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
		11 August 2008

Master Rogers:

A. INTRODUCTORY

1. The comprehensive points of dispute to this, between the parties, bill claiming £244,220.52 (including additional liabilities), raised eight preliminary issues which were considered appropriate for decision prior to the actual detailed assessment which might, and hopefully still may, result in the full detailed assessment not having to be conducted.
2. The first of these preliminary issues concerned whether or not the two CFAs entered into, firstly by the deceased prior to his death, with his local solicitors, Messrs Boys and Maughan, and secondly, entered into by his widow with his new solicitors, Messrs Irwin Mitchell, were unenforceable by virtue of non-compliance with the provisions of Regulation 4(2)(c) of the 2000 Regulations.
3. Since, if successful, that application would dispose of the bill totally in favour of the Defendant, it was argued before me as a separate and discrete preliminary issue on 22 January 2008.
4. I handed down a reserved judgment in the matter on 15 February 2008 in favour of the Claimant. That judgment is now reported at [2008] EWHC 90097 (Costs).
5. Since it is obvious that if any matters dealt with in this judgment go further, that judgment will be referred to. I do not intend to repeat the background to this case or any material which is contained in that previous judgment.
6. Following the hearing the matter was re-listed before me on 22 and 23 July to dispose of the remaining preliminary issues and hopefully also to deal with the actual detailed assessment.
7. It seemed to me that it was appropriate simply to deal with those preliminary issues, since they cumulatively will have a substantial effect on the outcome of the assessment and, as I have already indicated, may well obviate the necessity for a full item by item detailed assessment.
8. The remaining preliminary issues were as follows:

i) reliance on estimates and proportionality;

ii) hourly rates;

iii) recoverability of success fees on the two CFAs;

iv) level of solicitors' CFA success fee;

v) level of counsel's CFA success fee;

vi) recovery by claimant of costs of funding.

9. As indicated in paragraph 14 of my first judgment, no claim for costs is being maintained in this bill by or on behalf of the Claimant's first solicitors, Messrs Boys & Maughan and therefore any issues arising out of the validity or otherwise of their CFA fall away.
10. In addition, the third preliminary point, which was a technical point turning on the wrong date being inserted on the N251 by the Claimant's solicitors, was resolved during the course of the hearing before me by the Claimant making an application for relief from sanction under CPR 3.9 which, after hearing both advocates, I duly granted.

(I)_ RELIANCE ON ESTIMATE AND PROPORTIONALITY

11. Strictly, these are separate issues but they were argued together because it was contended on behalf of the defendant, that if it was successful, the level of the Claimant's base costs would be such that the issue of proportionality would no longer arise.
12. Nevertheless, I will deal with them separately in this judgment:

Reliance on estimates

Mr Brown on behalf of the Defendant argued strongly and at length that the Claimant's solicitors' figures for costs contained in the allocation questionnaire and which were relied upon by his client, or to be more strictly accurate, his client's insurer, were so much lower than the actual costs now claimed that the Claimant's solicitors should be limited to the amount of the estimate together with a margin which in this case amounted to some 31 per cent over and above the estimate.

The written estimate

This was contained at section G of the allocation questionnaire filed on 24 May 2005:

"What is your estimate of your costs incurred to date? £30,330

What do you estimate your overall costs are likely to be? £38,000"

13. However, the base costs claimed in the bill of costs total £106,453.88, of which £92,326 represents base profit costs and £14,127.88 base disbursements.
14. Obviously the starting point in considering this matter must be the relevant Practice Direction which is CPD Section 6, which reads as follows:

"6.1 This section sets out certain steps which parties and their legal representatives must take in order to keep the parties informed about their potential liability in respect of costs and in order to assist the court to decide what, if any, order to make about costs and about case management.

6.2 (1) In this section an 'estimate of costs' means –

(a) an estimate of base costs (including disbursements) already incurred' and

(b) an estimate of base costs (including disbursements) to be incurred,

which a party intends to seek to recover from any other party under an order for costs if he is successful in the case. ('Base costs' are defined in paragraph 2.2 of this Practice Direction.

(2) A party who intends to recover an additional liability (defined in rule 43.2) need not reveal the amount of that liability in the estimate.

6.3 The court may at any stage in a case order any party to file an estimate of costs and to serve copies of the estimate on all other parties. The court may direct that the estimate be prepared in such way as to demonstrate the likely effects of giving or not giving a particular case management direction which the court is considering, for example a direction for a split trial or for the trial of a preliminary issue. The court may specify a time limit for filing and serving the estimate. However, if no time limit is specified the estimate should be filed and served within 28 days of the date of the order.

6.4 (1) When –

(a) a party to a claim which is outside the financial scope of the small claims track files an allocation questionnaire; or

(b) a party to a claim which is being dealt with on the fast track or the multi track, or under Part 8, files a pre-trial check list (listing questionnaire),

he must also file n estimate of costs and serve a copy of it on every other party, unless the court otherwise directs. Where a party is represented, the legal representative must in addition serve an estimate on the party he represents.

(2) Where a party is required to file and serve a new estimate of costs in accordance with Rule 44.15(3), if that party is represented the legal representative must in addition serve the new estimate on the party he represents.

(3) This paragraph does not apply to litigants in person.

6.5 An estimate of costs should be substantially in the form illustrated in Precedent H in the Schedule of Costs Precedents annexed to the Practice Direction.

6.5A (1) If there is a difference of 20% or more between the base costs claimed by a receiving party on detailed assessment and the costs shown in an estimate of costs filed by that party, the receiving party must provide a statement of the reasons for the difference with his bill of costs.

(2) If a paying party –

(a)claims that he reasonably relied on an estimate of costs filed by a receiving party; or

(b)wishes to rely upon the costs shown in the estimate in order to dispute the reasonableness or proportionality of the costs claimed,

the paying party must serve a statement setting out his case in this regard in his points of dispute.

('Relevant person' is defined in paragraph 32.10(1) of the Costs Practice Direction)

6.6 (1) On an assessment of the costs of a party, the court may have regard to any estimate previously filed by that party, or by any other party in the same proceedings. Such an estimate may be taken into account as a factor among others, when assessing the reasonableness and proportionality of any costs claimed.

(2) In particular, where –

(a)there is a difference of 20% or more between the base costs claimed by a receiving party and the costs shown in an estimate of costs filed by that party; and

(b)it appears to the court that –

(i)the receiving party has not provided a satisfactory explanation for that difference; or

(ii)the paying party reasonable relied on the estimate of costs;

the court may regard the difference between the costs claimed and the costs shown in the estimate as evidence that the costs claimed are unreasonable or disproportionate."

15. During the course of the submissions to me there was a dispute between the advocates as to whether 6.5A applied to this case or not. That sub-paragraph was introduced into the Rules in September 2005, whereas of course the allocation questionnaire in this case was filed in May 2005.
16. Accordingly, Mr Green submitted that the mandatory provisions of 6.5A did not apply in his case.
17. Mr Brown on the other hand, submitted that 6.5A did apply to all assessments conducted after September 2005 irrespective of when the original estimate in question was filed.
18. I do not think it is strictly necessary for me to decide that issue, though I am inclined to think that Mr Brown's submissions are to be preferred. However, it seems to me that an explanation was supplied for the discrepancy by the Claimant's solicitors, albeit not with the bill as such, but in their points of reply.
19. This is perhaps unsurprising, because the point was not raised by the Defendant until their points of dispute were served in April 2007.

