- The 14 Claimants
in this case are receiving costs from the Defendants pursuant to notices of
acceptance of sums paid into court under Civil Procedure Rule 36 ("CPR") on 5
and 20 July 2001 and to an order made by Deputy District Judge Smythe sitting
at Sheffield County Court on 26 July 2001. The learned Deputy District Judge's
Order provided for payment by the Defendant of the Claimants' reasonable costs
of the action to be subject to a detailed assessment if not agreed.
- By Order of
District Judge Peters, dated 12 June 2002, the detailed assessment was
transferred to the Supreme Court Costs Office and the Claimants' bill in the
sum of £166,387.95 was assigned to me. On 1 August 2002 I gave directions at a
telephone hearing at which the parties agreed that the following matters would
be dealt with as preliminary issues:
- the indemnity
principle;
- hourly
rates;
- proportionality (including conduct);
- mail
merge;
- circular and
generic letters.
- The preliminary
issues were listed for hearing before me on 9 October 2002 when Mr Bacon of
counsel appeared for the Claimants and Mr Kimbell of counsel represented the
Defendants.
- During the
hearing, the preliminary points were resolved as follows:
- Indemnity
principle no infringement but the Defendant to have until 11 October 2002
to decide whether it wished to put the Claimants to their election under
Costs Practice Direction 40.14.
- Hourly expense
rates to be dealt with on paper.
- Proportionality judgment reserved.
- Mail merge
not pursued.
- Circular and
generic letters not pursued.
- This judgment
addresses the issue of proportionality having heard oral submissions and
hourly expense rates based upon the written submissions.
FACTS
- The 14 Claimants
are holiday makers who, between 10 May and 24 May 1995 spent 14 days at
Tygutreis in Turkey on a holiday provided by the tour operator Defendant. On
the evening of 24 May the Claimants were travelling by coach provided by the
Defendant from their resort to Dalaman Airport from where they were to catch
their return flight. At about 9 pm the coach collided with a taxi, as a result
of which the taxi driver was killed and each of the Claimants was injured.
- On 22 May 1998
the Claimants, represented by the Sheffield office of Irwin Mitchell
solicitors, issued proceedings against the Defendant in which they sought
damages for their injuries and consequential losses. The claim pleaded that
the coach driver provided by the Defendant was responsible for the accident,
whereas in its defence the Defendant averred that the taxi driver had caused
the collision.
- On 15 May 2000
the issue of liability was tried by Mr Recorder Henry Prosser sitting in the
Sheffield County Court. The Learned Recorder found that the coach driver was
negligent in failing to apply the brakes to his coach and on 25 May 2000
ordered that judgment be entered for the Claimants on the issue of liability.
- On 23 March 2001
District Judge Peters ordered that the assessment of the quantum of damages
and the issue of causation be listed for a trial window during the period 1
June 2001 to 31 July 2001, each individual claim to be heard consecutively
with a time estimate of 2 hours each, total time estimate five days before a
Circuit Judge.
- In June 2001
offers of settlement were made by the Defendant under Part 36 which were
accepted by those Claimants who were not publicly funded. Increased offers
were made to the publicly assisted Claimants which were accepted on terms
reflected in the Order of Deputy District Judge Smyth dated 26 July
2001.
- As a result of
the Part 36 Acceptances and Order of 26 July 2001 the Claimants recovered the
following sums:
|
Claimant |
Total damages recovered |
|
Gertrude Clyde |
£500 |
|
Kenneth Clyde |
£4,250 |
|
T. E. Greenwood |
£3,750 |
|
D. Harrison |
£4,330 |
|
J. Harrison |
£6,000 |
|
K. McCarthy |
£2,500 |
|
M. McCarthy |
£8,000 |
|
V. McCarthy |
£2,905 |
|
I. Pinder |
£6,000 |
|
M. Pinder |
£5,208 |
|
P. Randle |
£2,000 |
|
M. Stringden |
£4,782 |
|
J. Wales |
£5,284 |
|
D. Wales |
£7,500 |
|
Total |
£63,009 |
- The net result
is that the Claimants have incurred a liability to Irwin Mitchell for profit
costs, disbursements and VAT of not less than £166,687.95 in order to recover
£63,009, an average recovery of £4,500 each.
- On 6 November
2001 the Claimants commenced proceedings for detailed assessment by serving
notice in Form N252 on the Defendant together with their bill in respect of
which £83,050.39 was for generic work and the balance of £83,787.56 was for
the 14 individual claims.
- On 7 January
2002 the Defendants served Points of Dispute. Paragraph 4 said this:
"Proportionality
The
Defendants note that as yet this matter has not been compromised and therefore
contend that this generic bill of costs and the individual bills of costs are
wholly disproportionate to the issues and the matters involved. All of the
bills in this matter amount to sums in excess of £166,000 of which this
generic bill equates to approximately half.
