Case No:  HQ06L00212
Neutral Citation Number: [2010] EWHC 90185 (Costs)
IN THE SENIOR COURTS COSTS OFFICE

Cliffords Inn
Fetter Lane
London
EC4A 1DQ

Date: Tuesday, 11th May 2010

Before:
MASTER GORDON-SAKER

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B E T W E E N:  

LXM (BY HER LITIGATION FRIEND KLM)

and

MID ESSEX HOSPITAL SERVICES NHS TRUST

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Transcript from a recording by Ubiqus
Cliffords Inn, Fetter Lane, London EC4A 1LD
Tel: 020 7269 0370
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MR HUTTON appeared on behalf of the Claimant
MR HOGAN appeared on behalf of the Respondent
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JUDGMENT

MASTER GORDON-SAKER: 

1.	An anonymity order was made in relation to the claimant on the 23rd March 2009 and accordingly any transcript of this judgment should refer to the claimant as LXM and to the litigation friend as KLM.  Where I refer to the claimant, in context that may mean the claimant and/or the litigation friend. 
2.	The claimant and her twin brother were born on the 11th April 1997 at a hospital managed by the defendant Health Authority.  The claimant was the second to be born and shortly after her birth, she was diagnosed as suffering from cerebral palsy.  It was suggested to the claimant’s parents that this may be due to a delay in delivery.
3.	The parents instructed Leigh Day & Co, the well‑known firm of personal injury solicitors, in relation to whether there were grounds for a claim and a Legal Aid Certificate was granted to the claimant as early as the 24th July 1997, some three months after the birth.
4.	Experts’ reports were obtained.  They were supportive of an allegation of breach of duty but were more equivocal in relation to causation.  Dr Smythe[?], a Consultant Paediatrician, cast some doubt on the diagnosis of cerebral palsy and whether the claimant’s condition had been caused by hypoxia.  
5.	Dr Cowan, a Neonatal Neurologist, concluded that the claimant was not in fact suffering from cerebral palsy and that her brain damage had not been caused by a delay in delivery.
6.	At a consultation on the 6th February 2002, leading counsel gave rather pessimistic advice.  I have seen a copy of the attendance note and the attendance note of a subsequent conversation, and in essence, the advice the claimant’s parents were given was that they could either discontinue the case or wait a couple of years to see if better evidence emerged of the link between the claimant’s condition and the delay in delivery.
7.	By September 2003, the claimant’s parents had lost confidence in their solicitors and they decided to instruct Gadsby Wicks, a firm which specialises in clinical negligence.  The Legal Aid Certificate was transferred on the 8th January 2004.
8.	A Letter of Claim was sent to the defendant on the 19th October 2004. In view of the state of the expert evidence, that was described, I think fairly, by Mr Hutton, counsel for Gadsby Wicks, as a shot in the dark.
9.	The defendant’s response came on the 9th May 2005, by which time, one might infer that the defendant had had the opportunity to consider the claim carefully and probably, or almost certainly, with the benefit of expert opinion.  The letter denied liability but made neither an admission nor a positive case in relation to causation, which was then perceived by the claimant’s solicitors to be the weak point.
10.	Buoyed by that, Gadsby Wicks instructed another paediatrician, Dr Essex, and he produced a positive opinion in relation to causation in October 2005.  As at October 2005, the claimant’s solicitors considered that they had sufficient evidence to make out the claimant’s case.
11.	On the 22nd January 2006, the claimant’s mother as her litigation friend entered into a conditional fee agreement with Gadsby Wicks, which provided for a 100% success fee.  The following day, as I understand it, the Legal Aid Certificate was discharged.  Proceedings were issued on the 15th February 2006. By the defence,  liability was denied in detail but the defendant reserved its position in relation to causation.
12.	Split trials on liability and quantum were directed and, on the 14th December 2006, the trial on liability was listed for the 15th October 2007 with a time estimate of six to eight days.  On the 11th October 2007, the defendant admitted liability and consented to judgment being entered for damages to be assessed.
13.	The consequent order dated the 12th October 2007 provided that the defendant should pay the claimant’s costs to date forthwith and that the claimant’s costs to the 22nd January 2006, the date of the conditional fee agreement, and the base costs thereafter should be assessed and paid forthwith.
14.	In June 2008, the claimant changed solicitor again and, on the 20th June 2008, the litigation friend entered into a conditional fee agreement with Irwin Mitchell.  That provided for a staged success fee of 50% if the claim was won prior to three months before the trial fixture or the first date of the trial window and 100% thereafter.  Although I doubt anything turns on it, I accept that, in the context in which the agreement was made, trial would mean the final hearing, which would be the assessment of damages.
15.	The claim was in fact settled on the 23rd March 2009 on terms that the defendant would pay damages of £3.7m and further substantial periodical payments throughout the claimant’s life.  It was further agreed that the defendant would pay the claimant’s costs.
16.	Four bills were lodged for assessment.  First, the bill of Leigh Day, which has been agreed save for interest.  Second, the bill of Gadsby Wicks in relation to liability.  Third, the bill of Gadsby Wicks in relation to quantum and fourth, the bill of Irwin Mitchell.  I am told that the reason why there are two Gadsby Wicks bills was because it was anticipated that the claimant’s solicitors would seek detailed assessment of the liability bills first, which they were entitled to under the terms of the order of the 12th October 2007.  In the event, a decision was made to have all the bills assessed together.
17.	The parties have done their best to narrow the issues and the base costs of Gadsby Wicks and Irwin Mitchell have been agreed.  There are three outstanding issues which I now seek to address.  First, whether it was reasonable and proportionate for the claimant to incur the additional liabilities claimed when she had the benefit of public funding.  Second, and subject to that, whether the success fees claimed are reasonable and third, whether the claimant is entitled to interest on her costs of establishing liability, so in effect on the Leigh Day and first Gadsby Wicks bills, from the 12th October 2007.
18.	In relation to the first issue, Gadsby Wicks have disclosed a number of documents relating to the decision to abandon Legal Aid and enter into a conditional fee agreement.  To give those noting this judgment a break, I will read from those at length.  In an attendance note dated the 27th May 2005, it is recorded that the fee earner, Mr Wicks, 
‘Explained that in view of the fact that the letter of response from the defendants does not deny causation it merely makes no admissions and in view of the fact that they are seeking to defend the claim in relation to breach of duty when we have the very strong opinion from Peter Buchan, we are justified in issuing proceedings, however the scope of the Legal Aid Certificate will have to be extended and this will bring in the Special Cases Unit.  I explained the disadvantages of continuing the Legal Aid.  The irrecoverable statutory charge costs will be considerable because of the need to prepare costed case plans and deal with the other increasingly bureaucratic procedures that are being required by the Legal Services Commission.  The Legal Services Commission can be slow in approving increases to the scope and cost limitation that can lead to delays.  The LSC has issued a consultation paper suggesting that they may restrict the fees that can be paid to experts and they have suggested fees that are 50% of the current going rate.  This will be a disincentive to the experts.  The claimant’s litigation friend will have to get an undertaking as to costs but there is some doubt as to whether the costs protection provided by Section 17 of the Legal Aid Act 1998 will extend to the litigation friend.  I made it clear that I was quite happy to continue to act on a Legal Aid basis but I was equally willing to switch to a conditional fee agreement provided that we could obtain insurance.  If we then proceeded on a CFA with insurance, the irrecoverable costs would be less.  There would be no delay caused by the LSC.  There would be no threat of any interference by the LSC into our dealings with the experts and the litigation friend’s undertaking as to costs would be covered by insurance.  They said that they would be happy to proceed on a conditional fee basis and therefore I would see if I could arrange insurance.’

