CHAPTER ONE – COSTS & FUNDING
Improving results through avoiding ambiguity and adopting a planned approach to managing your caseload remains one of the central themes of this book. This chapter considers why it is essential to get the funding options right at the start of the case in order to avoid fundamental cost recovery problems arising at the end of it. In so doing, it is helpful to consider the costs issues which are likely to arise during the case so that you can have the correct sort of evidence on file to either head off the problem(s) or persuasively deal with them as needed.
As clinical negligence cases are proportionately more complicated than many other types of civil litigation of comparable value, the costs tend to be higher. This is an attractive lure for claimant firms but not necessarily for claimants themselves. Defendant organisations regularly publish figures purporting to show that claimants’ costs are excessive and the average claimant cannot take the risk of having to bear legal fees. However, the position post-Jackson is that they are expected to bear at least some of the costs. Clients are consumers of legal services and lawyers are increasingly finding ourselves part of a professional services industry.
This creates fertile ground for conflict on almost every clinical negligence case and so practitioners need a sound plan to deal with it. The winner is entitled to recover their proportionate costs of being required to prosecute or defend the action from the loser. The loser is entitled to seek to minimise these costs and seek assurances that professional obligations (such as the indemnity principal) have been properly complied with. This can leave the clients paying for the shortfall.
Accordingly, it is essential to get the funding and funding advice right from the start. Achieving this will make both your client’s and your position much more secure. There is little point in doing an excellent job in winning the case if you then do not get paid for it.
As one case finishes, another starts. You have cases at various stages from initial assessment to costs recovery. The same funding and costs issues are likely to arise again and again on these cases, although not all of them will arise on every case. Using the lessons learned from one case will help you on the others. Developing a professional process which allows you to replicate success again and again will allow you to control your case progression much better.
Client Care Information
A clear explanation of the funding method and potential costs liabilities needs to be given to your client before any substantive work is undertaken. Most firms seek to cover all of the bases by sending out a detailed client care information pack with the initial explanatory letter. Many clients find the morass of information they receive confusing and so will often not fully understand the minutiae. They tend to appreciate that there is some risk of paying something and will often need to be given a clearer explanation of what their potential liability and obligations are. It is advisable to keep a clear record of what they were told (including any amounts they might need to pay and possible scenarios which might lead to this) in case you need to prove that they were given the correct advice later in the case. Given the day-to-day pressures of running a case, this can be easily overlooked by even the most experienced of practitioners. If the task is delegated to junior colleagues, an effective supervision mechanism needs to be employed and maintained to ensure compliance with these requirements because the act of delegation by itself is rarely sufficient to satisfy a costs judge.
A commonly encountered issue at the conclusion of a case is whether the retainer itself was enforceable. There is no requirement that this possibility should be raised during the life of the case and so the risk is that too much time has elapsed to correct any problems. Even if a relief from sanctions application (under CPR 3.9) is possible, the additional cost, delay and risk this causes is undesirable to your client and your firm. The status of all of the fee-earners who may deal with the case needs to be agreed in advance by your client along with the hourly rates your firm intends to charge for them (see Pilbrow v Pearless de Rougemont & Co (A Firm)  3 All E R 355, CA). This is particularly so where the hourly rates charged are unusually high (e.g. Swain v J C & A Ltd  EWHC B3 (Costs), para. 27). If a fee earner does work on the case but has not been properly described, then those fees are irrecoverable from the losing party.
It is also entirely possible that the different documents in the client care pack have been updated at different times and so include different rates. If this is not corrected, then the lower rates will usually be applied. Where the rates change during the life of a case, then that must also have been notified to your client with suitable written evidence being kept on your file. Although the client care information is privileged, the losing party will often request sight of it having raised the issue of non-compliance in the points of dispute.
The availability of public funding is now so limited so as to be the exception rather than the rule. If your firm does hold a legal aid Franchise, then the Manual provides detailed guidance on the requirements to be followed.
All claimants’ solicitors are under a duty to advise on all of the available funding options. If a prospective client appears to be eligible for public funding, then this means advising them of this and signposting them onto a franchised firm even if this means losing the case. However, one of the issues with public funding is that the hourly rates allowed for experts are still relatively low. This means that your preferred expert may well refuse to act. As the defendant is usually not so constrained, there is a genuine risk of inequality of arms and this can justify advice that public funding is not the best option. If so, then it is usually advisable not to charge the client additional liabilities so that they are in the same position as if public funding had been used.
