England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		31 March 2008

Master Gordon-Saker :

1. This is an appeal by the Defendant against the decisions made by Mr Lambert, a Principal Costs Officer, on the detailed assessment of the Claimant's bill in relation to:

i) the hourly rates allowed to the Claimant's solicitors; and

ii) the success fees allowed to the Claimant's solicitors and counsel.

The background

2. Mr Michael Holliday was employed as a joiner by the Defendant's predecessors from 1963 to 1982. During the course of that employment he came into contact with asbestos fibres. He first experienced chest symptoms in August 2000, when he was aged 53 years. A biopsy in February 2001 led to a diagnosis of malignant mesothelioma.
3. In May 2001 Mr Holliday instructed the Sheffield office of Irwin Mitchell, solicitors, in relation to a potential claim. I was told that he was referred to them by a Macmillan nurse. On 14^th June 2002 he entered into a conditional fee agreement with Irwin Mitchell in relation to a claim against the Defendant for damages for personal injury. That agreement provided for a success fee of 67 per cent if the claim was won at least 28 days before trial and 100 per cent if it was won thereafter.
4. Particulars of Claim were drafted but proceedings were not issued before, sadly, Mr Holliday died on 3^rd July 2002.
5. On 20^th November 2002 the Claimant, Mr Holliday's widow, entered into a conditional fee agreement with Irwin Mitchell in relation to the estate's claim and her claim for loss of dependency under the Fatal Accidents Act. That agreement also provided for a success fee of 67 per cent if the claim was won at least 28 days before trial and 100 per cent if it was won thereafter.
6. The Particulars of Claim were redrafted and proceedings were issued in the Queen's Bench Division on 4^th April 2005. By the Defence, served in June 2005, the Defendant admitted that Mr Holliday had worked for its predecessors between the tax years 1968-9 and 1982-3. However liability was denied. The Claimant was put "to strict proof" of the nature of her late husband's work and the locations at which he worked. It was denied that he was exposed to asbestos in injurious quantities and it was denied that the Defendant's predecessors had been negligent or in breach of statutory duty. No positive case was pleaded.
7. It was the Claimant's case that in the 1980s and 1990s, after he had left the employ of the Defendant's predecessors, Mr Holliday had worked as a building officer for the Property Services Agency and had only slight contact with asbestos over that period. Rather oddly, by its Defence the Defendant denied that Mr Holiday "would have been exposed to any asbestos … during the course of such employment". It would appear that, in its enthusiasm for denial, the Defendant denied that Mr Holliday would have been exposed in his subsequent employment by another (for whom the Defendant was not responsible and of which presumably it would have had no knowledge).
8. The claim was allocated to Master Whitaker who was then in charge of the mesothelioma fast track list in the Queen's Bench Division. In Edwards v Rolls-Royce PLC^[1] the learned Master described how that list works:

4. … In essence, the practice that I have, both in live and dead claims is to allow the defendant sufficient time taking into account the period that has already passed for investigation before the claim was issued, to investigate the three basic areas in which they may be able to raise a defence on liability that is: (1) employment; (2) significant exposure increasing the risk and (3) causation, and then to order of my own initiative that the defendants show cause to me on the statements of case, the witness statements and expert reports and thus everything that would be available at a trial on liability to the judge, why I should allow the court's resources to be used for a liability trial rather than enter judgment for a sum to be assessed by the court and make an immediate order for an interim payment.

5. Experience has shown during the running of the fast track, that there are very few cases in which liability should be in issue, and once it is out of the way there is a 99% chance that the claim will be settled in respect of quantum. Something like 96% of claims do not need a liability trial.

