PROPORTIONALITY, ASSESSMENT AND PREMIUMS: THE NEED FOR CAREFUL CASE PLANNING: £72,320 REDUCED TO £24,604
In Rezek-Clarke -v- Moorfields Eye Hospital NHS Foundation Trust  EWHC B5 (Costs) Master Simons upheld a decision to assess costs, claimed at £72,320.85 to £24,604.40. The judgment emphasises the need for careful case planning, and consideration of proportionality, in low value cases (which is not to say these are not necessary in every type of case).
“In modern litigation, with the emphasis on proportionality, it is necessary for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which will be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost. While it is not unusual for costs to exceed the amount in issue, it is, in the context of modern litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.“
“Mr Mistri was unable to produce any evidence of any planning or any consideration of the costs to be incurred in conducting this low value claim. The manner in which the case was conducted did not vary throughout the duration of the claim.”
- A bill of costs of £72,320.85 in a clinical negligence case that settled at £3,750 was reduced to £26,604.40.
- The Master rejected the argument that the original bill of costs was proportional.
- The Master found that the question of proportionality covered the ATE premium and the original premium of £31,976 was disproportionate.
The claimant settled a clinical negligence case against the defendant for £3,250 plus costs. The claimant lodged a bill of costs totalling £72,320.85. Following service of points of dispute and replies the bill was provisionally assessed at £26,604.40. The claimant requested a oral hearing.
The claimant argued that the Master had erred in finding that the costs were disproportional. The Master rejected that argument.
In their Points of Dispute the Defendants state that the costs claimed are disproportionate and that no privately paying client would ever incur this level of expense for a claim worth £3,250. They say that the costs do not bear any relationship to the factors listed in CPR 44.3(5).
Mr Wilcock submitted that this was always going to be a low value claim and that the Claimant’s solicitors should at the outset have taken steps to deal with the claim in a proportionate manner. Mr Wilcock submitted that the sum allowed at the provisional assessment, £24,604.40 was a proportionate amount of costs bearing in mind that this was a claim for medical negligence and that the Claimant’s solicitors were under an obligation to investigate the claim.
In their reply to the Points of Dispute, the Claimants state that the costs claimed were reasonable and proportionate. They submitted that that the Defendants’ conduct should be taken into account as they disputed the issue of causation and it was therefore necessary to issue proceedings. They conceded that the value of the claim was modest but the Defendant’s negligence had led to the Claimant suffering symptoms for nine months longer than necessary and this had caused his visual field to deteriorate. The claim was of considerable importance to the Claimant. This was a clinical negligence claim which was by its nature complex. The matter required a high degree of skill and specialised knowledge in order to prove the allegations of breach of duty and causation and it was necessary to instruct experts with specialist knowledge to prepare reports namely, a consultant ophthalmologist, a consultant neurologist, an endocrinologist as well as a GP. The solicitors further submitted that the costs claimed were reasonable given that the pre-action investigations were necessary to ascertain the appropriate Defendant.
In oral submissions Mr Mistri submitted that this was a clinical negligence claim whereby the solicitors were obliged to investigate issues of negligence, causation and to investigate whether or not claims could be made against other Defendants. It was clear that the Claimant had suffered damage as a result of negligence and in making their investigations it was not necessary to have the amount of damages that the Claimant could recover in mind. This type of litigation is always “front-loaded” and therefore until the evidence had been obtained, the solicitors were not in a position to advise their client as to prospects of success and the value of the claim. The costs incurred were necessary in order to reach this stage.
In Jefferson v National Freight Carriers Plc  EWCA Civ 2082, the Court of Appeal quoted with approval the judgment of H H Judge Alton in the Birmingham County Court on 22 June 2000 in an unnamed case:
“In modern litigation, with the emphasis on proportionality, it is necessary for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which will be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost. While it is not unusual for costs to exceed the amount in issue, it is, in the context of modern litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.”
That statement by Judge Alton, although made some years ago, is even more relevant today as the rules regarding proportionality are now much more onerous.
I looked through the solicitor’s file, both at the provisional assessment and prior to the hearing today, and I could see no evidence of any planning in the manner described by H H Judge Alton. The claim was always going to be low value and indeed there is an entry in the documents schedule annexed to the bill dated 31 July 2013 “Conducting a preliminary valuation in the light of the information obtained to date”.
