CoA agrees that Leigh Day must reduce Trafigura success fee

The Court of Appeal (CoA) has handed down judgment in the latest bout between Leigh Day & Co and Trafigura, upholding an earlier ruling that Leigh Day must cut the 100 per cent success fee it charged for bringing a group action against the oil company to 58 per cent.

Leigh Day sent shockwaves through the profession when it unveiled a £105m bill for a group litigation order it brought against Trafigura on behalf of 30,000 Ivory Coast residents (17 May 2010).  The firm and its counsel in the case, 39 Essex Street’s Robert Jay QC, had been instructed on a conditional fee arrangement (CFA) and its bill was calculated to include a 100 per cent uplift.

The original case was settled after Trafigura agreed to pay out £30m of the £100m claimed (23 September 2009) but the ensuing battle over costs between the parties is still to be decided.

Today’s ruling from the CoA concerns preliminary points on the costings battle that will later be discussed before a costs judge.

The Master of the Rolls Lord Neuberger, vice president of the CoA Lord Justice Kay and Lord Justice Hughes were appointed to hear appeals from both sides on nine disputed issues contained within a judgment handed down by senior costs judge, Chief Master Hurst in March (2 March 2011).

On the issue of proportionality the panel upheld Trafigura’s appeal, stating that only items that passed a “necessity test” could be included in the firm’s final bill. Furthermore, the judgment added, any specific item can only be recovered if it falls within the grasp of the relevant claimant’s CFA. The test should also be applied to the claimed costs of obtaining medical reports and to claims that were “abandoned” during the course of the proceedings.

Of the £105m bill the after-the-event policy provided by legal insurance underwriter FirstAssist accounted for £9.6m. Chief master Hurst said the firm could recover any costs associated with setting up the insurance package, but today the CoA reversed that position.

Delivering the substantive judgment Neuberger MR stated: “The time, expertise and effort devoted by solicitors to identifying a potential claimant, and negotiating the terms on which they are to be engaged by the claimant, in connection with litigation, cannot, in my view, be properly described as an item incurred by the client for the purposes of the litigation.”

Trafigura, which instructed Henderson Chambers’ Charles Gibson QC, also challenged whether Leigh Day should be forced to reduce its legal bill because of a failure to comply with pre-action protocols.

According to the judgment: “Mr Gibson sought to mount a wholesale attack on what he contended was Leigh Day’s failure to comply with the spirit of the CPR [civil procedure rules] and the Woolf Reforms, and in particular the proper approach to GLOs [group litigation order]. His submission was that the purpose of a GLO is to achieve a reduction in costs, both through economies of scale and by managing the cases in such a way as to limit costs.”

The judges rejected the argument but did state that “the claimants’ legal advisers no doubt could have done more to comply with the spirit of the CPR”. Neuberger MR added: “The worst that can be said is that they did not fall very far short of their duty, and, to the extent that they did, no extra costs were incurred.”

Leigh Day partner Martyn Day instructed 7KBW’s Christopher Butcher QC, Doughty Street’s Richard Hermer QC to lead Benjamin Williams of 39 Essex Street for the firm.

In a statement the firm said the ruling was to be welcomed: “We’re pleased that the Court of Appeal has largely upheld the decision of Master Hurst that we’ve always been content with. This is another step within the detailed assessment of our costs and we now move on to going through the bill of costs, item by item.”