PROPORTIONALITY AND ADDITIONAL LIABILITIES: A SCCO DECISION THAT DIFFERS FROM BNM
I am grateful Alan Mendham of Gadsby Wicks to for sending me a copy of the decision of Master Brown in Murrells -v- Cambridge University NHS Foundation Trust (SCCO 17th January 2017) a case that re-visits the issue of proportionality and success fees.
- The Master declined to follow the decision in BNM -v-MGN Ltd  EWHC B13 but preferred the approach in King -v- Basildon & Thurrock University Hospitals NHS Foundation Trust.
- The proportionality principle, therefore, was not construed so as to cover additional liabilities.
The claimant had been successful in bringing a claim against the defendant trust after her husband had been killed as a result of medical negligence. The case settled at £9,650 plus costs on the standard basis. The bill of costs straddled two dates – before and after the 1st April 2013. After the initial assessment the total costs figure was £94,076.68 (which included the additional liabilities). The Master was then asked to consider whether the post-April 2013 figures were disproportionate.
The defendant argued that the base costs should be aggregated with the additional liabilities so that the total figure was disproportionate. The Master found that the new test of proportionality did not apply to additional liabilities.
“Does the new test of proportionality in CPR 44.3 apply to additional liabilities and, if so, how?
18. I agree with the decision of Master Rowley in King on this point. I do not accept that additional liabilities are subject to the new test of proportionality or, even if they were, that they should be aggregated with the Claimant’s base costs for the purposes of that test.
19. To my mind, it is relevant to have particular regard to the approach to the assessment of additional liabilities under the old pre-LASPO rules. That approach is summarised at paragraphs 40 and 41 of Coventry v Lawrence  A.C. 106. In short, the Court does not ask itself whether the costs of an ATE premium or a success fee are proportionate to the importance of the case and what was at stake but looks at the litigation risk. If the premium is necessarily incurred, it is proportionate and it is proportionate even in the event that it is disproportionately high when compared with the damages reasonably claimed. The same reasoning applies to a success fee claimed by solicitors or counsel: such a fee is recoverable if it is proportionate to the risk of the lawyer not being paid (using the ‘ready reckoner’ tables).”
32. I do not accept that the provisions of new CPR 48.1, read with this guidance, can bear the interpretation that is placed upon them by the Defendant. My reasons are as follows:
(1) I would, as I have indicated above, read CPR 48.1 as simply preserving the approach under the old rules to the recovery and assessment of additional liabilities. Read naturally, it seems to be clear that it was intended to preserve CPD 11.9 which was essential to the function of the relevant funding arrangements and integral to them.
(2) I agree with Master Rowley that the restricted meaning of “costs” applies to new CPR 44.3. It seems to me that the effect of sections 44(3) and 46 (4) of LASPO is to preserve the recoverability of additional liabilities as an item of costs subject to assessment under the old rules only. As Master Rowley has noted, the use of the term “costs” in Part 3 and the costs budgeting provisions and practices follow this restricted meaning of “costs” in new CPR 44.1 in cases where additional liabilities are claimed. Courts do not costs manage additional liabilities (Various Claimants v MGN  EWHC 1894 (Ch)). If the Defendant were right (and “costs” had a wider meaning), then there would need to be an assessment of proportionality at two stages: one in the costs management process and another in detailed assessment when the additional liabilities are known. This cannot have been intended.
(3) Practice Directions do not of themselves have legislative force: see Re C (Legal Aid Preparation of Bill of Costs)  1 FLR 602, Godwin v Swindon Borough Council  EWCA Civ 1478, Leigh v Michelin  EWCA Civ 1766 and KU v Liverpool  EWCA Civ 475. CPD 48 cannot itself amend CPR 48.1. I agree with Master Rowley that Section 1.4 of the CPD 48 does not purport to set out an exclusive list of the provisions relating to pre-commencement funding arrangements. Moreover, I consider it important to see the section in context: Sections 1-3 appear to be mere descriptions of the effect of the legislative provisions but not in themselves modifications of any of the primary or secondary legislation; I do not accept that Section 1.4 should be read any differently.
(4) It does not strike me, in any event, as surprising that the list in Section 1.4 of CD 48 should exclude old CPR 44.4 (2) because the approach to the assessment of an additional liability has been as set out above: the tests of proportionality and MASTER BROWN Approved Judgment Double-click to enter the short title reasonableness/necessity generally overlapped; this is in contrast to the practice in respect of base costs.