9. Neither party provided estimates of the costs incurred or overall costs in their allocation questionnaires. The Claimant's questionnaire anticipated 3 witnesses of fact and 3 medical witnesses and suggested a time estimate of 2 days for the trial. The Defendant's questionnaire suggested 1 day.
10. At the first case management conference, on 28^th November 2005, which was conducted by telephone Master Whitaker ordered that judgment should be entered for the Claimant for damages to be assessed and that the Defendant should make an interim payment of £40,000, and gave directions for the assessment which was then listed for December 2005 with a time estimate of half a day.
11. Shortly before that hearing the Defendant offered £220,000 and following negotiations it was agreed that the Defendant would pay the Claimant the net sum of £250,000 (in addition to the interim payment) and her reasonable costs to be assessed if not agreed. Those terms were embodied in a consent order dated 15^th December 2005.
12. The Claimant's costs were not agreed. On 27^th September 2007 the Claimant's solicitors lodged their bill for assessment. The amount claimed was £58,946.95 (including value added tax). The bill was assessed by Mr Lambert on 13^th December 2007. He allowed £43,905.81 and ordered the Defendant to pay the Claimant's costs of the detailed assessment in the sum of £6,743.80.
13. No success fee was claimed in relation to the work done under the conditional fee agreement with Mr Holliday, but a success fee was claimed in relation to the work done under the agreement with the Claimant. Mr Lambert allowed that at 67 per cent, as claimed. He did not allow the hourly rates claimed but he was not persuaded that he should allow no more than the figures suggested in the Guide to the Summary Assessment of Costs, for which the Defendant had contended. Although the Claimant claimed different rates for different periods, the Costs Officer allowed composite rates for the whole period covered by the bill. Neither party contends that this was inappropriate.

Hourly rates

14. The hourly rates claimed in the bill (with the figures for which the Defendant contended in the Points of Dispute in parentheses) are:

	1 May 2001 – 30 April 2003	1 May 2003 – 30 April 2004	1 May 2004 – 30 April 2005	1 May 2005 -
Partner	£220 (£165)	£230 (£165)	£240 (£165)	£250 (£173)
Senior Paralegal		£175 (£120)	£180 (£120)	£185 (£126)
Paralegal	£115 (£90)	£120 (£90)	£125 (£95)	£135 (£95)

As I understand it, the composite hourly rates allowed by Mr Lambert were:

i) Partner £187

ii) Senior Paralegal £159

iii) Paralegal £108.

15. Mr Brown, who appeared on behalf of the Defendant, drew my attention to a series of letters written by the District Judges of Sheffield County Court to the solicitors' firms practising in that area setting out guideline rates. It is clear from the letter dated 23^rd April 1999 from District Judge Peters that these rates were intended as guideline rates for summary assessment and, initially at least, incorporated "a notional 50% mark-up across the board". It is also clear that in each year the published figures were based on discussions with the local law society. The relevant figures for the period covered by this bill are:

	1 January 2001	1 June 2002	1 June 2004	1 June 2007
Grade A	£125-£150	£155	£170	£183
Grade B	£125-£150	£130	£140	£161
Grade C	£112	£115	£120	£133
Grade D	£80	£85	£85	£101