Considerable care needs to be taken in the advice given to claimants when switching from legal aid to a CFA (e.g. covering the prospects of success, how this affects the success fee and level of ATE premium, the reasonableness of changing the funding and how the legal aid costs & scope limits have been complied with) following decisions such as XDE v North Middlesex University Hospital Trust  EWCA Civ 543, Surrey v Barnet and Chase Farm Hospitals NHS Trust  EWCA Civ 451 and AB v Mid Cheshire NHSFT  EWHC 1889 (QB). As a general guideline, it is advisable to allow the claimant to make a fully informed decision which, perhaps years later, can objectively be seen to have been in their best interests.
Before the Event Legal Expenses Insurance (BTE LEI)
BTE LEI is now commonly included with other insurance policies. The advantage to the claimant is that they obtain a substantial amount of legal cover for little or no additional cost. This is more beneficial to claimants and defendants than After the Event (ATE) insurance policies which have higher premiums and so their availability and suitability needs to be carefully considered at the start of the case.
There may be valid reasons for not using the BTE policy. The indemnity limit may not be sufficient to cover the costs of the entire case to trial. The limit is usually intended to be divided equally between the claimant’s and defendants’ costs. If you have a multiple defendant case, then this can reduce the amount of cover available for each party’s adverse costs and disbursements significantly. The scope of the cover and any exclusions need to be carefully checked to ensure that the particular type of case you are dealing with is covered by the policy. For example, omissions of care or the acceleration of an injury may appear to be excluded and clarification needed.
The claimant ought to be asked for a copy of their insurance policies (rather than ‘legal expenses’ insurance policies which might confuse them) and a clear record kept of these being checked by you.
It is likely that the BTE insurer will require a formal application to be made before it will agree to indemnify your costs. Any costs which you incur before this may well not be covered by the policy. Most BTE insurers have selected a panel of specialist firms of solicitors whom they prefer to instruct and so a freedom of choice application will often be required.
Freedom of choice remains a somewhat vexed question in practice. The European Court of Justice’s ruling in Eschig v UNIQA Sachversicherung AG (C-199/08, 10/9/2009) appears to require insurers to allow freedom of choice in ‘proceedings’ (which does not necessarily mean just ‘issued proceedings’) as a result of the relevant EU Directive (now Directive 2009/138/EC, Article 201(1)(a)). However, the Financial Ombudsman Service interprets the enabling regulations (the Insurance Companies (Legal Expenses Insurance) Regulations 1990) as allowing insurers to refuse granting Freedom of Choice to non-Panel firms pre-proceedings. The FSO’s website (www.financial-ombudsman.org.uk/publications/
technical_notes/legal-expenses.html) confirms that it will look at each complaint on its merits but will not criticize a refusal unless there are exceptional circumstances.
The panel firm will usually be asked to assess the freedom of choice question and the merits of the case at the same time. It is advisable to send them a helpful breakdown of the proposed case on limitation, breach of duty, causation of damage and quantum issues; the core supporting evidence; and a summary of the proportionate investigative steps you wish to take in order to minimise the risk of delays occurring. If you can show that you have carefully considered the case, then the chances of agreeing to your request for funding are greatly improved.
In Orde van Vlaamse Balies & Another v Ministerraad [C-667/10, 11/12/
2019], it was held that this freedom to choose one’s own lawyer must also apply to mediation (which comes within the definition of ‘proceedings’ in Article 201(1)(a))
Conditional Fee Agreements
The Legal Aid, Sentencing & Punishment of Offenders Act 2012 (‘LASPO’) allows a success fee of up to 25% of the claimant’s damages for past losses and PSLA to be deducted from their damages. Accordingly, a claimant who agrees to this method of funding is likely to receive less compensation than a client who has BTE insurance. This relative disadvantage to clients can only partially justified on the basis that parliament has imposed this change and so the client still needs to be properly advised if problems are to be avoided.
One of the aims of the Jackson reforms was to reduce the amount of satellite costs litigation by making a failure to advise clients properly a regulatory client care issue rather than an inter partes issue over whether the success fee had to be paid. Accordingly, the issue should be one between the client and their advisors. If a complaint is raised, it is likely to result in delays to completing the case whilst the complaint (and possibly a solicitor-own client Detailed Assessment) is resolved. This is likely to reduce cash flow and profitability. However, XDE (supra) shows that a challenge to the recoverable part of the ATE premium can also prevent recovery of the success fee.
It is often assumed that the success fee cap (under the Conditional Fee Agreements Order 2013) means that no detailed risk assessment would be needed. However, because 25% is a cap, the success fee can be anywhere between 0-25%. This range creates the scope for clients shopping around and seeking an explanation as to why you set the success fee at a given amount.
