Christopher Bernard Upham and Others v HSBC UK Bank Plc
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Moulder DBE,Mrs Justice Moulder |
| Judgment Date | 07 February 2022 |
| Neutral Citation | [2022] EWHC 227 (Comm) |
| Docket Number | Case No: CL-2020-000347 / CL-2021-000169 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 227 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Moulder DBE
Case No: CL-2020-000347 / CL-2021-000169
John Jarvis QC, Nicholas Bacon QC, William Day (instructed by Edwin Coe LLP) for the Claimants in CL-2020-000347
Roger Mallalieu QC (instructed by Stewarts Law) for the Claimants in CL-2021-000169
Andrew Green QC, Simon Pritchard and Dominic Howells (instructed by Norton Rose Fulbright LLP) for the Defendant
Hearing date: Monday 31 st January 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This is the court's judgment on the issue of recoverability of costs as explained below. This is an issue on which the court heard argument at the first CMC on 31 January 2022 and on which the court reserved judgment.
There are two sets of proceedings before the court against a common defendant, HSBC UK Bank Plc (“HSBC”), which it has been agreed should be case managed together. These are the proceedings with claim numbers CL-2020-000347 and CL-2021-000169 (for convenience referred to by reference to the solicitors representing the various claimants in the two claims as the “Edwin Coe Claimants” and the “Stewarts Claimants” respectively).
The court has had the benefit of written and oral submissions from leading (costs) counsel for the two sets of claimants as well as witness statements from, respectively, David Greene (dated 24 January 2022) of Edwin Coe, and James Le Gallais (dated 26 January 2022) of Stewarts.
Background
It is not necessary to set out the details of the two claims. It is sufficient to note that both sets of claimants bring claims against HSBC in relation to a film finance scheme which involved the establishment by Future Films Limited (“Future”, now in liquidation) of limited liability partnerships (“LLPs”) and which were marketed on the basis that they would confer tax advantages to the claimants. I understood it to be common ground that the causes of action in the two claims are different (although the impact of that difference on the proceedings is not common ground) but in any event there are common issues between the claims which are identified in the Joint Agreed List of Points of Common Ground and Issues (the “List of Issues”).
It was the fact of common issues which led the parties to agree that the two sets of claims should be case managed together and tried together.
For convenience I shall refer to the group of claimants in a particular set of claims as a “cohort”.
It has been agreed that, for the time being, the two sets of claims will proceed on the basis that there will be a joint trial of sample claimants selected from both cohorts having regard to the “common issues” which have been identified in the List of Issues at Section A and other issues (being those issues identified in sections B – E of the List of Issues) so far as they have common elements.
Issue
The parties seek an order as to the “recoverability of costs” from claimants in the event that:
a) an adverse costs order is made against the claimants in favour of HSBC; and
b) the court identifies common issues across both cohorts of claimants, the costs of which the court orders should be borne across the cohorts.
The parties have agreed (as reflected in the draft order which was before the court at the CMC) that:
i. insofar as the claimants incur costs in the preparation and management of their own claims, the claimants within a cohort bear their own costs. Those costs consist of primarily common costs, that is costs which arise from the proceedings in relation to the particular cohort, including in relation to sample claimants within that cohort. In addition, claimants will be liable for their own individual costs, being costs which relate to matters which are personal and specific to an individual claimant;
ii. in respect of any adverse costs orders, costs are to be borne severally by claimants; and
iii. a claimant's liability for adverse costs shall be apportioned pro rata to his total investment in the capital of the Eclipse Partnerships and not on a per capita basis.
Thus if a costs order were to be made in favour of a claimant within a cohort, that claimant would recover his individual costs and his pro-rata share of the common costs within the cohort.
If an order for costs was made against a claimant, that claimant would be liable for the costs incurred by HSBC in relation to that individual specifically and the pro rata share of the common costs.
