COST BITES 45: COURT REJECTS DEFENDANT’S APPLICATION THAT CASE INVOLVING A CHILD BE BUDGETED: ACCEPTS CLAIMANT’S APPLICATION FOR AN INTERIM PAYMENT ON COSTS – BUT NOT THE AMOUNT CLAIMED

In CXS v Maidstone and Tunbridge Wells NHS Trust [2023] EWHC 14 (KB) Master Cook considered issues relating to costs in a case concerning a child where the matter is unlikely to be resolved for many years.  The Master rejected the defendant’s argument that there should be some form of costs budgeting.  He accepted the claimant’s application for a further interim payment on account of costs, however this was considerably less than the sum the claimant sought.

“It seems to me that the current case is typical of the kind of case the CPRC costs sub-committee had in mind when approving this provision. There will be many years before a final prognosis can be made and directions made for trial. The case currently bristles with complexity and unknowns. There is not in my judgment sufficient certainty to enable sensible assumptions to be made concerning the extent of the work required in the duration of the stay to provide the basis for a budget. If incorrect assumptions are made there is the potential for further applications to vary the budget which would just add another layer of cost to the proceedings, alternatively a budget may be set which is artificially high. I consider the Defendant’s concerns about the level of incurred costs are adequately catered for by the requirement for a detailed assessment at the conclusion of the claim.”

THE CASE

The Master was considering issues of costs in relation to a claim by a seven year old claimant who had suffered brain injury at birth and has been diagnosed with cerebral palsy.  Judgment had been entered in 2019 and, in 2020 the action was stayed until Septemer 2022. It was common ground that the claim would be stayed further until September 2027.

THE ISSUES RELATING TO COSTS

The Master considered two issues relating to costs. The claimant’s application for an further interim payment on account of costs of £325,000 and the defendant’s application that the matter be budgeted.  The defendant’s application was dismissed.  The claimant’s application was granted but £80,000 was awarded.

THE JUDGMENT ON THE COSTS ISSUES

1. 1. Against this background Mr Hutton KC explained the short-form detailed bill of costs to date which had been prepared by BBK . The total costs incurred down to 16 November 2022 were £1,155,262 which included disbursements of £92,000 and VAT of £189,000. Of this sum £225,000 was incurred before judgment was entered on 3 October 2019 and a further £620,000 was incurred since judgment was entered.

1. 1. Mr Hutton KC indicated that the Claimant was seeking a further £325,000 which would take the total of interim payments on account of costs to £805,000. This sum would be just under 70% of the amount of the short-form bill. In the circumstances he submitted that this is an archetypal case, to exercise the jurisdiction referred to in the case of RKK, and to make an order in favour of the Claimant for costs incurred to date, and to make an order for the payment on account of those costs. Further, when doing so he suggested the court should bear in mind that the Claimant’s costs will continue to be accrued over the months and years to come, with an almost inevitable costs order in the Claimant’s favour, so that the likelihood for repayment of any overpayment of costs paid on account is truly miniscule or immaterial.

1. 1. On behalf of the Defendant Mr Readhead KC made the point that the costs incurred to date are significant by any standards. He pointed out that the costs incurred in the period between 4 October 2019 and 16 November 2022 were more than twice those incurred before judgment was entered on 3 October 2019 in circumstances where the claim was fully investigated both in relation to breach of duty and causation with the assistance of several liability experts and leading and junior counsel. There were also investigations into quantum and correspondence between the parties concerning the appropriate experts to be instructed. He also made the point that the claim has been stayed since 4 October 2019.

1. 1. Mr Readhead KC pointed to Mr McCauley’s observation at paragraph 17 of his witness statement to the effect that BBK had received multidisciplinary team input from the Claimant’s proposed quantum experts in the fields of accommodation, physiotherapy, care and assistive technology. He questioned whether it was either necessary or reasonable to be incurring these further costs at this stage.

1. 1. Mr Readhead KC pointed to the hourly rates being charged for “partner preparation” of £530 per hour, a sum significantly in excess of the current hourly guideline rate of £373 per hour for London band 2 covering the City and Central London. He compared the total costs of disbursements, which includes experts’ fees, of just £92,000 to the level of profit costs of £874,262 and invited the court to conclude that this level of costs at this stage of the case was manifestly excessive.

1. 1. In the circumstances, Mr Readhead KC submitted, that if this claim is to be stayed for a further five years it is reasonable that there be an order requiring the parties to file and exchange costs budgets with a view to a costs management order being made by the court so as to ensure that the case was dealt with justly and at proportionate cost in accordance with the overriding objective. This he submitted was the express purpose of costs management encapsulated in CPR 3.12 (2).