If it is always set at 0%, then there is probably little need to do a separate risk assessment. However, this does not necessarily make good business sense or reflect the realities of each case. If it is always set at 25%, then a risk assessment helps to show the client why you consider that the risks justifies this and may demonstrate that your competitors have missed an important risk in the case. Another alternative is to carry out some investigative work before setting the success fee (although this must be funded some other way).
Whatever system is adopted, it must be properly explained to the client so they can make an informed decision. This is essential in children’s cases. CPR Part 21 requires that the advice given to the litigation friend about how the success fee was set be disclosed to the court before the infant approval hearing along with a witness statement from the litigation friend confirming why they agreed to this. The relevant risks are those relating to the child only not anyone else. Although these rules technically only apply to cases worth under £25,000, it is difficult to see why less protection would be afforded to children with more valuable cases. A bespoke approach to each case is advisable (see A & M v Royal Mail Group  EW Misc B24 (CC)).
The relevance of consumer protection legislation should also not be underestimated. The Consumer (Information, Cancellation & Additional Charges) Regulations 2013 set out specific requirements for advising any consumer of their right to cancel the contract where it is not signed at the place of business. Since most CFAs are sent out to clients for signature and return, that solicitor must ensure that the cancellation rights have been properly explained. Cox v Woodlands Manor Care Home Ltd  EWCA Civ 415 confirms that failing to do so renders the entire CFA unenforceable and so also prevents the recovery of base costs against the losing party as the indemnity principle has been breached. Although the cancellation point was not in issue in AH v Lewisham Hospital NHS Trust  EWHC B3 (Costs), at para. 69, Deputy Master Campbell made an observation that Cox “…is illustrative of the fact that the quality of the advice is capable of having a significant bearing on how much the paying party is required to pay under a costs order even where the client takes no issue with that advice.”
After the Event Legal Expenses Insurance
Qualified One-Way Costs Shifting (‘QOCS’) operates so as to greatly reduce the risk of paying the defendant’s costs if the case is lost. Post-Jackson, the ATE insurance premium is generally unrecoverable from the losing defendant. However, unlike in personal injury actions, part of the ATE premium may be recoverable in clinical negligence actions (see The Courts & Legal Services Act 1990, s58C (as amended) and the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (No. 2) Regulations 2013, Regulation 3). The key word here is ‘may’ and so it is prudent to notify the defendant that you will be seeking to include the recoverable part of the premium in any monetary settlement as soon as is practicable after taking out the policy. The pre-Jackson practice of giving notice in the letter of claim remains relevant.
At present, the recoverable part of the premium insures against the costs of obtaining expert evidence on liability issues. It may also cover the risk of failing to beat an opponent’s Part 36 offer. The irrecoverable part of the premium tends to cover a wider set of risks and is paid by the claimant out of their damages. The available products vary between providers and new products are always a possibility so the precise terms of the product on offer need to be considered and agreed to by the client (including their cancellation rights).
Accordingly, the client must decide whether they want to pay for insurance. If they do not, then another means of disbursement funding must be found. There are companies who offer specific disbursement-only funding credit, but a detailed consideration of these (and other) options is outside the scope of this book. Whilst leaving the ATE application until after the letter of response has been received may seem an attractive course of action, if a denial is received, it may lead to cover being justifiably refused or a higher premium being paid by the claimant.
The same considerations as were discussed above for CFA advice apply to the ATE advice. The reasonableness of a fairly typical ATE product was considered in Nokes v Heart of England Foundation NHS Trust  EWHC B6 (Costs). Although the premium was found to be reasonable on the facts, it left open the possibility that the issue could be revisited if defendants could find better evidence on another case. In McNenemy v Peterborough & Stamford Hospitals NHS Trust  EWCA Civ 1941, it was held that the premium was recoverable even if the expert report had not actually been obtained. In West & Demouilpied v Stockport NHSFT  EWCA Civ 1220, a comprehensive fact-finding exercise was undertaken and block-rated premiums were effectively found to be reasonable and proportionate. It remains possible that further satellite litigation may focus on further sub-issues surrounding ATE premiums as not every possibility was covered off. However, at present, challenges based on a comparison with another policy should be at an end.
