COST BITES 156: COSTS BUDGETING WAS APPROPRIATE IN THE CASE OF A SERIOUSLY INJURED CHILD: IT HELPS THE CLAIMANT AS MUCH AS THE DEFENDANT

I am grateful to PJ Kirby KC for sending me a copy of the judgment of Master Brown in the case of PXT -v- Atere-Roberts [2024] EWHC 1372 (KB), a copy of which is available here  Judgment PXT final 6 June 2024 .  The Master held that, on the facts of this case involving a seriously injured young child, it was appropriate for the action to be costs budgeted. Contrasting with an earlier decision in CXS v Maidstone and Tunbridge Wells NHS Trust [2023] EWHC 14(KB).

 “… in my view there is in this case a good reason to costs budget. That is for the very reason that costs budgeting is considered an effective form of costs management in other cases. It reduces the risk that costs become excessive and disproportionate, and reduces the prospect that detailed assessment will be required. It can also be expected to reduce the costs of dealing with costs issues and provide some transparency as to the parties’ respective liabilities in respect of costs and this, in turn, can enhance settlement.”

THE CASE

The claimant is a child who was seriously injured in a road traffic accident in 2021.  Proceedings were issued and liability agreed and approved 85:15 in her favour. Interim payments had been made in the sum of £1,025.000.

COSTS ESTIMATES PROVIDED

The Master had directed that costs estimates be filed.  He was concerned about the way in which the claimant’s figures had escalated.

“Importantly for current purposes, I ordered that the Claimant should, by 4pm on 12 July
2023, serve an estimate of her costs from the date of this Order to the next CMC and that if
the Defendant wished to apply for a costs management order with such an application to be
heard at that further CMC, it should do so by no later than 14 days before the date of the next
CMC. The Claimant had already provided the Defendant with a costs breakdown up to 27
February 2023 of some £253,000 (including VAT and including profit costs [solicitors’ time]
costs of £172,745 [excluding VAT]) and concerns as to the amount of costs claimed, underlay
the reasons for the Defendant’s request for the order that an estimate be served.

13. In accordance with the order of June 2023 the Claimant provided an estimate of costs
up to the next CMC: future costs were put at some £185,000 (of which some £93,920 were
profit costs [ex VAT]). In the estimate was a contingency for liaising with the Deputy, case
manager and, a property finder, and a letting agent and attendance at quarterly MDT meetings
(it is said, to monitor the care and rehabilitation package).

14. In December 2023 in support of a request for a further payment on account of costs, the
Claimant sent to the Defendant’s solicitors a detailed breakdown of costs and disbursements
incurred up to 24 November 2023; the incurred profit costs were then put at just below
£411,000 (ex VAT), (giving, it is said, a figure for costs significantly higher that the estimate
of profit costs to the next CMC but with another 17 months to go).

15. The Claimant’s solicitors have now served what they refer to as a short form bill of
costs (broadly in the form a statement of costs) and a revised costs estimate. The total costs
to date are now put at £850,000 (including VAT) with profit costs stated at £633,000
(excluding VAT) and expert fees at some £22,000 (excluding VAT). Estimated costs up to and
including the next CMC are put at £262,000 (including VAT) to include profit costs of some
£194,000 (excluding VAT) with expert fees of some £14,000 (excluding VAT).

16. Thus, in total, the figure for incurred and estimated costs to the next CMC substantially
exceed £1m (including VAT) and excluding VAT the figure is over £900,000 of which profit
costs are £827,000 (excluding VAT), and expert fees incurred and estimated at some £36,000
(excluding VAT). The Defendant has raised concerns about the accuracy of information
provided (suggesting that costs have wrongly been allocated to liability, or are based on
wrong hourly rates). It is not necessary to get into the detail of this matter. The main
concern appears to be the extent to which the costs have now exceeded the previous costs
estimate, and the sheer amount of costs now estimated and said to have been incurred. It appears
to be common ground that the estimate provided in accordance with my order has turned out
not to have been accurate, and during the course of the hearing it was suggested that the
incurred and estimate costs have just about doubled since about November 2023.

SHOULD THE CASE BE COSTS BUDGETED?

The defendant wanted the case to be costs budgeted.  The claimant did not.  The Master found that he had the power to order costs budgeting, even in a case involving a minor, and on the facts of this case it was appropriate to do so.  He considered the claimant’s arguments that this was not a suitable case for budgeting and hed

“43. As serious as all the matters are, and as sympathetic as I am to such difficulties, I do
not see them as presenting any hurdles to costs budgeting. However invidious it may be to
make any general comparison with other cases, such difficulties and challenges in claims
brought for serious injury in other cases do not prevent costs budgeting.