16. In fact the figures contended for in the Points of Dispute are based not on these rates, but on the figures set out in the Guideline Rates for Summary Assessment published by the Senior Costs Judge.
17. It would appear to be uncontroversial that, insofar as any guideline rates are relevant in this case, the partner who had conduct would be a Grade A fee earner, the Senior Paralegal would be a Grade C fee earner and the Paralegal would be a Grade D fee earner. As the Guide to Summary Assessment makes clear, Grade B is restricted to solicitors and Fellows of the Institute of Legal Executives.
18. Mr Brown submitted that this had been a straightforward case in which it was unlikely that liability would be in dispute. Allocated to the mesothelioma fast track, it was likely that it would settle along with the vast majority of such cases, as described by Master Whitaker in Edwards. There was no complicated employment history and the assessment of quantum was straightforward.
19. Mr Brown went on to submit that there had been extensive involvement in this case by the partner and also by counsel, such that the responsibility assumed by the more junior fee earners was lessened. Allowing for the weighting inherent in composite rates, the rates allowed effectively gave the partner an 80 per cent mark-up for care and conduct, a mark-up of over 100 per cent for the Senior Paralegal, and a 90 per cent mark-up for the Paralegal on their respective expense rates.
20. I am not sure that analysis is correct. It seems to me that the involvement of counsel was really rather sparse and was limited to drafting the Particulars of Claim and advising on quantum shortly before the date fixed for the assessment of damages.
21. Nor to my mind was there significant involvement by the partner. Taking as an example the documents item in Part 3 of the bill, of the 82 hours odd claimed only 7 hours and 36 minutes was claimed in respect of the partner. The remainder was fairly evenly split between the Paralegals. By reference to the schedule to the bill, all of the work done by the Senior Paralegal related to the preparation of the schedule of special damages.
22. The extent to which it is appropriate to apply concepts used before the Civil Procedure Rules 1998 wanes with time or as Fulford J put it in Higgs v Camden & Islington Health Authority^[2] may "rapidly diminish". I suspect that now, nearly 9 years on, it may be time to bury concepts such as expense rates, mark-ups, A figures and B figures, for we must by now have sufficient experience of the single hourly rates that have been claimed and allowed since 1999.
23. For the Claimant, Mr Green submitted that this was a hard fought case which settled just before the assessment of damages. The value of the case, the degree of specialisation required and the importance to the parties took this out of the norm for Sheffield.
24. Both Mr Brown and Mr Green referred me to CPR 44.5(3). It seems to me that the factors which are of particular relevance in this case are: the value of the claim, the importance of the matter to the parties (and in particular the Claimant), the skill, effort, specialised knowledge and responsibility involved, and the place in which the work was done.
25. I have reminded myself of my decision in Melladay v Park Street Properties (Lincoln) Limited.^[3] That was also a mesothelioma case conducted by Irwin Mitchell's Sheffield office. Again, sadly, what started as a personal injury case became a Fatal Accidents Act claim. It settled for £194,000 in 2003. For the period from May 2002 the claimant sought an hourly rate of £220 for the partner, £165 for the senior paralegal and £90 for the paralegal. The defendant offered the guideline rates for summary assessment. I allowed £185, £120 and £90 respectively.
26. As in Melladay, in my judgment the guideline rates for summary assessment are of no real assistance in this case. They are designed to assist judges on the summary assessment of costs, which generally will take place following a fast track trial in the County Court or a hearing lasting for less than a day. They are not designed for detailed assessment. Further, they are of course only guidelines and are stated to be "broad approximations only".
27. To my mind the present case was not particularly complex as against mesothelioma claims generally. Mr Holliday's employment history was straightforward. The calculation of quantum was relatively straightforward. The only unusual head of claim was the cost of maintaining 3 properties owned by the Claimant. But again that was relatively straightforward. However it was a £290,000 claim which was of singular importance to the Claimant and which did require some specialisation. Insofar as most of the work was done by Grade C and D fee earners, it does seem to me that they did assume a greater than average degree of responsibility, which should be reflected in the hourly rate. For these reasons - value, importance and specialisation - in my opinion the reasonable rates for this work would properly be higher than the rates that would be allowed by the local judges for "run-of-the-mill" cases in the County Court.
28. I think that the rates that I allowed in Melladay as reasonable for 2002 would seem to be a sensible starting position in this case, save in relation to the Paralegal who did assume more significant responsibility. A composite rate covering 2002 to 2005 should of course be higher than the rates allowed in Melladay. I would allow the same figures as Mr Lambert for the partner (£187) and Paralegal (£108). But in my judgment the rate allowed for the Senior Paralegal (£159) is too high. It seems to me that £130 per hour would be the appropriate rate. The appeal in relation to this aspect is therefore allowed to that extent.

The solicitors' success fee

29. In their risk assessment, Irwin Mitchell put the prospects of success at 60 per cent, giving rise to a success fee of 67 per cent. As I understand it the same risk assessment was used for the conditional fee agreement with the Claimant as was used for the conditional fee agreement with Mr Holliday. It seems to me that no unusual risks were identified. The question "what potential defences are there to the claim" was answered:

"was Fairchild issue, now resolved".

30. In answer to the question "If there is likely to be more than one defendant is there a risk of succeeding against one Defendant and failing against another Defendant", the fee earner wrote:

"No, other exposure v light & no action intended against this employer (Fairchild point taken by defs in any event)".