THE DEFENDANT'S SUBMISSIONS RELATING TO RELIANCE ON THE ESTIMATE

20. It was agreed between the advocates that the effect of 6.5A was to "put teeth" into the rule following the decision in Leigh v Michelin Tyre plc [2004] 1 Costs LR 148, in which the Court of Appeal sought to give guidance as to how the provision in regard to estimates should be applied thereafter, as it appeared that until the decision in Leigh these provisions had been something of a "damp squib".
21. Mr Brown pointed out, quite correctly, that the decision of the Court of Appeal in Leigh was handed down on 8 December 2003, and therefore should have been clearly in the minds of those preparing the allocation questionnaire on behalf of the Claimant in May 2005.
22. Mr Brown relied heavily on the judgment of Dyson LJ in Leigh. The relevant paragraphs of his judgment are 24-31, which I set out below:

"24. So how should CPR 43 PD para 6.6 be applied where there is a substantial difference between the amount of the costs estimate and the costs claimed on an assessment? If there is no substantial difference between the two figures, then para 6.6 will have no significance. But, if there is a substantial difference as there was in the present case, the practice direction gives no guidance as to how that difference should be taken into account in determining the reasonableness of the costs claimed. It is clear that some guidance is required. In a valuable article 'Costs in Personal Injury Cases' (Journal of Personal Injury Law 2002 issue 2/02) Professor John Peysner said this of costs estimates:

'Cost estimates, like building estimates, have a potential to make costs more predictable and controllable. In project management proper estimating is crucial, contingencies are built in and if the estimate is exceeded the contractor must explain. In cost assessment terms estimation, in effect, should shift the burden of proof onto the potentially receiving party to estimate correctly (always bearing in mind the litigators duty to the court) and to re-estimate. The author was very exercised in the run up to the Civil Procedural Rules about this idea and thought that it would be of great value. In fact it appears to have been a damp squib. Anecdotal evidence suggests that litigators are uncertain as to how the information disclosed is used, judges suspect that the estimating process is not rigorous and there seems little evidence of judges revisiting estimates on assessment.'

25. If costs estimates have proved to be a 'damp squib', it may be that the reason for this is that judges simply do not know how to take them into account when assessing costs. Another factor may be that, as Judge Mitchell said in the present case, there is a concern that, if para 6.6 is taken seriously, it will merely encourage satellite litigation.

26. What follows is not intended to provide an exhaustive guide as to the circumstances in which a costs estimate may be taken into account in determining the reasonableness of the costs claimed, but it should assist judges in the application of para 6.6 of the practice direction. First, the estimates made by solicitors of the overall likely costs of the litigation should usually provide a useful yardstick by which the reasonableness of the costs finally claimed may be measured. If there is a substantial difference between the estimated costs and the costs claimed, that difference calls for an explanation. In the absence of a satisfactory explanation, the court may conclude that the difference itself is evidence from which it can conclude that the costs claimed are unreasonable.

27. Secondly, the court may take the estimated costs into account if the other party shows that it relied on the estimate in a certain way. An obvious example would be where A shows that he relied on the relatively low estimate given by B not to make an offer of settlement, but carried on with the litigation on the basis that his potential liability for costs was likely to be of the order indicated in B's estimate. In our judgment, it would be a proper use of para 6.6 of the practice direction to take such a factor into account in deciding what costs it was reasonable to require A to pay B on an assessment.

28. Thirdly, the court may take the estimate into account in cases where it decides that it would probably have given difference case management directions if a realistic estimate had been given. To take a rather crude example: suppose that at the allocation questionnaire stage the claimant provides an estimate of overall costs in the sum of £20,000, and claims £50,000 at the assessment. The court might conclude that, if it had known that the claimant's costs were likely to be of the order of £50,000, rather than £20,000, it would probably have given different directions from the ones it gave, and that these would have had the effect of reducing the claimant's costs. It might, for example, have trimmed the number of experts who could be called, and taken other steps to slim down the complexity of the litigation in the interests of controlling costs in a reasonable and proportionate manner.

29. In our view, para 6.6 of the practice direction gives the court the power to take matters such as these into account in deciding whether, and if so how far, to reflect them in determining what costs it is reasonable to order the paying party to pay on an assessment. We do not, however, consider that it would be a correct use of the power conferred by para 6.6 to hold a party to his estimate simply in order to penalise him for providing an inadequate estimate. Thus, if (a) the paying party did not rely on the estimate in any way, (b) the court concludes that, even if the estimate had been close to the figure ultimately claimed, its case management directions would not have been affected, and (c) the costs claimed are otherwise reasonable and proportionate, then in our view it would be wrong to reduce the costs claimed simply because they exceed the amount of the estimate. That would be tantamount to treating a costs estimate as a costs cap, in circumstances where the estimate does not purport to be a cap.

30. Nor is there any justification for interpreting the provisions in the CPR as equating costs estimates with costs budgets or caps. There is, however, much to be said for costs budgeting and the capping of costs. Some judges have made prospective costs cap orders exercising the general power conferred by section 51(1) of the Supreme Court Act 1981: see, for example, Gage J in AB v Leeds Teaching Hospitals NHS Trust (in the matter of the Nationwide Organ Group Litigation) [2003] EWHC 1034. This is not the place to review these decisions. Suffice it to say that, whatever the scope of the jurisdiction to make such orders, it is quite different from the jurisdiction that is exercised retrospectively at the stage of costs assessment, and when the court is required to decide the amount of reasonable and proportionate costs. Costs estimates can also alert the judge responsible for case management to the need to take appropriate action to prevent disproportionate costs from being incurred.

31. We acknowledge the concerns about the danger of satellite litigation. It might be said that the guidance that we have sought to give will foster disputes. Did the paying party who alleges that he relied on the estimate in fact rely on it, and to what extent? Would the court in fact have made different case management decisions if it had been provided with a realistic costs estimate, and what effect would that have had on the litigation and the parties' costs? What is the explanation for the difference between the costs estimate and the costs claimed at the assessment stage, and does the explanation satisfactorily account for the difference? These are all valid questions to ask. But these concerns do not justify setting at nought the important CPR provisions relating to the making of costs estimates. If costs estimates are not taken into account at the assessment stage, then they will be entirely nugatory. It should not be difficult for the court to determine whether, and if so how, the paying party has relied on the costs estimate given by the receiving party without conducting an elaborate and detailed investigation. Likewise, in most cases the court should be able without prolonged investigation to form a judgment as to whether, and if so how, the case would have been managed differently if a realistic costs estimate had been given."

23. It is obvious that for the Defendant to succeed on his submission he must be able to point to "reliance". In this connection Mr Brown relied on two witness statement made in connection with the earlier issue by Mr Christopher David Robert Newton and Mr Adam George Murray Lidster respectively.
24. Mr Newton took over the conduct of this case on behalf of the Defendant from a colleague, Barbara Hatton. In the first three paragraphs of his witness statement made on 15 January 2008 he sets out his relevant experience and then concludes with the following four paragraphs:

"4. I took over the handling of this claim on 12 September 2006 from my colleague, Barbara Hatton. On doing so I considered the claimant's allocation questionnaire dated 20 May 2005. I noted the estimate of costs provided at paragraph G of the allocation questionnaire stated costs to the conclusion of the case as at 20 May 2005 were £38,000. I relied on this estimate of base costs to trial and in light of this I produced a coordinator's note on 20 September 2006 giving a total reserve on the claimant's costs of £50,000.

5. It is always my policy, and that of my colleagues in the occupational disease department, to advise the insurer clients of realistic reserves. It is very important the insurer client has an accurate reserve as this may effect [sic] their business projections for the year/following year. I also considered the Notice of Funding form that had been served on the defendant. It stated that a conditional fee agreement had been entered into which provided for a success fee and that an after event insurance policy was in place with Abbey Legal Protection Limited. Therefore the reserve made allowance for VAT, additional liabilities and a reasonable reduction of the claimant's costs.

6. I have seen a copy of the claimant's bill of costs and note that the base costs to settlement total £102,563.29. This figure does not include the time incurred by Irwin Mitchell drafting and checking the bill of costs. Although I have experience of dealing with these types of cases and of Irwin Mitchell's costs I could not have anticipated the base costs figure would be this high. This case did not proceed to trial but the figure in the bill of costs exceeds the estimate to trial by £64,563.29 and the matter settled just prior to service of the pre-trial checklists.

"7. Had I known the base costs claimed would be over £100,000 before the pre-trial checklist stage I would have consulted with our in-house London costs department on the merits of making an application to cap the costs at a reasonable level."

