The matter of Tucker v Griffiths and Hampshire Hospitals NHS Foundation Trust was recently heard by Master Rowley in the Senior Courts Costs Office. Master Rowley considered preliminary issues which were pivotal to the outcome of the detailed assessment proceedings. The issues heard included the hourly rates claimed and the success fee claimed however the most notable point was the miscertification of the Claimant's costs budget. The Claimant’s costs budget had been prepared on the basis of hourly rates that exceeded the rates permitted by the retainer; understandably, the Defendant’s took issue with this on receiving the Bill of Costs. Robert Marven was instructed on behalf of the Claimant and Nick Bacon QC was instructed on behalf of the Defendants.
Facts of the case
On 13 January 2011 the Claimant suffered a stroke and was admitted to hospital where he underwent an operation to replace his aortic valve. The Claimant instructed Irwin Mitchell in March 2012 to claim damages for injuries suffered due to failings on behalf of the Defendants in treating chest pains leading up to the stroke. A private retainer was entered into however this was converted to a CFA with the benefit of After the Event Insurance on 24 May 2012. Proceedings were commenced on 6 November 2013 and served on 14 January 2014. Directions questionnaires were filed in October 2014, along with the parties' costs budgets and the CMC took place on 11 March 2015. Several updated budgets were served and it was noted that the costs within the pre action phase of the Claimant’s budget increased from £6,030 to £7,216.50, despite the fact that it was not possible to incur further pre action costs at this point. Following settlement it became apparent that the reason for increase in the pre action profit costs was due to the time incurred having been recalculated at hourly rates that were in excess of the rates permitted in the retainer. On 23 February 2017 the Defendant made an application to disallow all or part of the costs incurred by the Claimant as a result.
The Defendant’s submissions
As to be expected the Defendant submitted that the updated costs budgets had been miscertified on the basis that these subsequent budgets were neither a fair nor accurate representation of the costs incurred. Bailey v IBC Vehicles Ltd [1998] was cited by the Defendant in support of these submissions. Nick Bacon QC submitted that both the Court and the Defendant had been misled by these incorrect figures and there was a resulting effect on the directions ordered and the approved budgeted figures.
The Defendant also submitted that, whilst the Defendant should have the opportunity at detailed assessment to challenge any incurred costs included within budgets that had been approved, this did not always happen in practice. Therefore, the Defendant considered that it was possible that it could have lost the opportunity to dispute the incurred costs further.
In submitting its application, the Defendant relied on the Court's discretionary powers relating to misconduct contained within CPR 44.11:
(1) The court may make an order under this rule where –
(a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or
(b) it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.
(2) Where paragraph (1) applies, the court may –
(a) disallow all or part of the costs which are being assessed; or
(b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.
The Defendant submitted that the consequential loss suffered amounted to the Defendant's costs of dealing with the Claimant's erroneous budgets.
The Claimant’s case
Mr Robert Marven, Counsel for the Claimant, relied on a witness statement provided by Irwin Mitchell Solicitors. Essentially the witness statement commented on the procedure generally for preparing costs budgets; it submitted that the hourly rate included within the budget was a blended rate which was intended to account for future increases in hourly rates. The main reason provided for use of a composite rate was to overcome the issue that only one hourly rate may be included within the Precedent H form. It was submitted that this method does not breach the indemnity principle because it remains a fair and accurate statement of the estimated costs being incurred in the future. It was also suggested that a costs budget is not intended to be accurate to the last penny and that the purpose was to fix a reasonable and proportionate amount for each phase.
Mr Marven further submitted that, in any event, the Defendant had not suffered any prejudice as a result of the increased incurred costs; if anything, it was the Claimant who had suffered a detriment given that Master Cook had considered that the incurred costs were too high at the CMC and reduced the amount allowed in respect of the future costs as a result. The Claimant therefore submitted that, as the Defendant had not actually suffered any prejudice, no costs sanctions should be applied under CPR 44.11. The Claimant also referred the Court to Ridehalgh v Horsfield [1994] Ch. 205, CA and averred that the threshold for improper conduct was a very high one.
Master Rowley’s findings
Whilst Master Rowley was willing to accept the Claimant’s reasoning in relation to any increased rate for the future costs, he did not agree that this was a reasonable approach to take with incurred costs. He noted that implementing this method would require a recalculation of the sums on the ledger with reference to a blended hourly rate; an unnecessary task which could only lead to potential problems for the Claimant. He considered that, in any event, a costs budget should not overstate a party's liability to his solicitor that has already been incurred as this would indeed be a breach of the indemnity principle. He commented that this approach was bound to mislead both the Court and the opponent during the costs budgeting process.
With regards to improper conduct, Master Rowley considered that the threshold for improper conduct as per Ridehalgh had been met. However he did not consider that an appropriate sanction under CPR 44.11 would be to award the Defendant its costs of the budgeting process as it had not illustrated that any additional costs were actually incurred due to this error; it was only after the Bill had been drawn that the error became apparent. He additionally noted that the sums claimed within the Bill of Costs itself did not offend indemnity principle and therefore, a disallowance of a percentage of these costs would not be appropriate. As the improper conduct related to the preparation of the costs budget itself, he considered that it should be the costs management activities that should be penalised and disallowed the Claimant's costs of budgeting.
Comments