19.	In a lengthy letter to the claimant’s parents dated the 8th June 2005, that advice was repeated.  The first substantive paragraph reads, 
‘The letter of response from the defendants is interesting because it does not in fact deny causation.  It merely makes no admission.  The letter in fact concentrates on attempts to justify the standard of the obstetric care although of course we have a very strong opinion from Peter Buchan that the obstetric care was substantially below a proper standard.  In these circumstances, I believe that we are justified in pursuing the claimant’s claim by issuing court proceedings.’

20.	From the penultimate paragraph on the second page, Mr Wicks addressed the question of funding.  Again, this largely repeats what had been said at the meeting on the 27th May.  It sets out the disadvantages of Legal Aid as compared to a conditional fee agreement.  In the last paragraph at page three, Mr Wicks wrote, 
‘In recent years, the Legal Services Commission have required solicitors to carry out a great deal of work before they will be satisfied that Legal Aid funding should be given in the first place and thereafter that it should continue.  The costs associated with that work are not recoverable from the defendants and therefore have to be paid by the client if the claim succeeds, for example, as explained above, if the claimant’s Legal Aid is to continue, I will have to ask the Legal Services Commission to extend the Legal Aid Certificate to cover the work that will be necessary to issue court proceedings and then pursue the claim to trial.  Before they will do this, the Commission will require us to prepare a detailed case plan which itemises all of the work that will be necessary and breaks down the anticipated costs.  The preparation of these case plans require a lot of work because they have to provide very detailed information.  It is both our own experience and that of other solicitors that these case plans can take up to eight hours and in some cases longer to prepare.  The cost of that work will not be paid by the defendants but will have to be paid by the claimant out of her compensation if her claim succeeds.  On the other hand, this work will not be necessary if the claim is to be funded in the future by a conditional fee agreement and therefore, although there will be other costs that cannot be recovered from the defendants, the irrecoverable costs will be lower if we switch to conditional fee funding.’

21.	He then pointed to the delays which can be a consequence of public funding and the need to obtain prior authority.  At the paragraph numbered three, he referred to the costs protection that an assisted party is given by Section 11 of the Access to Justice Act 1999 but expressed concern about the possible argument that costs protection would not apply to a litigation friend.
22.	At paragraph four, he wrote, ‘None of these disadvantages would apply to a conditional fee agreement’ and then, further in that paragraph, 
‘Please note in particular that we make the following promises.  Whilst the claimant’s claim continues, we will never ask you to pay any money to anybody.  If the claim does not succeed, neither you nor she will ever be required to pay any money to anybody ever.  The only money that we will ask to be paid to us is from the money that we recover from the defendants if the claim is successful.  However, if at the conclusion of the case, you are dissatisfied with the amount that we ask you to pay from the claimant’s compensation, you will have the right to have that sum checked by the court under a process known as detailed assessment.  To be frank, we have a fairly strong preference for working under a conditional fee agreement rather than Legal Aid simply because of the administrative difficulties for us in dealing with the Legal Services Commission who are not very efficient and who are increasingly bureaucratic in their approach.  We are not alone in this.  Most solicitors are very frustrated by their dealings with the Legal Services Commission.  We also feel on balance that for the reasons set out above, it would be more advantageous for the claimant to proceed on a conditional fee rather than a Legal Aid basis.  I should however like to make it clear that if it is your preference to continue with Legal Aid, then I will be happy to do so.  I am happy to leave the choice to you and whatever you choose, you will receive precisely the same standard of service from us.’

