Cost Orders will not be given a generous interpretation unless it is explicit.
This article covers a recent Costs Judgment involving six parties, five Receiving Parties and one Paying Party. The article provides an analysis of the court’s findings on the receiving party’s approach to claiming the costs, making it a valuable resource for anyone who wants to stay up-to-date on arbitration, litigation, and legal orders.
There were six parties in the Costs Judgement. Five receiving parties, Micula and Others, and one paying party, the State of Romania. The first and second of the paying parties were Romanian-born Swedish citizens, and the other three were incorporated Romanian companies. The case had been due to the attempted enforcement of an investment arbitration award (“the Award”) in favour of the receiving parties against the paying party (the State of Romania) about investments made by the Claimants in food production in Romania before the country acceded to the European Union.
Throughout the case, the receiving parties were represented by two separate firms of solicitors the First Receiving Party and the Second to Fifth Receiving Parties had separate legal representation. The First Receiving Party was initially represented by solicitors from Shearman & Sterling (London) LLP (“S&S”) until February 2019, and thereafter by Croft Solicitors (“Crofts”). The Second to Fifth Receiving Parties had their legal representation from solicitors at White & Case LLP (“W&C”) throughout the entire process.
Both sets of solicitors instructed their own leading and junior counsel. Before the assessment of the Receiving Parties’ costs, the court considered two issues. The interpretation of the Costs Order and where the Receiving Parties’ claim had been drafted by the terms of the Costs Order. The court also considered the treatment of costs which were originally charged in a currency other than Sterling.
During the initial order for costs, the Receiving Parties argued that the Paying Party should pay two sets of costs under the justification that the European Commission had supported Romania and had its interest in the proceedings. The Commission had been represented by one law firm and Queen’s Counsel, separate from Romania’s Counsel. Therefore, the Receiving Parties faced two legal teams and two leading Counsel.
Further, the Receiving Parties argued that the separate representation was appropriate because they claimed there was potential that their interests could diverge on key points in the litigation and in broader efforts to enforce the Award. They claimed they had acted responsibly to divide issues between them to manage costs and avoid duplication. They cooperated in written submissions and oral submissions, Leading Counsel for the First Receiving Party and the Second to Fifth Receiving Parties addressed discrete issues.
The supreme court had made the Costs Order, referring to the Paying Party as “Romania” and the five Receiving Parties as “the Micula Parties”:
“Romania pay the Micula Parties’ costs in the Supreme Court and below, to be assessed on the standard basis if not agreed and limited to one set of costs to be shared between the Micula teams in proportion to their actual costs expenditure, equal to one set of costs (being the higher set of costs claimed) but with allowance for two KCs and one junior between them.”
The Receiving Party produced a bill of costs which claimed the blended the bills of the two law firms they had instructed. If the cost for document review of one firm was higher, they would use that firm’s document time. At the same time, where the other firm’s time attending Counsel was higher, the bill included their fee for representing Counsel. This approach was taken to Counsel’s fees as well. While the brief fee for Mr Worboys was taken over Mr Leith’s, as it was higher, the refresher fee of Mr Leith’s was taken. The effect was that the result of this approach was to create bills that significantly exceeded the cost of each bill of costs and made up a significant portion of the combined parties’ total.
The question raised by this approach was, separate from Counsel’s fees, does the Order permit the receiving parties to claim the highest figure from either bill of costs in respect of each category of work; or the costs of whichever were the greatest total? The second question, concerning Counsel’s fees, was does the Order permit the highest combination of fees charged by any three Counsel (including at least one junior) regardless of who instructed them; or the fees in whichever of the party’s costs were larger in total, limited to two KC and one junior?
The court found the receiving party’s approach was not consistent with the definition of the term “set of costs” found in Bolton MDC v Secretary of State for the Environment [1995] 1 WLR
1176, that an award for costs means “the full costs of one party.” The court found the natural meaning of the order was that the higher set of costs claimed to be from one firm of solicitors, this being the solicitors instructed by the first Claimant. The Costs Order does not allow for recovery of the principal KC for both groups. The court concluded that since the costs Order did not specify the receiving party could blend the highest groups of each of the bill of costs, then it could not be interpreted as meaning that.
The court firmly supported the paying party’s interpretation of the Costs Order that the bill of costs could only originate from one of the receiving parties.
The second question concerned the methodology used to convert costs paid in different currencies to British Sterling. The paying party, in their points of dispute, argued that the bill should have displayed charges in the original currency, converted to Sterling using the exchange rate at the time of payment. They cited Deutsche Bank AG v Sebastian Holdings Inc [2020] EWHC B16 (Costs) as a reference. In response, the receiving parties claimed they would provide information before the assessment and believed that currency conversion should occur when a bill is filed with the Court. They based their argument on Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch).
The court found Deutsche Bank AG, more persuasive than Cathay Pacific Airlines, as it was far closer to the litigation being argued. The costs involved for conversion in Cathay were approximately £25,000 while the combined costs for the receiving party exceeded £2 million. The court concluded that the appropriate date for conversion for sums paid by the Receiving Parties in a currency other than Sterling is the date of payment. The court found it was not appropriate to wait until the assessment of the bill had been completed.
The Receiving Party argued this was a burdensome exercise. The Court remained open to pragmatic solutions if the Paying Party and Receiving Parties could agree on a solution.
The assessment went against the receiving party. This demonstrates the importance of the wording for Orders for Costs. The Court is unlikely to deviate from the obvious wording without what it feels to be a good reason, the Court was especially against interpreting the Order in a way which would create more work to assess the bill, as the Receiving Parties method would.
The information around currency converting being limited to the conversion rate when the solicitors were paid is important to know for any solicitor who receives payment in currency other than Sterling. The leaving of space open to negotiating a solution to the problem of currency conversion shows the space open to negotiate on cost issues to resolve them least expensively.
How can PIC help?
At PIC we can assist solicitors with negotiations and recovery as well as advise on the interpretation of Costs Orders. This allows our clients to recover costs quickly and efficiently, reducing the costs of litigation at this stage of the case and enhancing recovery.
Sam Ewart, Law Costs Draftsman
11.01.2024