Taking into account that there were 14 claimants in this matter this
means that the claimants' solicitors have thus far incurred costs in the
action of almost £12,000 per claimant. The defendants strongly contend that
since this matter is as yet to be completed the costs incurred thus far are
wholly disproportionate. Further the defendants would contend that group
actions are consolidated in order to minimise costs and would further contend
that this is clearly not the case in this matter ..."
- In Points of
Reply, dated 28 February 2002, the Claimants said this:
"We
will refer the court to CPR Part 44.5 Section 11.1 where it confirms that "the
relationship between the total costs incurred and the financial value of the
claim may not be a reliable guide" and 11.2 which states that "in any
proceedings there will be costs which will inevitably be incurred and which
are necessary for the successful conduct of the case".
In
applying the test of proportionality the court will have regard to CPR rule
1.1(2)(c) and Part 44.5(3).
We
will refer the court to the factors contained in CPR Part 44.5(3) and will
submit that the work undertaken was inevitable in order for the action to be
successful."
LAW
- The Claimants'
costs are payable by the Defendant on the standard basis. CPR 44.4.2
provides:
"Where the amount of costs is to be assessed on the standard basis the
court will:
(a)
only allow costs which are proportionate to matters in issue; and
(b)
resolve any doubt which it may have as to whether the costs were reasonably
incurred or reasonable and proportionate in amount in favour of the paying
party (factors which the court may take into account are set out in rule
44.5)."
- Rule 44.5 is in
these terms:
"(1) The court is to have regard to all the circumstances in deciding
whether the costs were
(a)
if it is assessing the costs on the standard basis:
(i)
proportionately and reasonably incurred; or
(ii) were proportionate and reasonable in amount.
(3)
The court must also have regard to
(a)
the conduct of all the parties including in particular:
(i)
conduct before, as well as during, the proceedings; and
(ii) the efforts made, if any, before and during the proceedings in
order to try and resolve the dispute;
(b)
the amount or value of any money or property involved;
(c)
the importance of the matter to all the parties;
(d)
the particular complexity of the matter or the difficulty or novelty of the
questions raised;
(e)
the skill, effort, specialised knowledge and responsibility involved;
(f)
the time spent on the case;
(g)
the place where and the circumstances in which the work or any part of it was
done."
- The Costs
Practice Direction rule 44.5 Section 11 says this:
"11.1 In applying the test of proportionality the court will have
regard to rule 1.1.2(c). The relationship between the total of the costs
incurred and the financial value of the claim may not be a reliable guide. A
fixed percentage cannot be applied in all cases to the value of the claim in
order to ascertain whether or not the costs are proportionate.
11.2 In any proceedings there will be costs which will inevitably be
incurred which are necessary for the conduct of the case. Solicitors are not
required to conduct litigation at rates which are uneconomic. Thus in a modest
claim the proportion of costs is likely to be higher than in a large claim and
may even equal or possibly exceed the amount in dispute."
- The reference in
Section 11 CPD to rule 1.1(2)(c) is to the Overriding Objective set out in
that rule which provides:
"(1) These rules are a new procedural code with the overriding
objective of enabling the court to deal with cases justly.
(2)
Dealing with a case justly includes, so far as practicable
(c)
dealing with the case in ways which are proportionate;
(i)
to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issue; and
(iv) to the financial position of each party."
- Proportionality
did not have an equivalent in the CPR's predecessor, the Rules of the Supreme
Court ("RSC") and it is not relevant if the costs are to be assessed on the
indemnity basis as defined in CPR 44.4.3.
- The approach
required by the CPR to ensure costs are proportionate was explained by the
Court of Appeal in Home Office v Lownds [2002] EWCA Civ 365. A
preliminary judgment as to the proportionality of the costs as a whole must be
made at the outset (see paragraph 35 of Lownds). This is in two stages,
first a global approach having regard to all the circumstances to see whether
the total sum claimed is or appears to be disproportionate having regard to
the considerations which CPR 44.5.3 state are relevant; second an item by item
approach applying the dual test of (a) necessity; and (b) reasonableness if
the total costs are disproportionate and normally the single test of
reasonableness, if they are not disproportionate, (see Lownds,
especially paragraphs, 8, 10, 21, 29, 31 and 39).
- In paragraph 36
of Lownds the Lord Chief Justice also said this:
"Based on their experience Costs Judges will be well equipped to assess
which approach a particular case requires. In a case where proportionality is
likely to be an issue a preliminary judgment as to the proportionality of the
costs as a whole must be made at the outset. This will ensure that the Costs
Judge applies the correct approach to the detailed assessment ....Once a
decision is reached as to the proportionality of the costs as a whole the
Judge will be able to proceed to consider the costs item by item applying the
appropriate test to each."