Mr Mistri was unable to produce any evidence of any planning or any consideration of the costs to be incurred in conducting this low value claim. The manner in which the case was conducted did not vary throughout the duration of the claim. An attendance noted showed that on 7 July 2014 there was a further consideration of the value of the claim which put the general damages at £2,000 to £5,000. On 15 December 2014 there was another review whereby one of the fee earners indicated that the figure they had previously considered for quantum was over-optimistic.
Notwithstanding the solicitors’ knowledge of the low value of the claim, they proceeded to instruct expensive medical experts to prepare reports the costs of which totalled almost £20,000. The costs of some of those reports were reduced by me on the grounds that their cost was disproportionate. Furthermore, I remained to be convinced as to whether or not some of the reports were indeed necessary as significant fees were being claimed by the medical experts for preparing addendum reports and for amending their reports.
As Mr Mistri correctly stated, it is necessary for costs to be incurred to enable an investigation to be carried out to ascertain whether the client was able to sustain a claim for damages. However, to be recoverable from the paying party the costs must be proportionate whether or not they were reasonably or necessarily incurred.
Costs of £72,320.85 for a low value medical negligence claim are disproportionate. They do not bear any reasonable relationship to the sums in issue in the proceedings. The litigation was not particularly complex, no additional work was generated by the conduct of the Paying Party and there were no wider factors involved in the proceedings such as reputation or public importance.
In the points of dispute the Claimants submit that when looking at the question of proportionality I should look separately at profit costs and additional liabilities. 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 may be disallowed or reduced on the ground that it is disproportionate even if it was reasonably or necessarily incurred.”
The claimant had taken out premium totalling £30,166.50.
THE MASTER’S DECISION ON THE PREMIUM
The Master rejected the argument that the premium was not to be taken into account when considering issues of proportionality. Further the Master rejected an argument that the premium itself was proportional.
“61. A major difficulty that the Claimants have is that they cannot tell me what the insurance premium is. The amount claimed in the bill is £31,976.49 (including IPT) and a certificate has been produced identifying this amount. The Bill of Costs has been certified as being true and accurate.
62. I am now told by Mr Boyle that the amount of the insurance premium is wrong and that the correct premium is £22,225.23. This is a submission made by Mr Boyle. It is made on the basis of his own calculation taking into account the methodology explained in Mr Brown’s first witness statement. Although I have two witness statements from Mr Brown and one witness statement from Ms Millband, I have no evidence from them as to what the actual premium is. Furthermore, I have no explanation as to why the Bill was certified as being true and accurate when it clearly was not.
63. In these circumstances I would be justified in disallowing the premium in its entirety as I do not know what it is. Mr Boyle’s calculation is a submission and is not evidence.
64. The only evidence that has been submitted is a schedule of insurance which shows a premium of £30,916.50. This premium is disproportionate. In my judgment this case is clearly distinguishable from Rogers which was decided pre-LASPO. Rogers concluded that if the Court decided that it was necessary to incur a premium then that should be adjudged as a proportionate expense. At that time the definition of proportionality was different to what it was after the 1 April 2013. Since that date regulations specifically state that costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred. Consequently in my judgment a different test has to be applied than the test that was being applied in Rogers.
65. The witness statements from Mr Brown provide a background to this particular policy and the method of calculation of premium. Ms Millband’s evidence deals with the reasons why her firm chose this particular policy for insuring her firm’s clients’ cases. None of the witness statements deals with this specific case and whilst it is clearly acceptable for insurers to deal with insurance on the basis of a basket of cases, the amount of costs which the paying party has to pay has to be an amount that is reasonable and proportionate to that particular case.
66. Mr Mistri was unable to produce any evidence to indicate that the choice of the insurance policy was anything other than a mechanical exercise carried out by the fee earner. Although it was quite clear from the moment the instructions were taken that this was going to be a low value claim, no consideration appears to have been given as to the proportionate costs of running the case. If the solicitors decided that they needed to utilise the services of five separate medical experts, it should have been obvious to them that if they were going to utilise this particular insurance policy then this would likely mean an expensive premium. No consideration was given by the solicitors as to whether or not this particular policy was appropriate to this particular low value case. Whilst it may well be that this type of policy is appropriate for many of Thompsons’ cases it cannot be the case that it is suitable for every case. Thompsons would have been aware that there are many other insurance products on the market that may have been more appropriate to this particular low value case, but no attempt was made by them to investigate this.