44. For the avoidance of doubt, I should say that I have borne in mind everything that has
been said in defence of the costs, and the possible justification for earlier costs estimate being
inaccurate (it is not necessary for me to make any ruling on this and the parties did not require
me to). Ms. Abrahams and Mr Hutton referred to challenges of obtaining instructions from
AXD. Mr. Hutton also tells me that there is a vast treating team of 8 people in professional
care, case management and therapy team to liaise which requires advice from the legal team
as to what kind of package should be recoverable. There are also said to be a large number of
experts to liaise with, as well as the case managers and the MDT, an Educational Consultant
and the Claimant’s mother in terms of schooling. It is said that liaison with the deputy is
essential to provide advice about recoverable items, including the care package, the
accommodation, equipment, transport and holidays. Mr. Hutton says that there was a
substantial amount of documentation in this case, referring also to very substantial
applications for interim payments since the initial approval order of the court (for which he
says documentation had to be marshalled). I note that there have been the challenges outlined
above with the family’s move to larger rental accommodation. Indeed, Ms Abrahams says in
her witness statement that “[this] case has been one of the most complex and labour-intensive
cases I have ever been involved in”.
45. But again I am not satisfied that these challenges prevent the court from effectively and
fairly costs budgeting. In my judgment, in contrast perhaps to the position in CXS, where the
court was asked to cost budget during what was effectively a stay and notwithstanding all the
complications referred to in the evidence, it seems to me that reasonable and safe assumptions
can be made as to the work reasonably required for the purposes of costs budgeting (as they
are in other cases where significant challenges of the sort relied upon arise). It will in any
event always be open to the parties to apply for variations of a budget

46. The Claimant has not yet served a report from a neuropsychologist. Such reports often
provide a reasonably objective measure of the extent of disability (being based on testing).
It has been said that the brain injury in this case was in some measure subtle. The views
of a neuropsychologist can be expected to assist in determining whether and to what extent
disability is due to neurocognitive difficulties or whether it might have a psychiatric
explanation. There may well be complex and difficult issues of causation for the experts to
address and witness statements will no doubt address the pre-existing position. Even allowing
for the points made by Mr. Hutton it appears a reasonable area of enquiry; indeed I would
suspect that this is a matter which the Claimant’s advisers were aware needed to be addressed
at an early stage. There is at least some indication of features in the pre-accident
documentation which require consideration. Quite how such issues will feature after the
investigation is uncertain. However, even accepting the difficulties associated with such
matters, again I do not accept that they prevent the court effectively costs budgeting. Such
matters arise in other costs budgeted claims.
47. But, even if those factors which Mr. Hutton referred to weighed more heavily against
costs budgeting than I think, and might on their own constitute reasons for not costs
budgeting, in my view there is in this case a good reason to costs budget. That is for the
very reason that costs budgeting is considered an effective form of costs management in other
cases. It reduces the risk that costs become excessive and disproportionate, and reduces the
prospect that detailed assessment will be required. It can also be expected to reduce the costs
of dealing with costs issues and provide some transparency as to the parties’ respective
liabilities in respect of costs and this, in turn, can enhance settlement.
48. I have some concerns about the explanations given for the costs estimates proving so
inaccurate, not least of which is the suggestion that more issues had to be dealt with in the
witness statements than it was said had been anticipated. But without making any finding on
the particular points raised by the Claimant (and as to the various competing reasons as to
why the earlier estimate has proved inaccurate) which is not necessary for these purposes, I
think there is clearly substance to the concerns raised by the Defendant about both the extent
of the departure from the earlier estimates/costs information and the level of costs generally.
Ordinarily I would expect that at least in the great many cases estimates can be expected to
provide reassurance that costs are likely, within a range, to be reasonable and proportionate,
but that is not the case here.

