SCCO ruling adds to confusion over application of proportionality test to additional liabilities

Rowley: transitional problem

Uncertainty around the question of whether recoverable additional liabilities are subject to the proportionality rule has grown after a split between costs judges emerged.

In King v Basildon & Thurrock University Hospitals NHS Foundation Trust, Master Rowley expressly disagreed with Senior Costs Judge Gordon-Saker’s decision in BNM v MGN, which is due to be considered by the Court of Appeal.

However, the appeal is not listed until October 2017, meaning the uncertainty will continue for some time to come.

Master Rowley said: “I respectfully disagree with [Master Gordon-Saker] as to whether the allowance of recoverable additional liabilities over and above the sum allowed for proportionate base costs is a significant hindrance to the court’s role in allowing only reasonable and proportionate costs.

“In any event, it is only a transitional problem for the great majority of additional liabilities and the remaining, discrete, areas continue by dint of the express will of Parliament.”

King was a clinical negligence case in which the claimant was awarded £35,000 plus costs after a three-day trial.

The conditional fee agreement and after-the-event insurance were incepted before 1 April 2013, but proceedings did not begin until after.

At detailed assessment, Master Rowley allowed £250,000 of the claimed £326,000 as reasonable, and then went on to consider whether the £234,000 incurred after 1 April 2013 was proportionate under the new test in CPR 44.3(5).

Base costs were £88,337, a sum Master Rowley said would “almost always” be proportionate in such a case, unless the damages were “very modest”. Here they were not, he said.

The judge said the word ‘costs’ in the proportionality test, as now defined, referred to profit costs and disbursements, but not additional liabilities.

“Given that the proportionality test in 44.3(5) only applies to work carried out since that definition of costs came into being, the obvious interpretation is that it only relates to the base costs of a CFA. It is not clear to me why additional liabilities should necessarily be caught by a test which is based on a definition recast specifically to exclude such liabilities.”

Among other reasons he cited for defining ‘costs’ as referring only to base costs was that it fitted in with the provisions of part 3 relating to costs management. For example, Precedent H expressly excludes any additional liabilities that may still be recoverable: “Consequently, the only interpretation of the recoverable costs which the costs management is controlling, is that they are base costs of a CFA as set out in the Precedent H.”

He added that if the base costs have been allowed at a proportionate figure, a success fee at a percentage agreed by the parties or allowed by the court would also be proportionate.

Had the additional liabilities been subject to the test, the judge said, it was unlikely that he would have considered £234,000 to be proportionate.

Master Rowley has granted the defendant leave to appeal within 21 days of the Court of Appeal’s ruling in BNM.

Oliver Jones, technical and advocacy manager at Just Costs, which acted for solicitors Wiseman Lee on the claimants costs, also acted in the Brian May case, again before Master Rowley, earlier this year. He said: “The main lesson to be learnt is that you are much more likely to recover what appear to be disproportionate costs if you take a matter to trial. This could lead to fewer cases settling.”

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