67. I also question the methodology of calculation of the premium. This is based on the cost of the medical reports whether or not the costs of those reports are reasonable. Where, as in this case, I have considered that the cost of the medical reports is unreasonable and disproportionate in amount, the Claimant is seeking to recover part of a premium that includes an uplift of 200% of those parts of the fees that are unreasonable. As the premium is deferred, surely the basis of calculation should be on the reasonable amount of the fees for the medical reports, not the actual cost. Furthermore, it is often the case that the fee claimed for a medical report includes the fee charged by a medical agency. I query whether any attempt is made by the solicitors or the insurers when calculating the premium, to distinguish between the actual cost of the report and the fee paid to the medical agency.
68. In the points of dispute 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.
69. Costs incurred are proportionate if they bear a reasonable relationship to the sums in issue in the proceedings. This insurance premium claimed bears no reasonable relationship to a claim which at best amounted to £5,000 but settled at £3,250. The Claimants say that I should also look at the complexity of the litigation, the conduct of the Defendant and wider factors. I do not consider that this litigation was complex. In my judgment this was a routine low value medical negligence case. Proceedings were issued not as a result of the complexity of the case but because of the solicitors concerns about limitation. The case was settled shortly after proceedings were served. The fact that there were a number of medical experts instructed does not make a case complex.
70. I do not accept that as this issue of proportionality relates to an insurance premium it means that this is a wider factor that I have to take into account when dealing with the question of proportionality. One of the reasons that I have given as to why I consider that this premium was disproportionate is that there was a failure on the part of the solicitors to give any consideration as to other options. The facts are case specific. I am not deciding that this type of policy is inappropriate for low value cases. What I am deciding is that in this particular case no thought was given as to whether or not this policy was appropriate. This issue should have been part of the planning described by H. H. Judge Alton to which I referred in paragraph 19 of this Judgment.
71. I reject Mr Boyle’s submission that I should not give consideration to the evidence of alternative policies that have been produced by the Defendants. I accept that this evidence does have its limitations but what is clear from the evidence is that there are alternative products available on the market that the Claimant’s solicitors could have considered when dealing with this particular low value medical negligence case.
72. 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. At provisional assessment I decided that £2,120, inclusive of IPT, was a reasonable and proportionate premium. I decided upon this figure based upon firstly the comparative premiums that had been submitted by the Defendants and secondly upon the basis of my own judicial knowledge of dealing with detailed assessments in similar cases. This latter basis has not been challenged by the Claimants.
73. Although, as I have indicated above, I am perfectly entitled to disallow the premium, I have decided not to interfere the decision with the decision that I made at the provisional assessment, so the sum of £2,120 inclusive of IPT should be allowed. I make this decision on the basis that, as has been conceded by the Defendants, it was reasonable for the Claimant to have taken out an appropriate ATE policy.
74. Having made my decisions that the Bill is disproportionate and the amount of insurance premium is disproportionate, I must now stand back and decide as to whether or not as a result of my decisions that the costs as a whole that have been allowed are still disproportionate. Although I have made some small increases to the amounts allowed at provisional assessment I am satisfied that the sums that have now been allowed are reasonable and proportionate.”
The proportionality and survival series
This judgment emphasises the points made in the “Proportionality and survival for litigators series.
- Proportionality and survival for litigators Part 1
- Proportionality and survival for litigators Part 2.
- Proportionality and survival for litigators 3
- Proportionality and survival for litigators 4
- Proportionality and survival for litigators 5
Posts about proportionality
- Costs budgeting and litigants in person: budgeting the costs of assistance and counsel
- Costs budgeting is appropriate and necessary in a high value case.
- Costs budgeting & David -v- Goliath: Does it give the “little guy” a chance?
- Costs budgeting: proportionality: City firms and proportionality when there is £16 million at stake.
- That proportionality judgment: 10 key points.
- Budgets, proportionality & disclosure
- Proportionality, assessment and the costs of budgeting
- Proportionality, bundles & £3 million spent on costs.
- More on summary assessment of costs and proportionality.
- A working example of proportionality in practice.
- Rigorous costs budgeting to ensure proportionality.
- Enterprise, Proportionality, witness statements & unnecessary costs.