- It follows that
in carrying out this detailed assessment I shall apply the single test of
reasonableness unless the Defendant's point of dispute about proportionality
is successful, in which case the costs will be subjected to the double test of
reasonableness and necessity. Since the threshold required to meet necessity
is higher than that of reasonableness (see paragraph 37 of Lownds) it
is important for both sides to know in advance of the detailed assessment
which test is to apply. A global finding in favour of the Claimants will make
it easier for them to justify their costs; one in favour of the Defendant will
make it harder.
- In paragraph 39
the Court of Appeal set out the approach which should be followed where, as
here, the claimants have recovered significantly less than they have
claimed:
"(1) The proportionality of the costs incurred by the claimants should
be determined having regard to the sum that it was reasonable for him to
believe that he might recover at the time he made his claim.
(2)
The proportionality of the costs incurred by the defendant should be
determined having regard to the sum that it was reasonable for him to believe
that the claimant might recover should his claim succeed.
The
rationale for this approach is that the claimant should be allowed to incur
the cost necessary to pursue a reasonable claim but not allowed to recover
costs increased or incurred by putting forward an exaggerated claim
..."
- Proportionality
is not relevant to any costs claimed in bills prior to the introduction of the
CPR on 26 April 1999. This is because the transitional provisions in rule 51
CPD 18 apply:
"... the general presumption is that no costs for work undertaken
before 26 April 1999 will be disallowed if those costs would have been allowed
in a costs taxation before 26 April 1999."
It
follows that only those costs incurred after 26 April 1999 are susceptible to
the Defendant's challenge in its points of dispute.
THE PARTIES'
SUBMISSIONS
- In his skeleton
argument Mr Bacon has carefully calculated what percentage of the total costs
of £166,687.94 were incurred before the introduction of the CPR. I do not know
whether this is an agreed figure but broadly speaking two thirds of the
individual costs are attributable to work before 26 April 1999 and one third
after that date. For the generic costs the split is one third pre CPR and two
thirds post. It follows that on Mr Bacon's figures approximately 50% of the
total costs were incurred pre CPR and 50% post CPR. Thus, even if I was to
find in favour of the Defendant, the double test of necessity and
reasonableness could apply only to the £83,300 or so of costs incurred after
26 April 1999 given the effect of the transitional provisions in rule
51.
- Mr Bacon
contends, however, that that analysis is over simplistic. In his view the
£83,300 or so incurred before 26 April 1999 must be ignored in its
entirety.
- The argument is
this; in implementing the global approach to costs claimed in litigation which
straddle the introduction of CPR, the court must take into account only those
costs incurred after 26 April 1999. The court must ignore all pre CPR costs
since they were incurred when there was no requirement under the RSC for such
costs to be proportionate. Amalgamating costs which do not need to be
proportionate with those that do would be to penalise solicitors by applying
hindsight and rules which were not in existence when the costs were incurred.
In other words, to say "I'll take into account all pre CPR costs to see if the
post CPR costs are proportionate" is wrong. This can be illustrated by the
following example:
Suppose the
Claimant recovers £10,000
Post CPR costs are £2,000
Pre
CPR costs are £15,000
Total costs are £17,000
- If the global
test is applied to the total costs, the Court would be applying
proportionality to £2,000 of costs incurred under the CPR as a result of its
views about work done pre CPR when proportionality under the RSC was
irrelevant. If, on the other hand, the global approach is applied only to the
£2,000, as Mr Bacon contends it should be, then those costs would not be
disproportionate to the amount recovered by the Claimant in this example.
- That the court
cannot take into account costs incurred pre CPR in determining whether costs
incurred post CPR are disproportionate is plain from the judgment in
Lownds. In paragraph 2 Lord Woolf CJ said this:
"Proportionality played no part in the taxation of costs under the
Rules of the Supreme Court."
- This means, in
Mr Bacon's submission, that the court cannot not say: "your costs are
disproportionate before 26 April, therefore I can apply the necessity test to
costs incurred after 26 April". On the contrary, paragraph 8 of the Lord Chief
Justice's judgment sets out what is to happen in the future. That the Court of
Appeal was not willing to take into account work done pre CPR in deciding
whether post CPR costs were proportionate is clear from paragraph 21 of the
judgment which says this:
"If, however, the entire costs had related to expenditure which
occurred after 26 April 1999 we would have taken a significantly different
view."
- By ignoring the
pre CPR work, in accordance with the transitional provisions, the court was
not persuaded that the post CPR work was disproportionate and accordingly the
appeal was dismissed.
- In short, says
Mr Bacon, the approach which the court should adopt is to ignore all the work
done pre 26 April 1999 in deciding whether the test of necessity as well as
reasonableness should be applied to work done post 26 April 1999.