23.	Mr Hogan on behalf of the defendant criticises this advice on the basis, I think fairly, that it does point more to the disadvantages of public funding and the advantages of conditional fee agreements and does not give the same balance to the advantages of public funding.
24.	On the 16th June 2005, the claimant’s father wrote to Gadsby Wicks, ‘The conditional fee agreement would appear to be advantageous to both of us and we confirm this is the route we would like to take.’
25.	In 2004 and 2005, there were two decisions by Master O’Hare which considered the merits and demerits of conditional fee agreements as against the public funding to which they might have been entitled.  These decisions were the subject of some discussion within the legal profession and provoked some concern at Gadsby Wicks.
26.	On the 31st August 2005, Mr Wicks wrote to the claimant’s parents thanking them for returning the conditional fee agreement and authority to discharge the public funding certificate (that conditional fee agreement, as I understand it, was not in fact implemented and I have not seen it), and continued, 
‘Unfortunately and very frustratingly there has been a development in that one of the costs judges at the Supreme Court Costs Office has ruled albeit in a completely different type of case that a solicitor who entered into a conditional fee agreement with their client who was eligible for Legal Aid was not entitled to be paid any fees for any work that he carried out.  That decision was not only made by a fairly junior judge but it is also case specific in that in the circumstances of that particular case as outlined in the judgment, it probably was in the client’s best interests to have Legal Aid rather than a conditional fee agreement.  I do not believe that the situation is the same for the claimant but I think it would be prudent for me to review the judgment very carefully before we switch to a conditional fee agreement in the claimant’s case.  I am not therefore immediately applying to discharge her Legal Aid Certificate and have not issued the insurance policy.

27.	On the 4th October 2005, Mr Wicks spoke to the claimant’s grandfather, who I am told is himself a litigation solicitor, and the attendance note made by Mr Wicks records, 
‘I explained that we were willing to move onto a CFA.  We were aware of the Bowen v Bridgend Council decision but felt that we could distinguish it.  We therefore explained the advantages and disadvantages of Legal Aid/CFA to the claimant’s parents and we also told them that although it was a matter for them, they will receive the same service whichever method they adopt.  We had a personal preference for CFAs. They therefore instructed us that they were willing to switch to a CFA and have signed the agreement.  We were then about to issue the policy when we became aware of Master O’Hare’s judgment in Hughes v London Borough of Newham.  This has made us a little more nervous about switching to a CFA and we therefore decided that we would take counsel’s opinion before doing so.  Obviously the cost of taking the opinion will be met by us and will not form part of the cost of the claimant’s claim.’

28.	On the 17th November 2005, Mr Wicks wrote to the claimant’s parents following the receipt of Dr Essex’s report.  
‘We are therefore now clear to issue and serve proceedings but before doing that we must put in place a satisfactory method of funding the claim because after court proceedings are issued, you will potentially become liable for the defendant’s legal costs should the claim not succeed.  Hitherto of course, the claim has been funded by the Legal Services Commission but for the reasons set out in my letter of the 8th June, it has been agreed that we will switch to a conditional fee agreement.  Unfortunately however, as we were about to do that, some uncertainty arose following a recent court decision as to whether we could do so.  Consequently, although you signed the necessary document at the end of August, I explained in my letter to you of the 31st August that we should not in fact make the switch to a conditional fee agreement nor discharge the claimant’s Legal Aid until I have time to consider the impact of the recent court decision.  There has also been another development in that the regulations relating to the way in which conditional fee agreements must be entered into changed as from the 1st November.  Having reviewed these recent developments, I am now able to confirm that we can switch to a conditional fee agreement although it will be necessary for the agreement to take a slightly different form from the one that was previously sent to you and signed.  I am in the process of preparing the new agreement which I hope to be in a position to send to you within the next two weeks.  The difference between the new agreement and the one that you have previously signed but was never implemented is that under the new agreement we will make it clear that we will not under any circumstances require the claimant to make any payment towards any of the costs out of any compensation that may be awarded.  This in fact puts her in a better position than she would be with Legal Aid where there would inevitably be some costs that would not be paid by the defendants even if the claimant were successful and those costs would then be paid to us by the Legal Services Commission who in turn would deduct them from the claimant’s damages.  Therefore, as we are now willing to promise that we will not under any circumstances require any payment from the claimant or yourselves, she will in fact be significantly better off with a conditional fee agreement than she would under Legal Aid.’

29.	The conditional fee agreement that was entered into by the litigation friend and Gadsby Wicks is in a form which has commonly become known as a ‘CFA lite’.  Paragraph nine of the agreement provides, 
‘On the information that is at present available to us, it seems that community legal services funding may be available to the claimant but it is not a better option to her than this agreement.  We have advised you in detail as to the advantages and disadvantages of community legal services funding compared to this agreement and you have told us that you would prefer us to pursue your claim under this agreement rather than community legal services funding.’  

30.	Paragraph 12 under the heading ‘what you will have to pay if you win’, 
‘If you win, you will have to pay us the basic charges, the success fee and the expenses.  However, the provisions of paragraph 17 of this agreement will apply so that the total sum that we will ask you to pay for the basic charges, the success fee and the expenses will not exceed the total sum for those items that is actually recovered from your opponent.’

