters. I was taking
the view that -- I didn't realise that disclosure hadn't
been given. I assumed from the letters that disclosure
had been given and the fact I hadn't heard anything
meant it was not an issue. I will keep ploughing my own
furrow. This judgment is not going to be distributed in
draft by the end of this week. If the Post Office can
give disclosure of those or at least a substantial
number of those by the end of this week, so let's say
5 o'clock on whatever the date is on Friday --
the 25th -- then that gives the claimants enough leeway
to raise a point with me if a point has to be raised,
and what I will do is, before I distribute the draft
judgment or 24 hours before I distribute the draft
judgment, I'll just notify the parties that I'm about to
distribute the draft judgment and if either party wants
to saying anything to me about it along the lines of,
"Please don't do that yet. We'd like to come and speak
to you about it", to raise a particularly important
point", then they can. I'm not encouraging that. I'm
just saying it's sensible to have provision.
MR DRAPER: I'm grateful, my Lord. If we may, my Lord, we'd
like to keep your Lordship informed of roughly where we
are.
MR JUSTICE FRASER: That's what has been being done on
the disclosure point generally, but obviously, because
I'm at the point where, so far as I was concerned,
the trial has ended --
MR DRAPER: Of course.
MR JUSTICE FRASER: -- I was taking what could be described
as a passing mental note of it and not really paying too
much attention.
MR DRAPER: Yes.
MR JUSTICE FRASER: All right. So, Mr Warwick, you've got
your solicitors here with you, I can see.
MR WARWICK: Yes, my Lord, yes.
MR JUSTICE FRASER: So that was the Horizon issue team --
well, actually --
MR WARWICK: Mr Miletic was present.
MR JUSTICE FRASER: Mr Miletic was on it anyway --
MR WARWICK: Yes.
MR JUSTICE FRASER: -- so none of this is going to be
a secret.
MR WARWICK: No. Suffice to say, my Lord, that the
explanation given of the nature and number of those
documents is not necessarily accepted at all, but I just
don't have full instructions on that.
MR JUSTICE FRASER: No, well, that's a different matter.
MR WARWICK: Thank you.
MR JUSTICE FRASER: I'm not going to say anything else
about it, other than it's obviously a point that's
currently being addressed by both parties and it will be
kept under review. All right. Anything else?
NEW SPEAKER: No, my Lord.
MR JUSTICE FRASER: So if any of you do have children of
half-term age who have half-term holidays next week, you
won't be getting the draft judgment during half-term,
which is purely coincidental.
Thank you all very much.
(2.47 pm)
(The hearing adjourned)