- For the
Defendant, Mr Kimbell contended that in deciding whether the post CPR costs
were disproportionate, the court needs to look at the total costs
incurred pre and post 26 April 1999. The reason for this is that the CPR
applies to all detailed assessments commenced on or after 26 April 1999
regardless of when the costs were incurred. What did not happen upon the
implementation of the new rules was the introduction of a provision which
said: "apply the old rules to pre 26 April 1999 expenditure and apply the CPR
to expenditure post 26 April 1999". Instead, the CPR is expressly applied to
all assessments taking place after 26 April 1999 regardless of when the
expenditure was incurred, subject only to a general presumption that no costs
will be disallowed for work undertaken prior to 26 April 1999 if they would
have been allowed in a costs taxation before 26 April 1999 (CPR 51 paragraph
18 ante).
- The effect of
this is that the Court cannot forget everything that was done before 26 April
1999. On the contrary, the Court needs to look at the whole picture but in
doing so, the Court cannot penalise solicitors for undertaking work
disproportionately before 26 April 1999 because of the operation of the
general presumption in CPR 51 paragraph 18. The transitional provisions mean
that such solicitors do not lose out and any unfairness is thereby prevented.
- So far as
Lownds is concerned, Mr Kimbell did not accept that the appeal was
dismissed because most of the costs had been incurred pre 26 April 1999 and
the Court of Appeal did not take them into account. The appeal failed because
the bill had already been assessed item by item by the District Judge. This
was plain from paragraph 42 of the judgment which said this:
"Because of the effect of the transitional provisions and because we do
not consider that the guidance we have provided should be applied
retrospectively to cases in which costs have already been assessed we dismiss
this appeal."
DECISION
- Two detailed
assessments (Giambrone v JMC Holidays and Balch v Airtours)
involving Irwin Mitchell acting on behalf of disappointed holiday makers have
previously been assigned to me for detailed assessment. The issue of
proportionality was raised in both cases; in Giambrone the judgment is
under appeal; in Balch the costs were settled after argument but before
the judgment was delivered. In neither case was it clear to me that the point
now taken by Mr Bacon about whether pre CPR costs are relevant, was raised.
What I understood to be in dispute between the parties was whether the costs
to which the global approach was to be applied were the total costs
claimed in the bill as delivered, or to the lesser sum which was in issue at
the commencement of the detailed assessment, following concessions made by the
receiving party. I make this point in case any misunderstanding has arisen;
for my part I am satisfied that no ruling was sought on the issue upon which
Mr Bacon has now requested me to adjudicate and none was given.
- Having
considered the parties' submissions and the material before me I am satisfied
that the court must look at the total costs, both pre and post CPR, in
carrying out the global approach. If the Court only looked at post CPR work
and was kept in ignorance of expenditure incurred before 26 April 1999, in my
view it would be impossible to reach a considered judgment as to whether the
CPR expenditure was reasonable and proportionate.
- Mr Bacon's
approach necessarily means that you ignore all work done on the case before 26
April 1999 so that, in effect, the solicitors start with a clean sheet from
that date. I am not persuaded that that argument is correct. In the present
case, the pre CPR period was necessarily front loaded with investigative work.
In my view, when applying the global approach the court cannot pretend nothing
was done to advance the claim before 26 April 1999 happened. On the contrary,
to decide whether the post 26 April 1999 work was proportionate, the Court
needs to know what work was done on the claim before that date but in
assessing the costs for the former period, the Court applies the transitional
provisions to ensure that the solicitors do not lose out through the rule
change.
- Suppose a claim
is settled for £2,000 and all the court is told is that the post CPR costs are
£3,000. I surmise that in such a case it is unlikely any issue about
proportionality would arise on account of Section 11.2 CPD. If, however, the
court finds out that a further £7,000 was spent pre CPR, the position is
likely to be very different. To make any sense of whether the work done post
CPR was proportionate, in my opinion the court must know what the solicitors
were doing pre CPR and I am not persuaded that the guillotine drops in the way
contended for by Mr Bacon. In carrying out the detailed assessment I consider
the Court cannot judge whether, for example, the time spent with counsel after
26 April 1999 was proportionate without at least knowing how many conferences
had been held and the number of advices that had been given before that date.
In my view Mr Kimbell is right when he says that in applying the global
approach you look at everything, but to protect solicitors who were working
under the old rules from being penalised, you apply the transitional
provisions to any pre CPR work susceptible to disallowance by reason of
proportionality.
- I have also
reached a different view to Mr Bacon about whether the Court of Appeal in
Lownds was looking just at the post CPR costs. It seems to me that the
costs which the District Judge was being asked to stand back and consider were
the total costs claimed of £19,405.38 (referred to as £17,000 in his judgment)
and not just the £6,987.50 incurred post CPR, hence the reference in paragraph
18 of Lownds that it would be possible for the court to "take a gobal
view of the costs". The care with which the District Judge approached this
question was noted by the Court of Appeal (see paragraph 18). In paragraph 22
Woolf CJ went on to say this:
"Although we recognise that clinical negligence cases are usually
complex we do not consider that on any approach the amount of costs [my
emphasis] assessed in this case can be regarded as proportionate. They are
not."