31.	Paragraph 17 under the heading ‘recovering what you have to pay to us from your opponent’, provides, 
‘If you win, it may be possible to recover some of the basic charges, the success fee and the expenses from your opponent but the total sum that we will ask you to pay under paragraph 12 of this agreement will not exceed the total sum for the basic charges, the success fee or the expenses that are actually recovered from your opponent.’

32.	Paragraph 39 provided, under the heading ‘insurance’, 
‘It is important to understand that Temple Legal Protection Limited may have the right to cancel the policy immediately if you do not keep to your obligations under it, if you abandon or stop your claim without their prior consent, if this agreement ends before your claim ends or if you transfer your claim to other solicitors.  If the policy is cancelled, you will still have to pay the premium but Temple Legal Protection Limited will be released from any obligation to pay any claim that may be submitted to them.  We would also have the right to cancel this agreement in accordance with paragraph 85 and if court proceedings have already been issued, you would become liable to pay your opponent’s legal costs unless you go on with your claim and win or arrange alternative insurance cover.’

33.	Paragraph 82 under the heading ‘ending this agreement’ provides, 
‘You can end this agreement at any time and for any reason, even if your claim has not fully been dealt with.  We will then have the right as our option to decide whether you must either (a) immediately pay to us the basic charges and the expenses including the fee but not the success fee of any barrister who has worked on your claim whether or not he or she has a conditional fee agreement with us.  You will then be released from any liability for the success fee or the success fee of any barrister who has a conditional fee agreement with us even if you go on with your claim and win or (b) immediately pay to us the expenses including the fee of any barrister who does not have a conditional fee agreement with us.  You will then pay no more to us unless you go on with your claim and win, in which event you will then immediately also have to pay to us basic charges, the success fee and the fee and success fee of any barrister who has worked on your claim and who has a conditional fee agreement with us.  

34.	‘Expenses’, which always starts with a capital E and is a term of art, is defined in paragraph 4 (j) as ‘the payments which as your claim progresses will need to be made to other people’.  A full explanation is given in paragraphs 32-34 and at 32, under the heading ‘expenses’, it is provided, ‘These may include but will not necessarily be limited to payments such as (g) insurance premium.’
35.	In the event, as we know, the claimant did end the agreement but Gadsby Wicks did not immediately seek payment of their basic charges or expenses and the premium was not demanded by Temple under paragraph 39.
36.	On the 2nd February 2006, Gadsby Wicks under delegated authority arranged an after the event insurance policy with Temple Legal Protection Limited.  The cover was defined on page two as an indemnity, 
‘In respect of any claims made during the period of insurance up to the limit of indemnity (a) for opponent’s costs in the event that the insured becomes liable to pay such costs either by order of the court or because the legal action has been withdrawn, discontinued or settled subject to the prior approval of the insurer which shall not be unreasonably withheld and (b) for the insured’s disbursements if the insured becomes liable to pay the opponent’s costs by order of the court or because the legal action has been withdrawn with the prior approval of the insurer or the legal action has been discontinued with the prior approval of the insurer or settled in the opponent’s favour.’

37.	On page three, disbursements were defined as ‘fees and expenses including the premium’ and the premium was defined as ‘the amount specified in the schedule, which is payable by the insured at the conclusion of the legal action’.  The premium was staged across three stages and those stages were prescribed in the definition of ‘premium’.
38.	In the event that the claimant lost, the insured, defined on page two as the claimant’s mother, would be indemnified against her liability to pay the premium.  If the claimant won, the litigation friend would be liable to pay the premium.
39.	A further after the event insurance policy was purchased on the 11th October 2007, again with Temple.  This was not a staged premium but a single lump sum.  The policy contains similar terms to the earlier policy, which makes the definition of premium inapposite to this particular policy.  Again, the litigation friend assumed a liability to pay the premium in the event of success.
40.	The circumstances in which Irwin Mitchell’s conditional fee agreement came to be signed are less clear to me.  Irwin Mitchell lodged no papers in advance of the detailed assessment.  Two files appeared at lunch time on the first day but I was not invited to read them.  
41.	Irwin Mitchell’s conditional fee agreement is not in the form of a CFA lite.  At page two, under the heading ‘paying us’, it provides, 
‘If you win your claim, you are primarily liable to pay our basic charges, success fee, your disbursements, after the event insurance premium and VAT.  Your opponents will be ordered to pay part or all of your legal costs and those costs will be recoverable from your opponent to the extent that they are reasonable and proportionate to the value of your claim.  If it appears to us that you are unlikely to recover all of your legal costs from your opponents we will give you a reasonable estimate of any potential shortfall which will be payable out of your damages.’

42.	Under the heading ‘if you lose after taking court proceedings’, it provided, 
‘You do not pay any basic charges, success fee or VAT to us.  You will be responsible for payment of our disbursements although these may be recovered from your insurance if you have taken out an after the event insurance policy.  You are liable to pay your opponent’s charges and disbursements except for any opponent’s success fee.  If you have taken out after the event insurance policy, the insurers will pay your opponent’s charges and disbursements.’

43.	Under the heading ‘if the agreement is ended before you win or lose’, 
‘If you end the agreement but continue to pursue your claim yourself, or through other solicitors, you remain primarily responsible for payment of our basic charges, VAT, disbursements and insurance premium.  If you go on to win, you will pay our success fee.  You may be able to recover part or all of these costs from your opponent.’

