Buncefield proves trial fees can be cut

Davies Arnold Cooper’s client, Total, actually got off lightly when costs were awarded in the Buncefield litigation. A series of claimants applied for indemnity costs on grounds that Total failed to cooperate and misrepresented its case. In the end Mr Justice David Steel ordered the oil company to pay out £16m indemnity to claimants on just a single issue- that of negligence. It could well have been four times that.

Buncefield fire

The Buncefield litigation was the acid test for the recommendations of commercial court working party on long trials 15 September 2008

The working party was put together in the aftermath of the spectacular collapse of the BCCI trial. In that case Deloittes legal fees alone were £38m.  The judiciary was aghast – how can litigation in London be so expensive?

It recommended reform of the commercial court with the judiciary given more powers to take control of cases which have spun out of control. The aim would be for shorter cases which would produce lower legal bills.

Mr Justice David Steel is a strong advocate of the working party recommendations. His appointment to the Buncefield case was an indication that the judiciary wanted to make the pilot trial work. If he could pull it off it would be a resounding endorsement of the guidance and would mean that the recommendations would be enshrined into the commercial court.

So has it worked?

This week, Steel J ordered Total to pay indemnity costs on the claim of negligence to the claimants who were based outside the fence parameter 20 March. This amounted to £16m for all the claimant’s legal costs – or the equivalent of 2.1 per cent of the £750m claim.

Total was clearly negligent, said Steel J; its own report showed that it was the supervisor on duty who had failed to spot a gas tank over filling – this lead to the explosion. The company filed its defence in May 2007, but it was not until almost a year later that it conceded, albeit cautiously, that it might be at fault somewhere.

The claimants also applied for indemnity costs on foreseeability issues, arguing that Total was deliberately misleading in its case. Steel J rejected this argument saying that Total’s case was not “manifestly so weak as to justify indemnity costs”.

Chevron,  which Total attempted to hold jointly liable but failed, also applied for indemnity costs, but that too was rejected.

Meanwhile, claimants London Pipeline and Storage (LPS) and UK Oil Pipelines (UKOP), represented by Pinsent Masons, also forced Total to cough up liability costs. The oil company initially accepted liability but later changed its stance saying that it’s case was well covered by the other claimants.

Steel J rejected this, but expressed his “astonishment” that Pinsent Masons had managed to bill twice that of BP and Shell which were also claimants in the action.

Given that there were seven defendants instructing heavyweight counsel such as Brick Court Chambers Jonathan Sumption QC and 7 King’s Bench Walk’s Jonathan Gaisman QC in a case worth £750m, is £16m in indemnity costs fees really disproportionate? Particularly when Total’s counsel, Lord Grabiner QC, withdrew  the main tranch of Total’s defence just days into the case.

One claimant lawyer working on the case says: “How long it took to bring the case to court, how long the case lasted and how it was managed- it was all done well, particularly as it is a process where you go into as much detail as possible. The costs compare favourably to what they would be anywhere.”

“This is a vindication of the working party proposals,” another adds.

With Lord Justice Jackson due to publish a consultation paper on how the litigation system should be reformed next week (8th May) , this case demonstrates just how far the court has come since the BCCI litigation.