‘Costs capping orders’ (CCOs) were introduced in 2013 as part of a wider ‘costs budgeting regime’ that was to be applied to civil litigation. They allow the court to place a limit on the costs that a ‘successful’ party can recover from another party in litigation, in the hope that doing so will reduce the overall cost of litigation, and make it less unpredictable.
It is perhaps fair to say that the introduction of ‘costs capping orders’ hasn’t been the roaring success that reformers hoped it would. Eight years on from their introduction, what is believed to be the first application for such an order was recently made in the High Court.The ongoing case of Thomas & Ors v PGI Group Ltd involves 31 Malawian women bringing a claim for damages from the UK-registered parent company of a Malawian-domiciled company that the 31 women were employed by. The claimants allege that the parent company owed them a duty of care, and that this duty has been breached. The financial strength of the two parties is, understandably, significantly disparate.
The defendant made an application last month for future recoverable costs to be limited to £150,000, meaning this would be the ‘upper limit’ of costs incurred that the claimants would be able to recover from the defendant, if they were successful. The claimants have already incurred costs of £1.66m and their costs budget for future costs is £1.5m. In practice therefore, if a CCO had been made it would have limited the claimants’ recoverable future costs to c.10% of their costs of the litigation. This, Justice Cavanagh said, would likely have forced the claimants to discontinue the proceedings – due to their inability to find any lawyers who would continue to act ‘pro bono’ if their ability to recover future costs was limited. It was on this basis that the defendant’s application was rejected.
This case calls into question the ‘effectiveness’ of CCOs. The claimants argued that the defendant’s application for a CCO was no more than a ‘lightly disguised’ attempt to strike out the proceedings, and that the CCO regime was now effectively redundant given the obligation on parties in litigation to provide costs budgets, and to stick to them. It is perhaps for this reason that only one such application has been made in the eight years since CCOs were introduced. With a ‘post-pandemic’ increase in litigation anticipated, it remains to be seen whether applications for CCOs become more commonplace.