31. The House of Lords handed down its decision in Fairchild v Glenhaven Funeral Services Limited on 20^th June 2002^[4], five months before the conditional fee agreement was entered into with the Claimant. From that decision Irwin Mitchell would have known that it would be necessary to establish only that the Defendant's breach of duty had materially contributed to causing the mesothelioma by materially increasing the risk of it being contracted. It would not be necessary to prove that the mesothelioma would not have occurred but for the Defendant's breach of duty.
32. On behalf of the Defendant, Mr Brown submitted that the risk of losing did not justify a success fee of greater than 27.5 per cent. That would put the prospects of success at between 75 per cent and 80 per cent.
33. He submitted that this was a straightforward case of a type which, statistically, would probably settle. At the time that the conditional fee agreement was entered into Irwin Mitchell had the benefit of a favourable report on liability by Mr Clark, an expert in health and safety, a favourable report on causation by Dr Rudd, a consultant physician, a detailed statement from Mr Holliday which described significant exposure to asbestos during his employment with the Defendant and minimal exposure in his subsequent employment and a post mortem report which revealed malignant mesothelioma with asbestos bodies present in the lung parenchyma.
34. Mr Brown submitted that there was no real risk of failing to beat a Part 36 payment and referred me to the judgment of the Court of Appeal in Ellerton v Harris^[5] in which, at paragraph 49, Brooke LJ explained:

the only significant risk related to the possibility of the claimant accepting her solicitor's advice and then not beating a payment in. This is just one of the rare risks which justified a success fee set as high as 20% in the simplest of claims.

35. On behalf of the Claimant, Mr Green submitted that the success fee claimed and allowed, by Mr Lambert, was appropriate. The claim had settled only days before trial and strictly, he submitted, the solicitors were entitled to a 100 per cent success fee. There was evidence of asbestos exposure in Mr Holliday's subsequent employment.
36. Further, submitted Mr Green, there was a risk that this claim would not be met by insurers. The initial response by Axa, dated 10^th July 2002, was that:

"The claim falls to be co-ordinated by Norwich Union, as they were the last insurers from 1.7.80 to 30.11.83."

37. Axa indicated that they had forwarded the papers to Norwich Union but on 20^th November 2002 Irwin Mitchell wrote to Axa:

It is of great concern that we have not yet heard from Norwich Union concerning the situation.

38. It was not until 23^rd June 2003 that Irwin Mitchell wrote to Norwich Union about the claim and not until 26^th August 2003 that Norwich Union confirmed that they would be acting as co-ordinating insurer.
39. Mr Green also pointed to the risks of not beating a Part 36 payment. It was a term of the conditional fee agreement with the Claimant that:

It may be that your opponent makes a Part 36 offer or payment which you reject and, on our advice, your claim for damages goes ahead to trial where you recover damages that are less than that offer or payment. If so, we will not charge you our basic charges for the work done after the 21 day period following receipt of notice of the offer or payment.

40. Mr Green drew my attention to the decisions of Crane J in Smiths Dock Limited v Edwards^[6] and of Master Wright in Rugg v Harland & Wolff PLC ^[7]. Both were mesothelioma claims. In Smiths Dock the learned Judge upheld the Deputy Costs Judge's conclusion that a success fee of 87 per cent was reasonable:

32. Mr Friston [counsel for the defendant] argues that effectively liability had been conceded. He argues that in any event the reports of Dr Muers strongly supported liability. Having read the reports, I accept that, but a possible new issue had been introduced by the post mortem results. A report on mineral content by Dr M K Bennett dated 4 July 2000 recorded a low fibre count and wrote, "this … does not indicate occupation exposure to asbestos". When Dr Muers came to express a view about that in his report dated 7 November 2000, he doubted that conclusion.

33. I accept that at the date of the CFA [31^st August 2000], it was possible to be very optimistic that some liability would be established, but it was not certain. The risk was not negligible. I do not accept that at the date of the CFA that Irwin Mitchell could simply ignore any argument about the fibre count.

34. However, there is no dispute that the other issues identified by the learned Costs Judge remained. Mr Friston's argument is that all these issues, quantum issues in the sense that he used that expression, must be given much less weight than true liability issues. He submits that quantum issues only lead to the case being lost if a series of events occur. There must be a Part 36 payment into court, followed by the non-acceptance of that, the case going to trial, the case being won and the claimant failing to beat the payment into court. He submits that it is unusual for all those events to occur and the chance of losing is thus at a very low level. He further submits that the claimant's legal advisers should, if they do their job, be able to advise on the quantum issues and have only themselves to blame if their advice is wrong.