Although the general rule that costs follow the event remains intact (CPR 44.2(2)(a)); the court has a wide discretion in deciding whether to award costs (CPR 44.2(1) and 44.2(2)(b)). Relevant factors include the conduct of all parties; the extent to which the winner has succeeded on all issues they pursued; and the effect of settlement offers made and refused (CPR 44.2(4) & (5)). The court may order that only some of the winner’s costs need to be paid (see CPR 44.2(6)(a-g)) so recovery may be less than 100% even before the assessment begins.
The standard order for ‘100%’ recovery is that the loser pays the winner’s costs on the standard basis, to be assessed if not agreed. This does not mean that the winner is likely to recover all of their costs. The twin precepts are that the costs must have been reasonably and proportionately incurred. As this is a question of fact, each case is likely to have significant scope for argument over the amount to be paid. At the start of the case, the client needs to be advised as to who will meet any shortfall and in what circumstances they might become liable. As the costs arguments are largely predictable, your client will expect you to minimise any losses or else expect your firm to bear them.
The Jackson reforms redefined this and ‘necessity’ is no longer considered relevant. That said, clinical negligence claims are usually complex enough to include what would have previously been described as ‘necessary’ within the new definition.
CPR 1.1 requires courts to deal with cases at a proportionate cost. CPR 44.3 sets out the test for assessing this for costs incurred after 1st April 2013. Specifically, CPR 44.3(5) sets out a 5-stage test:
“(5) Costs incurred are proportionate if they bear a reasonable relationship to –
The sums in issue in the proceedings;
The value of any non-monetary relief in issue in the proceedings;
The complexity of the litigation;
Any additional work generated by the conduct of the paying party; and
Any wider factors involved in the proceedings such as reputation or public importance.”
There is much scope for interpretation because there is no genuinely authoritative guidance. This rule does not prioritise any one factor. However, it is usually assumed that the emphasis is on 5(a). There is no stipulation that costs must be less than the amount recovered although this is the interpretation which should be contended for by the losing party. Costs awards higher than the damages award are well-known and this can be the position adopted by the winner. Costs which are less than the damages are not automatically or prima facie proportionate and so the loser is entitled to seek further reductions. The winner needs to have been planning to address this from the outset not least because the court can make a costs order at any time (CPR 1.1) and the case is likely to be costs budgeted.
The value of non-monetary relief is usually the least important of these factors in clinical negligence. However, if receiving an apology (for example) is especially important to a claimant, then this is likely to be relevant. The timing of the apology or the failure to provide one would then also be relevant considerations.
The complexity of the litigation appears to provide much greater support to the winner. However, the point is often made that the case is not, in fact, complex when compared to other clinical negligence cases and given the evident expertise of the solicitor who has just won it. Other common arguments are that one-expert cases are obviously not complicated or that suitable admissions render the case a simple one. This is not obviously wrong in the absence of contemporaneous evidence accrued during the life of the case even though the CPR is intended to cover all types of civil litigation. If you want to persuade the court that your position is the more reasonable, then the winner is well advised to have plenty of evidence showing that they raised specific points regarding the complexity of the matter during the case whilst the loser ought to be able to prove that they sought to keep costs down due to the case’s relative simplicity.
‘Additional work’ or ‘conduct’ arguments (5(d)) are very often useful in this context although they need quite a lot of advanced preparation to be persuasive. The paying party is understandably unlikely to accept that their approach to the case increased costs even when faced with carefully prepared evidence. This means that an assessment hearing is more likely to occur. Conversely, the paying party may raise conduct issues under CPR 44.2(4) & (5) even though CPR 44.3(5) refers only to the paying party’s conduct. It is useful to bear in mind that the loser’s costs draftsman is likely to have prepared such points from their client’s file so the winner ought to plan ahead for this by raising conduct issues in correspondence. At the very least, the response you will get gives you advanced notice of your opponent’s position and may help to resolve the issue more quickly. Malmstein v Bohinc  EWHC 1386 (Ch) emphasises the importance of providing directly supportive evidence.
‘Wider factors’ (5(e)) may appear to be less relevant. However, a proportion of cases will be fully defended on the basis that the medic’s professional reputation can only be exonerated by forcing discontinuance or winning at trial. This argument is often persuasive to a judge even where there is no evidence presented that the medic’s reputation has actually suffered. However, if the defendant is allowed to use this argument, then the claimant ought also be able to rely on it to show that the costs of the action increased unnecessarily as a result of the refusal to settle.