1. 1. Mr Readhead KC accepted that CPR 3.12 (c) excluded claims made on or behalf of a person under the age of 18 from costs management. However he pointed out that CPR 3.13 (3) makes specific provision for the court, on its own initiative or on application, to make an order bringing such a claim within the costs management provisions. He also placed reliance on the guidance given in PD 3 para 2(f) to the effect that an order for the provision of costs budgets with a view to a costs management order being made may be particularly appropriate in personal injury and clinical negligence cases where the value of the claim is £10 million or more.

1. 1. Mr Readhead KC accepted that the final resolution of this claim may not be for some years after the current stay is lifted by the court. He also accepted that BBK would need to undertake further work in the duration of the stay. He referred to the issues raised by Ms Hillemand at paragraphs 70 to 78 of her witness concerning the high levels of uncertainty in this case and the consequent difficulty in providing an accurate estimate of the likely costs. He submitted that the court when deciding the reasonable and proportionate costs for a particular phase would have regard to the factors set at CPR 44.3(5) and 44.4 (3).

1. 1. Mr Readhead KC submitted consideration of the CPR 44 factors includes a consideration of the work that will be required to be done as well as the circumstances in which the work will be carried out. It therefore followed that the practical difficulties to which Ms. Hillemand referred can and will be taken into account by the court and properly reflected in the budget. The fact that the claim is complex or “labour-intensive” is not a reason not to make a cost management order if the court considers that it is otherwise appropriate to do so.

1. 1. In the circumstances Mr Readhead KC invited me to make a costs management order limited to the duration of the stay namely to 6 September 2027 rather than to make any further interim payment on account of costs. He referred to CPR 3.13 (4) which provides that the court may, in a substantial case, direct that budgets are to be limited in the first instance to part only of the proceedings and extended later to cover the whole proceedings.

1. 1. In response Mr Hutton KC accepted the court had a discretion to apply costs management to this claim but submitted that it would be wholly inappropriate on the facts of the case.

Discussion and conclusions

1. 1. On any view the £1,155,262 costs incurred by BBK to date is high. To put the matter into some form of context, this court has extensive experience of cases involving claimants with cerebral palsy, multiple experts and a potential value of over £20 million. Where such claims are subject to costs management approved budgets usually fall in a range of £750,000 to £1,500,000. I readily accept that in such cases the incurred costs would usually be much lower as the period of time between issue and the first CCMC would be much shorter. In this case proceedings were issued almost four years ago and it will be almost a further five years before the first substantive CMC.

1. 1. I also readily accept that BBK have had to undertake a considerable amount of work in relation to CXS’s care and therapy regime and the management of the interim payments on account of damages. I note the terms of the stay contained in the order dated 25 June 2020 permitted the following steps;

“i. Insofar as may be required from time to time the Claimant shall be at liberty to apply for further interim payments on account of damages

ii. Pursuant to CPR31.11, the Claimant shall continue to comply with her duty to provide disclosure relevant to the issue of quantum, such duty to be discharged by way of keeping all relevant documents and serving a fully up to date List of Document upon the Defendant by 5 September 2022

iii. The Claimant shall apply to the Court for a further CMC to be listed before the Master for the first open date after 5 September 2022, the time estimate 1.5 hours

iv. By 5 September 2022, the Claimant shall obtain and serve upon the Defendant expert evidence in the fields of paediatric neurology and paediatric neuropsychology;

v. For the avoidance of doubt, the effect of the stay shall not preclude the Claimant from obtaining and being provided with such legal advice as may reasonably be required in relation to the general management of her claim and in relation to the management and application of the interim funds obtained on her behalf

vi. Such costs reasonably incurred in relation to the general management of the Claimant’s claim and in relation to the management and application of the interim funds obtained on the Claimant’s behalf to be recoverable on the standard basis to be assessed if not agreed.”

1. 1. The work reasonably undertaken by BBK in relation to providing legal advice and in relation to the general management of the claim and the application of interim funds must however been seen in the context that there is a Deputy and a Case Manager in place. The disparity between the cost of disbursements £92,000 and profit costs of £874,262 down to 6 November 2022 is clearly the root of the Defendant’s concern that that the case is not being conducted in a proportionate manner. In particular, I accept the Defendant has a genuine concern and may well be able to argue in due course that much of the solicitors’ time recorded in relation to experts and in liaising with CXS’s parents may not be reasonably incurred. However the fact remains, both parties accept that a substantial amount of work has had to be undertaken by BBK in connection with this claim and that acceptance is reflected in the amount of the voluntary payments made on account of costs down to 30 August 2022 in the sum of £480,000.

