Males: Costs judge must take firm approach
The Court of Appeal has described the costs claimed in a high-profile claim as “eye-watering even by Commercial Court standards” and urged a sampling approach to their assessment.
Lord Justice Males deprecated the possibility that the detailed assessment in the Nigeria v P&ID case could take twice as long as the trial of the substantive matter.
In October 2023, Mr Justice Robin Knowles overturned an $11bn arbitration award made against the Nigerian government for repudiatory breach of a gas supply and processing agreement with a company called Process & Industrial Developments Ltd (P&ID).
He upheld Nigeria challenge that it was obtained by fraud and he heavily criticised two of P&ID’s lawyers.
Nigeria is seeking costs of £44m plus interest, of which £20m has been paid on account, as well as the costs of the detailed assessment, estimated to run into millions of pounds too.
Its bill is more than 3,000 pages and contains over 95,000 individual items. P&ID’s points of dispute run to over 1,200 pages and Nigeria’s response to 2,000 more.
It is expected that the assessment will require at least 50 days of hearings before a costs judge – the trial took 29 days – and is unlikely to be concluded for at least another year to 18 months “and potentially much longer”.
The latest Court of Appeal hearing saw the court uphold Knowles J’s decision to stay Nigeria’s application for a third-party costs order against P&ID’s funder until after the conclusion of the detailed assessment.
Males LJ concluded by commenting on the process he said should be followed so as to ensure the detailed assessment was conducted in accordance with the overriding objective, saying he was “dismayed” by its predicted cost and length and that it could last almost twice as long as the substantive trial.
“Even if this is time and expense which these well-resourced parties are willing to devote to the exercise, it seems to me that it would be the worst kind of satellite litigation, which will prejudice the many other court users who need to have their costs assessed with reasonable promptness, and that it should not be countenanced.”
Males LJ went on that, if a preliminary issues hearing this spring did not resolve matters, “the costs judge must adopt a firm approach, limiting the parties to a reasonable allocation of further court time”.
He went on: “If necessary, a sampling approach should be adopted. For example, each party could select a number of items from the bill and any reduction applied to those items could be applied to the bill as a whole.
“That seems to me to be as likely to produce a fair and reasonable result as detailed scrutiny in oral argument of every item in the bill in addition to the thousands of pages of written submissions which have already been served.
“As I have already said, both parties have access to high quality legal advice and will be well able to form a view of the likely outcome. It is time for them to adopt a realistic approach.”
Lady Justice Andrews expressly associated herself with these comments. “The level of costs claimed is eye-watering even by Commercial Court standards,” she said.
“It is possible that the resolution of the preliminary issues will significantly truncate the time required to carry out the remainder of the costs assessment, but the history of this litigation does not give rise to grounds for any optimism on that score. The sampling approach seems to me to be a very good idea.”
David Bailey-Vella, chair of the Association of Costs Lawyers, commented: “Costs are, of course, extremely important to every piece of litigation but the process of determining them must be as reasonable and proportionate as the costs themselves.
“The Court of Appeal clearly expects those involved in this case be pragmatic and the sampling approach it suggests is one that, with the support of expert costs professionals, could be used in other cases.”
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