This blog is written by Lois Aldred, a member of 12KBW’s costs team and is the second of a two-part blogpost looking at R v Barts Health NHS Trust [2022] EWHC B3 (Costs). This blog focuses on the second central issue considered by Master Rowley: when will specialised solicitor hourly rates be recoverable?
The background to this case is set out in our previous blog, see here. In short, it involved a severely brain-damaged little girl, Tafida, and whether her treatment ought to be withdrawn and only palliative care be given.
The hourly rates claimed were subject to challenge before Master Rowley. The Claimant lived in London but had instructed Irwin Mitchell in Manchester, the paying-party took issue with this. An obvious reminder was given that it is usually a bad point to suggest that it was unreasonable to instruct solicitors in a different area, if the area is cheaper than the claimant’s locality. It was held [@ 42]:
“There can hardly ever be any criticism of a receiving party who instructs solicitors in a less expensive area of the country.”
Once Manchester was accepted the Court found that the 2021 Guideline Hourly Rates were the preferred starting point for work undertaken in 2019, rather than the 2010 Guideline Hourly Rates. No great surprises there, you might say.
The need for the exercise of specialist skill once the baton has been passed to Counsel
The more interesting and central point made by the Defendant questioned the need for the exercise of specialist skill by the solicitors if the “baton of responsibility and importance to the claimant” had been passed to Leading and Junior Counsel and if the solicitors relied heavily upon counsel’s specialised knowledge and skill to take the case forward. As such, it was argued the claimant’s solicitors did not “have to exercise any more skill, effort and specialised knowledge than that of an un-specialised solicitor.” Master Rowley reminded himself that in cases that do not require a specialist solicitor, the hourly rate will be reduced to a non-specialist firm rate or more junior solicitor rate. Nonetheless this was not apposite here. The Court held [@ 50]:
“it is hard to imagine any case involving more importance to the client or, given the need for urgent action, one which would score more heavily on the circumstances in which the work was done.”
The Defendant also argued that the claimant’s solicitors did not display their skill in this particular case, and rendered their own specialism redundant due to the choice of Counsel and the arguments run. This was resolutely rejected [@ 53]:
“It is in my view, a remarkable suggestion that a case whose own weight clearly justified using expertise to pursue it, can be downgraded in the choice of an appropriate solicitor by that solicitor’s choice of external assistance.”
Master Rowley no doubt was assisted by a perusal of the correspondence between Counsel and the Claimant’s Solicitors that lead him to the conclusion [@ 54] that:
“There is very much a team effort between solicitors and counsel”. He went on [@ 55]: “I therefore conclude that the solicitors not only had the requisite skill, effort and specialised knowledge and responsibility appropriate for this grave case but also demonstrated it in their dealings with counsel and other solicitors. There is no warrant in my view for there to be a reduction in the hourly rates claimed simply on the basis that counsel was also involved in dealing with matters.”
The hourly rates were awarded as claimed.
Practical Takeaways
Paying parties should take a realistic view as to whether the case merits a specialist firm with corresponding fees in formulating offers on costs.
In cases requiring specialism a whole team of specialist legal advisors, including Counsel may well be reasonable.
Receiving parties, be prepared for your file to come under scrutiny from the Costs Judge when determining whether the work your fee earners undertook merited any ‘specialist’ fee. The Costs Judge may not have a background in your specialism, so make it easy and show your worth.
In R v Barts Health NHS Trust [2022] EWHC B3 (Costs), as part of detailed assessment proceedings, Costs Master Rowley dealt with several preliminary issues. The two central issues were: 1) How will a court determine the recoverable costs in proceedings A against the irrecoverable costs of proceedings B when both proceed concurrently, and share some common costs? 2) When will specialised solicitor hourly rates be recoverable?
This is the first of a two-part blog and considers issue (1).
Background
A little girl, Tafida (the receiving party and claimant) was at the centre of this case. Sadly in 2019 she sustained a brain injury, thereafter she required full time paediatric intensive care. Her treating physicians at the Defendant Trust believed active treatment being withdrawn would be in Tafida’s best interests. Tafida’s family opposed this and unsuccessfully applied to the Trust to transfer Tafida to an Italian hospital for alternative treatment. The family brought a challenge by way of judicial review. The Trust concurrently brought proceedings under the Children Act 1989 for a best-interests determination.