44.	The agreement incorporated modified Law Society conditions and on the first page of those conditions, about a third of the way down, it was provided, 
‘If you reject and supported by our advice you continue to pursue your claim but you recover damages that are less than the sum offered or paid by your opponents, we will not charge you our basic charges or success fee but the work done after the expiry of 21 days following receipt of the notice of the offer or payment.  We will charge you our basic charges, success fee, VAT, disbursements and insurance premium for the work done before that date, which you should be entitled to recover from your opponents.  The legal costs payable will not be limited by reference to the amount of damages which may be recovered on your behalf.  Your opponents will be entitled to an order for costs against you but you may be covered for this risk by your insurance policy.’

45.	On the second page of those standard terms, the penultimate paragraph in the left hand column provided, 
‘If the court carries out an assessment of our charges and disallows any amount whether of basic charges, disbursements, success fee or insurance premium, for any reason whatever, including on the ground that the level at which the success fee was set is unreasonable in view of what we knew or should have known at the time it was set, that amount ceases to be payable under this agreement, unless the court is satisfied that it should continue to be payable.’

46.	Paragraph seven on the third page provided, 
‘If you end the agreement, we then have the right to decide whether you must pay the basic charges and your disbursements including barrister’s fees when we ask for them, or pay the basic charges and your disbursements including barrister’s fees and success fees if you go on to win your claim for damages.’

47.	Then, at paragraph 7 (b) (i), 
‘We can end this agreement if you do not keep to your responsibilities in condition two.  We then have the right to decide whether you must pay the basic charges and your disbursements including barrister’s fees when we ask for them or pay the basic charges and your disbursements including barrister’s fees and success fee if you go on to win your claim for damages.’

48.	A further document is appended to the agreement headed ‘Irwin Mitchell clinical negligence guide for pursuit policyholders’ and that provided under the heading ‘the premium’, 
‘The premium for this policy is only payable if you succeed in your case.  What is meant by success is set out in the CFA and the policy.  It is also only payable when you have won the case.  Normally, your opponent will be required to meet the costs of this policy along with your other costs.  It is important that you understand that your opponent can challenge the level of the premium under this or any ATE policy.  The courts have the authority to decide whether your opponent should pay the premium in full or part or even not at all.  Whatever the courts decide is payable by your opponent, you are responsible for paying the whole premium to us.  This may mean you have to meet part or all of the premium out of your own funds.  Your solicitor is not permitted under the policy to release your damages to you until you have agreed with us how the premium is to be paid.’

49.	Irwin Mitchell arranged an after the event insurance policy with First Assist Insurance Services Limited.  The premium, according to the terms of the policy, is calculated by
‘(a) determining the level of indemnity required to afford the insured protection in the event of an unsuccessful outcome at the conclusion of the legal proceedings.  This shall be the sum of expenses and opponent’s costs.  (b) Multiplying the level of indemnity referred to in (a) by the premium rate as stated in the schedule (c) adding insurance premium tax which is payable on the premium at the rate prescribed at the date when the premium is payable.’
  
50.	The schedule to the policy provided that the premium rate was 72.851% plus tax.
51.	Across the four bills, the claimant’s solicitors claimed base costs of £525,201, success fees of £249,739 and after the event insurance premiums of £330,583.  That latter figure was split between the Temple premium at £193,882 and the First Assist premium at £136,701. The latter has been reduced as a result of an unexplained mistake just before the detailed assessment to £6,433 making an amended total for the ATE premiums of £200,316.
52.	On behalf of the defendant, Mr Hogan submits that the decision to abandon public funding and enter into a conditional fee agreement and purchase after the event insurance was both unreasonable and disproportionate.  He relies on a critique of the present system by Sir Rupert Jackson in his review of civil litigation costs and he drew my attention to the costs to the National Health Service Litigation Authority for paying additional liabilities as set out in paragraphs 9.2 to 9.7 of the report.
53.	My decision, however, has to be made in the context of the present system, whatever deficiencies it may have.  To provide access to justice against a background of restraint in public funding, parliament allowed parties to enter into conditional fee agreements with their lawyers and then allowed the recovery of the additional costs that would be incurred, including the cost of purchasing insurance cover against liability for adverse costs orders. While, personally, one can see the problems that such a system has created, that presently is the system in which we operate.
54.	The first question to my mind is whether the claimant’s decision to enter into a conditional fee agreement and purchase after the event insurance was reasonable at the time that it was made and reasonableness must, it seems to me, primarily be viewed through the eyes of the claimant.
55.	In Wraith v Sheffield Forgemasters [1998] 1 WLR 132, the Court of Appeal approved the words of Mr Justice Potter, as he then was, at first instance at page 142 (d),
‘However, in deciding whether such an objection is sustainable in practice, the focus is primarily upon the reasonable interests of the plaintiff in the litigation so that in relation to broad categories of costs, such as those generated by the decision of a plaintiff to employ a particular status or type of solicitor or counsel or one located in a particular area, one looks to see whether, having regard to the extent and importance of the litigation to a reasonably minded plaintiff, a reasonable choice or decision has been made.  If satisfied that the choice or decision was reasonable, it is the second question, what is a reasonable amount to be allowed which imports consideration of the appropriate rate or fee for a solicitor or counsel of the status or type retained.’

56.	In Sarwar v Alam [2002] 1 WLR 125, Lord Phillips of Worth Matravers then Master of the Rolls said at paragraph 13, 
‘As the judge rightly pointed out, the central question in this appeal is whether it was reasonable in all the circumstances for Mr Sarwar acting on his solicitor’s advice to incur the cost of the ATE premium without making any further enquiries into the possible existence of BTE cover.’