25. It will be noted that in paragraph 4 of this witness statement the deponent states that he "produced a coordinator's note". I took this to mean that it was exhibited to the witness statement but no copy of it appeared in the agreed bundle.
26. Mr Brown explained that "produced" was not a mistake for "produce" but simply recited the fact that Mr Newton had prepared a document which he sent to his insurance company clients and that such document was clearly privileged and the Defendant could not, and would not, waive privilege over it.
27. Nevertheless it seemed to me that if reliance was to be placed on the document, then I should see it and accordingly, after the short adjournment on the first day of the hearing, Mr Brown duly produced the document to me.
28. Without giving too much away I can confirm that it does state what Mr Newton says in his witness statement it states, but it also contains a lot of additional information.
29. The second witness statement on behalf of the Defendant is by Mr Lidster and was made on 16 January 2008, paragraphs 3-9 of which read as follows:

"3. I undertook the majority of my own costs negotiations when in the personal injury department from 1998 to 2002. I then assisted with defending high value bills of costs in the catastrophic injury team from 2002 to August 2005. I have written numerous costs articles for the Post Magazine, provided extensive costs training notes for the legal training institution BPP and am the author of many internal costs articles and papers, and have provided costs lectures to insurer clients and fellow employees. I have attended numerous costs conferences and seminars since 2002 and have represented my defendant clients at numerous detailed assessment hearings.

4. I have discussed this case with Barbara Hatton, who had the conduct of this file from December 2005 to September 2006. She has advised me that she did not consider that the claimant's costs estimate contained in the allocation questionnaire dated 20 May 2005 gave her any cause for concern as it was in line with estimates in the majority of mesothelioma cases she had dealt with. Although the dependency claim was somewhat more unusual than in other cases she did not think the costs would be significantly higher than the average for a case of this type. She has informed me that if an estimate to trial had been served by the claimant's solicitors in the sum/or in excess of the sum claimed for base costs in the bill of costs, namely £102,563.29, she would have referred the matter to her supervising partner, Nicholas Pargeter.

5. I have discussed matters with Nicholas Pargeter who has informed me that had such an estimate been served by the claimant's solicitors he would have taken advice from the London costs department on whether it was appropriate to make a formal application to cap the costs in this case. He has said that in any event had the London costs department advised against such a course of action he would have advised Barbara Hatton to raise the fact the costs were so high with Master Whitaker of the High Court at any case management conference. It would then have been open to the Master to consider whether to exercise his case management powers in limiting any future costs.

6. Since October 2005 I have had conduct of 28 Irwin Mitchell occupational disease costs cases, all of which relate to asbestos related diseases. 22 of these cases relate to mesothelioma claims. I have conducted 98 mesothelioma costs cases within the same period against numerous firms of solicitors. My colleague, Gavin Beardsell (the previous head of the department), had conduct of 4 Irwin Mitchell cases (not including this case) all of which were asbestos related diseases and 2 of which related to mesothelioma. Overall the London costs department has conducted 140 mesothelioma costs cases in the past 2 years.

7. Of the 24 Irwin Mitchell mesothelioma cases (not including this claim) 20 claim success fees of 100%, although a success fee at this level has never been recovered. The costs in this case exceed any other Irwin Mitchell mesothelioma case dealt with by the London costs department by £125, 030.07 (this sum includes a success fee of 100% and ATE insurance of £1,608.23 with Amicus). Of the 140 mesothelioma cases the second highest bill of costs totals £147,759.64 (this sum includes a 100% success fee but no ATE premium) and was conducted by Field Fisher Waterhouse. The estimate of overall base costs contained in the allocation questionnaire was exceeded by 30% in that bill of costs. In this case the estimate is exceeded by 270%. In my submission a bill of costs of £244,220.53 could not have been reasonably contemplated in a case of this type.

8. Whilst I am aware that case law relating to estimates and costs capping has developed since December 2005 had Nicholas Pargeter sought advice from the London costs department that an estimate of in excess of £100,000 had been served he would have been advised by either myself, or my colleague Gavin Beardsell, to make an application to cap the costs at a reasonable level of base costs expected to be incurred in this type of case. This is particularly so in light of Lord Justice Brooke's remarks in King v Telegraph Group Ltd [2004] EWCA Civ 613 on costs capping. Further the case of Sheppard v Essex Strategic Health Authority (Queens Bench Division 13 May 2005), would have been taken into account the court in that case accepted that because there was a risk that costs might escalate unreasonably a costs cap was appropriate. This was despite the claimant's solicitors being experienced in the type of litigation.

9. In my view there would have been compelling grounds for the court applying a costs cap on 13 October 2005 or at a subsequent hearing and I believe that a reasonable costs cap would have been in the sum of £50,000 base costs overall. This claim settled prior to the pre-trial checklists being served and any cap would have covered all the preparation for trial and counsel's attendance at the five day trial. The claimant's solicitors could have served an updated and more accurate estimate at any time after the allocation questionnaire but chose not to do so."

30. Mr Brown submitted that the Claimant's solicitors' base costs should be "capped" at £50,000, this representing the £38,000 contained in the estimate plus the margin which I have referred to in paragraph 12 above.
31. In addition to the quotation from Leigh which I have given above, Mr Brown relied on other cases. The first of these is the decision of Master Simons in the case of Pask v McNicholas Construction Services Ltd which was handed down on 31 May 2006. It is not generally reported.
32. This was an industrial disease case, although it did not concern asbestosis as did so many of the other cases cited to me over the two days of this hearing. In the first twelve paragraphs of his judgment, Master Simons recites the background and submissions made to him and then continues in paragraphs 14 to 20 as follows:

"14. Taking all those factors into account at the end of the day my decision is based on the question, do costs of £269,000, which is the net amount of the costs excluding VAT, appear to be proportionate in a case where £678,500 damages have been recovered, where liability was not in issue and the case was settled before trial. As I indicated to you I have had the opportunity of going through the file of papers and reading through the correspondence file. Taking all these factors into account I have come to the conclusions that these costs appear to be disproportionate.

15. I am not satisfied that there has been any planning, as envisaged in Home Office v Lownds, where, as I read out the quote, one of the factors in planning is what the likely overall cost is. I have been able to find no indication of what the client was told about what the likely overall costs would be. If one adopts the suggestion made by the senior costs judge in Musa King v The Daily Telegraph was [sic] that if Mr Pask was informed that it was going to cost him over a quarter of million pounds, bearing in mind he was paying privately to recover his damages what would his reaction be? I do not think that once the question of liability had been admitted that there was ever any detailed consideration of the overall costs.

16. I have referred to the costs estimate that was given in February 2004 when it was estimated that the costs were £40,000. I am told this was a mistake, that nobody relied on it, but h Having seen the meticulous way in which Mr Marks has prepared this case it seems surprising, to say the least, that he was so meticulous in dealing with so many aspects of this case that he would not be meticulous when dealing with a question of the costs estimate, bearing in mind this estimate was given in February 2004 when the issue generally of costs estimates was a very live topic amongst practitioners, there already having been a decision in Leigh v Michelin Tyres, certainly the first instance decision in that case.

17. For costs to have arisen from February 2004 from an estimated £40,000 to £269,000 in December 2004, a period of ten months notwithstanding the difficulties that were encountered with the other solicitors, seems to me that there has been a total lack of planning about the costs and a failure to carry out this litigation in an economic and proportionate manner.

18. Mr Bacon submits that the question of costs estimates has nothing to do with the question of proportionality and I respectfully disagree with him. Firstly, because as I said the comment made in Home Office v Lownds that the likely overall cost is a factor with regard to the planning and, secondly, because of the overriding objective [of] which one of the factors is the financial position of each party. Mr Pask, as I understand it, was never going to be in a position or is unlikely to have been in a position, to have incurred £269,000 worth of costs and, therefore, I do feel that it is a relevant factor that the case has to be dealt with economically and proportionately.

19. Having looked at the file and having looked at some of the letters, what strikes me is the prolixity of some of the letters, some of which appear to be attritional with their underlinings and bold type, letters to experts run into pages which I find surprising and, in my experience, quite unique that such detail is spent in instructing these experts. It commends in a way Mr Marks' meticulous approach but is it reasonable and proportionate for the paying party to have to pay for that degree of meticulousness – I think not.

