Court gives judgment on £104,000,000 legal costs case

01 Nov 2011

The recent case of Motto v Trafigura [2011] has seen the largest ever claim for costs in British history, with the Claimants' solicitors submitting a bill of costs of over £104 million, including an ATE premium of £9.6 million.

This case involved a group action of approximately 30,000 Claimants who had become ill after the Defendants had illegally disposed of chemical waste in Abidjan, Côte d'Ivoire. A Settlement Agreement was drawn up in September 2009, under which the Defendants agreed to pay total damages of £30 million plus costs.

Due to the substantial sums involved, both parties agreed that the Court should be asked to determine a number of preliminary issues before proceeding to a detailed assessment of the legal costs. An initial decision was made by a Senior Costs Judge, but was appealed by the Defendant. A ruling has now been provided by the Court of Appeal, who dealt with five main issues:

Proportionality

The Claimants had all entered into separate Conditional Fee (also known as ‘no win no fee') Agreements which had each provided for a success fee of 100%. This entitled the solicitors to recover their normal costs, plus a 100% uplift as recompense for the risk of handling the claim on this basis. The total costs claimed, including the success fees, were over £95 million.

At first instance, the Senior Costs Judge held that the solicitor's ‘base' costs (i.e. before the success fee was applied) appeared disproportionate when considered as a whole. However, he added that this should not prevent him from concluding that some aspects were actually proportionate and therefore the test of necessity should not need to be applied to every item on the bill of costs.

On appeal, the Court held that this decision was partially incorrect and that each item on the bill of costs did need to satisfy the necessity test.

Vetting Claimants

The first instance Judge also considered the issue of whether the costs could include the work undertaken in collecting and assessing prospective claimants, even before they had signed the Conditional Fee Agreements (‘CFAs') and become official clients of the firm. He held that as long as the wording of the CFA included provision for any work undertaken prior to the signing of the document then these costs could be recovered. This decision was upheld on appeal.

Cost of Funding

In addition to the CFAs, the Claimants had taken out After The Event (‘ATE') insurance to protect themselves against the potential liability of paying the Defendant's costs, had the claim failed. The Judge was required to consider whether the time spent on setting up the CFAs and ATE insurance policy could be recovered. At first instance it was held that such work was recoverable; however this decision was reversed on appeal.

Success Fee

The CFAs provided for success fees of 100%; however the Judge determined that this was too high. A success fee of 58% was held to be reasonable and a similar figure was reached on appeal.

ATE Premium

As the claim was successful, the premium for obtaining ATE insurance was recoverable from the Defendant as part of the claim for costs. The total premium claimed in this instance was approximately £9.6 million.

The Judge at first instance held that this was recoverable in its entirety and the Court of Appeal agreed with this conclusion.

The case will now progress to a detailed assessment of costs.