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Costs judge issues strong proportionality warning over need to plan cases

Cutting costs: ATE premium slashed

A costs judge has emphasised the need for solicitors to plan their litigation so as to ensure that their costs are proportionate, after slashing a £72,000 bill for a low-value clinical negligence case by two-thirds.

Master Simons also added to the confusion over whether additional liabilities should be included when undertaking the proportionality test by coming down on the side of those judges who say they should be.

Rezek-Clarke v Moorfields Eye Hospital NHS Foundation Trust [2017] EWHC B5 (Costs) [1] was brought as a result of the defendant’s failure to refer the claimant for imaging; it was alleged that, had the defendant done so, a pituitary tumour would have been found nine months earlier than was the case.

It was a case where the claimant’s solicitors, Thompsons, recognised that damages would not exceed £5,000, said Master Simons, and it settled for £3,250.

The claimant sought costs of £72,320, which on provisional assessment the master reduced to £24,604; in particular, he slashed the DAS after-the-event (ATE) insurance premium from £31,976 to £2,120, and four of the fees for medical reports totalling £18,036 including VAT to £7,500 plus VAT.

The claimant requested an oral hearing, in which the master made some minor adjustments, and then in his ruling considered in detail the issues of proportionality and the ATE premium.

Master Simons cited the Court of Appeal in Jefferson v National Freight Carriers Plc [2001] EWCA Civ 2082, which in turn had quoted with approval the judgment of HH Judge Alton in Birmingham County Court in an unnamed case the year before.

Judge Alton said: “In modern litigation, with the emphasis on proportionality, it is necessary for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which will be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost.

“While it is not unusual for costs to exceed the amount in issue, it is, in the context of modern litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.”

Master Simons said: “That statement by Judge Alton, although made some years ago, is even more relevant today as the rules regarding proportionality are now much more onerous.

“I looked through the solicitor’s file, both at the provisional assessment and prior to the hearing today, and I could see no evidence of any planning in the manner described by HH Judge Alton. The claim was always going to be low value.”

He said the claimant had been unable to produce any evidence of any planning or any consideration of the costs to be incurred in conducting the claim, and that the approach did not change even as reviews indicated that previous damages expectations were optimistic.

“Notwithstanding the solicitors’ knowledge of the low value of the claim, they proceeded to instruct expensive medical experts to prepare reports the costs of which totalled almost £20,000.

“The costs of some of those reports were reduced by me on the grounds that their cost was disproportionate. Furthermore, I remained to be convinced as to whether or not some of the reports were indeed necessary as significant fees were being claimed by the medical experts for preparing addendum reports and for amending their reports.”

He was also critical of the failure to consider whether this was the most appropriate ATE policy given the impact of the number of experts on the premium.

“Whilst it may well be that this type of policy is appropriate for many of Thompsons’ cases, it cannot be the case that it is suitable for every case. Thompsons would have been aware that there are many other insurance products on the market that may have been more appropriate to this particular low value case, but no attempt was made by them to investigate this.”

He acknowledged that it was necessary for costs to be incurred to enable an investigation to be carried out. But Master Simons said that “to be recoverable from the paying party, the costs must be proportionate whether or not they were reasonably or necessarily incurred”.

He concluded: “Costs of £72,320.85 for a low-value medical negligence claim are disproportionate. They do not bear any reasonable relationship to the sums in issue in the proceedings. The litigation was not particularly complex, no additional work was generated by the conduct of the paying party and there were no wider factors involved in the proceedings such as reputation or public importance.”

The only reason proceedings were issued, he said, was because the solicitors were concerned about limitation, adding: “The fact that there were a number of medical experts instructed does not make a case complex.”

He also rejected the submission that, in considering proportionality, he should look at profit costs without additional liabilities.

“That may well have been the case prior to the 1 April 2013 but in my judgment the position is now different. Costs must include those costs that are claimed in the bill of costs that are presented to the court.

“CPR 44.3(2) does not make any distinction between profit costs, disbursements or additional liabilities. In my judgment this means that any item contained in a bill of costs may be disallowed or reduced on the ground that it is disproportionate even if it was reasonably or necessarily incurred.”