The issue which is in dispute between the Edwin Coe Claimants and the Stewarts Claimants is as follows:
i. whether, if an adverse costs order is made against the claimants, the share of the common costs should be the pro rata share of all costs incurred by HSBC and which have been incurred “wholly or mainly” in relation to matters which are common to both claims (the approach advanced for the Stewarts Claimants); or
ii. whether the division between the claims should be respected such that a claimant would only be liable for his pro rata share of common costs incurred in relation to his own claim but not costs which, although they relate to common issues across the cohorts, have been incurred by HSBC in relation to the other cohort (the approach advanced for the Edwin Coe Claimants).
No order for costs in favour of HSBC has yet been made in the proceedings but in essence the order is said to be sought at this stage for three reasons:
1. to enable claimants to evaluate their liability for costs;
2. to enable the quantum of an application for security for costs to be agreed/determined; and
3. to allow/give guidance to HSBC (and their lawyers Norton Rose) as to how they should record time during the life of the proceedings.
Edwin Coe Submissions
It was submitted for the Edwin Coe Claimants that:
i. there should be no order now which provides for costs across cohorts;
ii. unlike the position in Rowe v Ingenious Media Holdings plc [2020] EWHC 235 (Ch), the two proceedings are not akin to a joint venture – there is no sharing by the two cohorts of claimants of common costs incurred by the claimants and there should be no liability to share common costs incurred by HSBC which would oblige Edwin Coe Claimants to pay costs incurred by HSBC as a result of Stewarts' actions;
iii. HSBC are currently allocating costs equally to the two actions except where HSBC take the view that particular costs result from work done in response to particular cohort; this position should be maintained;
iv. it is unnecessary to legislate now for HSBC common costs: even though it may be necessary in future, this is not the right time;
v. any order made at this stage should reflect the fact that the Edwin Coe claim and the Stewarts claim are separate claims – such order should not tie the cases together inappropriately;
vi. the position is distinguishable from Greenwood v RBS [2014] EWHC 227 (Ch), given that case concerned a Group Litigation Order;
vii. the proposed definition of common costs is unworkable and imposes a burden on Norton Rose;
viii. the pragmatic solution reflects the law and is in furtherance of the Overriding Objective – namely, by asking what is the fair and proportionate order; and
ix. once any order is made in this regard, it will set a “bedrock”.
In relation to Ingenious, it was submitted that it was open to this court not to make any order. I note in particular the judgment in Ingenious at [41]–[43]:
“[41]…Given that I have already decided that the liability of the Claimants for the Defendants' costs should be several rather than joint, it seems to me fairer that the risks to a Claimant of participating in the litigation should be proportionate to the reward that he or she might obtain from the litigation. The notion that someone who invested £36,000 (and who, if successful, might recover compensation, whether for loss of investment, penalties or interest, commensurate with that) should contribute to the common venture exactly the same as someone who invested £10.5m (and whose compensation if successful would be very much larger accordingly) seems to me plainly unfair on the most basic principles of equity.
42. It is noticeable that in Davies v Eli Lilly Sir John Donaldson MR said of Hirst J's order at 1141D: “Those who practise in the Commercial Court, of which Hirst J is one of the judges, will recognise the age old respectability of such an order, based as it clearly is upon the Rhodian Law, the Rolls of Oleron and the maritime law of general average.” Those who do not practise in the Commercial Court might like to be reminded of the maritime law of general average, set out in Halsbury's Laws (vol 7 (2015), Carriage and Carriers) at §606 as follows:
606. Principle of general average. General average is part of the law of the sea founded on equity. It formed part of the Rhodian law, was based in earlier custom and existed many centuries before the existence of marine insurance. Rhodian law provided that, when cargo was thrown overboard to lighten a vessel, that which had been given for all had to be replaced by the contribution of all. The most often cited legal definition of ‘general average’ is ‘all loss which arises in consequence of extraordinary sacrifices made or expenses incurred for the preservation of the ship and cargo losses within general average, and must...
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