Shell: Costs unpaid to date
Listed law firm Rosenblatt is facing the prospect of having to pay out millions of pounds after the High Court allowed proceedings for costs orders against it to proceed.
Mrs Justice O’Farrell ordered the firm to show cause why a wasted costs order should not be made over whether it had authority to act for the claimants in a huge failed group action.
She further ordered Rosenblatt to disclose funding agreements and other information that would help Shell understand the level of control it exerted on the claim brought against the oil giant with a view to applying for a non-party costs order.
Shell argues that the firm went beyond acting as solicitors and became a funder of the litigation.
Rosenblatt acted for 27,380 claimants and 479 communities taking action against Shell over an oil spill off the coast of Nigeria in two related actions (called Jalla 1 and Jalla 2), which last year the Supreme Court held were statute-barred for limitation.
Initially, between 2015 and 2020, the claimants were represented by London law firm Johnson & Steller, with Rosenblatt latterly providing legal assistance and funding under a collaboration agreement.
Rosenblatt took over the case in August 2020 and signed up the two lead claimants, who were stated to have authority to act on the individual claimants’ behalf, and the claimant steering committee to a damages-based agreement (DBA).
A question throughout was whether, as a matter of Nigerian law, Rosenblatt had authority to act for the claimants. O’Farrell J ruled last year that it did where individual claimants had given their consent – but only five had – and where the claims were community claims in respect of community land rights (of which there were four).
At a hearing last October, for which O’Farrell J has only just given judgment, the defendants sought its costs from the claimants and a wasted costs order against Rosenblatt for acting in breach of warranty of authority, as well as the disclosure order.
She held that the claimants should pay the defendants 90% of their costs of the authority issue – said to be approaching £1.2m – and ordered an interim payment on account of £577,000.
The defendants sought these costs from Rosenblatt on the ground that it was the real party to that issue or alternatively a wasted costs order.
O’Farrell J said she was satisfied “that there is evidence and other material before the court which, if unanswered, would be likely to lead to a wasted costs order being made, and that the wasted costs proceedings are justified notwithstanding the likely costs involved”.
She noted that Rosenblatt had accepted that “a solicitor acting without authority is vulnerable to a wasted costs order”.
Further, if, as was now suggested, Rosenblatt did in fact obtain letters of authority from individual claimants, “it is arguable that it acted improperly, unreasonably or negligently in failing to notify the defendants of this fact or produce them”.
The judge added Rosenblatt as a defendant for the purposes of costs so it could show cause why a wasted costs order should not be made.
Shell has incurred more than £14m in costs in the substantive proceedings and has five costs orders in its favour following various hearings. The claimants have been ordered to make interim payments totalling £6.3m but have not paid anything and Shell predicted it would be extremely difficult to enforce the costs orders in Nigeria.
There was no after-the-event insurance and Shell said it had a “reasonable belief” that Rosenblatt “crossed the line” by acting as a funder and party.
It sought an order that the law firm should provide funding information, disclosure and inspection of documents in support of its contemplated application for a non-party costs order.
Rosenblatt argued that a firm of solicitors funding claims and contributing financial resources and staff through a lawful DBA was not a litigation funder for the purpose of section 51 of the Senior Courts Act 1981.
Making the order, O’Farrell J said the application could not be described as “fanciful or speculative”, given the issues raised by the defendants, namely, the firm’s control of the litigation, potential benefit from it, the absence of authority, the lack of insurance and involvement of third-party investors.
“Whether it has any real merit is not a matter for the court at this stage,” she added.
The information and documents were “likely to shine a light on the control and funding arrangements for the litigation”, she went on. “As such, they are likely to assist the court in determining whether section 51 is engaged; and, if so, the exercise of the court’s discretion.”
“Thirdly, where a DBA or similar funding model has been utilised, and a successful party is unable to recover costs from those benefitting from the DBA, it is unsurprising that the successful party will wish to understand the terms of the funding when assessing its options.”
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