20. Therefore, I am not satisfied this case has been carried out in an economic and proportionate manner and, therefore, when going through the bill on an item by item basis I have to look at each item and decide whether they were reasonable and necessary and that is the basis on which I am going to assess this."

33. Although the judgment does not say so in terms, it seems reasonably clear and the advocates before me agreed with this, that this was another CFA case.
34. Mr Brown also relied heavily on the decision of Master Gordon-Saker in Tribe v Southdown Gliding Club Ltd & Others in which Mr Gordon-Saker handed down his reserved judgment on 4 June last year and which is now reported at [2007] EWHC 90080 (Costs).
35. It seems to me that this contains a very helpful exposition of the current position and accordingly I set out below paragraphs 27 to 41 from that judgment:

"27. According to Mr Tribe's statement dated 23^rd March 2006:

'10. I understand that my solicitor was reassured as a consequence of these estimates that the £100,000 limit for the cover I had purchased would be sufficient to cover my costs exposure. My solicitor quite obviously relied on these estimates. Given the amount of the estimates there was no need to seek "top up" or additional premium [sic].

…

13. I was shocked to learn that the estimates provided and relied on by my solicitor in giving advice to me have been grossly exceeded by as much as almost five times by the first and third defendants.'

28. According to Miss Levison's statement, dated 26^th January 2007:

'6. … I advised Doug to take out an After the Event insurance policy in case he should lose the case. The insurance was arranged through the Accident Line Protect Scheme and the policy was taken out at the same time as the CFA was signed up. The cover was for £100,000 which I considered would be adequate to cover the Claimant's liability for his own disbursements and the Defendants' costs should he lose or have to discontinue the claim.

…

10(c) It is my invariable practice to check estimates of costs to trial on Allocation Questionnaires served by Defendants. This is particularly important in Conditional Fee Agreement cases. The reason is that it is, of course, absolutely necessary to keep a close eye on costs to protect the Claimant's position and make sure there is adequate insurance cover. I considered that on the basis of the costs estimates provided by the 2 firms of solicitors acting for the 3 Defendants, the After the Event insurance policy cover for £100,000 would be adequate to cover the Claimant's liabilities. There was no need to seek top up cover on the basis of the information provided.'

"29. Although Mr Tribe did not give evidence before me, he did address me. I formed the very clear view that he was an honest, measured, careful and reasonable man. I have no doubt that had he been aware at the outset of these proceedings of the true magnitude of the claim for costs against him, he would have purchased additional insurance cover. At the outset, the expert evidence favoured his case and I have no reason to suppose that adequate cover could not have been purchased at relatively modest cost. Therefore, even ignoring the evidence of Miss Levison, I have no doubt that the Claimant did rely on the estimate of costs given by the First and Third Defendants in their Allocation Questionnaire.

30. Paragraph 6.6(2)(b)(ii) of the Costs Practice Direction imports a concept of 'reasonable' reliance which was not suggested by the Court of Appeal in Leigh. It seems to me that while, following the guidance suggested by the Court of Appeal, it may not strictly be necessary for the paying party to establish that his reliance on the estimate was reasonable, unreasonable reliance on an estimate is unlikely to lead to the same result as reasonable reliance.

31. While I consider that the estimate in the Allocation Questionnaire was too low at the time that it was given, it was not so low that it was unreasonable for the Claimant and his solicitors to rely on it. It must I think be of some significance that the estimate was contained in a document which was signed by a solicitor in a respectable and respected firm. The figure of £50,000 had been 'decided on' by Mr Barham, a partner at Beaumont & Son, who had overall responsibility for the case^[1]. He would have been aware that the Claimant had purchased ATE insurance from the earlier Notice of Funding. He should have been aware of the importance of the estimate. Clearly it was intended that it be relied on.

32. Although the Allocation Questionnaire was served after a Defence in which liability was denied, the extent of the resources which the defendants were willing to commit to this action could not have been known. Further it is commonly believed that solicitors acting for insurers generally charge lower than the going market rate to reflect a relationship which provides work in bulk.

The Defendants' explanation for the difference

33. The First and Third Defendants' explanation for the difference between the estimate and the sum now claimed for costs is set out in the statement of Mr Barham

34. He identifies the following factors as leading to costs which were unanticipated at the time that the estimate was given:

(1) The complexity and volume of the engineering evidence.

(2) The identification of 2 further eyewitnesses to the accident.

(3) The death of Mr King, the Second Defendant, and the consequent need to obtain further evidence as to his competence.

(4) The death of Mr Philips, the Claimant's expert.

(5) Difficulties relating to Mr Darlington, the Claimant's new expert.

(6) The need for metallurgical evidence.

(7) The need to investigate Mr Tribe's medical history.

(8) Delays by Pattinson & Brewer.

35. It seems to me that, having regard to the issues identified in the statements of case, it should have been apparent when the estimate was given that the engineering evidence would be lengthy and complex. I accept that all of the other factors would have been unanticipated, although some of them (the identification of further witnesses, the need for further expert evidence and delays by the other side) are fairly commonplace in this sort of litigation.

36. But I cannot accept that these factors, collectively, can explain the difference between the estimate and the sum now claimed. Looking through the bill, no more than a few hundred pounds was spent attending on any witness. The costs consequences to these defendants of the death of Mr Philips and the logistical difficulties of arranging a meeting with Mr Darlington cannot have been anything other than modest. The cost of investigating Mr Tribe's condition is claimed at £750 (£300 in attending the neurologist and £450 for the neurologist's fee). While £2,042 is claimed for attending on the metallurgist and about £11,500 claimed for his fees, these figures cannot explain the difference and do appear to be somewhat high themselves.

37. The chasm is not bridged. In my judgment the First and Third Defendants have not given a satisfactory explanation for the difference between the estimate of £50,000 (including trial and dealing with quantum) and the sum now claimed of £244,509 (excluding trial and dealing with quantum).

Case management

38. I doubt that the case would have been managed very differently if a higher figure had been given at the outset or if the First and Third Defendants' solicitors had volunteered to the Court a higher figure subsequently. There may have been scope for giving different directions about expert witnesses, but having regard to the potential value of the claim and the crucial importance of the expert evidence on liability, this would probably not have been a case where a direction for joint experts would have been appropriate.

Reduction in the costs

39. Given my findings that the Claimant relied, and reasonably relied, on the low estimate given by the First and Third Defendants in their Allocation Questionnaire and that those defendants have not satisfactorily explained the difference between that estimate and the costs now claimed, should the claim for costs be limited to the estimate? The Court of Appeal stressed in Leigh that an estimate is not a 'cap', Rather the appropriate approach is that set out in paragraph 32 of the judgment of Dyson LJ:

"If, applying the guidance given in this judgment, the court is satisfied that the costs claimed should be reduced having regard to the costs estimate, the question remains: by how much should the costs be reduced? This will always depend on the circumstances of the individual case. It is a matter for the judgment of the court to decide what reduction to make."

