Thread by @nickwallis

Good morning everyone from Court 30 of the High Court’s Rolls Building in London. We are here for a Bates v Post Office costs hearing. I recently calculated the combined costs for this litigation must have gone past £40m.
We might find out how close I am shortly.
#postofficetrial

If you want to know how I got to £40+m:

The Post Office has admitted spending £23m on legal fees to end March 2019 (including paying out £6m worth of costs to the claimants)….

… Assuming costs on both sides are roughly the same and guesstimating that both parties have spent another £5m each already this financial year (reasonable), that's c. £22m spent by the Post Office and...

… c. £22m spent by the claimants, rebalanced because of the costs award to c. £28m spent by the Post Office and c. £16m spent by the claimants = c. £42m.

You can read more about how much the Post Office has spent on this litigation (and its implication for its exec’s bonuses) in its annual report, fisked for your reading pleasure on my blog here:
postofficetrial.com/2019/10/post-o…
#postofficetrial

Okay we’ve started. Henry Warwick on his feet for claimant, Fraser J presiding.
Owain Draper for the Post Office.

Karl Flinders (@Karlfl) from @ComputerWeekly is sitting next to me. Alan Bates from the Justice for Subpostmasters Alliance is sitting in front of me, flanked by his legal team from Freeths. Andrew Parsons from WBD is behind the Post Office counsel.

Complicated discussion going on about a sheet of paper with costs on it which we can’t see. The are talking about costs for “ADR” - alternative dispute resolution - ie offers to settle. There is no suggestion there has been an offer, but it is interesting that money...

… is being spent on thinking, talking about or working on a possible out of court settlement.

A costs summary has been sent to the judge. Both parties agree that it is the latest and correct.
J notes costs of first trial was £3.6m and Horizon trial was £3.7.

Wants to know why predictions for cost of third trial in March 2020 are “well north” of £4m.

J notes it is a three week trial to discuss one issue (Quantam - ie Heads of Loss).

(ie shorter and less complicated than the the other two trials)

J notes March 2020 is being done on “assumed facts” - because there is a process in the order to agree assumed facts before the trial.

There are facts, assumed facts and distinct alternative assumed facts being discussed.

J it’s either going to be assumed facts or some relatively narrow dispute of facts.

J I am struggling to understand why any costs managment order for this trial should be so high.

[PLEASE NOTE I AM SUMMARISING AND PARAPHRASING EVERYTHING SAID IN COURT - nothing is a direct quote unless it is in direct quotes]

J I think this trial is going to be narrower in scope than either of the other two.

OD yes, the trial itself is narrower in scope...

… but the meat of the difference is in the costs allocated to ADR settlement.

J so if we take out £1.2m for ADR costs, we have £3.04m for the trial.

J but the problem with approaching it like that is if… in a way because those settlement figures are for the whole action it’s misleading to have them in a third trial Costs Management Order…?

OD yes my lord.

OD makes the point that it is happening in the same time stage

J i understand. Other ways of comparing like with like - £.5m in first trial for compiling witness statements, yet you’re not getting witness statements in this trial...

… so even without the ADR costs, it should be substantially cheaper.

OD notes that the cost estimates for previous trials were lower than they turned out to be.

J accepts. Asks HW for claimants to carry on.

HW now discussing HSF fee estimates - Herbert Smith Freehills appear to be getting involved in the ADR. PO appears to be estimating a budget of £18m to cover the various rates charged by HSF.

HSF are acting for the Post Office (alongside several other legal firms).

J CMO sought by the claimant - not disputed. CMO sought by defendant for third trial budget which is disputed. And this is disputed on duplication of solicitors (the HSF point) and overall total. And you want comment on overall costs from me?

HW indeed my lord.

J let’s take this step by step.

The parties agreed to adopt the cost management regime, there therefore must be some purpose and they must want the involvement of the court in their future costs or they never would have agreed to adopt the cost management regime.

J I am going to make Cost Management Orders (CMO), but the court is not now simply content to waive through v substantial sums just because they are agreed. This may come as a surprise. One point that gives me very great concern is that the third trial is going to be narrower...

… in scope than the other two.

1st trial 3.6m
2nd trial 3.75m

it seems to me the global figure for the 3rd trial is not reasonable or proportionate if it is in excess of the other two figures. That is the approach I am adopting.

J Am I right in saying the parties are agreed the claimants’ budget for the third trial is £2.814m?

OD yes

J so are you happy for a CMO on this basis?

[there is confusion about calculation of estimates]

[resolved]

Both claimants and defendants budgets for the trial also include costs for ADR, mediation and settlement discussions.