- To my mind "the
amount of costs" means the total. The court did not say "the amount of costs
assessed post CPR". On the contrary, the court meant the total costs assessed
of £16,784.53. This is supportive of Mr Kimbell's view that in taking a global
approach you look at the total costs and then apply the transitional
provisions to those incurred pre CPR so that the solicitors are not penalised.
- A further point
is this. Mr Bacon relies upon the Defendant's conduct during the litigation in
justifying the level of costs (see skeleton argument paragraph 57 et seq). He
says the Defendant was relentless and had liability and causation been
admitted earlier, as it should have been, the costs per claim would
undoubtedly have been less (see skeleton argument paragraphs 59 and 63). In my
view it is inconsistent for Mr Bacon to argue, on the one hand, that the
Defendant's conduct pre CPR should be taken into account in justifying the
reasonableness of his clients' costs, but on the other to urge upon me that I
should ignore all costs incurred pre CPR when implementing the global
approach.
- For these
reasons, I am satisfied that in making its preliminary judgment the Court must
look at the total costs incurred both pre and post CPR.
THE GUIDELINES
UNDER CPR 44.5
- So far as the
factors to which the court must have regard under CPR 44.5(3) are concerned,
the parties competing submissions were these.
- Conduct;
for the Claimants, it was accepted that this was not a case where it could
be said that the Defendant "misconducted" itself, but the court was asked to
take into account the manner in which the Defendant chose to run the action. A
substantial proportion of the costs were incurred because the Defendant did
not admit liability or causation. Had such an admission been made early on,
the costs would undoubtedly have been less than the figure claimed.
Accordingly, it ill behove the Defendant now to complain, having forced the
Claimants to incur the costs proving those issues, that the costs were
disproportionate to the sums recovered.
- For the
Defendant, Mr Kimbell did not accept that conduct played any significant role
in this case. He submitted that his clients had co-operated in bringing the
action to trial once the claims had been issued, some 3 years after the
collision. It was accepted that it was reasonable for Claimants, who were
predominately Merseyside based, to have used Sheffield solicitors. Save for a
dispute about the cost of the Turkish agents, it was accepted that the experts
retained by the Claimants had been reasonably instructed.
- Value of the
claim; the Claimants contended that the costs compared favourably to the
sums recovered given that the issue of liability was bitterly fought. Moreover
the generic disbursements would have been incurred however large the case, for
example foreign lawyers fees, counsel's fees, court fees, translation fees,
expert witness reports (joint instructions) and so on. For the post CPR
period, the total costs per claim averaged out at about £5,000. These were
"modest" claims of the sort envisaged by Section 11.2 Costs Practice Direction
which permits costs to exceed damages in such cases. This had happened
here.
- For the
Defendant, Mr Kimbell was dismissive of the Claimants' case. He pointed out
that in the County Court summons, Irwin Mitchell had stated that "the damages
of this action will exceed £100,000". In fact all the claims were settled for
£63,009. Accordingly, in May 1998 when the claims were issued, it was not
reasonable for Irwin Mitchell to believe that their clients could recover more
than £100,000 or anything approaching such a figure. By then all medical
reports had been obtained and witness statements prepared. Any competent
junior barrister or solicitor ought to have been able to produce a ballpark
figure. In respect of general damages, the injuries suffered were classic road
traffic accident injuries such as moderate whiplash, bruising, bumps, cuts and
grazes leading to aches and pains. The maximum those claims could be worth was
around £3,000 to £4,000 (with the exception of Mary McCarthy and Derek Wales).
The claims therefore should have been estimated to be in the region of
£50,000.
- As for special
damages, it ought to have been abundantly clear to the Claimants' legal
advisers at the outset that the level of recovery was going to be very low.
The majority of the Claimants were retired and on pensions and only three were
younger than 55. In these circumstances any loss of earnings claims were
likely to be minimal. The only Claimant who had a requirement for continuing
care was Mary McCarthy. These were 14 Claimants with modest claims; when the
CPR came into effect Irwin Mitchell should have planned henceforth how the
litigation was to be managed. Their failure to do so had resulted in the costs
being nearly three times the objective values of the claims. On any view that
was disproportionate.