57.	In considering the reasonableness of the claimant’s decision, one must, it seems to me, analyse the advantages and disadvantages of public funding as against conditional fee agreement.  In Sarwar, the Court of Appeal considered the merits and demerits of before the event insurance as against the after the event policy that was purchased.  
58.	In Bowen v Bridgend in 2004, and Hughes v Newham Borough Council in 2005, the two cases which caused concern to Mr Wicks, Master O’Hare considered the merits and demerits of the funding arrangements which the claimants had entered into as against the public funding to which they might have been entitled.
59.	There was another case to similar effect in 2005, Howarth v Britton Merlin, but not reported save as number 25 [2005] in the Supreme Court Costs Office cases.  There, the claimant had a public funding certificate for a claim against his employer.  Proceedings were commenced against the wrong defendant and then discontinued.  The claimant consulted new solicitors who took the view that the Legal Aid Certificate had been discharged by the discontinuance of the proceedings and they entered into a conditional fee agreement in relation to a claim against the correct defendant.  That claim was compromised at trial.  On the detailed assessment of the claimant’s costs, the defendant contended that there had been a breach of Regulation 4 (2) (d) of the Conditional Fee Agreement Regulations 2000.  I held that the Legal Aid Certificate was in force at the time of the conditional fee agreement and that the claimant’s solicitor had not advised the claimant appropriately as to the funding option.
60.	At paragraph 28 of my judgment, I said, 
‘I have no hesitation in saying that no client who walks into a solicitor’s office waving a public funding certificate which would cover his claim for personal injuries would be advised by a solicitor to tear up that certificate and enter into a conditional fee agreement.  That in practice this is what happened in this case does, in my judgment, amount to a very material adverse effect on the protection afforded to this claimant because he has incurred liabilities under the conditional fee agreement and under the disbursement funding loan agreement which he would not otherwise have incurred.’

61.	Five years on, I must apologise for the number of negatives in that paragraph but it was an ex tempore judgment at the end of a long day.  
62.	On appeal, His Honour Judge Inglis upheld my decision that Legal Aid was available and that the certificate was still in force when the conditional fee agreement was entered into and that in failing to advise the claimant of that, there had been a breach of the regulations.
63.	From the SCCO case summary, it is recorded, 
‘The judge was not persuaded that the financial disadvantages of the CFA brought to C were outweighed by the financial and other advantages the CFA were said to have over legal aid.  Not using legal aid made C liable to pay disbursements insofar as these were not paid by D, unless he successfully sought a solicitor and client assessment so as to avoid them.  It also exposed him to liability for interest upon a disbursement loan but since that was very small, under £53, this additional liability was not by itself significant.  By agreeing to pay a success fee which included 5% in respect of the deferment element, C was liable to pay 5% of the base costs i.e. a sum of £1,800.  That by itself was a substantial disadvantage.  C would also be liable to pay both base costs and allowed success fees in respect of any profit costs which were disallowed as between litigants unless he successfully applied for a solicitor and client assessment to avoid those costs.  C also had at least notional liability to pay the difference between the insurance premium paid and the insurance premium allowed.  There was a substantial risk that now the full facts were known, the professional indemnity insurers of the first firm of solicitors might seek to set aside their agreement to indemnify him for this expense.  The judge did not accept that the substantial disadvantages outlined above could be avoided by the courts assessing costs between litigants.  In any event, to do so would merely increase the disadvantage to C as between solicitor and client.  The advantages said to outweigh the disadvantages did not in fact do so.  The freedom from bureaucracy if it existed was a benefit to the solicitor not the client.  It was unreal to suggest that the costs protection provided by the ATE cover was better than the costs protection provided to legally aided litigants under Section 11 of the Access to Justice Act 1999.  Although the receipt of damages without waiting for the delay of detailed assessment was valuable, its value did not exceed the extra burdens the CFA placed upon C.  The judge also disallowed the appeal as to the recovery of the ATE premium.  The costs judge had exercised his judgment as to whether the premium should have been incurred and held that it should not.  Although at the time it was purchased, no other form of costs protection was available to C, the costs judge felt that the responsibility for that misfortune should fall upon C rather than D.  The costs judge’s ruling on that question could not be categorised as wrong.’

