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High Court awards costs for premature GLO application
The High Court, in Crossley and others v Volkswagen AG and others, has handed down judgment awarding the Defendants' costs in respect of certain Claimants' premature application for a Group Litigation Order (GLO). This led to various unnecessary and ineffective hearings throughout 2017. Freshfields acted for the Defendants.
The decision is of interest in indicating how a court will respond to applications for a GLO that are made prematurely and the level of coordination that is expected by the Court before a GLO application should be made.
Whether the GLO application was issued prematurely
The Court found that, in this case, the GLO application was issued prematurely as there was simply not enough time allowed for pre-action and pre-application correspondence with other Claimant groups and with the Defendants. The GLO application in this case had been issued just three months prior to the January 2017 GLO hearing. Thus, the Senior Master remarked that this conclusion was "obvious" given the "state of disarray" in which the GLO application reached the Court in January 2017 (emphasis added):
"For such a major piece of litigation there was simply not enough time allowed for pre-action and pre- application correspondence with other Claimant groups and with the Defendants. The state of disarray in which the application reached me at the hearing on 30 January 2017 made that conclusion all too obvious. As I commented at the hearing, it was simply not possible for the court to have dealt with the GLO application on the state of the evidence and information before it. It was clear to me when reading the papers submitted for that hearing over the weekend before it was due to be heard, that there was no possibility that the application could be dealt with and that the VW Defendants' application for an adjournment was, unless there was some development that I was unaware of, bound to be successful. When the hearing commenced on the morning of Monday 30 January 2017 the Relevant Claimants conceded that there would have to be an adjournment. That conclusion should have been reached by the Relevant Claimants at a much earlier stage."
The Senior Master did not, and did not need to, make any finding as to the reasons why the application was issued when it was. The Senior Master only needed to be "satisfied that it was premature and pursued unreasonably, such that the consequences were that the VW Defendants, and later the Dealer Defendants, suffered unnecessarily incurred costs".
In this case, the GLO application was clearly precipitous for the following reasons:
- other Claimant firms considered the GLO application to be premature. Whilst the Senior Master accepted that "full agreement from the smaller Claimant groups during the relevant period" was not a pre-requisite for issuing the GLO application, she noted that "that there had simply not been sufficient discussion with those groups before the January 2017 hearing". The Senior Master found that "the lack of an agreed position by the lead claimant groups at the January 2017 hearing, was one of the main reasons why that hearing was premature and could not have been effective";
- whilst the Senior Master did not make any finding as to the reasons why the application was issued when it was, she commented that "timing suggests that the decision to issue proceedings and file the GLO at that stage was a commercially driven decision for the benefit of [the law firm issuing the application]..., rather than for the benefit of the Relevant Claimants or Claimants generally";
- limitation was not an issue. Even if it was necessary to issue the claims for limitation reasons, the Senior Master remarked that in these circumstances “there could have been agreement, or in default of agreement, applications to stay those claims pending the issue of the GLO application, or, once the GLO application was issued, there could have been agreement that it should not be listed until an appropriate date”; and
- an unusual feature of this case was that there was a parallel dispute between two of the Claimant firms, Harcus Sinclair (HS) and Your Lawyers (YL), which had not been resolved prior to the GLO application being heard in January 2017. Whilst the Senior Master was “not without sympathy for the dilemma in which both HS and YL found themselves in with regard to this dispute in the middle of the GLO application,” she considered that “it was not possible to proceed with the GLO application until that dispute was resolved, unless one of the firms agreed to cease to act in the litigation”. The appropriate course of action would have been for the GLO application to have been stayed pending the determination of this dispute.
Further, whilst not a separate factor in the Senior Master’s reasoning, the fact that there were seven different drafts of the GLO was “illustrative of the fact that the GLO application was premature and that there had been insufficient liaison and discussion before issue”.
In respect of the level of coordination between claimant groups, it is not necessary for all issues to have been agreed and a final formulation of the draft GLO order to be in place by the time of the GLO application or the hearing. However, the Court set out in detail certain steps that should be taken in advance of making a GLO application:
- the claims should be at a stage “where GLO issues can be identified, and where some claimants may have different claims in law, these need to be identified so that the court can decide whether they should be included in the GLO or dealt with outside the GLO”;
- “proper vetting” of the claims need to have been carried out so that “weak or unmeritorious claims can be weeded out”;
- the claimants should at least be “some way” towards arranging satisfactory funding of the litigation and ATE insurance (or other means of paying any adverse costs order);
- the common and individual costs provisions of the draft order need to have been “discussed and agreed if possible”;
- “a realistic timetable” for service of a generic particulars of claims and the generic defence needs to have been discussed;
- the various claimant firms need to have had “substantial discussions” so that a common approach can be agreed if possible and any issues of difference be identified;
- the formation of a Solicitors’ Group needs to have been agreed;
- the lead solicitors should be identified and, if possible, agreed; and
- if there are any limitation issues, an agreement for a stay pending the GLO needs to have been canvassed or an application be made if agreement cannot be reached.
The Court also remarked that defendants should be involved in discussions once there is a sufficiently identified common approach, or differences of approach are capable of being identified.
Orders for costs
Consequently, the Senior Master ordered the relevant Claimants to pay the Defendants’ costs of three ineffectual hearings of the GLO application, one vacated hearing of the GLO application, an application to adjourn and an application for costs. The Court ordered that the costs of one hearing should be costs in the GLO on the basis that in litigation of this magnitude a single directions hearing may in any event have been necessary. Costs are to be subject to detailed assessment. Pending detailed assessment, the relevant Claimants have been ordered to make a payment on account of costs to the VW Defendants and Dealer Defendants in the sum total of £168,000.
The Senior Master, relying on the Court of Appeal’s decision in Excelsior Commercial & Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson [2002] EWCA Civ 879, also saw fit to award the Defendants’ costs of the previous hearings on an indemnity basis in light of the conduct by the relevant Claimants’ solicitors, which brought “the circumstances outside the norm”. Such conduct included:
- the GLO application being “issued prematurely, pursued inappropriately when it should have been stayed, and in the face of cogently expressed grounds given by the VW and Defendants and some of the other Claimant groups”; and
- the law firm issuing the application’s “desire to obtain a commercial advantage in the litigation,” this being the “most likely explanation” for the manner in which they issued and pursued the GLO application.