40. In my judgment this is an appropriate case to reduce the costs that may be recovered by the receiving party to take account of the paying party's reliance on the estimate. As the estimate cannot be a cap, it seems to me that the appropriate starting position should be the costs which one would expect to see incurred in this case by these parties. I would have expected the First and Third Defendant's reasonable costs of defending this claim to trial, including the assessment of damages, to have been no more than about £100,000 - £150,000. Allowance then has to be made for three competing factors:

i) The low estimate (less than one-half of what I would expect) that was given. That would suggest a starting point at the bottom of the bracket of £100,000 - £150,000.

ii) A deduction of the costs of trial and of dealing with the assessment of damages. On these defendants' own figures the costs of trial (but not the assessment of damages) would have been about £79,984. I take that figure from their breakdown filed with the Listing Questionnaire. I think that a reasonable figure for trial and the assessment of damages would have been just over one half of the Defendants' figure for trial alone.

iii) The additional costs of the factors identified in Mr Barham's witness statement"

36. Finally, Mr Brown relied on another decision of Master Simons given only the Friday prior to the hearing before me, on 11 July, namely Mastercigars Direct Ltd v Withers LLP.
37. This was a Solicitors Act dispute with which I am reasonably familiar, having originally had the conduct of it at Costs Judge level before the appeal to Morgan J, which is reported at [2008] 1 Costs LR 72.
38. As a result of that appeal the matter was remitted to a different Costs Judge and was balloted to Master Simons, who on 23 and 24 June this year heard evidence and submissions in relation to the Claimants' reliance on the Defendants' estimate.
39. Master Simons' decision is contained in paragraphs 39 to 52 of his judgment but it is to be noted that this was a Solicitors Act case and it seems to me that for the purposes of this judgment I need only refer to paragraphs 43 to 45 of his judgment, which read as follows:

"43. I do not accept Miss Rylett's submission that to show reliance the Claimant has to adduce evidence that it has acted to its detriment. Morgan J referred to the judgment of Dyson LJ in Leigh v Michelin Tyres plc [2003] EWCA Civ 1799 at paragraph 31 where it was stated that the paying party had to show "how" he relied on the estimate. That case related to an inter parties assessment where the paying party was relying on an estimate given to the court by way of an allocation questionnaire. The estimate in this case was given by the solicitor to his client at the client's request and in my judgment the question of reliance is more obvious than in an inter parties context where a paying party may well have to show that it has acted to its detriment.

44. Mr Kenyon has explained both in his witness statement and in evidence, "how" he relied on his estimate. Where there is only a small divergence between an estimate given by the solicitor to his client and the invoice, then there may be a greater burden on the client to show how he relied on the estimate and acting to his detriment may be a relevant factor. In this case the difference between the estimate and the invoices was so substantial that it is, in my judgment, not as relevant to show that the Claimant has acted to its detriment. The Claimant must show "how" it relied on the estimate and it has done so to my satisfaction.

45. It seems commonsense to me that if any client requests an estimate from a solicitor he is entitled to rely on it whether or not he acts to his detriment, if only for purely budgetary reasons. The solicitor is an expert in these matters; the client is not and has no alternative other than to rely on an estimate. The position is different in an inter parties assessment when the party alleging reliance on an estimate provided to the court will usually have the benefit of advice from a solicitor."

THE CLAIMANT'S SUBMISSIONS RELATING TO RELIANCE ON ESTIMATE

40. Mr Green submitted that the 20 per cent margin is a "red light" and that a satisfactory explanation for the substantial difference between the estimate and the allocation questionnaire and the figure at which the costs had been brought in is contained in his detailed points of reply.
41. He also referred to the fact that annexed to those points of reply was a substantially increased figure for the Claimant's costs which would have been exchanged with the Defendants' equivalent estimate at the listing stage on 26 October 2007 but for the fact that the case settled the previous day.
42. Mr Green conceded that the overall estimate of £38,000 given in May 2005 seemed to be "on the low side" bearing in mind that it was contended that £30,000 had already been incurred, so that that left only £8,000 to cover costs up to trial.
43. Nevertheless, he pointed to the complications which this case produced and which could not have been foreseen when the original estimate as given at the allocation stage.
44. He submitted that there were two principal reasons for the increase in costs. The first of these was the uncertainty as to the cause of death. The post mortem report suggested that the deceased had died of peritonitis rather than from mesothelioma and therefore considerable additional work had to be carried out in relation to this issue, particularly as, although the Defendants did concede liability at a relatively early stage, causation remained an issue for a considerable further period.
45. Secondly, he pointed to the dependency claims for Kim Webber and Kwankou Eseme. There was some dispute between the advocates as to the true position relating to these claims. It was suggested by Mr Green that the solicitors did not think that these claims had much chance of success and were going to advise the Claimant accordingly that she should abandon those claims.
46. However, when the matter came before Master Whitaker for directions on 6 March 2006 he expressed concern that the possibility that these claims were being abandoned and effectively gave directions to ensure that, if they were to be pursued, detailed directions had to be complied with.
47. Mr Brown contrasted the approach adopted by Mr Green in relation to this issue and the rather different approach which he adopted to the same issue when we came to the second preliminary issue, namely the hourly rates.
48. Mr Green did produce to me and, after I put him to his election also to Mr Brown, copies of certain attendance notes which indicated that there was, to put it no higher, a "vigorous debate" between those advising the Claimant as to this point.
49. Mr Green stated rightly that there were further attendance notes which he did not wish to disclose because he did not wish to waive privilege. However, I have had the opportunity since the conclusion of the hearing to go through the files again, and I am able to confirm that there was such a vigorous debate going on and this undoubtedly increased the costs in a way which could not have been foreseen when the original costs estimate was given in May 2005.
50. Both in his points of reply and in his oral submissions Mr Green made much of the factual differences between this case and the Tribe case. In particular at paragraph 3 of his points of reply on this point, Mr Green said this:

"The 'reliance' placed on the estimate in the case of Tribe took the form of the claimant having relied on the figure in estimate in relation to the purchase of sufficient ATE insurance to cover his liabilities. It was stressed that the claimant's solicitor found the defendant's estimates to be of particular importance in CFA cases where adequate cover has to be purchased to protect the claimant. For that reason the court found that the estimate had been relied upon.

This is quite different to the reliance that the defendant's solicitor claims to have placed on the estimate by reference to the 'coordinator's notes'."

51. Mr Green then pointed to paragraph 30 of the Tribe case where Master Gordon-Saker rightly points to the Costs Practice Direction importing a concept of "reasonable" reliance which was not suggested by the Court of Appeal in the Leigh case.
52. Mr Green also went further and says he did not believe that the Defendant did reasonably rely on the estimate in any event because the evidence which he has seen indicates that the "coordinator" placed the likely overall costs of the Claimant at £40,000 on 22 July 2005. However, the "coordinator" then put his own figure of £50,000 on the likely overall costs of the Claimant as of 20 September 2006 and this was some fourteen months after the estimate was given, and no doubt in light of the way that the litigation had proceeded both in relation to causation and the introduction of additional claimants. His Points of Reply continue:

"The Claimant will therefore submit that the coordinator's decision to increase the original estimate given by just £10,000 was not a reasonable one and in any event the Defendant cannot claim to have ultimately reasonably relied upon the estimate given by the Claimant but upon their own updated estimate."

53. As to the Mastercigars decision, Mr Green pointed out that this was a solicitor/client dispute and he submitted that from paragraphs 43-44 of Leigh it was clear that there was a difference between assessments as between parties and as between a solicitor and client, and that in the former case the paying party does have to show some detriment.
54. Both parties expressed surprise that when making his Order on 6 March, Master Whitaker, who is renowned for his active case management in mesothelioma cases, did not at the very least raise the issue of the additional costs which might be caused by his decision.
55. Nevertheless, Mr Green did not believe that any case management decisions would have been made differently from those which were made had Master Whitaker been told of the likely increase in costs.

THE DEFENDANT'S POINTS IN REPLY ON RELIANCE ON THE ESTIMATE

56. In reply, Mr Brown suggested that it was quite clear that the Defendants had relied on the estimate and would have taken steps to obtain a costs capping order had they been aware of the rapid increase in costs.
57. Mr Brown referred me to the decision of Hallett J (as she then was) in the case of Sheppard v Essex Strategic Health Authority [2006] 2 Costs LR 8 in relation to costs capping. In particular, he referred me to paragraphs 60 to 62 of that judgment:

"60. Having reviewed the authorities put before me so helpfully by counsel for both sides, authorities on case management and cost control post the introduction of the CPR, it is plain to me that, whether or not the CPR themselves made provision for cost-capping, there is a clear trend, as Mr Pooles suggested, to active case management on the question of costs. The courts are moving, at whatever pace, toward a system of pre-emptive strikes in order to avoid the costs of litigation spiralling out of control, and becoming unreasonable or disproportionate."

