Costs News

12 November 2015
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Proportionality trumps necessity in case where costs were 10 times damages

Master O’Hare has delivered a stark application of the new proportionality rule, disallowing three items in a bill that he considered it reasonable for the claimant’s solicitors to incur but “unfair” to make the defendant pay for.

He was ruling in Hobbs v Guy’s And St Thomas’ NHS Foundation Trust [2015] EWHC B20 (Costs), where the substantive case over a delay in treatment settled for £3,500. The claimant sought costs of £32,329, which Master O’Hare reduced on provisional assessment first on the grounds of reasonableness and then proportionality, to £9,879, plus the £1,694 costs of the assessment (all including VAT). The claimant’s solicitors requested a hearing.

Master O’Hare explained that he provisionally assessed that it was reasonable for the claimant to incur costs exceeding £11,000 plus VAT in order to obtain medical records and appropriate expert evidence, send a letter of claim and settle it pre-issue. 

“I next considered whether the sum allowed as reasonable was also proportionate. The answer would be yes if I were to apply the test propounded by Leggatt J [in Kazakhstan Kagazy PLC v Zhunus [2015] EWHC 404 (Comm)]. I had already assessed what was the lowest amount which the claimant could reasonably have been expected to spend in order to have this case conducted and presented proficiently, having regard to all the relevant circumstances.

“However, I do not think that test applies in cases such as this where the amount of reasonable costs will inevitably exceed the value of the claim. Kazakhstan Kagazy PLC was a case where the sums in issue bore no relation to the costs, however high they were. However, the amount of the sums in issue is one of the factors I have to take into account here and, indeed, it is the first factor listed in CPR 44.3.

“I provisionally ruled that the sum I had allowed as reasonable was not proportionate. In doing so, I had regard to the factors listed in CPR 44.3(5) (especially (a) and (c)).”

Master O’Hare said that, when deciding what reduction to make on grounds of proportionality, he decided against “chopping off a slice of all of the costs I had just found to be reasonable”; it was better to target particular items of work which he thought disproportionate to do in the circumstances of the case. As a result, he disallowed the £1,200 combined cost of three items “which now appear, with hindsight, to be inconsistent with the true value of the claim”.

He said: “In my judgment, although it was reasonable for the claimant’s solicitors to incur these costs, it is unfair to expect the defendant to pay for these items.” The rule against the use of hindsight in costs assessment was based upon reasonableness, he added, “which today is trumped by proportionality”.

Though the costs he provisionally allowed were still high in respect of a claim that settled pre-issue for £3,500, there were not disproportionate. Master O’Hare said: “I did not think it right to disallow the expenditure on medical records or expert reports. Even in modest value clinical negligence claims, it is necessary to incur costs on these items. I did not allow these items of costs on grounds of necessity since that is trumped by proportionality. 

“I allowed them having regard to the fact that clinical negligence claims have more complexity and involve more work than do other claims of similar value.” 

Master O’Hare also explained why he reduced the hourly rate claimed by the claimant. Almost all of the work was done by a senior solicitor and grade A fee-earner at the City of London office of Simpson Millar. The bill claimed £300 per hour but, in the assessment, Master O’Hare chose the Outer London rate for a mid-range grade B fee-earner as his starting point and did not allow any enhancement on that rate except some inflation enhancement for work done after April 2014, leading to a rate of £210.

He rejected a bid at the hearing to restore the £300 rate. “Grade A rates are appropriate only for grade A fee-earners doing grade A work. I do not accept that this case merited a grade A fee-earner at any stage. To my mind, the claim had no complexity worthy of mention and no public importance. In my judgment, [counsel’s] submissions greatly over-estimated the complexity and importance of this case and substantially under-estimated the abilities of an average middle-range grade B fee-earner… In my judgement, the conduct of this case was not of such weight or responsibility which would make comparable the hourly rate applicable for a grade B fee-earner in Central London.”

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