The High Court has criticised the “deeply alarming” level of costs which the trustee of the British Airways pension scheme expects to spend in a Supreme Court appeal.
Mr Justice Arnold said the court had to “seize the nettle now” and restrict the costs in respect of which the trustee was entitled to an indemnity from the scheme.
Airways Pension Scheme Trustee Ltd v Fielder & Anor  EWHC 29 (Ch)  was an application for Beddoe relief – a court sanction for a trustee to take a specific course of action – following long-running proceedings. The first defendant was a representative member of the scheme and BA was the second defendant.
In 2013, BA brought proceedings to challenge two decisions of the trustees, which were rejected by the High Court. But the Court of Appeal held that the decisions were invalid, and unusually granted the trustee permission to appeal to the Supreme Court.
The trustee now sought the approval of the court to pursue the appeal and for the trustee to be indemnified in respect of its costs, and any adverse costs order, from the scheme funds. The first defendant supported the application, while BA opposed it.
Arnold J ruled that the trustee would be acting in the interests of the scheme by pursuing the appeal and was therefore entitled to the indemnity.
However, this did not mean the trustee had carte blanche to spend whatever it chose, he continued.
“I am very concerned about the estimated costs of both sides, but particularly the trustee’s estimated costs.
“The trustee’s estimated costs of the appeal amount to £1,239,063, of which £444,033 has already been incurred. This estimate is based on the assumption of a 1½ day hearing and does not include the costs of BA’s proposed cross-appeal.
“For comparison, BA estimates its costs at £1,034,000 for a two-day hearing including its cross-appeal.”
Part of the reason for the difference was that the trustee intended to instruct two QCs and a junior, while BA was to have one QC and two juniors.
In all, the trustee has so far spent nearly £13m on the proceedings, excluding the appeal, and the judge assumed BA had spent something similar.
Arnold J said: “In my view it is deeply alarming that the trustee should be proposing to spend some £1.24m on an appeal raising a single point of law with a hearing lasting only 1½ days.
“I consider that it is necessary for the court to intervene to ensure that the trustee’s costs are kept within some semblance of reasonableness.”
Counsel for the trustee argued that, instead of imposing a cap, the court should direct that the trustee’s costs be subject to assessment on the indemnity basis unless the first defendant agreed those costs.
But the judge said this did not go far enough, “because it does little to protect BA from excessive costs being incurred by the trustee”.
He continued: “I consider that the court should seize the nettle now so that everyone knows where they stand. If BA can deal with the appeal and its proposed cross-appeal at a cost of £1,034,000, I see no good reason why the trustee should not be able to do likewise.
“I recognise that the trustee has incurred costs on taking advice which BA has not had to incur, but in my view that should enable costs to be saved later. I also recognise that the trustee will bear more costs through being the appellant, but in the Supreme Court that should be a marginal factor.
“Moreover, BA will incur more costs in respect of its cross-appeal, notably in seeking permission to appeal from the Supreme Court.”