At the conclusion of the hearing Macdonald J ordered the Defendant to pay 80% of the Claimant’s costs in the Judicial Review proceedings with no order as to costs in the Children Act Proceedings (save for detailed assessment of the publicly funded parties).
Separating the recoverable from non-recoverable costs in concurrent proceedings
The detailed assessment proceedings before Master Rowley primarily related to the order the Defendant pay 80% of the claimant’s costs in the Judicial Review proceedings. Master Rowley had to consider whether any of the costs claimed fell outside that costs order and instead came within the order following the Children Act proceedings, for which the claimant had no entitlement to costs.
The Defendant, as the paying party, argued that the Children Act application was the central application. Accordingly, the Defendant submitted that Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] AC 88 should be applied, with the effect that only the costs which were over and above those which would be incurred in the Children Act proceedings could be recovered.
Master Rowley rejected “the harshness of the Medway Oil approach”.Medway Oil required the same parties to be involved in a claim, counterclaim or possibly more than one set of proceedings. He distinguished Medway Oil as the Litigation Friend for the Claimant (XX) acted in a different capacity in the two sets of proceedings before Macdonald J. In the Judicial Review proceedings, the litigation friend acted for Tafida but in the Children Act proceedings the Court Appointed Guardian advanced Tafida’s interests. Consequently, it was found Medway Oil did not apply as it would be wrong to characterise one of the proceedings as the “more central proceedings.”
But how is the assessing judge to handle the division of the costs common to both proceedings, given some work would be recoverable and some not?
In rejecting the Defendant’s contention that Medway Oil applied Master Rowley gave short shrift to the contention that indivisible common costs are irrecoverable. He held [@ 24]:
“It is my experience that common costs are rarely non-divisible in any event. Almost all work which is common between two issues or two parties et cetera can properly be divided between the recoverable and unrecoverable element. Even the level of some court fees will depend on the extent of the claims brought and may be divided between successful and unsuccessful claims or parties. The only problem is a practical one. It is extremely time consuming to contemplate each attendance note or other documentation in order to come to a conclusion on where to divide each piece of work. The authorities are keen to stress that a blanket approach to the percentage that is recoverable is not the way the court should proceed. This approach was taken by Master Simons in Jean Mary Doris Haynes (personal representative of the estate of Brian Haynes deceased) v Department for Business Innovation and Skills [2014] EWHC 643 (QB) and was only upheld by Jay J in the absence of any other option. In practice, the allowance of the same percentage may become the de facto approach when a similar proportion appears to be appropriate on reviewing a number of items of work.”
He further held [@ 37]: “To the extent that there are any non-divisible items however, then it seems to me that the receiving party is correct in saying that they are recoverable in full. That is the tenor of the authorities in cases such as Haynes.” While Master Rowley rejected the Defendant’s high-impact points he left no doubt that the onus is on the receiving party to attempt to attempt a reasoned division in its bill.
What level of scrutiny will be expected by the assessing judge at a detailed assessment?
The clue is in the name. The answer (it seems): is “Detailed scrutiny”. Although, if there is a group of pieces of work that appear to have a similar allowable percentage a more broad-brush percentage allocation to those grouped items could be appropriate. However, it was held [@ 34-35]:
“detailed assessment hearings where division is, or may be, required are time-consuming affairs. There is little for it but to consider each item that is claimed….” “It is, and always has been, for the receiving party to draft the bill of costs to reflect any necessary division of the work that has been done. There is no realistic way, absent the receiving party’s file, for the paying party to be able to interpret the time claimed in order to be able to challenge items in the bill in the fashion contended for by the claimant. If that division has not been carried out, bills are regularly returned in order for them to be redrawn.”
This should be a warning to strike fear in all but the most bullish of receiving party’s Cost Draftsperson. Master Rowley went on:
“Where, as here, the receiving party argues that it is not required, then it will have the effect of the court receiving more speculative arguments from the paying party and being required to spend longer on each entry before reaching a decision.”
An interesting example where caution is required was where Counsel’s brief fee covers both recoverable and irrecoverable work. When this is the case, a division needs to be undertaken so that the non-recoverable costs can be removed. This is even the case where Counsel’s fee would have been judged reasonable if it only covered the recoverable costs.
