Appeal court judge’s “dismay” over £2m costs bill for flight claims

Hickinbottom: Costs were main driver of proceedings

An appeal court judge has expressed his “dismay” after estimating that legal costs “not far shy of £2m” had been spent in a case involving over 800 claims for flight-related compensation each worth only a few hundred pounds.

Lord Justice Hickinbottom also cautioned that “who pays the cheque” is not necessarily the right guide as to who has won in litigation.

The Court of Appeal heard in Sirketi v Kupeli and others [2018] EWCA Civ 1264, that Atlasjet agreed with the government of Northern Cyprus to provide replacement flights after Cyprus Turkish Airlines, the second defendant, lost its air operator’s licence and ceased trading.

None of the claimants received their replacement flight and had to purchase new tickets with other carriers or did not travel.

The proceedings were never formally incorporated into a group litigation order, but the claims were joined and managed together by one firm of solicitors, Hudson Morgan Williams.

In a postscript to the judgment, Hickinbottom LJ said it would be “remiss if I did not express my dismay” at the way the parties’ costs had “so vastly, and so obviously, exceeded any substantive claim that the claimants may have had”.

Although the court did not have “precise figures” for costs spent so far, he said Atlasjet’s costs for the part 1 trial – an initial trial of both legal issues and lead claims – were “in the region of £800,000” and the claimants’ costs, including the success fee, would be the same if not more, making a total not “far shy of £2m”.

Hickinbottom J said that, from a “very early stage” in the litigation, it was clear that “the main driver of these proceedings was clearly not the substantive sums claimed but costs”.

He said the claimants, described by their own counsel as “modest folk”, each claimed sums “in the low hundreds” of pounds from Atlasjet.

“We do not have details of the CFA between the claimants and their solicitors; but we do know (i) that the solicitors must have regarded the claims as being high risk, as the success fee was put at 100%; and (ii) the claimants did not have the protection of after-the-event insurance.

“On any view, this litigation, for the claimants, presented a very high commercial risk out of all proportion to the potential prospective rewards.

“On the other hand, knowing that the claims were necessarily very modest in amount, Atlasjet refused to consider any form of compromise, until shortly before the trial, when, in effect, its efforts were both too little and too late.

“The judge correctly observed that this case cried out for some early, sensible consideration of compromise.”

Hickinbottom LJ said only two of ten lead claims against Atlasjet succeeded at trial before Mrs Justice Whipple in February 2016. Whipple J ordered Atlasjet to pay 33% of the claimants’ costs and £225,000 on account.

He said that “in a group claim such as this, whilst the defendant may be unitary, the claimants are not”. Of the total of 838 individual claims, following the part 1 trial, Atlasjet was successful in 792 of them and was entitled, as a “starting point”, to its costs from those claimants.

He said the purpose of the trial was not merely to “conclusively” determine the lead claims, but to help determine the rest of the claims.

“Looking at the litigation as a whole, whether a party is ‘successful’ is an issue which has to take into account both the extent to which a party has been successful in such issues and the consequences of the trial for the balance of claims.”

He went on: “In my view, unfortunately, Whipple J was wrong to equate ‘who receives the cheque’ with the successful party for the purposes of CPR rule 44.2(2) in the context of this complex group claim.

“She was required to consider who was successful, in the context of the group litigation as a whole; and that was not truly reflected by the fact that a limited number of claimants were successful in and as a result of the part 1 trial.”

However, Hickinbottom LJ said Atlasjet’s conduct should also be taken into account.

“It was certainly open to the judge to conclude that Atlasjet’s conduct in failing to engage in attempts to compromise this litigation, in circumstances which were ‘crying out for some sensible attempt at negotiation before costs racked up and the parties’ attitudes hardened’, was a matter which should be reflected, against Atlasjet, in consideration of costs as between the parties.”

HIckinbottom LJ replaced Whipple J’s order that Atlasjet should pay 33% of the claimants’ costs, with no order for costs: “In the part 1 trial, it is clear that neither party had anything close to complete success, and indeed that honours were fairly even.”

Lord Justice Davis agreed, describing the litigation as a “melancholy tale”.

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