61. In my judgment, it is far better for the court to attempt control and budget for costs where appropriate, than to allow costs to be incurred and then have them submitted t0 detailed assessment after the event; an assessment, of course, that is meant to take place with the benefit of hindsight. It seems to me that such an approach is entirely in accordance with the spirit and the letter of the CPR. It is true to say, as Mr Hutton argued, that the facts of Ledward and the facts of Leeds Teaching Hospitals, are very different from the present case. In the Teaching Hospital case, the damages likely to be awarded were very low compared to the very high level of costs. In Ledward I made a number of very adverse findings against the claimants' solicitors. I wish to emphasise at this stage that I make absolutely no adverse findings against the claimants' solicitors in this case and certainly not their draftsman Mr Filtness.

62. The idea of a cost capping order is to exercise some kind of control, even over the most experienced and respected firm of solicitors. Any solicitor must obviously act with the best interests of their client at heart. With the best of intentions; there must be a risk that in certain cases without some kind of control by the court, there may be an unreasonable or disproportionate expenditure of limited resources. It is significant, in my view, that in this case both sides are publicly funded. Public funds are scarce and it is the duty of the court to play its part in ensuring they are expended properly and effectively."

MY DECISION ON RELIANCE ON ESTIMATES

58. I consider that the estimate of £38,000 given at the allocation stage was far too low but there were complications in what would otherwise have been a straightforward mesothelioma claim (and I accept from Mr Brown that these days there are such cases) which resulted in an increase in the costs and which could not have been reasonably contemplated at the stage at which the allocation questionnaire was completed.
59. I am not satisfied that what is described in Tribe as the "chasm" can be fully explained in that way. I think that the key to this issue is the question of "reasonable reliance". I have had the advantage of seeing the coordinator's note referred to in paragraphs 25-28 above and as I have already indicated it clearly shows that in the reserve that was being put forward was the figure of £30,000 for the Claimants' costs and a surprisingly low figure of £20,000 for Defendants' own costs.
60. The rest of the note however indicates that the solicitor was concerned at the sympathy which the Claimant would undoubtedly obtain from the court and that this should have an important bearing on the figure at which the Defendant should attempt to negotiate a settlement of the Claimant's claim.
61. I do not believe that the Claimant's solicitors' costs played such an important part in the Defendant's overall calculations as they now seek to contend. Even their witness statements go no further than saying that had they been aware of the higher figure for costs subsequently put forward by the Claimant's solicitors they might well have applied for a costs capping order and as Mr Green pointed out, even had they done so, there was no guarantee that they would have succeeded.
62. And of course, costs conscious defendants can at any time make an application to the court for an update of any costs estimate.
63. Some at least of the additional costs incurred by the Claimant's solicitors were as a result of enquiries, perfectly legitimate enquiries, but enquiries nonetheless, which the Defendants suggested needed to be made, both in relation to the cause of death of the deceased and also the two dependants' claims.
64. At the end of the day, therefore, I do not find that there was reasonable reliance by the Defendants on the Claimant's estimate and on this point, therefore, the Defendants do not succeed.

(b) Proportionality

65. The issue of proportionality under the Lownds principle remains to be considered but in this case I think that the overall base costs of some £120,000 are not disproportionate to the recovery of £250,000.
66. What has to be borne in mind is that Mr Woolley was sadly dying prematurely from mesothelioma and not only had a potential widow to consider but also two disabled dependants, one of whom was in the care of the local authority.
67. In my judgment such a claimant, were he paying his own costs, (and I accept that this being a CFA case, that was not something which he would be expecting to pay), he might well have been prepared to spend that sort of figure in order to effect a recovery of double that amount to give at least some security to those left behind him after his death.
68. Accordingly, I do not find as a preliminary point that the overall costs were disproportionate and if insofar as it is necessary to conduct a detailed assessment at the conclusion of the resolution of the remaining preliminary issues, I will not be applying the necessity test.

(2) Hourly rates

69. The hourly rates claimed in the bill are as follows:

	Up to 30 April 2004	1 May 2004 to 30 April 2005	Post 1 May 2005
Partner	£320	£350	£365
Litigation Assistant	£120	£125	£130
Trainee/Paralegal	£175	£180	£185
Associate Solicitor		£350	£365
Associate Solicitor (Public law)			£365
Senior paralegal			£275
Costs draftsman			£115

70. These of course are rates in excess of the SCCO guideline rates for Central London (not the City of London).
71. Mr Brown submitted that there was no necessity for this case to be handled in Central London by such a specialist firm with such a high expense rate. He pointed out that the deceased and the Claimant lived in Margate and he pointed to the considerably lower rates claimed by Messrs Boys & Maughan in the period when they were acting for the Claimant, albeit no claim for their costs is being pursued in this bill.
72. He contended that on the authorities a reasonable person in the position of the Claimant would not have gone to such an expensive solicitor as Mr Ettinger and subsequently Miss Pinfold.
73. He also contended that there were firms in Kent, or at any rate in Outer London, who could perfectly reasonably have dealt with this sort of case. He handed to me pages taken from a website of Messrs Thompson Snell & Passmore, solicitors in Tunbridge Wells, indicating that at least two of their solicitors who joined the firm in 2002 could have been perfectly capable of dealing with this sort of work and at much lower rates than were charged by Messrs Irwin Mitchell.
74. The usual cases which are referred to in this sort of dispute were, of course, once again listed in the list of authorities before me, namely

Wraith v Sheffield Forgemasters Ltd [1998] 1 WLR 132

Jones v Secretary of State for Wales [1996] 1 WLR 1008

and the even older case of

Johnson v Reed Corrugated Cases Ltd [1992] 1 All ER 169.

75. I handed to the parties at the outset of the hearing a very recent decision (only handed down six days prior to the hearing before me) of Teare J in A v The Chief Constable of South Yorkshire Police [2008] EWHC 1658 (QB). This is a case with which I am very familiar since I was one of the two assessors sitting with the judge, though I must emphasise that the judgment to which both parties are referred is entirely his judgment and not mine.
76. The case concerned a claimant who was arrested by the police and allegedly assaulted by them, and there were racial undertones. He was acquitted by the magistrates of any criminal offence and subsequently brought proceedings against the defendant, ultimately recovering over £300,000.
77. Although all this happened in Sheffield, where he had a local firm who represented him in those criminal proceedings, the Claimant chose to go to a London firm to deal with the civil proceedings and the issue in the case was whether the deputy costs judge who had decided that Sheffield rates should apply rather than London rates had been correct in that decision.
78. In paragraphs 7-11 the learned judge sets out the governing principle clearly:

"7. CPR 44.5 provides that on the standard basis of assessment those costs which are 'proportionately and reasonably incurred' may be allowed.

8. There are several cases, decided both before and after the introduction of the CPR, in which the question whether the liability of the unsuccessful party to pay costs should be restricted to what a reasonably competent solicitor practising in the area of the court, or in the area where the successful party lived, might have charged or whether the successful party should be entitled to recover the sums claimed by the solicitor who was in fact instructed to act on his behalf.

9. In Wraith v Sheffield Forgemasters Ltd [1998] 1 WLR 132 (a case decided under the RSC) the Court of Appeal held that in deciding whether the successful party had acted reasonably in instructing his solicitor it was necessary to have regard [to] all relevant circumstances and not just to the circumstance that the rates charged by that solicitor were higher than those charged by a solicitor in the locality of the court or in the locality where the successful party lived. The Court of Appeal suggested that in that case the judge should have had regard to (i) the importance of the matter to the successful party, (ii) the legal and factual complexities of the case, (iii) the location of his home, his place of work and of the court, (iv) his dissatisfaction with the solicitors originally instructed, (v) advice received as to whom to instruct, (vi) the location of the solicitor in fact instructed and (vii) what, if anything, he might reasonably have been expected to know of the fees likely to be charged by the solicitor in fact instructed as compared with the fees of other solicitors whom he might reasonably be expected to have considered.

10. In Sullivan v The Co-Operative Insurance Society Ltd [1999] Costs LR 158 (also decided under the RSC) the Court of Appeal said that the question 'is whether objectively the plaintiff … acted reasonably in engaging the lawyers in question'. In answering that question, 'the court takes account of and balances a wide range of relevant circumstances.'