Practical Takeaways
The harsh Medway Oil approach may be distinguishable where an individual acts in different capacities in concurrent proceedings and where it would be wrong to characterise one of the proceedings as the “more central proceedings.”
Determining the costs recoverable under a costs order in concurrent proceedings requires careful (and sometimes time-consuming apportionment).
Receiving parties who decline to attempt a division of common costs do so at their peril.
The Costs Judge will, in the main, expect to scrutinise each item that is a potential common cost so it’s worth the receiving party doing the work to get it right in the bill.
Time may be wasted if the receiving party’s bill has to be re-drawn or fails to make a decent attempt at division. The receiving party should not be surprised if they foot the bill for any delay or associated costs.
If the receiving party either declines to re-draw their bill or otherwise does not properly attempt to divide common costs they can expect the assessing judge to be more receptive to some of the paying party’s arguments as to why particular items are irrecoverable.
The decision of Deputy Master Campbell inHankin v Barrington & Ors [2021] EWHC B1 (Costs) considers: (1) what is a reasonable brief fee for leading counsel in a 13-day liability and quantum personal injury trial; and (2) what is the appropriate level of abatement when a case settles nearly three weeks before trial.
Summary In this case leading counsel’s brief fee was reduced from £125,000 to £75,000. However, it was held that an abated fee was payable despite the case settling nearly three weeks before trial. In this case 50% of what had been determined to be the reasonable brief fee (£75,000) was allowed as the abated fee (i.e., £37,500). A further deduction was made to account for the work counsel undertook in mitigation of his loss, meaning counsel’s final abated brief fee was £27,500. It was not in dispute that £15,000 was also payable to leading counsel for the mediation.
This blog respectfully suggests it was wrong to account for what leading counsel had earned during the trial period. This is contrary to Lewis v The Royal Hospital Shrewsbury Hospital 20 May 2005 (unreported) (below) and was inappropriate in circumstances where no account was taken of counsel’s 12 lost refreshers. It does not appear from the judgment that Leggatt LJ’s obiter comments in K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1991] 3 All ER 211 [@ 222] were drawn to the Court’s attention. In K/S Norjarl A/S it was explained that in a case set down for a lengthy hearing, an abated brief fee would normally include an element of compensation for possible loss of refreshers. Moreover, trying to ascertain what counsel would have earned had their diary not been occupied is an inherently speculative and unsatisfactory exercise.
It is also submitted that interfering with the headline brief fee, before considering the issue of abatement, in a budgeted case (the trial phase at £307,500), undermines the central aim of costs budgeting, which is to provide transparency.
Background The Claimant suffered severe head injuries which ended his career as a professional rugby player. He claimed £3,155,842.76 from three defendants, all of whom denied liability. The case was listed for a 13-day trial on liability and quantum that was due to start on 15 March 2021. However, the case settled on 24 February 2021, 19 days before the start of trial.
Terms of Settlement The terms of the mediation agreement were that the First and Second Defendants would pay agreed damages and the Claimant’s costs, with there being no order for costs against the Third Defendant.
Determining an Appropriate Brief Fee It was noted that there are two elements to a brief fee. The first is to cover all the work done by way of preparation for representation at the trial and attendance on the first day of the trial, see the judgment at 22] citing Hobhouse J in Loveday v Renton [1991] Costs LR (Core) 204. The second, is to compensate counsel’s “commitment” and the fact that other work will likely be turned away once a trial goes into counsel’s diary.
In determining what is an appropriate brief fee a Costs Judge will have to determine what “a hypothetical counsel capable of conducting the particular case effectively but unable or unwilling to insist on the particular high fee sometimes demanded by counsel of pre-eminent reputation” would demand for such a case. In other words, what would counsel competent to undertake the case, but not pre-eminent, charge for such a trial.
Factors relevant to the determining a brief fee will be how “heavy” the trial is, i.e. the number of issues, witnesses, experts jurisdictions et al. Deputy Master Campbell noted in Hankin that whilst this was “a difficult and complex case on liability, causation and quantum” it was “not strikingly more so in these contexts than other tragic and life changing cases which come before the courts involving personal injury and clinical negligence.” It will also be relevant whether counsel has been instructed late. If so, counsel will need to work up his/her “brief from a standing start”.
In this case leading counsel had already charged for 20.5 hours in addition to £15,000 for the mediation: these were “all matters which militate against the reasonableness of the fee [of £125,000] claimed.”