1. 1. I have concluded, accepting the submission of Mr Hutton KC, that it would not be appropriate to make a costs management order limited to the period of the stay as proposed by Mr Readhead KC. There are very sound policy reasons behind the decision to exempt children’s claims from costs management. As stated in the notes to the White Book at 3.12.3, the CPRC costs sub-committee responsible for this provision noted that typically such cases took many years to come on for trial and it may take many years for injuries to stabilise before a proper prognosis can be given and a trial date fixed. It is also relevant that the provisions of CPR 46.4 (2) (b) will require a detailed assessment of the costs payable to the Claimant in the proceedings unless there is a default costs certificate. This affords a level of protection to the Defendant against excessive costs being incurred by the Claimant’s solicitor.

1. 1. It seems to me that the current case is typical of the kind of case the CPRC costs sub-committee had in mind when approving this provision. There will be many years before a final prognosis can be made and directions made for trial. The case currently bristles with complexity and unknowns. There is not in my judgment sufficient certainty to enable sensible assumptions to be made concerning the extent of the work required in the duration of the stay to provide the basis for a budget. If incorrect assumptions are made there is the potential for further applications to vary the budget which would just add another layer of cost to the proceedings, alternatively a budget may be set which is artificially high. I consider the Defendant’s concerns about the level of incurred costs are adequately catered for by the requirement for a detailed assessment at the conclusion of the claim.

1. 1. I therefore turn to the Claimant’s application for a further interim payment on account of costs. I have no doubt that the Claimant is entitled to a costs order down to date of this application as there is no relevant offer and no other relevant factor which would militate against such an order being made.

1. 1. In the circumstances the sole question I must address is what amount, if any, is a reasonable sum in the circumstances. As the cases make clear the determination of a reasonable sum involves the court in arriving at some estimation of the costs the receiving party is likely to be awarded by the costs judge in the detailed assessment proceedings or as a result of the compromise of those proceedings. In undertaking that task there will always be a degree of uncertainty which will vary from case to case. At one end of the scale a judge may be asked to make an interim payment on account of costs having heard a trial or a specific application. In such a case the judge is better placed to have a detailed appreciation of the likely range of costs particularly in a case which has been subject to costs management. At the other end of the scale there are cases such as the present where the judge has had little involvement in the detail of the case and there is no costs management. In such a case the judge will have far greater difficulty in establishing the likely range of costs.

1. 1. Mr Hutton KC pressed for a sum of £325,000 which he said amounted to just under 70% of the short-form bill. Mr Readhead KC was reluctant to put a figure on what he thought a reasonable sum might be. Reading between the lines I think his position was that the sum already paid by the Defendant of £480,000 was a reasonable amount.

1. 1. I have already indicated that I have serious concerns about the level of costs incurred to date by BBK in this case. Equally I have accepted there are complex issues which potentially explain costs of this magnitude. However these issues are potentially in dispute between parties and I have no doubt they will fall to be considered further at any detailed assessment. In the circumstances I do not think it is useful to approach this case on the basis of a standard percentage reduction to the short-form bill of 70% as urged by Mr Hutton KC.

1. 1. The voluntary interim payments on account of costs to date have been made as follows;

i) 30 April 2019 – £150,000

ii) 11 March 2020 – £80,000

iii) 26 June 2021 – £150,000

iv) 30 August 2022 £100,000.

1. 1. It is not possible from the shortform-bill to estimate accurately the sum which has been incurred from 30 August 2022 down to the present, although the preparation for the CMC and some consideration of the expert evidence would be the minimum. In any event I may take into account the entire period from the entry of judgment. Given the uncertainties I have referred to above and the unusual features of this case I am prepared to make an order for payment of a further £80,000.

1. 1. This results in total interim payments on account of costs to date of £560,000. I am satisfied that this sum represents a reasonable amount to be paid on account in the circumstances of this case. I do not think the fact the Claimant may go on to incur further substantial costs in the future is a factor which should lead to any increase in the sum which I have found to be reasonable.

1. I would be grateful if counsel could draw the appropriate order. Finally, I would observe that this would seem to be an appropriate case for the parties to produce costs estimates in advance of the CMC which will take place in September 2027.