Reasonableness is subordinate to proportionality. It is not mentioned in CPR 44.3(5). There is a 2-stage test in assessing costs. Firstly, the court assesses the reasonableness of the costs by analysing the individual items in the Bill, the time reasonably spent on these items and the CPR 44.5(3) factors. Having done so, the judge should then take a step back and decide whether the total figure is proportionate. If it is not, then it should be reduced accordingly (see Malmstein, supra). As the previous test of whether the costs were ‘reasonably and necessarily incurred’ (under Lowndes v Home Office  EWCA Civ 365) is now incorrect, reasonableness depends on proportionality not necessity. If an item of costs looks disproportionate in either being incurred or the amount that was spent on it, then it is probably also unreasonable on the standard basis (where uncertainty is resolved in the paying party’s favour). However, the courts still hear arguments that the deduction for unreasonableness is sufficient to also cover proportionality (Malmstein, supra). An example of the difficulties some judges are having in separating the two precepts is provided by Savoye and Savoye Ltd v Spicers Ltd  EWHC 33 (TCC).
Reasonableness has separate relevance if the assessment is on the indemnity basis as proportionality is irrelevant (CPR 44.3(3) does not refer to it) and uncertainty is resolved in favour of the receiving party.
Helpful Case Law
It remains difficult to provide much useful guidance on this issue beyond saying that making it clear in contemporaneous attendance notes and correspondence explaining why you felt that any given costs item was or was not reasonable and proportionate is likely to assist the court in reaching a reasoned decision on this difficult issue. However, many cases do not reach an assessment so you (or your costs draftsman) need to be able to persuasively negotiate the issue.
Such guidance as is available needs to be cited in its proper context. Presently, the general position can perhaps best be illustrated by Ted Baker plc v Axa Insurance UK plc  EWHC 4178 (Comm). Lord Neuberger said obiter that “…disproportionate costs, whether necessarily or reasonably incurred, should not be recoverable from the paying party. To put the point quite simply, necessity does not render costs proportionate.”
In Hobbs v Guy’s & St Thomas’ NHSFT  EWHC B20 (Costs) the claimant’s costs in a fairly straightforward case settling pre-issue were reduced significantly because they had not been reasonably incurred and then because they were still disproportionate. However, Master O’Hare also said (at para. 35) that “Even in modest value clinical negligence claims it is necessary to incur costs … clinical negligence claims have more complexity and involve more work than do other claims of similar value.”
In May & Another v Wavell Group plc & Another  EWHC B16 (Costs), the claimant’s costs were approximately 9 times the value of the pre-issue settlement (partly because a QC had been instructed via direct access). Reasonable costs were assessed at approximately four times the settlement value and then this was reduced to less than 1½ times on proportionality grounds. At para. 35, Master Rowley said “The amount that can be recovered from the paying party is not the minimum sum necessary to bring or defend the case successfully. It is a sum … only a contribution to that receiving party’s costs in many modest cases.” Similarly, at para. 42 that proportionality “will require legal representatives to inform their clients that, even if successful, they will receive no more than a contribution to the costs that will be incurred” and that this is intended to promote settlement. This creates the risk of the client paying a considerable shortfall, possibly even exceeding the value of their damages. However, at para. 45, the Master also said that “Sir Rupert Jackson refers to the possibility of low value but complex litigation incurring costs above the value of the damages” so does not preclude recoverable costs exceeding damages.
BNM v MGN Ltd  EWHC B13 (Costs) provides the first indication that judges are prepared to give a ratio to assist in determining proportionality. At para. 49, Master Gordon-Saker states that base costs of over 3 times the settlement value must be disproportionate and costs of around 1½ times would be proportionate.
In Murrells v Cambridge University NHSFT  EWHC B2 (Costs), the 100% success fee was found to be too high because the prospects of success were better than 50/50. An 82% success fee was substituted (para. 9). However, the already-reduced base costs were considered to be proportionate and the complexity of a modestly valued clinical claim was recognised (para. 52)
In Rezek-Clarke v Moorfields Eye Hospital NHSFT  EWHC B5 (Costs), reference was made to the need for the experts’ fees to be reasonable and proportionate. At para. 23, Master Simons reduced some of these fees and noted with some approbation the practice of charging large fees for addendum reports. At para. 25, he noted that costs of over £70,000 bore no reasonable relationship to the agreed damages of £3,250.
This is an area which is likely to continue to see satellite litigation.
Qualified One-Way Costs Shifting (QOCS)
QOCS protects the losing claimant from paying the defendant’s proportionate costs. As this protection is not guaranteed in every case so caution is needed. The injury element of a clinical negligence claim brings it within the scope of the definition under CPR 44.13(1). However, a pre-action disclosure application is not covered.