35. Although in my view Mr Friston is correct in analysing the events that must happen if a claimant is to fail to beat the payment into court, the crucial event is the last. I do not accept that advising on quantum issues is straightforward in such a case. Particularly when they are several factors, as here, which may ultimately affect the final award, advising is very far from straightforward. That is illustrated by what happened. The payment in, much later, was £165,000. Irwin Mitchell advised non-acceptance. The damages agreed were £180,000. Such advice requires good judgment.

36. While I accept that liability issues and quantum issues can usefully be considered separately in such a case as this, ultimately a single success fee must be arrived at on an assessment of the prospect of "winning".

41. In Rugg Master Wright dismissed the defendants' appeal against the decision of Mr Lambert to allow an 80 per cent success fee. Mr Rugg had worked for a number of employers as a ship's plumber in casual employment over the 1950s and early 1960s. The conditional fee agreement was entered into after the decision of the House of Lords in Fairchild. There was however then some uncertainty as to the argument raised in Barker v Saint Gobain Pipelines PLC^[8] as to whether a defendant's share of damages should be proportionate to the degree of exposure which he had caused, which was then on its way to the Court of Appeal. As in the present case and as in Smiths Dock, the conditional fee agreement in Rugg provided that the solicitors would not be entitled to any costs after receipt of a successful Part 36 offer. Master Wright concluded:

116. There was a serious risk that the Claimant might not win (in the sense defined in the CFA) because she might be unable to establish that Mr Rugg had been employed by any of the Defendants or that he had been employed by any of them for a sufficiently substantial period of time. Failure to win would result in FFW [the Claimant's solicitors] recovering no costs at all.

117. There was a serious risk that an early Part 36 payment might be made which (if not beaten) would result in FFW recovering no costs at all from the date of the payment. Barker had been decided by Moses J at the relevant time but FFW were not to know what the result of the appeal to the Court of Appeal would be and still do not know what the result of the appeal to the House of Lords will be. If Barker were to have been reversed it could have impacted on the total amount of damages which would be recoverable and hence on the consequences of a Part 36 payment.

118. Similarly if Barker were to have been reversed it would have been almost impossible (on the very limited evidence available) for the Claimant to establish the relevant periods of Mr Rugg's employment and might well have prevented the Claimant from winning his case.

42. It seems to me that at the time that the solicitors entered into the conditional fee agreement with the Claimant they could not reasonably have put the prospects of success as low as 60 per cent. Mr Holliday had not had a complicated employment history. There would have been no reason to doubt his very clear evidence as to the significant exposure to asbestos dust during his lengthy employment by the Defendant. Nor would there have been any reason to doubt his evidence of minimal exposure to asbestos in his subsequent employment as a building officer by the Property Services Agency. The expert evidence which had been obtained was favourable both on liability and causation. The post mortem evidence was unequivocal. Establishing liability on the part of the Defendant was therefore highly probable.
43. As far as I am aware in none of the decisions to which I was referred had the attention of the court been drawn to the judgment of Master Whitaker in Edwards:

5. Experience has shown during the running of the fast track, that there are very few cases in which liability should be in issue, and once it is out of the way there is a 99% chance that the claim will be settled in respect of quantum. Something like 96% of claims do not need a liability trial.

44. That, to my mind, suggests a far greater chance of success in mesothelioma cases than might otherwise have been thought. Of course those percentages will not take into account claims which are abandoned before they reach the fast track nor claims which settle for less than an earlier Part 36 offer. But I doubt that there would be many of either, particularly the latter.
45. In the present case there was no possibility of a Fairchild argument and, bearing in mind the evidence of Mr Holliday's employment history, no real prospect of a Barker argument even if the decision of the Court of Appeal were reversed. Quantum in this case was reasonably straightforward. So while the solicitors were at risk of not recovering their costs for the period following a successful Part 36 offer, that risk was no greater in this case than in the run of personal injury cases.
46. Nor to my mind was there any particular risk that an order for costs would not be satisfied. Irwin Mitchell were told by Axa that there was a coordinating insurer. That the insurer did not respond until Irwin Mitchell wrote to it directly does not, to my mind, indicate any real risk. If Irwin Mitchell were particularly concerned, doubtless they could have written to Norwich Union rather sooner than they did.
47. In my judgment allowing for the high probability of either establishing liability or obtaining an admission of liability but the possibility of not recovering all of their costs in the event that a Part 36 offer was not beaten, a reasonable assessment of the prospects of success as at November 2002 would be about 75 per cent and certainly no less. That would give rise to a success fee for the solicitors of 33.3 per cent and the appeal on this aspect is allowed to that extent.