- Complexity/novelty; for the Claimants it was contended that this
case was exceptional (see skeleton argument paragraph 43). It was plainly
distinguishable from a "run of the mill" personal injury claim. The accident
had taken place in Turkey which created its own linguistic problems; documents
needed to be translated and Turkish agents instructed. Causation and liability
were in dispute. The Defendant's case was that the taxi driver was entirely to
blame. To establish who, in fact, was the tortfeasor, it was necessary to
investigate the criminal proceedings which had taken place in Turkey leading
to the conviction of the coach driver. Unusually for "modest" litigation of
this type, there was a split trial. Through their endeavours, Irwin Mitchell
had persuaded the Judge that the coach driver was not blameless (as contended
for by the Defendants) but was negligent. To prove this, eight different
experts were instructed in the proceedings and even after the trial on
liability, the Defendant put the Claimants to proof as regards causation and
their losses. Irwin Mitchell demonstrated expertise in persevering with the
claim against the coach driver in circumstances where a local solicitor would
probably have said "you'll have to sue the taxi driver in Turkey and he is
unlikely to be insured".
- For the
Defendant, Mr Kimbell contended the assertion that the proceedings represented
a novel and complex action was almost comical. This was a low value RTA case
in which the issue of liability was simple did the coach driver drive
negligently and thereby cause or materially contribute to the collision? The
degree of factual evidence was extremely limited; only two passengers could
recount what had happened and there was no issue between the parties as to
whether the Claimants had contributed to the accident. The Turkish material
gathered by Irwin Mitchell did not assist the court and the appointment of
Turkish agents was unnecessary. The Claimants also had the advantage of
Regulation 15(2) of the Package Travel Regulations. Once they had established
that there had been an improper performance of the contract of carriage, full
liability would follow unless the Defendant could discharge the onerous burden
of proving that the collision occurred due to unusual or unforeseeable
circumstances.
- The
importance of the matter to the parties; Mr Bacon submitted that the
case was of considerable importance to his clients. Fortunately the injuries
were not severe, but that did not reduce the importance of the case to the
individuals concerned who had been involved in a very distressing incident.
- For the
Defendants, Mr Kimbell pointed out that the Claimants were nearly all retired
and the collision did not bring any career to an end. The accident occurred at
the conclusion of an otherwise enjoyable holiday and the claims did not raise
issues of general importance.
- Skill,
effort, specialised knowledge and responsibility involved; for the
Claimants, Mr Bacon emphasised the minimal reliance on counsel and the
considerable efforts, skill and knowledge applied to the individual cases
which resulted in the successful outcome.
- For the
Defendant, Mr Kimbell submitted the issues were straightforward and there
should have been minimal partner input. Over the course of the litigation
Irwin Mitchell had employed three partners, four fully qualified solicitors,
two trainees and one paralegal. This presented a prima facie case of over
manning.
- Time
spent on the case; Mr Bacon produced a table showing how fee earners
had been deployed. There had been no over manning; over time, the fees earners
were changed through promotion, etc, but at any material point, the case was
being run by a supervising partner, a solicitor and trainee. It was impossible
to suggest that such deployment of personnel could be anything other than
reasonable and proportionate.
- Mr Kimbell was
particularly critical of time spent on the case. There were no special
difficulties in this matter; the Claimants were all in England and nearly all
retired; this was not a multi party group action, requiring multi level
co-ordination meetings. There were only 14 Claimants. Excessive solicitor
hours were spent on documents, for example in the generic bill between May
2000 and July 2001 there is a claim for 63 hours, the cost of which exceeded
£10,000 alone. There are many references to "considering and discussing the
claims" or "reviewing the files" which are duplicated between the generic and
individual bills. In a case involving only 14 Claimants, inter departmental
discussions and reviews were an unnecessary luxury.
- The place
where and the circumstances in which the work or any part of it was done;
it appeared to be common ground, that this factor did not play a
significant role one way or the other with regard to the question of
proportionality.
DECISION
- In making a
preliminary judgment at the outset as to the proportionality of the costs as a
whole, I have reached my conclusions not only having heard the competing
submissions by counsel for both sides, but also having read the bundles of
pleadings, witness statements, expert evidence, retainer documentation, the
original correspondence files, the bills, points of dispute and replies and
the skeleton arguments lodged with the court. Having done so, I have concluded
that the 14 claims were nothing like as complex or difficult as Mr Bacon has
been instructed to argue. In reality, these were 14 road accident cases tried
in the County Court by a Recorder. At no stage could the expectations of the
individual Claimants reasonably have exceeded the limit of £15,000 for fast
track claims. This ought to have been evident at an early stage on account
of:
(a)
the nature of the injuries bruising, shock and whiplash;
(b)
the age of the Claimants, the bulk of whom were retired.
- The only factors
influential in distinguishing this action from a "run of the mill" RTA claim
are the dispute about the identity of the tortfeasor and the fact that the
accident occurred in Turkey. Both added modestly to the complexity but
disregarding these factors, the other matters to which I must have regard
under Rule 44.5 do not favour the receiving party. On the contrary, the view I
have reached is that the Defendant's conduct in contending that the taxi
driver was at fault was fully justified (given, for example, the evidence of
Mr Frank Ogden (another passenger) that the driver had a "death wish"). In my
view, too, the importance to the Claimants would have been limited given their
age and the nature of their injuries. As for the amounts involved, it is
common ground that these were modest claims, akin to those in Lownds.
