The facts
The proceedings concern the collapse of the Fundão Dam in Brazil in November 2015. There are some 450,000 claimants, described by the court as “individuals, businesses, municipalities, utilities and other entities claiming compensation from BHP for losses allegedly caused by the collapse of the Dam” (at [1]).
Mrs Justice O’Farrell, sitting in the Technology and Construction Court, made an order on 26 January 2026 after a Stage 1 trial that lasted some five months between October 2024 and March 2025 (at [2]). She decided that BHP were strictly liable as polluters under the Brazilian Environmental Law, alternatively liable as having been at fault under article 186 of the Brazilian Civil Code, and that the claims were not time-barred. The Court of Appeal recorded that “Both the judge and the Court of Appeal have refused permission to appeal these substantive decisions” (at [2]).
On costs, the judge ordered BHP to pay the claimants 90% of their Stage 1 costs on the standard basis, pre-judgment interest at 1% above UK base rate on the total recoverable amount of those costs from 1 August 2023 until 26 January 2026, and £43 million on account of costs under CPR 44.2(8). The claimants were refused an immediate detailed assessment (at [3]). The judge accepted 1 August 2023, the date at which half of the fees were incurred, as “a pragmatic and proportionate approach” (her judgment at [52], set out at [28]).
The claimants are represented by Pogust Goodhead. Both sides asked the Court of Appeal to assume that the claimants had entered into CFAs under which, if their claims succeeded, they would be liable to pay their solicitors’ base costs together with a success fee (at [16]). The court was “only shown indirect evidence” of the funding arrangements (at [14]). Mr Goodhead’s evidence, quoted in the judgment, stated that the firm is funded by a secured corporate debt facility of $552.5 million to which its clients are not party (at [15]).
The issues
BHP appealed only the interest award, on the grounds that the court had no power to award pre-judgment interest on costs “on account of a potential liability to pay a success fee reflecting the costs of funding the litigation”, and that, if the power existed, it should not have been exercised in the claimants’ favour (at [4]).
BHP advanced two arguments. First, relying on the Supreme Court’s decision in Hirachand v Hirachand [2024] UKSC 43, it said that the prohibition on recovering success fees in section 58A(6) of the Courts and Legal Services Act 1990 could not be circumvented by re-categorising the fee (at [5]). Second, it said that pre-judgment interest could only be awarded where the claimants were out of pocket or had borrowed money to fund their costs, which it was common ground they had not (at [7]). The claimants accepted that they had to be “in some sense, out of pocket”, but said they were, because they were contingently obliged to compensate their solicitors for late payment through the success fee (at [9]).
The decision
The appeal was dismissed (at [54]). The court held that the claimants came within the scope of CPR 44.2(6)(g) “because they are under a liability, albeit through the mechanism of a success fee, to compensate their solicitors for the fact that they have provided the claimants with their services without payment” (at [12]). The order did not infringe section 58A(6) “because it is an order for pre-judgment interest on costs, which is quite distinct and separate from an order requiring ‘the payment by one party of all or part of a success fee payable'” (at [12]).
The reasoning
The statutory and rule framework
CPR 44.2(6)(g) provides that the orders the court may make include an order that a party must pay “interest on costs from or until a certain date, including a date before judgment.” The rule was introduced in 1999 (at [21]).
Section 58A(6), as substituted by section 44(4) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, now provides: “A costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement.”
Funding costs were not recoverable as costs of litigation before or after Hunt v RM Douglas (Roofing) Ltd in the Court of Appeal, and the only exception was between 2000 and 2013, when the original section 58A(6) permitted success fees to be recovered (at [25]). The court said that allowing success fees to be recovered as costs “may have meant in practice that claimants in CFA-funded litigation had no routine need to seek pre-judgment interest on their costs for that 13-year period” (at [26]); the position was different after 2013 (at [27]).
The scope of the power
Citing Sharp LJ in Jones v Secretary of State for Energy and Climate Change [2014] EWCA Civ 363, the court said the discretion “is at large” and its purpose “is to compensate a party who has been deprived of the use of his money, or who has had to borrow money to pay for his legal costs” (at [34]).
Such an award “is not an exceptional or unusual step for the court to take” (at [36]), and “There is, however, nothing in the wording of CPR Part 44.2(6)(g) or elsewhere to suggest that such interest can only be awarded if the receiving party has actually expended money on costs or has borrowed money to pay such costs” (at [36]).
Endorsing Akenhead J in Fosse Motor Engineers Ltd v Conde Nast, the Master of the Rolls said an application “should not normally entail a minute examination of the funding mechanism” (at [37]). He concluded that the power “provides a broad discretion to compensate for the loss of the time value of money”, for the purpose of compensating the receiving party “either for having been kept out of its money or for itself being liable to compensate someone else (whether the solicitors providing the legal services themselves, an insurer or a third-party funder) for the fact that legal services have been provided on credit” (at [38]).
Hirachand distinguished
In Hirachand, the Supreme Court held that a success fee could not be recovered as part of an award under the Inheritance (Provision for Family and Dependants) Act 1975, and that such an order was a prohibited “costs order” under section 58A(6) (at [40] to [43]). The Court of Appeal said that Hirachand “actually had nothing to say about the scope of the power in CPR Part 44.2(6)(g), nor about its interaction with section 58A(6)” (at [45]).
The court held that the irrecoverability of success fees and funding costs “does not mean that an order for pre-judgment interest on costs under CPR Part 44.2(6)(g) is prohibited just because a receiving party has agreed to pay a success fee” (at [46]). Such a rule “would be unjust to funded parties in a large number of situations” (at [46]). It added: “The award of pre-judgment interest is compensatory, but it does not amount to the award of the success fee itself, nor is it awarded for the purpose of paying that fee” (at [46]).
The court found support for that distinction, while noting that it was “in no sense binding”, in the reasoning of Master Brown in Nosworthy v Royal Bournemouth & Christchurch NHS Foundation Trust [2020] EWHC B19 (costs) (at [48] to [49]), and in the fact that the concern behind Lord Justice Jackson’s reforms did not arise: “The availability or otherwise of an order for pre-judgment interest on costs will have had no influence on the amount of that success fee” (at [50]).
The contingent liability “is merely a trigger to enable interest to be claimed” (at [51]). The amount “is based on what funding the costs would reasonably have cost the class of persons of which the claimants form part, as opposed to the value of the success fee itself” (at [51]).
BHP made no oral submissions on its second ground, and the court held the judge “was entirely right to exercise the discretion” in the claimants’ favour (at [53]).