Proportionality - To include or not to include?

That is the ongoing question and the uncertainty continues…

We continue to work in an uncertain world pending the appeal of the BNM v MGN Ltd Case which is due to be heard in October 2017 and in the meantime decisions keep rolling in from senior Judges which further compound this uncertainty.

The following recent cases of Rezek-Clarke v Moorfields Eye Hospital NHS Foundation Trust and Mather v Doncaster & Bassetlaw Hospitals NHS Foundation Trust add further cause for discussion in the ongoing legal debate amongst the senior judiciary.

In the case of Rezek-Clarke v Moorfields Eye Hospital NHS Foundation Trust [2017] EWHC B5 (Costs), the damages were eventually agreed at £3,250.00. The Claimant’s Solicitors presented their bill of costs totalling £72,320.85. At Provisional Assessment the bill of costs was assessed in the sum of £24,604.40. An Oral Hearing followed to address various issues: including his finding that the bill was disproportionate, and the reduction of the ATE premium from £31,976.49 (premium of £30,166.50 plus IPT of £1,089.99) to £2,120.00.

In this case, all of the work had been carried out after 1st April 2013 and therefore the Judge made reference to the rules under CPR 44.3(2):

(2) Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.

and CPR 44.3(5):
(5) Costs incurred are proportionate if they bear a reasonable relationship to –
(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance.

The Judge stated that “the Claimants submit that additional liabilities should be excluded from the test of proportionality. 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, including any ATE premium, may be disallowed or reduced on the ground that it is disproportionate even if it was reasonably or necessarily incurred.”

He went on to comment “having decided that the amount of the premium is disproportionate I am, as recommended by Lord Jackson, entitled to stand back and decide what a proportionate premium is.”

Regional Costs Judge Besford has recently ruled in the case of Mather v Doncaster & Bassetlaw Hospitals NHS Foundation Trust. DJ Besford ruled that when a case straddles the 2013 reforms both pre and post April 2013 costs should be considered when addressing proportionality but ignore any additional liabilities.

This case had not been subject to a costs budgeting process. The total bill amounted to £514,700.00 including additional liabilities, disbursements, VAT and assessment costs. On assessment DJ Besford reduced this to £332,229.00. He then went on to consider proportionality.

DJ Besford proceeded to agree with the ruling of Master O’Hare in the case of Hobbs v Guy’s And St Thomas’ NHS Foundation Trust [2015] EWHC B20 (Costs) that the relevant figure to take into consideration is the total assessed figure and commented “It would be a selective exercise if the court was to ignore what could be a significant pre-April 2013 amount of costs. This is particularly pertinent given that there are likely to be ‘split’ bills going forward for a number of years.”

He went on to comment that “If, when considering what is a proportionate figure, the success fee was included, the costs, as in this case, may well appear disproportionate. If reduced on a global basis, that would amount to a reduction simply on the grounds that, when added to the base costs, the total appears unreasonable. Such an action would be contrary to the rules.

Further, the amended definition of ‘costs’ by excluding additional liabilities implies that they are no longer relevant when considering ‘proportionate costs’. To include them would be ignoring the new definition and would penalise a party solely on the basis that they acted under a CFA.

Finally, even though the success fee is excluded from consideration, I accept that if costs are reduced, that will inevitably reduce the amount allowed for the success fee which in turn reduces the total. If the base costs are proportionate, the addition of the success fee in whatever amount would also be proportionate.”

In respect of the ATE premium, DJ Besford commented that this should also be treated in the same as otherwise the court would introduce “a degree of inconsistency”.

The Judge also provided useful comment in respect of the ongoing issue of costs budgeting and the impact upon assessment – “In my judgment, the costs incurred for the amount recovered, with the number of experts as to causation and the stage at which the matter settled, are proportionate. In reaching this conclusion I have had regard to the range of figures a similar case would be budgeted at.”

He held that base costs of £72,254.00 plus Counsel’s fees of £25,181.00 was proportionate. This totalled £97,434.00 against damages of £60,000.00.

DJ Besford has granted leave to appeal so we now await a further Court of Appeal listing and decision.

These cases continue to provide further arguments for both Claimants and Defendants. Whilst these issues remain under the spotlight, and pending the outcome of various key appeals, we continue to attempt to navigate our way through an uncertain costs journey.

 

Written by Charlotte Knight - Associate and Solicitor

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