It would have been clear to the solicitors at the outset that the special
damage claims would be small and that the general damages would be under
£5,000 each. So far as the time spent on the case is concerned, it is
something of a surprise to be told the extent of the hours spent on the
documents item, undertaking such tasks as "inter-departmental discussions",
"reviewing recent progress", "agreeing action plans", "considering the files,
etc". To my mind, the time involved in such tasks is excessive and the
examples I have taken are simply illustrative. I have no doubt there are many
others. All these matters are persuasive in leading me to conclude that the
costs claimed are or appear to be disproportionate.
- A further factor
is this: in group litigation the purpose of having one firm acting for the
Claimants is to avoid having numerous solicitors looking up the law. Yet the
impression I have in the present case is that the economies of scale which
ought to have been achieved have not been reflected in the number of hours
claimed in the bills. On the contrary, the costs involved in the tasks to
which I have referred have contributed to the overall costs becoming
disproportionate to the amounts at stake and at variance with the guidance
given by Sir Christopher Staughton in Griffiths v Solutia (CA
26.4.01).
- Even if Mr Bacon
is right in his submissions that I should disregard the pre CPR costs, I
consider spending £83,500 in post CPR costs to recover damages of £63,000, is
or appears to be, disproportionate. If however, he is mistaken and I am
correct that the pre CPR costs are to be included, then, a fortiori, the costs
are disproportionate to the amounts at stake. It follows that in my judgment
the costs claimed in the bills appear as a whole to be disproportionate and
the detailed assessment of the post CPR costs will be subject to the dual test
of reasonableness and necessity.
HOURLY EXPENSE
RATES
- In their bills
Irwin Mitchell have averaged their hourly expense rates over the period during
which the litigation was undertaken from April 1996 until August 2001. In both
the generic and individual bills the rates are £160 per hour for partners and
£120 per hour for other fee earners. Mr Bacon told me that these rates are
"global" and thus include a notional uplift.
- In their Points
of Dispute at paragraph 10 Badhams said this:
"The Defendant contends that the hourly rates utilised by Messrs Irwin
Mitchell are excessive. The Defendant refers to the hourly rates allowed by
the Sheffield County Court and would be prepared to offer the following:
1996 to 25 April 1999 - £117 for all fee earners including mark
up.
26
April 1999 to 28 February 2001 - £120 for grade 1, £105 for grade 2 and £75
for all other fee earners.
1
March 2001 to conclusion - £125 for grade 1, £112 for grade 2 and £80 for all
other fee earners.
The
Defendant does not see the need for an increased uplift in this matter and
therefore makes no offer in respect of the same reserving the right to raise
further objections."
- In his skeleton
argument Mr Bacon explained how the rates had been calculated. First, the
published guideline rate for Sheffield County Court had been taken for the
years 1996 to 1999 inclusive for partners/solicitors which had given a figure
of £89.25 over the period. This was arrived at by adding the expense rates of
£78, £85, £94 and £100 together and dividing by the 4 years in question. To
that sum was then added an uplift of 80% to bring the global expense rate up
to £160 per hour.
- For other fee
earners, the average expense rate for Sheffield was £58.25. This was arrived
at by adding the expense rates of £50, £53, £65 and £65 and dividing by four.
An uplift of 105% was then applied to bring the global figure up to £120 per
hour. Whilst it was accepted that these expense rates are higher than the
published guideline rates for Sheffield County Court (from November 2002 these
were £150, £125 and £112 for respectively solicitors with 8 years post
qualification experience, solicitors with over 4 years PQE and "others" eg,
legal executives, trainees, etc), Irwin Mitchell's expense rates are higher
than the Sheffield average. In Giambrone I had allowed £120 as an
expense rate for partners when the Birmingham published guideline rate was
£102 and there had been no appeal from that decision. That approach should be
followed in the present case, and expense rates above the published figures
should be allowed.
- So far as the
notional uplift was concerned, Mr Bacon drew my attention to Johnson v Reed
Corrugated [1992] 1 AER 184 in which Evans J stated that the starting
point for assessing uplift in run of the mill cases was 50%. To justify
uplifts exceeding 100% the case needed to be exceptional (see Brush v Bower
Cotton & Bower [1993] 1 WLR 1325 and Loveday v Renton (No.2)
Costs Law Reports Core Volume 1 204). This was such a case and justified an
uplift of 80% for partners and 105% for other fee earners (see skeleton
argument paragraph 43).