The Deputy Master also compared the fee claimed to other brief fees. It was noted that in East Sussex FireAnd Rescue Service v Austin [2019] EWHC 1455 (QB) [2019] Costs LR 709: leading counsel’s brief fee was £50,000 for a 15 day trial in 2013 in a Group Action involving negligence and breach of statutory duty which the judge described as “… not, by any stretch, a typical “run of the mill” personal injury action”. Deputy Master Campbell also reminded himself [@ 24] that: “Assessing the brief fee is not a case of working out the hours spent by Counsel and multiplying them by an hourly rate – see judgment of Lambert J in [Austin]”; and yet comments “In so far as an hourly rate has been used, it [£550] is too high and reflects a sum for pre-eminence.” The hourly rate claimed was another reason given for reducing the brief fee.
Determining an Appropriate Abatement
As noted above, this case settled 19 days before the start of trial. How close to trial a matter settles is relevant to the level of abatement. In this case it was not submitted that leading counsel had started to “work up his brief fee” as he had not started his trial preparation. However, following Bowcott, where Hallett J attributed 50% of the brief fee to what she described as the commitment element, 50% of what was determined to be a reasonable brief fee was allowed (i.e. £37,500, plus VAT).
As a rule of thumb, although the Courts will always consider each case on its own facts, if a case is listed for more than three days 50% of the brief fee is arguable to compensate the commitment element of counsel’s brief fee, despite counsel not having undertaken any work on the matter. Deputy Master Campbell went on to deduct £10,000 to account for work undertaken by counsel to mitigate his losses. In so doing he distinguished Lewis v supra where Mitting J held the Master had erred in speculating what Counsel might have earned after the case had settled. However, in this case evidence of what counsel had done was advance so it was held, and Lewis thereby distinguished, there was “no need for any speculation.” It is submitted that this was not correct as Mitting J also held “It was irrelevant whether or not counsel could take on other work”. It is also likely that the lost refreshers, had they been accounted for in the abated fee, would have exceeded the amount counsel earned mitigating his losses.
Concluding Comments Hankin confirms that even where a case settles over two weeks before trial and trial preparation has yet to commence an abated brief fee is payable. This compensates counsel’s “loss of chance” and the likelihood that other remunerative work will have been turned away. In this judgment the Deputy Master first assessed what would be a reasonable brief fee for leading counsel in a case such as this. He held that because the £307,500 budgeted for the trial phase had not been allocated as between profit costs and counsels’ fees he was “not constrained” and could exercise his “own discretion” in respect of what constitutes a reasonable brief fee. This decision, if it is followed in future, will mean that unless approved budgets allocate each phase as between time costs and disbursements, the judge hearing the detailed assessment will “not be constrained” by the budgeted sums insofar as determining the level of a brief fee. It is not disputed that there was a “good reason” under CPR 3.18(b) to depart from the budget as there had not been a trial. However, in this author’s submission, the percentage abatement should have been the sole issue for the Court’s determination.
Practical Takeaways
When budgets are approved ensure that each phase is allocated between time costs and disbursements.
Typically, a 50% abated fee can be recovered when a case settles nearly three weeks before trial (and no preparation has been undertaken) if the case was listed for more than three days.
The level of abatement will be determined by how much work counsel has already done to work up their brief fee and how close to trial the matter settles.
Whilst there is no obligation to stage a brief fee it will often be wise to do so.
Keep the other side informed as to when counsel’s brief will be delivered and the staging of fees.
Hankin is a good case for paying parties.
However, whether and to what extent it will or should be followed is debatable.
ABA v University Hospitals Coventry and Warwickshire NHS Trust [2022] EWHC B4 (Costs) concerned a single simple question; is a claimant, who wins a preliminary issue trial on liability and obtains a ‘vanilla’ order for liability costs, entitled to have those costs assessed before quantum has been determined?
Costs Judge Leonard held that the answer to this was a clear no. However, he also highlighted that this is not necessarily unadulterated good news for defendants.
The Case
This was a claim for clinical negligence. Liability and causation were tried as preliminary issues in January 2021. The claimant won.
As result the claimant obtained an order that “the Defendant do pay the Claimant’s costs of and incidental to the issue of liability on the standard basis such costs to be the subject of a detailed assessment, if not agreed”.