A successful claimant may be awarded damages but fail to beat the defendant’s Part 36 offer. In that case, the claimant stands to lose the damages which go towards paying the defendant’s costs. CPR 44.14 allows an order for the full amount of the defendant’s costs to be paid (in this case from the date the relevant period of the offer expired) but then limits the payment to the amount of damages recovered. In short, the claimant would get a pyrrhic victory but their solicitor can claim some of the costs (up to the point when the offer should have been accepted). Conversely, QOCS protection puts defendants in substantially the same position as they were when public funding used to be more widely available. In most cases, if they win, they bear their own costs because there is no award of damages. However, in Ho v Adelekun  EWCA Civ 517, the court’s power under CPR 1998 Part 44.12(1) to set off defendants’ costs entitlement against claimant’ costs was applied to a QOCS case. This will now be considered by the Supreme Court.
Whether this is likely to result in defendants making low Part 36 offers on cases they believe will fail is open to question. CPR 44.15 allows them to recover their costs in full where the case has been struck out but this is a relatively rare occurrence in clinical negligence cases. CPR 44.16 may provide a more fruitful avenue, however. If the claimant is found to be fundamentally dishonest, then the defendant will be entitled to apply to the court to recover all of its costs. The judge then needs to decide whether it is just to allow this. What amounts to fundamental dishonesty is itself still very unclear which creates risks for both sides.
Wagenaar v Weekend Travel Ltd & Another  EWCA Civ 1105 has held that QOCS is not ultra vires and does not apply to Part 20 Proceedings. Accordingly, separately represented defendants in clinical negligence actions appear not to be able to invoke QOCS protection against each other.
QOCS may be resulting in lower and less-controversial costs budgets from defendants for these reasons. Alternatively, it may be that it is in their interests to file budgets at the lower end of the reasonable range in order to improve their chances of reducing their potential exposure to the claimant’s costs. Costs budgets which are properly linked to the remaining issues on the case do provide excellent opportunities to reduce costs. However, budgets which are simply too high or low do not achieve this.
The key practical question is knowing how to correctly price the remaining work on the case. If you underestimate it, then you will end up either having to try to get a revised budget approved or face difficulties with your client. Accordingly, it can be safer to over-estimate the work even though the purpose of costs budgets is to assist the court in its duty to prevent disproportionate costs being incurred. Tactically, it is in the defendant’s interests to have lower budgets imposed for both sides because the burden of proof of negligence is on the claimant. As will be seen in later chapters, the claimant generally bears the risk of leaving stones unturned. However, a defendant who has a ‘low’ budget agreed but then finds the claimant has had a ‘high’ budget approved has only succeeded in hobbling themselves.
The disparity between the parties’ budgets is also skewed further because the claimant is likely to have already incurred significant costs in investigating and attempting to settle the case pre-proceedings. Front loading a case remains reasonable; Jackson LJ made it clear in his 12th pre-implementation lecture (https://www.judiciary.gov.uk/wp-content/
implementation-programme-22032012.pdf) that he expected meritorious cases to settle pre-proceedings.
Incurred costs, however, cannot be budgeted; the best that the court can do is to record an adverse comment as to the amount that has been incurred and to take that amount into account when budgeting the remaining phases. This issue is not helped by the time it takes for Costs CMCs to be listed. A combined hearing (directions and costs) is typically listed for 90 minutes which has resulted in significant listing delays at the RCJ. In the County Court, if the CCMC is listed separately, there are examples of it taking place well into the directions timetable, as late as after expert evidence has been exchanged.
The parties’ respective budgets tend to raise the same issues seen at the end of the case. Accordingly, points relating to excessive hourly rates, hours spent, simplicity of the case, etc are frequently raised by defendants to counter what are arguably unreasonably high budgets prepared by claimants. CPR PD3E 7.3 provides that the courts approval will relate only to the total for each phase of the budget rather than performing a detailed assessment. It will consider whether the proposed figures are within a reasonable and proportionate range (with reference to the CPR 44.3(5) factors considered above). However, in doing so, the court may take into account the constituent elements of those figures.
As the prescribed budget form (Precedent H) requires details of hourly rates, hours spent and disbursements, this creates the opportunity for each side to invite the judge to have regard to those figures because they are used in calculating the phase totals. In Yeo v Times Newspapers Ltd  EWHC 209 (QB) Warby J offered this guidance at para. 65:
“It seems to me that whilst the question of whether the totals are reasonable and proportionate will always be the overall criterion, the courts may need to consider rates and estimated hours. The approach may need to be tailored to the case before the court.”