(5) The references at section 1.4 (c) appear to confirm that in circumstances where pre-LASPO the success fee was fixed, it will remain fixed under the transitional provisions. As I see it, there is no indication in CPD 48 that a claim in respect of which the success fee was fixed under CPR 45 would also be subject to the new proportionality rules. But if the Defendant were right it would, seemingly, be necessary to aggregate such a fee with the base costs and the total would be subject to full or partial disallowance on the grounds of proportionality. This is notwithstanding the provisions of old CPR 45 which set out the amount to be allowed for an uplift in certain prescribed circumstances.
(6) New CPR 44.3 makes no reference to additional liabilities; indeed, I have difficulty reconciling its provisions, including in particular the transitional provisions at CPR 44.3 (7), with the Defendant’s contention. In respect of cases commenced after 1 April 2013 the section provides that the new test does not apply to costs incurred in respect of “work done before 1 April 2013” (underlining added). It is difficult to see how the taking out of an ATE premium could be regarded as “work done“. But, if it could not be so regarded, then if the Defendant is right, all such liabilities whenever incurred would, for cases issued after 1 April 2013, be caught by CPR 44.3(7). It strikes me as unlikely that the provision could be intended to have such retrospective effect; this is particularly so in circumstances where the provision does not apply retrospectively in respect of base costs. Accordingly, if I have understood CPR 44.3 (7) correctly, then it appears to support the contention that CPR 44.3 was not intended to apply to additional liabilities.
(7) If it were right that new proportionality test applied in the way contended for by the Defendant, it would moreover have a considerable prejudicial effect upon those litigants and lawyers who have entered into pre-commencement funding arrangements. It seems likely that they will have entered into such arrangements in the reasonable expectation that the additional liabilities would continue to be recoverable as they were pre-LASPO. To apply the new test to additional liabilities in the way contended for would however require many litigants to submit to a substantial, if not complete, disallowance of their additional liabilities as against the other party or parties to the litigation whilst at the same time the liability to pay an insurer or the lawyers the additional liability would be preserved. If that were right it would inevitably lead to many litigants, including -it might be observed- victims of mesothelioma, having to give up deserving claims or defences (see Coventry, paragraph 93). I agree with Master Rowley: in these circumstances the Defendant’s contention cannot be reconciled with transitional provisions and the clear will of Parliament. The intention must have been to provide, at the very least, an orderly retreat from the old funding scheme.
(8) The further practical issue that arose in the course of argument was this: how should the court determine what sum is proportionate if additional liabilities are to be aggregated with base costs? I intend no disservice to Mr. Wilcock’s helpful and thoughtful submissions if I were to confess that following argument it was unclear on what specific basis how in this case I should determine that any particular figure, following aggregation, was proportionate (bearing in mind the test in CPR 44.3 (5) and that additional liabilities are otherwise, in principle, recoverable). On one reading of that provision no allowance should be made for the fact that a party is acting under a funding arrangement which provides for an additional liability; a proportionate figure MASTER BROWN Approved Judgment Double-click to enter the short title might well be the same or similar whether allowance is made for additional liabilities or not. If that were right, the effect of applying the proportionality rules would be simply to make additional liabilities wholly or substantially irrecoverable in many instances.
33. To the extent that there is any ambiguity in respect of the relevant statutory provision, ordinary principles of statutory interpretation would, for the reasons set out, have lead me to the same conclusion. Parliament could not have intended such a radical departure from the previous approach to the assessment of additional liabilities. It would have had in mind the earlier authorities referred to above (Atack, Rogers and others) and could not have intended an outcome which would preclude the recovery in many cases of any or any substantial proportion of additional liabilities reasonably incurred. Indeed, had it intended such a radical departure from the earlier approach the rules would have done so expressly.
34. In the circumstances I respectfully disagree with the decision of Master Gordon-Saker in BNM as to the application of the new proportionality test to additional liabilities and therefore also as to the need to aggregate base costs with additional liabilities.
35. In the event that I had accepted the Defendants’ contentions as to the application of new CPR 44.3(2) to additional liabilities, I would have reached the same conclusion, that is that it was not appropriate to aggregate additional liabilities with base costs for the purposes of this test. That would be because it would seem to me that even if the new proportionality test was to apply to the additional liabilities such a conclusion could only be reached if CPR 44.3(5) were read as being a non-exclusive test; and, if that were the case, that in turn would have led to the conclusion that the test did not prevent a court applying the approach set out in CPD 11 5-9. Both old and new tests require the court to consider, in the first instance, whether costs are proportionate to the “matters in issue”: on the earlier authorities, as set out above, such a term is to be read widely.
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