This might be described a standard vanilla order. It is evidence that the claimant did not seek an order permitting immediate assessment of these costs, commonly known as a “forthwith order”.
The quantum trial was set down for between February and May 2023. In the meantime, the claimant commenced detailed assessment proceedings in respect of the costs from the preliminary trial on liability. The defendant argued that there was no jurisdiction to assesses these before the conclusion of the claim in its entirety (i.e., until quantum was agreed or determined).
The Judgment
The judge identified the starting point as CPR 47.1. This provides:
The general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure until the conclusion of the proceedings, but the court may order them to be assessed immediately.
(Practice Direction 47 gives further guidance about when proceedings are concluded for the purpose of this rule.)
PD 47 provides:
1.1 For the purposes of rule 47.1, proceedings are concluded when the court has finally determined the matters in issue in the claim, whether or not there is an appeal, or made an award of provisional damages under Part 41.
1.2 The court may order or the parties may agree in writing that, although the proceedings are continuing, they will nevertheless be treated as concluded.
1.3 A party who is served with a notice of commencement (see paragraph 5.2 below) may apply to a costs judge or a District Judge to determine whether the party who served it is entitled to commence detailed assessment proceedings. On hearing such an application the orders which the court may make include: an order allowing the detailed assessment proceedings to continue, or an order setting aside the notice of commencement.
1.4 A costs judge or a District Judge may make an order allowing detailed assessment proceedings to be commenced where there is no realistic prospect of the claim continuing.
The claimant argued that the order following the conclusion of the preliminary issue trial was a final order determining the matters in issue in the claim, thus entitling him to seek assessment.
The judge had little difficulty rejecting this. He found that the authorities;Industrie Chimiche Italia Centrale & Anor v Alexandra G. Tsavliris Maritime Co. & Ors [1992] 7 WLUK 182, Bottin (International) Investments Ltd v (Venson Group Plc & Ors [2005] EWHC 90005 (Costs), Crystal Decisions (UK) Ltd v Vedatech Corporation[2007] EWHC 1062 (Ch) and Khaira & Ors v Shergill & Ors [2017] EWCA Civ 1687; [2018] 3 All ER 44, were conclusively against it.
He further observed that the claimant’s arguments were flawed as a matter of plain construction. The claimant had been pursuing one personal injury claim, not two different ones. In a personal injury claim breach of duty, causation and the quantification of damages are all essential elements. The order of 21 January 2021 determined some of the matters in issue in this claim, but not all of them.
This is clearly correct. The claimant’s arguments were irreconcilable with (a) the plain wording of the rules; (b) authority; and (c) long established practice.
However, the judge concluded at [49] with the following highly pertinent observation:
I will only say, with apologies for perhaps stating the obvious, that the default position being that interest will accrue upon the Claimant’s unpaid liability costs at 8% per annum, it might be to the parties’ mutual advantage to use the work done to date in an effort to settle what would appear to be a substantial claim for costs.
With apologies for stating the even more obvious, interest accruing at a non-discretionary rate of 8% (Simcoe v Jacuzzi UK Group PLC [2012] EWCA Civ 137; [2012] 1 W.L.R. 2393) is likely to add significantly to a defendant’s overall outlay. In circumstances where a defendant has successfully resisted immediate assessment it would be difficult to say there is any basis for curtailing the period of interest.
Thus, taking ABA as an example, the following scenario is entirely plausible: (a) quantum trial in April 2023; (b) judgment in July 2023; (c) assessment proceedings commence in October 2023; (d) assessment proceedings concluded in October 2024. On that basis interest on the liability would run for 3.75 years from January 2021, adding an eye-watering 30%.
Takeaway Practice Points
Claimants who wish to obtain immediate assessment of their costs should seek, where appropriate, either (a) a summary assessment; or (b) an order for detailed assessment forthwith;
Failing that, they should seek a substantial payment on account of costs.
Given the punitive rate at which interest runs on outstanding unassessed costs, defendants should give serious consideration to agreeing (or indeed themselves seeking) a forthwith order or failing that a substantial payment on account.
These points are not limited to costs following a preliminary issue trial (be it of liability, limitation etc.). They apply whenever the court makes or is considering making an order for detailed assessment before the conclusion of the claim (e.g. following an interim application).
Costs Litigation Blog 