64.	Mr Hutton, in his skeleton argument at paragraph 51, suggests that it is clear that there is no automatic rule in the courts that a claimant must avail themselves of available Legal Aid public funding rather than enter into a CFA and no simplistic Legal Aid good/CFA bad analysis which appears to be suggested in the defendant’s skeleton argument.  It is a weighing up of which option is the best option for the claimant in the light of reasonable advice and if the CFA is a reasonable option and it does not have to be proved that it was the best, only that it was a reasonable option, then costs are recoverable under the CFA.  
65.	Broadly, I would agree with that but my emphasis would be slightly different.  Was the CFA and the attendant ATE policy a reasonable choice for the claimant at that time, having regard to all the circumstances?  
66.	In this case, as at the 21st January 2006, the claimant had a public funding certificate with a nil contribution.  Her only potential exposure to costs would be, first, if the certificate was revoked, which to my mind would be a fanciful risk in this case.  Second, if she won, costs which were not recovered between the parties but which were claimed by her solicitors or barristers against the Legal Services Commission, would, if allowed, be recovered out of her damages through the statutory charge.
67.	That is, in my experience, an inevitable result where a claimant is bringing a claim with public funding.  There are always some irrecoverable costs such as, commonly, the costs of arranging funding, but there are often other irrecoverable costs as between the parties.  For example, in the Leigh Day bill, £37,000 odd excluding VAT was claimed against the defendant and about £2,000 excluding VAT was claimed against the Legal Services Commission, of which £1,839 excluding VAT, if allowed, would be recovered under the statutory charge and those costs largely relate to corresponding with the Legal Services Commission.
68.	At the assessment of the Leigh Day bill yesterday, I was asked to transfer to the Legal Aid column over £5,000 in respect of the costs of obtaining expert evidence from two experts. Thus the balance of between the parties’ costs and public funding costs, if allowed, would shift to £33,000 as against £7,000. 
69.	From experience, there may also be a risk of more significant exposure such as an interlocutory costs order if the claimant were unsuccessful on an application or even the costs of an interlocutory appeal.  In my experience, in this sort of case, the costs which can be claimed against the Legal Services Commission, as opposed to the defendant which would fall to be recovered under the statutory charge can be significant.  
70.	The third area of potential exposure to costs is adverse costs.  If the claimant lost there would be no realistic prospect that the defendant would recover its costs, allowing for the costs protection under Section 11 of the Access to Justice Act 1999.  If she won, but along the way was ordered to pay some interlocutory costs, or interlocutory appeal costs, it is likely that a Lockley order would be made and the defendant would be entitled to set off its costs either from the costs payable to the claimant or the damages. 
71.	In my experience, the order for set off tends to be against the costs.  Those costs, under a Legal Aid Certificate, would belong to the claimant’s solicitors and whether they would seek to recover them from the claimant would be an unknown risk; but probably a doubtful risk if the interlocutory costs were lost on an application which they had advised.
72.	After the 22nd January 2006, the claimant assumed a potential liability to pay Gadsby Wicks and counsel’s basic fees if she ended the agreement under paragraph 82 or if Gadsby Wicks was entitled to end the agreement because of the claimant’s breach under paragraph 85.  She also assumed a liability under clause 7 of the Temple policy in the event the policy was cancelled and under paragraph 2 if she changed legal representative without the insurer’s consent.  She also assumed a liability for the after the event insurance premiums in the event that she won the case subject to recovery from the other side.
73.	These liabilities are created by an insurance contract made between the insurer and the litigation friend and they create direct liabilities on the part of the litigation friend.  As against that, paragraph 17 of Gadsby Wicks’ conditional fee agreement seeks to hold harmless the litigation friend against any shortfall in the expenses, which includes, in its definition, the insurance premium.
74.	After the 20th June 2008, the claimant assumed a liability to Irwin Mitchell for their basic charges if she ended the agreement and for their basic charges and success fee if she won, subject in the latter case to recovery from the defendant.  The protection afforded by Regulation 3 (2) (b) of the Conditional Fee Agreement Regulations 2000 did not apply to this agreement but similar protection was provided by the shortfall provision on the second page of the modified Law Society conditions, penultimate paragraph in the left hand column.
75.	There is however a tension between that provision and the provision under the heading ‘the premium’ in ‘Irwin Mitchell’s clinical negligence guide for pursuit policyholders’, a tension which I am unable to reconcile.  Again, the claimant assumes a direct liability to the insurer under the policy but with an assurance that the insurance premium, if unrecovered, is not payable.  
76.	I think it fair to say that the arrangements made by Gadsby Wicks and Irwin Mitchell created uncertain risks for the claimant and the litigation friend, at least on paper.  I think it can also fairly be said that in reality, neither the claimant, a minor under a disability, nor her mother, would be called on to pay anything out of her damages in respect of unrecovered costs under the conditional fee agreements or unrecovered premiums under the after the event insurance policies and I am fortified in that view by, what I have termed the shortfall provision, paragraph 17 in the Gadsby Wicks’ conditional fee agreement and the provision on the second page of the modified Law Society conditions appended to the Irwin Mitchell agreement.
77.	It seems to me highly unlikely that anything would be payable out of the claimant’s damages which would not be recovered from the defendant and I am further fortified in that view by the promise made by Mr Wicks in his letter of the 17th November 2005.
78.	Bringing a claim with public funding has advantages and disadvantages and bringing a claim under a conditional fee agreement has advantages and disadvantages. But for the defendant’s objections in this case, the conditional fee agreement route would be obviously more advantageous to the claimant because the only impact of costs on her damages will be the unrecovered Legal Aid costs in Leigh Day’s bill.
79.	Many clinical negligence cases are brought by claimants who would be eligible for Legal Aid.  It has not been my experience before that defendants challenge the reasonableness of entering into a conditional fee agreement where the claimant would be eligible for public funding.  The only difference between those cases and this case is that, in this case, a certificate had been granted but to my mind, that can make no difference.
80.	I cannot say that it was unreasonable for the claimant to incur the potential additional liabilities consequent on entering into the conditional fee agreement and the after the event insurance policy as against the potential costs disadvantages of public funding and that therefore leaves me eating my own words in Howarth v Britton Merlin.
81.	The second point in relation to the first issue is as to the proportionality of the additional liabilities.  That is an unusual objection in relation to additional liabilities.  Paragraph 11.5 of the Costs Practice Direction provides, 
‘In deciding whether the costs claimed are reasonable and on the standard basis assessment proportionate, the court will consider the amount of any additional liability separately from the base costs.’