Looks like claimants are proposing to spend 410K m on ADR, mediation and settlement and PO are going to spend 700K. This is obviously being taken very seriously as a possible outcome of this litigation.

Sorry if that’s not clear - ADR, mediation and settlement is being taken very seriously as a potential outcome of this litigation.

But lots of water will pass under the bridge before it even gets there.

Much of it in darkness….

J discussing making a CMO which deals with ADR/settlement separately from the trial CMO.

Neither party seems to have a problem with that.

But HW for the claimants say also there might be benefit to keeping them in the same order as that’s how they’ve been prepared.

OD agrees with HW.

J says he is persuaded to make a single CMO for £2.814m for the claimants costs for third trial AND ADR/mediation/settlement discussions.

J now wants to talk about PO CMO for the third trial.

OD there are two distinct issues - does your L want to make any adverse comment and what figure you ought to approve for estimated cost of settlement. HW wants crit of incurred costs for ADR/settlement and/or budgeted costs.

J it’s more than that isn’t it because I have to approve the figures are reasonable and proportionate even if they are agreed by both parties for the third trial. if I am to issue a CMO…?

J it’s part of the court’s duties in this process

OD looks at rules

OD it’s 3.15.2

… in the White Book.

OD starts reading from the White Book 3.15.2 to back up his argument
J suggests he looks at 3.15.3

[there is a little battle here. Court has a duty to try to keep costs down. Legal teams want to spend as much as they can, to, er, ensure the job is done...

… properly and to their clients’ satisfaction.]

OD arguing he doesn’t have to issue a CMO at all and the court can’t reduce costs where the are agreed.

J Are you saying the court does not have the power to do that?

OD yes my lord

J I’m not sure that’s right. give me a moment….

[Fraser J is reading the White Book]

HW I’m with my learned friend on this.

J I have the ability to make a CMO in respect of certain heads of costs in the budget whether they’re agreed or not. Just because the parties might be agreed, they’re not entitled to a CMO in respect...

… of the agreed item.

HW but respectfully you can’t revise figures.

J accepts.

HW but a pitfall of not making a CMO allows a party to sidestep costs management.

J okay it looks as if I might have just spent 10 minutes taking everyone up a side street. Back to your budget….

[whilst this is fun for me, this probably is not that much fun for you, so I will just try to pick out some headline numbers as we go on…]

[OD is on his feet reading from the authorities with regard to awarding and assessing incurred costs. I don’t wish to be flippant - this is a costs management hearing after all...

… but there appears to be an amazing amount of court time and brain power expended on how much lawyers should pay themselves]

If you want a thought on mediation by an ex-Subpostmaster and blogger, have a read of the influential @Jusmasel2015’s latest broadside: problemswithpol.wordpress.com/2019/10/21/aft…

[we’re on a short break for the stenographers]

OD The Post Office it putting a great deal of resource in trying to settle this case in proportion to trying to fight it. The question is what does PO have to do in order to maximise the chance of settling?
It is inherently a document and fact-intensive process.

J the difficulty with that is that any litigant will do what any litigant will do at any stage of the litigation. The problem is the involvement of a wholly different set of solicitors. This is very unusual. You might shrug your shoulders and I know there has been...

… correspondence on this. But I am telling you in my experience it is highly unusual.
OD but complaining about having two sets of solicitors on principle is wrong
J I’m not sure it is.

[this is about bringing the PO bringing HSF on board]

[HSF are dealing with the first trial appeal at the court of appeal AND the settlement/mediation process]

[the argument against allowing two firms is that there will be duplication of work and a doubling of costs]

OD saying well WBD are doing prep for third trial and to a very large degree HSF are doing very different work in relation to settlement.
The fact there are two firms doesn’t raise a red flag - there is a given amount of work - it can be done by 20 solicitors in one firm or...

… 10 in one firm or 10 in another. The amount of work does not change and the costs will be more or less the same. So the claimants have to show where the duplication is supposed to be.
He says by reference to his summary points in his skeleton he can show there is duplication.

[the argument about the principle vs evidence of potential duplication has been going for a good 15 mins now]

Essentially the claimants say the Post Office’s incurred costs in the latest round and budget costs are way too high. OD doing a persuasive job of telling his Lordship they’re all very reasonable.

J has hear OD for the PO.
J says he’ll hear HW for the claimants after lunch.

[he rises]

We’re back after lunch. at court 30 of the High Court’s Rolls Building, listening to a costs hearing in Bates v Post Office.

It appears Herbert Smith Freehills have been engaged by the Post Office to conduct a review into each of the 555 claimants’ cases.

At a cost of £1328 per claimant.

Claimants say this is the PO’s prerogative, but these should not be recoverable costs as part of the litigation.