11. In Gazely v Wade and News Group [2005] 1 Cost LR 129, [2004] EWHC 2675 (a case decided under the CPR) it was common ground that it was appropriate to have regard to the principles discussed in Wraith v Sheffield Forgemasters Ltd. Eady J observed that the assessment of reasonableness was to be made as at the time the relevant decision was taken, rather than with the benefit of hindsight."

79. The judge then went on to consider the various submissions and documents put before him and came to the crux of his decision in paragraphs 25-26:

"25. The remaining limb of the appeal, as presented to the court orally, was that there was no sound evidential basis for finding that in 1999 there were in Sheffield solicitors with the three-fold experience of Ms Murphy. However, since the case did not require such a solicitor in order to bring it to a satisfactory conclusion but only a solicitor with experience of bringing claims against the police, the correct question is whether the Deputy Costs Judge was right to find that such a solicitor could be found in Sheffield in 1999. It is to be noted that in the 'Points of Dispute to the Claimant's Bill of Costs' the Claimant submitted that 'the claim could have been handled by a large number of solicitors in the Sheffield area, several of whom specialise in exactly this type of case, amongst others Irwin Mitchell Solicitors and Howells LLP.' The Claimant, in his reply, said 'it was not accepted that this case could have been dealt with by most Grade A fee earners specialising in personal injury matters and the contention reflects a complete lack of understanding of the specialist nature of proceedings against the Police and in this particular case the psychiatric as well as physical injury sustained by the Claimant.' No specific point was made in relation to the firms named by the Defendant.

26. I do not consider that on an assessment of costs evidence is required to establish the proposition that in 1999 there were in Sheffield solicitors with experience of bringing of claims against the police. Indeed, Counsel for the Claimant appeared to accept that on an assessment of costs I was entitled to have regard to my own view and that of my assessors on such a matter. It was common ground that Irwin Mitchell had offices in Sheffield in 1999. It is my view, and that of my assessors, that that firm was likely to have had experience of bringing claims against the police. Moreover, that view is supported by the evidence adduced on this appeal from Simon Hills, who has dealt with Irwin Mitchell for over 15 years. He describes them as employing 'extremely competent police law lawyers'. Mr Oppenheim expressed the opinion that Irwin Mitchell would not have been 'an appropriate referral because of the combination of skills required.' However, he did not say that Irwin Mitchell had no experience of bringing claims against the police."

80. Mr Brown also referred me to paragraph 34 of the same judgment, which reads as follows:

"34. Finally, one comes to the question of fees and what the claimant might reasonably be expected to know of the fees likely to be charged by Bhatt Murphy compared with a firm in Sheffield. The Deputy Costs Judge does not specifically address the knowledge that the claimant could reasonably be expected to have of the comparative fees in London and Sheffield. It was submitted that it was unreasonable to expect the claimant to have an awareness of such matters. In assessing whether the reasonable litigant might reasonably have been expected to be aware of the comparative level of fees it seems to me that one must put to one side the fact that this particular claimant was legally aided and assume that the reasonable litigant is funding his legal representation himself. Otherwise the question of cost would not feature in the analysis of what a reasonable litigant would have done. Such a litigant would clearly inquire into the level of fees charged by Bhatt Murphy before instructing that firm. He would also compare that level of fees with the level of fees charged by a Sheffield firm with experience of bringing actions against the police. Indeed, the attendance notes manifest the claimant's concern with the comparable charges because he was anxious to know how much his contribution to his legal expenses would be. The reasonable litigant would make himself aware of the comparative charges by consulting the Sheffield firm and the London firm. He would have appreciated that there was a substantial difference in rates. The rates approved by the Deputy Costs Judge were £190 per hour and the rates claimed by Bhatt Murphy were £265 per hour. It is agreed that the choice of Bhatt Murphy has led to a difference in the final bill of £50,000 (£195,000 compared with £145,000)."

81. Mr Brown also relied on the decision of Master Gordon-Saker in the case of Cynthia Holliday v EC Realisations Ltd [2008] EWHC 90103 (Costs), a decision given on 31 March this year in which Mr Green and Mr Brown were once again pitted against each other and which also concerned a claimant who had contracted mesothelioma.
82. In issue in that case were the hourly rates to be allowed for the Claimant's solicitors and also the success fees to be allowed to them and to counsel.
83. This was not a case where the London branch of Irwin Mitchell were employed but simply concerned whether the hourly rate should be limited to that set out in the SCCO Guide for the Summary Assessment of Costs. The arguments of both sides are clearly set out and are to some extent replicated in this case, where once again Mr Brown contended that the guideline rates for Outer London or Kent should be applicable.
84. Master Gordon-Saker, following an earlier decision of his own (Melladay), allowed higher rates than set out in the guideline rates but lower that those claimed by the Claimant. Of the guideline rates he said this in paragraph 26 of his judgment:

"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 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'."

85. Mr Brown sought to support the guideline rates on the basis that there was a built-in 50 per cent uplift and if one "deconstructed" the claims made in this case (certainly by the Grade A fee earners) then there was a huge "uplift" on the rate which was meant to represent the actual cost to the firm in question of running the case.
86. I do not think that that is the correct approach. I entirely agree with Master Gordon-Saker that the hourly rates set out in Guide for Summary Assessment are not intended to cover cases of this nature and that each case needs to be looked at in the light of the particular difficulties and complications which it presented.
87. Even on that basis, as already indicated, Mr Brown submitted that this was not a difficult case as mesothelioma cases go, and if and insofar as there were any difficulties caused by the additional dependency claims, these were, as it were, "provoked" by Master Whitaker.
88. For his part, Mr Green went through the various headings in the case of Wraith & Truscott, pointing out the importance of the various issues to his client. The first is the "radius" test within which it would be reasonable for a litigant, given that there were competent solicitors able to handle his case within that radius, should go before he should be permitted to go further afield.
89. In this case it appears that the Claimant firm was recommended to Mrs Woolley by a MacMillan nurse at the hospice where Mr Woolley was cared for in his final days.
90. Mr Green submitted that it was clear from the evidence given on the preliminary issue by Mr Ettinger that Messrs Irwin Mitchell had the necessary expertise and Mr Green went further and suggested that the evidence about Messrs Thomson Snell & Passmore was far from conclusive. He pointed out that the extracts from the website indicated that the two fee earners concerned had joined that firm and set up a specialist department dealing with this sort of work in Tunbridge Wells in 2002, which was when this CFA was signed.
91. He strongly suggested that there were no firms in 2002 between London and Margate who could competently have dealt with this case and it was therefore perfectly reasonable for the Claimant to go to Irwin Mitchell and that their rates were reasonable rates to charge.
92. In paragraph 26 of his judgment, Teare J in A v The Chief Constable of Yorkshire Police said this:

"I do not consider that on an assessment of costs evidence is required to establish the proposition that in 1999 there were in Sheffield solicitors with experience of bringing claims against the police. Indeed, counsel for the claimant appeared to accept that on an assessment of costs I was entitled to have regard to my own view and that of my assessors on such a matter …"

93. On that basis I believe, from my own experience, that there were firms at least in Outer London who could have competently handled this case in 2002 and it was not necessary objectively for Mrs Woolley to go to a Central London firm.
94. Mr Green submitted that if that were to be my decision I should allow a much more generous "uplift" on the hourly rates for all fee earners for Outer London and I am inclined to think that that is correct. I therefore allow the following rates:

	Up to 30 April 2004	1 May 2004 to 30 April 2005	Post 1 May 2005
Partner	£210	£215	£250
Litigation Assistant	£105	£110	£125
Trainee Solicitor/ Paralegal	£150	£160	£175
Associate Solicitor		£215	£250
Associate Solicitor (Public law)			£250
Senior paralegal			£225
Costs draftsman			£115