COSTS BUDGETING CAN PROTECT A CLAIMANT TOO…

57. Having considered all the points made by Mr. Hutton, closely and carefully developed
as they were, and issues arising as to the utility, practicality and the expense of costs budgeting
and on weighing up all the relevant matters I am satisfied, that I should make an order for
costs management by costs budgeting and for reasons which are apparent from the above, that
such costs budgeting should start soon.
58. There are, however, two further issues which arose in the hearing and which it is
appropriate for me to deal with, albeit briefly, and even though their resolution is not necessary
for my decision.
59. First, in CXS reference is made to the to the availability an assessment under CPR
46.4(2)(b) as protection to a defendant and as a reason for not cost budgeting. Such an
assessment generally takes place at the end of a claim when solicitors acting for a claimant
seek to claim costs against the child or the protected party. It may be required when the
solicitors seek payment of a success fee or reimbursement of an ATE premium (as an
additional liability) (such expenses not being recoverable against the defendant to the claim)
but such a claim is generally made when the costs claimed against the defendant have been
agreed or assessed, and the amount recovered between the parties has fallen short of the
amount the solicitors say is due (giving rise to what is referred to as a ‘shortfall’ claim). An
assessment under 46.4 is required to protect the interests of the child or protected party and it
takes place after inter partes costs have been assessed. Often (if not normally) shortfall claims
are not pursued and solicitors waive such a claim so a detailed assessment is not required and
the remaining matters can be dealt with summarily. It is not however clear to me that the
provision set out in of 46.4(2)(b) does substantially protect a defendant against excessive
costs being incurred by the claimant’s solicitor; it is for the benefit of a protected party and a
child.
60. But I should perhaps say that there is at least some basis for thinking that costs budgeting
may be beneficial for protected parties and children in an assessment under CPR 46.4. That is
because there may be a presumption in certain circumstances that costs in excess of a budget
are unreasonable: see JXC v NIS [2023] EWHC 1000. Thus costs budgeting may provide
some protection to a protected party or child from a claim by their solicitors in costs. In this
case it is not necessary for me to go into this matter in any detail because Mr. Hutton told
me (Mr. Kirby not objecting to me being told about it, rather than evidenced in the normal
way) that there is a funding arrangement in place such that the Claimant will not be expected
to pay costs in excess of those recovered for the Defendant (by way of additional liability or
by way of a claim for a shortfall). It would seem to follow that there would be no assessment
at all under CPR 46.4 (see PD 46.4 2.1 (a)). So it is not clear to me that the points that are
made in CXS about CPR 46.4 apply here.
61. Second, there is an issue arising as to cost protection (QOCS) and the fact that issue of
this claim pre-dated the recent changes to QOCS in Part 44 ( which came into effect on 6
April 2023). In The Scout Association v Bolt Burdon Kemp [2023] EWHC 2575 it was
common ground that QOCS protection applied to costs orders in detailed assessment and in
that case, on appeal, Freedman J agreed with the conclusion of Costs Judge Leonard at first
instance, that the claim by the defendants for costs against the solicitors themselves under
section 51(3) of the Senior Courts Act 1981 was, in the absence ground for wasted costs being
made out, inconsistent with such costs protection. In Challis v Bradpiece [2024] EWHC
1124 (SCCO) Deputy Costs Judge Roy KC found, following argument, that QOCS did apply
in detailed assessment proceeding but held that the competing arguments as to whether this
we are very finely balanced and gave permission to appeal. It thus appears, as things stand,
that cost protection that QOCS costs protection does apply in detailed assessment. And, in the
light of the decision of the Supreme Court in Ho v Adelekun [2021] 1 WLR 5132 and the
decisions of the Court of Appeal in Cartwright v Venduct Engineering [2018] 1 WLR 6137
and Harrison v University Hospitals of Derby [2023] 4 WLR 8, any costs orders in favour of
the Defendant, including any costs awarded in detailed assessment proceedings, could only be
set off against any damages and interest ordered in favour of the Claimant. So if the Defendant
were successful at detailed assessment and was awarded costs in his favour he could enforce
that costs order at that assessment but only up to the total amount in money terms of the
damages and interest ordered in favour of the Claimant. Any costs orders in favour of the
Defendant could not be set off against any damages and interest which were payable to the
Claimant pursuant to a settlement or a Tomlin order or the acceptance of a Part 36 offer, rather
than pursuant to an order of the court. Thus, if costs protection does apply in detailed
assessment (and Mr. Hutton say that this must be regarded as doubtful) the Defendant
(effectively the insurer) faces the prospect that if damages are agreed either in a Tomlin order
or by way of acceptance of part 36 offer (in respect of which there is perhaps at least a
substantial prospect), the Defendant could not at detailed assessment, even if successful,
obtain an enforceable order for costs. Whilst the protection is one conferred by Parliament
it was not clear to me that it might not be a factor that would also weigh in favour of costs
budgeting rather than leaving the costs disputes for detailed assessment.
62. Mr. Kirby submitted that it was a factor that should weigh in his favour in the exercise
of discretion. The short point being that this claim having been issued before the recent QOCS
amendments, the Defendant has a significant disadvantage and that these provisions created
something of a ‘free hit’: any Part 36 offer (or other admissible offer) in the detailed
assessment is deprived of much its force as the usual costs consequences would, as I
understood the point, not be applicable. Mr Hutton’s response to this was that there was no
such ‘free hit’ as even if the Defendant were not likely to recover his costs if successful, any
admissible offer would mean the Claimant would not receive her costs and this was a real
and sufficient incentive to settle costs. In any event it was argued that Parliament must be
considered to have had this in mind when instituting QOCS as is inherent in cost protection;
and for this reason it cannot properly be taken into account in when exercising my discretion.
63. For reasons which are apparent from the above, I am satisfied that whether or not there
is any cost protection in detailed assessment, and whether or not Mr. Hutton is right about the
points he makes that I should order costs management. It is significant enough that the parties
are exposed to a substantial dispute which would require the preparation of Bills, Points of
dispute etc and further, the prospect of a detailed assessment with substantial costs. Indeed
I am not sure that I heard quite as full argument on this as might have been appropriate on
the second point that Mr. Hutton raised. But I should perhaps record that I would have rejected
the contention that cost protection could not substantially affect the costs incentives that come
with Part 36 offers and thus effect the detailed assessment process; in short, that it would
constitute a real and significant disadvantage to the Defendant. The Claimant’s solicitors
would, of course, risk recovery of their own time spent on costs recovery. But not to incur
any enforceable costs liability for the other side’s costs substantially reduces the downside
of declining an otherwise good offer and reduces the prospect of settlement2
. Further, and on
a relatively superficial consideration of the points made by Mr. Hutton, and without deciding
this point, I should also say that I had some difficulties seeing why this matter should not
add weight to, or perhaps accentuate, the concerns I have with the submission that it would
be preferable that costs should be left to detailed asses