In cases where the costs run to six or seven figures, Warby J felt that this was all the more likely. Where a costs budget has been carefully prepared with reference to the issues still in dispute, it entirely reasonable for the costs to exceed £100,000 even in modestly valued claims. However, a successful challenge to an opponent’s budget is a case management decision and therefore very difficult to appeal (see Havenga v Gateshead NHS Foundation Trust & Another  EWHC B25 (QB)).
In many cases, however, it is possible to agree most or all of a proposed budget. The QBD Masters in particular require evidence of the early exchange of costs information and offers being made in respect of the disputed phases. Other courts require a summary of the issues in dispute to be exchanged; and failing to do so can lead to wasted costs orders being made.
The risk of being limited to court fees only for failing to file a correct budget on time is a significant incentive for claimants to adopt an overly cautious approach. Contingencies ought to be included if they appear to be reasonably necessary (but cannot be included in a budget phase) and there is no guarantee that permission will be granted later for the budget to be revised if this is not done.
All-in-all, costs budgeting is only likely to prove effective if both sides make a determined effort to narrow the issues in dispute to what is genuinely needed to resolve the proceedings. The more that remains in dispute, the higher the costs are likely to be. The judge needs to be presented with clear evidence of this in order to properly understand why these issues remain in dispute and the costs associated with them. They can then make a more reasoned decision also whether the costs of pursing those issues are proportionate and reasonable rather than making ‘harsh’ decisions on the facts as arguably occurred in Havenga (ibid.). The later chapters consider this in further detail.
Effect On Assessments
Once a budgeted case has concluded, the loser is still entitled to seek confirmation that the approved total for each phase has not been exceeded even where the total bill is within the budget’s total. Accordingly, you need to have in place an effective system of checking the running total being spent on each phase. If it appears that a phase will be exceeded, then a prospective application for an amended budget will need to be considered. The risk is that your opponent or the court will need to see evidence of why this was not dealt with in the first budget so you need to be prepared to have good evidence on file as to how the problem has arisen since then.
As long as the budgeted phases are within the approved totals, then there ought to be little scope for arguing that further reductions should be made. However, it is likely that the budget was approved but the court’s position on the hourly rates claimed was reserved. Thus, the traditional arguments over hourly rates remain.
The guideline hourly rates (GHRs) can be found here: https://www.gov.uk/solicitors-guideline-hourly-rates . They have not changed since 2010 and Lord Dyson MR has confirmed that “[t]he existing rates will remain in force for the foreseeable future, and will remain a component in the assessment of costs, along with the application by the judiciary of proportionality and costs management.” (https://www.judiciary.gov.uk/
publications/guideline-hourly-rates/ 17th April 2015). However, on 6th March 2020, the Civil Procedure Rules Committee decided that another review will be held.
It is important to remember that GHRs are for summary assessment not detailed assessment. In Higgs v Camden & Islington Health Authority  EWHC 15 (QB), Fulford J held that they were of only limited assistance in that catastrophic injury case and the criteria set out in the CPR (i.e. those factors considered above) were relevant. He also stated at para. 51:
“Further the guideline figures are not supposed to replace the experience and knowledge of those familiar with the local area and the field generally… it is expressly recognised in the Guide that costs and fees exceeding the guidelines may well be justified in an appropriate case as an exercise of discretion.”
In Choudhury v Kingston Hospital NHS Trust  EWHC 90057 (Costs), Master Rogers emphasised that relying on past decisions on hourly rates is unhelpful and each case must turn on its own facts. However, he did not feel constrained by the guideline rates where there was evidence of complexity and of how the solicitor’s experience contributed to winning the case. At para. 65, he commented:
“The rates claimed are higher than set out in the SCCO Guide to Hourly Rates, but, as been said many times, that is a document which is intended to govern fast track matters concluding in one day, and other interlocutory matters that conclude in the same period, the rates set out therein are not intended to cover the generality of litigation.”
In Ohpen Operations UK Ltd v Invesco Fund Managers Ltd  EWHC 2504 (TCC), O’Farrell J (para. 14) stated that “[i]t is unhelpful that the guidelines are based on rates fixed in 2010…as they are not helpful in determining reasonable rates in 2019.” At para. 15 she continued: “The hourly rates cannot be considered in isolation when assessing the reasonableness of the costs incurred; it is but one factor that forms part of the skill, time and effort allocated to the application. It may be reasonable for a party to pay higher hourly rates to secure the necessary level of expertise, if that ensures appropriate direction in the case, including settlement strategy, with the effect of avoiding wasted costs and providing overall value.”