Counsels' success fees

48. The work done by the two counsel involved was fairly limited and the submissions made on the appeal in relation to their success fees was also limited.
49. Mr Phillips entered into a conditional fee agreement with Irwin Mitchell on 14^th July 2002. His reasons for the success fee of 43 per cent were given as:

i) "no corroborative evid at present re exposure"

ii) "no full liability report"

iii) "Defendant's insurance position not finalised".

50. The agreement provided (at paragraph 20) that in the event that a Part 36 offer or payment was not beaten, counsel would be entitled to his normal fees throughout and a success fee to the date of the offer if he had advised its rejection. If he had advised its acceptance, he would be entitled to normal fees and a success fee throughout. There was therefore no risk to counsel from a successful Part 36 offer or payment.
51. In my judgment the risks for counsel were no greater as at July 2002 than they were for the solicitors as at November 2002. The supportive reports of Mr Clark (albeit stated to be provisional) and Dr Rudd were available as at July 2002. I do not know if the post mortem report was available, but I assume that it was probably not. However the medical evidence was clear. If there was no corroborative evidence of exposure at the time of the risk assessment, it was available later and there was no reason to suppose that none would ever be available.
52. A success fee of 43 per cent infers an assessment of the prospects of success at 70 per cent. In my judgment, and for the reasons I have given in relation to the solicitors' success fee, that overestimates the risk of failure and is unreasonable. Unlike the solicitors, counsel was under no specific risk in relation to Part 36 offers and payments. I would put the prospects of success as at July 2002 at 80 per cent. That would give rise to a success fee of 25 per cent.
53. Miss McCormick entered into a conditional fee agreement with Irwin Mitchell on 5^th December 2005. This agreement also provides for a success fee of 43 per cent. It has a similar provision to that in Mr Phillips' agreement in relation to Part 36 payments. I was not shown a risk assessment by Miss McCormick.
54. By the date of the agreement judgment had been entered. Again there was no risk to counsel from a successful Part 36 offer or payment. In my judgment an assessment of the prospects of success of 70 per cent as at 5^th December 2005 was wholly unrealistic. I would put the prospects of success at 90 per cent, simply to reflect a general litigation risk in a case in which the claimant has already succeeded on liability. That would give rise to a success fee of 11 per cent.
55. In section 5 of the Appellant's notice the order which the Defendant sought was inter alia:

The uplift in respect of the success fees should not have exceeded 27.5%.

56. Although expressed equivocally, that, it seems to me, would reasonably be read as a contention that the success fees should be 27.5 per cent - a figure which, quite probably, was taken from the fixed success fee provisions of Section V of CPR Part 45. In the course of submissions Mr Brown indicated, almost in passing, a desire to amend the Appellant's Notice "if necessary" to contend for lower success fees for counsel. That would require the permission of the court under CPR 52.8. Although the sums are relatively small – a matter of hundreds of pounds – insofar as the amendment would affect the positions of those who were not present at the hearing, in my judgment it would not be appropriate to allow it. An adjournment for instructions to be taken from both counsel would have given rise to a disproportionate expense.
57. Accordingly the success fees of both counsel should be allowed at 27.5 per cent and this aspect of the appeal is allowed to that extent.
*****

Note 1   (unreported) 9th March 2006    [Back]

Note 2   [2003] EWHC 15 (QB) at para 51(iv)    [Back]

Note 3   unreported; 21st October 2004    [Back]

Note 4   [2003] 1 AC 32    [Back]

Note 5   [2004] EWCA Civ 1712    [Back]

Note 6   [2004] EWHC 1116 (QB)    [Back]

Note 7   unreported 12th September 2005    [Back]

Note 8   [2004] EWCA Civ 545    [Back]