- Mr Kimbell
disagreed with this submission. In his view the case did not qualify as one of
the "small and exceptional class of cases" referred to in Johnson where
uplift could exceed 70%. The fact that the collision occurred abroad rather
than in Sheffield might justify a mark-up of 55% rather than the standard 50%
but nothing more.
- As to the basic
rates, higher than average rates for the court in question are only
appropriate if the litigation is clearly outside the range of work which can
be handled by other local solicitors. It was plain from Jones v Secretary
of State for Wales [1997] 1 WLR 1008 that if a solicitor wished to
challenge what may have become the going rate in any area in order to make a
special case he would need to produce evidence. None was before the court and
in reality this was a claim which could have been handled by any Sheffield
firm offering personal injury litigation services. Accordingly, the guideline
rate for Sheffield should apply as offered in the Points of Dispute.
DECISION ON
RATES
- In reaching my
decision, I am mindful that the work straddled the introduction of the Civil
Procedure Rules. Prior to 26 April 1999 solicitors calculated their rates on
the basis of an "A" factor, that is to say the hourly expense rate or cost
rate and then added a "B" factor to reflect care and conduct, that is to say
an uplift to take into account the factors set out in Part II of Appendix 2 of
RSC Order 62 now replaced by CPR 44.5. Following the introduction of the CPR
it has become customary to claim composite rates which cover both the "A" and
"B" factors, but it is not incorrect that Irwin Mitchell have calculated their
rates in the way that they have done, or, indeed, to have averaged them over
the years in which the work was carried out.
- The view I have
reached having considered the material before me is that the rates claimed are
too high. In the first place, I reject the submission that "what's good for
the Birmingham office is good for the Sheffield office". In Giambrone I
was persuaded to allow higher than the guideline rates because Irwin Mitchell
had followed the guidance in Jones and submitted evidence which
supported the allowance of higher rates to reflect the exceptional nature of
that case. In my view there are no such similarities here; in Giambrone
there were 652 claimants; in the present case there are just 14 and I agree
with Mr Kimbell that the litigation could have been handled by any Sheffield
firm with a personal injury department.
- So far as uplift
is concerned, I am not persuaded that the factors to which Mr Bacon has
referred me under CPR 44.5 justify an allowance in the range 80% to 105%. In
Johnson Evans J said this:
"but only a small percentage of accident cases result in an allowance
of over 70%. To justify a figure of 100% or even one approaching 100%, there
must be some factor or combination of factors which means that the case
approaches the exceptional. A figure of 100% would seem to be appropriate only
when the kind of individual case or cases of a particular kind can properly be
regarded as exceptional and such cases will be rare."
- In his judgment
in Brush, Brooke J (as he then was) referred to Johnson and at
page 1344 D to E said this:
"While not in any way wishing to differ from Evans J who has great
experience in this field, I do not consider that at this very far end of the
range much profit is to be gained by quibbling over the use of words. I
certainly accept that, as one gets higher and higher above 75%, more and more
it should be said that a case should be approaching the
exceptional."
- Prior to the
introduction of the CPR it was customary for uplift to be dealt with at the
conclusion of the detailed assessment. In the present case the parties wish me
to make a decision at the outset. As I have had the benefit of a days argument
and the opportunity to read the documentation referred to in paragraph 60
above, I am in as good a position to do so now as I would have been at the end
of the assessment. The view I have reached is that the case was not as simple
as Mr Kimbell contends; the fact that the accident took place abroad and that
there was a dispute about the identify of the tortfeasor created a degree of
difficulty sufficient to distinguish this case from the "run of the mill". I
am not persuaded, however, that the other factors in CPR 44.5 to which my
attention was drawn elevate this litigation into the class which is
"exceptional or approaching the exceptional". On the contrary, the general
damages were modest, those for special damage could scarcely have been more
straightforward, the importance to the client was limited and although the
case was handled effectively, this was certainly not a novel or test case
action. In my judgment the generous ambit within which a reasonable
disagreement about the level of uplift is possible would be in the range 60%
to 70%. Having heard the arguments, read the material before me and having
regard to CPR 44.5 I would allow 65%.
- I have further
concluded that the Defendant is correct in its submission that the expense
rate should not be averaged over the years of the litigation. If this was
permitted it would allow the pre CPR rates to be higher than is reasonable.
For work carried out by grade 1 fee earners before 26 April 1999, I would
allow £135 per hour and £145 per hour after that date. For other fee earners
the rates will be £95 and £105 per hour.
CONCLUSION
- I have found
that the Claimants' bill is or appears as a whole to be disproportionate.
Accordingly, the CPR costs will be subject to the joint test of reasonableness
and necessity.
- The parties are
at liberty to apply to me by letter within seven days of receipt of this
judgment if they wish to apply for permission to appeal, in respect of which
their time is extended by this period. They are reminded that as this is a
County Court case, any such appeal would lie to a Circuit Judge not to a High
Court Judge.
