Court rejects £150,000 cost capping in Malawian tea plantation litigation

The High Court has just determined an interesting case dealing with costs. This case is of importance, as it is the first time that an application for a cost capping order (CCO) has been made since the start of the cost budgeting regime eight years ago.

In Thomas & Ors v PGI Group Ltd, Mr Justice Cavanagh refused the defendant’s request during a case management conference to make a CCO limiting the future costs of the claimants to £150,000 (the claimants estimated their total costs of the proceedings at just over £3 million). 

It was acknowledged that this limitation may have caused the claimants to discontinue the court proceedings, and therefore the making of the CCO was not considered to be in the interests of justice. In making his ruling, the judge noted that this case raised “novel and potentially important points of law and practice”. 

Background

The background to this matter involves 31 Malawian women employed at a tea and macadamia nut plantation based in Malawi. The women allege rape, sexual harassment and other types of sexual discrimination at the hands of male colleagues. 

The defendant’s parent company, domiciled in England, denies any liability on the grounds that it did not exercise operational supervision and control over the women’s direct employers. 

Although Malawian law applied, the claimants asserted that they had no real confidence in obtaining justice in Malawi and therefore brought the case in the English courts.

Legal argument: The interests of justice

The defendant claims that if the claimants are successful, they will be entitled to fairly modest damages of only £310,000. However, although this sum appears to be relatively low for English standards, it is said to be life-changing for the workers, who are extremely poor and living in Malawi. 

Furthermore, the claimant’s argue that this claim is being pursued for a number of legitimate reasons and that the case is not all about the money. The claimants state that the proceedings have powerful, non-financial motives, including holding the defendant to account, restoring the claimant’s reputations and highlighting the systematic abuse of female plantation workers in Malawi (the judge referred to this as ‘vindication’). 

In light of this, it was considered not to be in the interest of justice to force the claimants to abandon their claims.

In addition, even if the claimants could struggle on regardless of a CCO, this imposition would create a “gross inequality of arms”, given that the defendant’s resources are far greater (its proposed a budget would involve them spending more than ten times as much as the claimants in costs). 

It is understandable that the defendant would feel it is unfair that it would have to pay the claimants’ costs if they succeed but that the defendants were unlikely to recover any of their own costs, even if they won, owing to the effect of qualified one-way costs shifting (QOCS). 

However, the judge stressed that this was not a reason to impose a CCO on the claimants, and this was how the rules worked on a strict interpretation. Furthermore, CCO’s are known to be exceptional and have always been extremely rare. 

The defendants argued that incurring over £3 million in costs to recover only £310,000 in damages was neither reasonable nor proportionate and further argued that the claimants could bring cheaper proceedings against the Lujeri Tea Estate in Malawi and potentially receive the same damages award plus vindication. 

Ruling

The judge refused the defendant’s application for a CCO and held “that it would not be appropriate, on proportionality grounds, to cap the claimant’s costs at less than the level required for them to litigate their claims effectively”. Furthermore, there was no substantial risk that, without the CCO sought, costs would be disproportionately incurred. 

In reaching his decision, the judge considered the various cost provisions and the overriding objective provision contained in the civil procedure rules. Regarding the applicable principles, he stated that the court would have the discretion to make a CCO on the following grounds:

• where it is in the interests of justice to do so;
• where there is a substantial risk that without a CCO, costs will be disproportionately incurred; and
• if the court is not satisfied that the risk of disproportionate costs can be adequately controlled by costs budgeting or a detailed assessment.

The judge agreed with the claimants that imposing a CCO would amount to a strikeout and, since the defendant had accepted that the proceedings were not an abuse of process and that England was an appropriate forum to hear the claim, it would not be right to impose a CCO. Lastly, the defendants had failed to demonstrate that the grant of the CCO sought would be in the interests of justice. 

Conclusion

This ruling demonstrates that the CCO regime serves no practical purpose in contrast to cost budgeting, which is a more refined way of setting a costs figure. 

In other words, it seems this case confirms that CCO’s have fallen out of use with the advent of cost budgeting. It will be interesting to see whether this decision is appealed.

If you have any questions about the rules for costs budgets and costs management in litigation, contact our team at enquiries@solegal.co.uk.