It is also true that the GHRs are comprised of generalised rates from a basket of local law firms doing a range of work. Accordingly, a specialist area such as clinical negligence is not well represented and a higher rate is justifiable. However, proportionality was not in issue in Ohpen (see para. 16) whereas it often is in clinical negligence. In Re RBS Rights Issue Litigation  EWHC 1217 (ChD), Hillyard J said (at para. 134) “… litigants are free to pay for a Rolls Royce service but not to charge it all to the other side.” It is frequently contended that the GHR will be applied by the costs judge on the facts of the case. Just as inevitably, this means negotiating the best rate you can and carefully picking those cases you allow to go to an assessment hearing. Planning out the evidence you need from the start of the case greatly assists in getting the best result for you, your firm and your client.
The hourly rates claimed in the budget and bill of costs should be accurate and identical. In MXX v United Lincolnshire NHS Trust  EWHC B23, Master Rowley held that the appropriate sanction where the budget and the final bill of costs contain different hourly rates is to disallow the time claimed in the bill claimed for creating and maintaining the budget as this is where the error occurred (para. 68). This followed his reasoning in Tucker v Hampshire Hospitals NHS Trust & Griffiths (19/5/2017, unreported). However, on appeal ( EWHC 1624 (QB)), Slade J noted that the clear guidance as to what amounted to ‘unreasonable and improper conduct’ under CPR 1998 Rule 44.11 in respect of a bill of costs in Gempride Ltd v Bamrah & Another  EWCA Civ 1367 required this issue to be reconsidered by the Master in the specific context of a costs budget.
It is also useful to bear in mind the different types of costs orders which the court has permission to make. These are listed in CPR PD44 para.4.2. Knowing when to use these greatly increases your ability to deal with pre-trial applications and limiting the damage to your client or maximising the prospects of success. They can make the difference between paying your opponent’s costs or not.
One area that needs very careful advanced preparation is where you are dealing with multiple opponents. The basic problem is that, because costs follow the event, you may succeed against one party but lose against another, thus reducing or wiping out your client’s win. In order to avoid this, it is advisable to plan ahead from the start in any case where you face (or might face) multiple opponents (including Part 20 claims). The preferable order is a Sanderson Order (Sanderson v Blyth Theatre Co  2 KB 53) which orders the losing party to pay the costs of the other successful parties directly. The next best order is a Bullock Order (Bullock v London General Omnibus Co.  1 KB 264) which requires your client to pay the costs of the other successful parties put allows you to reclaim those costs from the loser.
As NHS Resolution usually does not take issue where you succeed against one Trust but fail against another, this risk tends to be underestimated. It is a very real risk when GPs and hospital Trusts are sued or private treatment is in issue (and the doctor and clinic are separately pursued). It is unclear the extent to which it arises when English and Welsh hospitals are pursued concurrently. The increasing prevalence of private hospitals carrying out NHS treatment also makes this issue relevant.
The need for careful, advanced preparation arises from the fact that you will need to prove that it was reasonable for you to involve the other successful parties so that costs should not follow the event. To do this, there needs to be good evidence that the way in which the unsuccessful party pursued its case meant that your client could not safely release the other parties before they incurred significant costs. You also need evidence to show that you did not delay in trying to release them after it became apparent that they would win. This requires evidence of communication on these issues and of genuine attempts to act reasonably which is why it cannot be left until discontinuance is needed.
Following Swift v Carpenter  EWCA Civ 165, it seems unlikely that a protective costs order is available in private litigation, even where the issues are as significant as in this case (viz. the effect of the negative discount rate on accommodation claims). However, as the decision was essentially based on public policy reasons, it is possible this may change. Taken in conjunction of the potentially unlimited costs liability of third-party funders following Chapelgate Credit Opportunity Master Fund Ltd v Money & Others  EWCA Civ 246 the risks associated with making genuinely ground-breaking legal challenges in clinical negligence are very significant.
The key point to take from this chapter is that it is necessary to ensure that your approach to costs and funding issues are proactive and not reactive. If you get the structure correct from the start, then it is much easier to maintain it throughout the life of the case. The losing party is fully entitled to take advantage of any aspect of the case which has not been properly prepared and the court will actively seek to maintain costs at a proportionate level. Accordingly, the winner needs to remove as many of the potential ambiguities which arise in practice by keeping clear, contemporaneous evidence that they provided proper advice to their client, acted reasonably and used their experience effectively.