HW for the claimants says these costs are overheads relating to what the judge has found is the correct interpretation of the contract.

HW Is this not simply a business cost, based on the judgement of the first trial.

[ie it’s what they should have been doing...

… before the litigation and what they are retrospectively obliged to do under the terms of their contract according to Fraser J’s ruling on 15 March]

HW asking judge to disallow HSF costs as recoverable. Or reduce them, partly for the above reason.

HW now having a go at the already incurred costs by HSF for analysis before pleadings of 200K and asking the court to make adverse comment.

J is asking when final individual pleadings have to be served for 3rd trial, and is told it is this Friday at 4pm.
HW if there’s anything else I can help…
J there is one thing. What’s the date on Friday?
HW 25th of October my lord
J Thank you very much.

[now onto CMOs]
J records a comment on incurred costs - total of time costs appears to be excessive based on fact individual particulars of claim have not been served - now up to the costs judge as how to deal with that comment.
J now onto settlement discussions...

… in col E the incurred costs up to 3 September £502K and estimated combined costs going forward of £733. PO is currently represented by WBD except for Court of Appeal applicaiton to appeal, where it is HSF. HSF are also solicitors for the PO in acting for them in a forthcoming

… mediation. There is a dearth of material in court as to how WBD and HSF won’t duplicate work. The PO say having two parties doing work like this is usual. I have difficulty with that. In my experience it is very unusual. I asked the PO to tell me what steps they have taken...

… to avoid potential duplication. They did not take me up on that invitation. I therefore comment that the incurred costs appear on their face to be extremely high, however the costs may be affected by number of claimants, length of time of each dispute and the involvement...

… of HSF and the potential for duplication. The issue of duplication is an issue for the costs judge to examine.

J In terms of the order I’m very much aware of comparing like for like. The PO have added £736K for ADR. The claimants have added £450. The claimants have...

£450K! not £450

…. hardly incurred any costs already on ADR, whereas the PO has loads, so that the TOTAL incurred and budgeted costs for the PO for ADR is actually £1.239m and the claimants is not much more than £450K.

[J decides a reasonable and appropriate amount for both parties to spend on ADR is £900K]

J now - it would be somewhat artificial to ignore the fact you’re all waiting for a judgment.

I had hoped to get it out in draft before the end of Oct. That’s not going to happen.

But it will arrive early in early November. The judgment will be in two parts. A judgment and what you might call a technical appendix which may not be of interest to the general reader.

OD for the PO stands up to say Fujitsu has uncovered an issue with some of the KELs which were put before the court. Some earlier versions of existing KELs have come to light and now the PO is in the process of bundling and disclosing them.
J so there’s more disclosure coming...

… and the claimants know about it.
OD indeed
J when will they get them
OD end of the week and the claimants may want to review them and make submission to the court about them.
HW in fact we very would likely have something to say about them.

J I will keep plowing my own furrow. If the PO can give disclosure of those KELs [they are in “the low hundreds”] but as the judgment is not coming before the end of this week the claimants should have time to see if they want to raise anything with me.

J and unless I hear anything, I will, 24 hours before the draft judgment is released ask if you don’t want me to release it for any reason you will let me know.
OD we will keep you informed
J well you had been but because I was working on the basis that the trial has ended...

… I hadn’t been paying that close attention to the correspondence.
HW well we are likely to make a submission based on what we know about this, but until we see it we can’t know for sure.
J well let’s cross that bridge when we come to it, but for those of you who have school...

…. age children, you can be assured that the draft judgment will not be arriving next week, during half term.

[he rises]

So that’s it. We’re going to get a judgment on the Horizon Issues trial early November unless this new as-yet undisclosed info from Horizon via Fujitsu and the Post Office puts a spanner in those works.

It SOUNDS as if the intention is to get it out before the Court of Appeal hearing on the 12 November.

Which means November is a busy month.

So a quick summary:

1. we have a total costs for both parties in the whole litigation up to 3 September but before publishing I’m going to check with the transcript to ensure I get it right.

2. Mediation has been budgeted and some work has been done on it.

3. Herbert Smith Freehills proposes properly investigating the 555 claimants’ cases in relation to everything that happened in order to better inform any mediation settlement discussion. Claimants say this is something they should not be able to claim the costs for...

…. as part of the litigation as it’s what they should have contractually done in the first place before the claimants became claimants and were Subpostmasters.

4. We’re going to get a judgment on the Horizon trial in early November. Well - the parties will - it should be published before 12 Nov.

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… on the litigation. Thanks very much for reading this far. Look out for the report on postofficetrial.com once I get the court transcript later today!

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