High Court caps Appeal costs

Mathew Lawton, Costs Lawyer & Team Leader

The High Court (Business & Property Courts: Chancery Division) has taken a proactive step to cap the costs of a litigant before they pursued an appeal through the Supreme Court.

Our Mathew Lawton reports.

Mr Justice Arnold said the Claimant in Airways Pension Scheme Trustee Limited v (1) Mark Owen Fielder (2) British Airways plc [2019] EWHC 29 (Ch) should be limited to the same costs as the Defendant and in doing so removed approximately £200,000 from their costs estimate.

In summary, the Claimant is the Trustee of the Airways Pension Scheme (“the Scheme”). The First Defendant is a member of the Scheme, who has acted as a representative member for the purposes of this application. The Second Defendant is the principal employer under the Scheme, which has been joined to the application at its own request.

In 2013, the Second Defendant brought proceedings against the then Trustees of the Scheme challenging two decisions: (i) a decision in 2011 to exercise the unilateral power of amendment conferred by clause 18 of the Scheme Trust Deed to amend the Scheme rules to empower the Trustees to augment members’ benefits by the award of discretionary increases and (ii) a decision in 2013 to exercise the discretionary increases to confer a 0.2% increase. Following a seven-week Trial in 2016, those challenges were rejected by Mr Justice Morgan. The Second Defendant appealed to the Court of Appeal, which in its Judgment of 5 July 2018 held by a majority that the 2011 decision was invalid because it was a use of the Scheme’s power of amendment for an improper purpose. The 2013 decision was therefore also held to be invalid.

Very unusually, the Court of Appeal granted the Trustee permission to appeal to the Supreme Court. The Trustee duly filed a Notice of Appeal and then issued a claim for Beddoe relief, seeking Court approval to pursue the appeal and an indemnity from Scheme funds in respect of its costs. Mr Justice Arnold said the Trustee’s request to have its costs subject to assessment on an indemnity basis did not go far enough because it did little to protect the Defendant from excessive costs. The Court should ‘seize the nettle now so that everyone knows where they stand’, said the judge. ‘It is deeply alarming that the Trustee should be proposing to spend some £1.24m on an appeal raising a single point of law with a hearing lasting only 1½ days’, he added. ‘I consider that it is necessary for the court to intervene to ensure that the trustee’s costs are kept within some semblance of reasonableness’.

The Court was required to decide an application for Beddoe relief from the Trustee, asking for cost protection when the wider dispute over discretionary benefits goes to the Supreme Court. Mr Justice Arnold said the Trustee, which lost in the Court of Appeal, was acting in the interests of the Scheme as a whole by pursuing a challenge in the Supreme Court and should therefore be entitled to indemnity costs from the assets of the Scheme. But it was made abundantly clear that this decision did not give the Trustee ‘carte blanche’ to spend whatever it chose on the appeal.

The Trustee’s £1.24m estimate, of which £444,000 had already been incurred, was based on the assumption of a hearing lasting 1½ days and did not include the costs of the Second Defendant’s proposed cross-appeal. It also took into account the instruction of two QCs and a Junior. The Second Defendant estimated its costs at around £1m for a 2-day hearing, with the intention of instructing one QC and two Juniors. The Trustee had so far spent almost £13m on the main proceedings excluding the appeal, and Mr Justice Arnold said it could be assumed that the Second Defendant had spent a similar amount. As such, he saw ‘no good reason’ why costs should not be the same for both parties.

The decision in these proceedings highlights that the issue of costs is always at the forefront of the Court’s thinking in all litigated cases and this has been particularly prevalent since the introduction of costs budgeting and management. Although the Court ordered that the parties be on a level footing in terms of their spending in relation to the appeal proceedings in the Supreme Court, this approach will not always be the case as is evident in the personal injury and clinical negligence matters which we deal with on a day-to day basis. None-the-less it is clear that the Court is willing to take more proactive steps whether that be costs capping or costs management to curb disproportionate costs.

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Mathew Lawton ~ Costs Lawyer and Team Leader ~ Partners in Costs