82.	Generally, in my experience, when proportionality is questioned by the paying party, the focus is limited to the base costs but I accept Mr Hogan’s submission that the test of proportionality applies to all costs when allowed on the standard basis as is provided by CPR 44.4 (2) (a).  Proportionality is however a quantitative concept.  In Lowndes v The Home Office [2002] EWCA Civ. 365, Lord Woolf, then Lord Chief Justice, said at paragraph 31, 
‘In other words, what is required is a two stage approach.  There has to be a global approach and an item by item approach.  The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which CPR Rule 44.5 (3) states are relevant.  If the costs as a whole are not disproportionate according to that test, then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable.  If on the other hand the costs as a whole appear disproportionate, then the court will want to be satisfied that the work in relation to each item was necessary and if necessary, that the cost of the item is reasonable.  If because of lack of planning or due to other reasons, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner.  This in turn means that reasonable costs will only be recovered for the items which were necessary, if the litigation had been conducted in a proportionate manner.’  

83.	It is clear to my mind that the court is not required to consider how or why the costs were incurred.  The first test is to consider whether the total sum claimed is or appears to be disproportionate.  That is a quantitative test.  In the present case, it is reasonable for me to infer that the base costs that have been agreed are reasonable and proportionate; and had I been asked to determine whether the base costs that were claimed appeared to be disproportionate, I would have said ‘no’, having regard to the value of this case and the complexity and the fact that liability ran nearly to trial and the fact that a settlement was not achieved until some 18 months after liability was conceded.
84.	I cannot say that the success fees, based on those base costs, are disproportionate because only a reasonable proportion of the reasonable and proportionate base costs will be allowed. If the prospects of success were 50% a success fee of 100% of the reasonable and proportionate costs must be reasonable and proportionate.  As to the after the event premiums, if it was reasonable for the claimant to purchase cover, and the premium is reasonable, and the premiums are not now challenged by the defendant, it is difficult to see how they could be disproportionate. 
85.	The second issue is the amount of the success fees claimed.  In relation to Gadsby Wicks, by January 2006 when the conditional fee agreement was entered into, the claimant had favourable expert reports on breach of duty and causation.  The defendant’s response on the 9th May 2005 had concentrated on breach of duty and had not put forward any positive case on causation.  In his letter to the claimant’s parents on the 8th June 2005, Mr Wicks referred to ‘the very strong opinion that the obstetric care was substantially below a proper standard’.  Following that, a positive report was obtained on causation from Dr Essex in October 2005.
86.	Of course, this case would be decided according to the expert evidence and the view that the court formed of that expert evidence after, if necessary, skilful cross-examination. The claimant’s solicitors would not know, as at January 2006, what the defendant’s experts would say.  Nor would they know whether their own experts would withstand, first, the meetings of experts and, second, if it came to it, cross-examination. But as at the date of the conditional fee agreement, they had positive expert evidence.  They had an indication that the battlefield was likely to be breach of duty and that would reasonably be based on an inference that the defendant had obtained expert guidance. In my judgment, putting the prospects of success at only 50% was pessimistic.  I would put the prospects of success reasonably as at January 2006 at 60% which would justify a 67% success fee.
87.	In relation to Irwin Mitchell’s success fee, by June of 2008, when the conditional fee agreement was entered into, judgment had been obtained on liability.  The only risk therefore was of a failure to beat a Part 36 payment.  Under the terms of the agreement, if the claimant failed to beat a Part 36 payment, Irwin Mitchell would not be entitled to any fees for work done after 21 days following receipt of the notice of the payment.
88.	With competent solicitors and counsel, these risks will be reduced and the risks relate only to post offer costs, the proportion of which will be reducing day by day.  I have to take into account that this was a staged success fee and that following the decision of the Court of Appeal in KU the court should look more kindly on such arrangements, but even allowing for that, I do not think that the risk justifies more than a success fee of 33% which would reflect a 75% chance of success.  
89.	In my experience, it is rare for a Part 36 offer not to be beaten in this sort of case.  I accept that this was a complex case involving large sums of money, significant parts of which will be dependant again on the outcome of dispute between the experts.  It is for that reason that I allow more than the success fee allowed in C v W by the Court of Appeal.  In my judgment, a success fee of 100% where liability has been established is unreasonable.
90.	In relation to junior counsel who entered into her conditional fee agreement on the 9th July, that was before liability had been determined.  It was a month before.  The trial on liability was listed.  It seems to me that things were very much up in the air and I would allow counsel the success fee of 100% claimed.
91.	The third issue relates to interest on the claimant’s costs.  The defendant objects to paying interest on the costs incurred from the 12th October 2007 because there was no liability on the part of the claimant to pay the costs to Gadsby Wicks.  
92.	The decision of the House of Lords in Hunt v R M Douglas (Roofing) Limited [1990] AC 398 is authority for the proposition that an order for costs to be assessed is a judgment debt within Section 17 of the Judgments Act 1838 and that interest runs from the date of the order rather than from the date of assessment.  While there is provision in CPR 41.8 (1) for the court to order that interest should run from a different date, conventionally, interest is allowed from the date of judgment.  
93.	The defendant’s argument is similar to that raised before Master Rogers in Bollito v Arriva London [2009] EWHC 90136 and before Deputy Master Williams in Hanley v Smith and the Motor Insurers Bureau [2009] EWHC 90144, neither finding favour with it.
94.	I can see no good reason to deprive the claimant of interest on the costs of establishing liability from the 12th October 2007.  The defendant was liable to pay those costs from that date and an order was made that the costs be assessed forthwith.  If there has been a delay which has increased the amount of interest, then it may be appropriate for some of the interest to be disallowed, but I do not see that the claimant is not entitled to interest as from that date.
End of judgment.
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