3. SUCCESS FEES IN THE CFAs

(A) Solicitors' CFA

95. Messrs Irwin Mitchell claim a 100 per cent success fee throughout based on the difficulties and complications presented by the case.
96. Mr Brown, on the other hand, submitted that the appropriate level of success fee for the solicitors should only be 40 per cent because he contended that the chances of the Claimant losing the case were not as high as fifty-fifty.
97. Considerable time was spent by both advocates in analysing the relevance of the various points put forward in the risk assessment.
98. These were stated to be medium risk for (i) limitation, (ii) type of occupational disease, (iii) weakness of liability, (iv) identity number of defendants, (v) quantum of damages, (vi) costs recovery, (vii) medical condition, (viii) expert witness evidence, (xi) Claimant's documentation, (x) Defendant's financial position, (xi) Defendant's Part 36 offer.
99. The only matters on which it was said that there was a high risk were (i) Claimant's evidence, (ii) independent witness evidence, (iii) causation of loss, and (iv) identity of Defendant's insurers.
100. Finally the level of risk was stated to be low in respect of contributory negligence.
101. On limitation, Mr Brown said that the claim was brought well within the limitation period after the deceased's death and therefore this was certainly no risk at all and he contended that someone with the experience of Mr Ettinger the type of occupational disease that this case presented was not in any way difficult.
102. He referred to the decision of Master Whitaker in Edwards v Rolls Royce plc. In that case the Master indicated that as a result of experience he had obtained from running the special mesothelioma fast track cases in the RCJ, very, very few ever went to trial and most were actually quite straightforward and could be conducted quite easily by a variety of solicitors around the country.
103. Mr Green on the other hand pointed out the particular difficulties which this case presented and how little evidence was available to Mr Ettinger at the time that he entered into the CFA.
104. There was a statement which had been prepared for the deceased before his death but this, as Mr Green pointed out, hardly touched on the issue of liability.
105. There also was a continuing dispute as to which company in the Haden Group was the correct defendant and a continuing query as to whether or not adequate insurance was in force at all relevant times.
106. In addition, I was referred to six authorities on the point, but with only two exceptions I do not find these of particular value, since it seems to me that the success fee is a peculiarly subjective issue which can only be decided on a proper analysis of the facts of each particular case.
107. Nevertheless, having said that, I do derive some limited benefit from two cases, namely (i) Edwards v Smith Docks [2004] EWHC 1116 (QB) and the Holliday case.
108. The Edwards case is the only one that I am aware of at High Court Judge level at which the level of a success fee has been judicially considered. In that case the Deputy Costs Judge had allowed a success fee of 87 per cent, which was upheld by Crane J on appeal sitting with assessors. However, the benefit which I derive from that case is contained in paragraph 35 where the judge says this:

"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. As 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."

109. In other words, it cannot be right simply to discount the possibility of not beating a payment in as being a factor to take into account assessing the success fee.
110. I also find the analysis of the relevant law contained in paragraphs 29 to 47 of the Halliday case by Master Gordon-Saker to be very helpful, dealing as it does with Master Whitaker's decision in Edwards and the relevance of the Fairchild and Barker decisions as those cases were going through the appeal courts.
111. During the course of the submissions before me reference was made by both advocates to what Mr Ettinger may have said in cross-examination at the preliminary issue hearing in January 2008. I indicated that I could not take any account of that without the transcript, because the parties' recollection of the evidence was not identical, while my notes were rather sketchy because I knew a transcript could be obtained from the tape if necessary.
112. After the submissions had closed, and I had reserved judgment, Mr Brown supplied me with the copy transcript which, in fairness to him, had been requested by his solicitors some considerable time earlier but was not available at the time of the oral hearing.
113. He correctly identifies the relevant passages as being paragraphs 31G to 38 and in particular, paragraphs 34H to 35F and 36G.
114. I have read these passages carefully, but do not consider that they materially affect the decision I need to take on the appropriate level of the success fee for the solicitors in this particular case.
115. At the end of the day, these matters are very fact sensitive, which is no doubt why there are relatively few reported cases on success fees.
116. Weighing up all the factors on submissions which I have heard and take into account, I consider that the prospects of success at the time that this CFA was entered into in 2002 were 65 per cent and this equates therefore to a success fee of 54 per cent for the solicitors applying the ready reckoner on page 658 of the 20008edition of Cook on Costs, and I accordingly allow 54 per cent for the solicitors' success fee percentage.

(b) Counsel's success fee percentage

117. This was entered into by counsel on 21 June 2004 and counsel assessed the prospects of winning at only 60 per cent, and therefore seeks a success fee of 67 per cent.
118. The Defendant's case is clearly put in the points of dispute as follows:

"The Defendant contends that based on the definition of 'success' (the same as 'win') this was an unrealistically pessimistic assessment of the risks, given the evidence at the time. A very favourable report had been obtained from Dr Moore-Gillon dated 03/11/2003. Counsel also knew Mr Woolley had only been exposed to asbestos with the Defendant and had contracted mesothelioma. The Defendant contends the chances of contracting this disease without exposure to asbestos is very low. The Defendant therefore offers 27.5 per cent."

119. Mr Brown also referred me to the full transcript of a hearing before the Principal Costs Officer O'Riordon on 29 June 2006 (Stone v Samuel Courtauld & Co Ltd). This demonstrates that Mr O'Riordon is highly experienced in this work and that any decisions that he takes must clearly command respect.
120. Having said that, however, again I repeat that this must be a matter which is fact sensitive.
121. I consider that at the time counsel entered into his CFA the chances of success were definitely higher than at the time the solicitors' CFA was entered into but there did remain difficulties and these could not be totally discounted.
122. I consider that the prospects of success at that stage were 75 per cent and again, applying the ready reckoner at page 658 of the current edition of Cook on Costs, this equates to a success fee of 33.3% for counsel, and that is what I allow.

(4) COSTS OF FUNDING

123. The Claimant seeks to recover as part of their costs of the action in this case the costs of the funding, that is to say the work necessary to put in place the CFA.
124. Mr Brown contended that as a matter of principle this is simply not recoverable. He submitted that it is quite clear that the costs of obtaining and dealing with legal aid were never recoverable.
125. He referred me to the decision of His Honour Judge Cockcroft given at Leeds Civil Hearing Centre on 18 March 2005 in the case of Masters v Hewden Stuart Heavy Lifting Ltd where he refers to the decision of the Senior Costs Judge in the Claims Direct case in July 2002, who said at paragraph 171:

"171. It has long been held that the cost of funding litigation is not a recoverable cost as between the parties:

"... by established practice and custom funding costs have never been included in the category of expenses, costs or disbursements envisaged by the statute or RSC Order 62. To include them would constitute an extension of the existing category of "legal costs" which is not under the prevailing circumstances warranted."

(per Lord Justice Purchas, Hunt v R M Douglas (Roofing) Ltd, 18 November 1987, CA, unreported. This point was not taken in the subsequent House of Lords Appeal.)"

126. He submitted that there was nothing in the change from RSC to CPR which could bring about any change and he further pointed out that the detailed regulations in regard to CFAs which were in force until November 2005 could very easily have provided for the Claimant's solicitors to recover costs of funding if that had been the Government's wish, but they did not.
127. Mr Brown also submitted that was a further fatal obstacle to claiming funding costs, namely that until funding was in place there could be no liability by a client to his solicitor for any costs and he equated the situation with that of a builder who is asked to give a quotation but would not of course be entitled to any payment until such time as the work is actually commissioned.
128. In response, Mr Green submitted that there was a genuine divergence of opinion, even in the Supreme Court Costs Office, on this point, the majority of Costs Judges certainly following the lead of the Senior Costs Judge in Claims Direct Test Cases with others who took the opposite view.
129. Similarly, in the County Courts there was a divergence of view and he submitted that the time had come for a definitive decision to be taken.
130. I agree with Mr Green to the extent that it would be helpful to have a definitive decision, but such a decision must, it seems to me, come from a higher court, probably the Court of Appeal.
131. Presumably, although the matter has been litigated extensively, it has never been taken to that court because the sums at stake are never sufficiently high.
132. In this case I asked Mr Green what this element of the bill was and he estimated these to be approximately £1,000.
133. I am entirely persuaded on this point by Mr Brown's arguments and find in his favour, but I am not persuaded that the opposite decision would be helpful to the profession, which is what Mr Green has been suggesting.
134. In my judgment, the costs of funding have never been recoverable and nothing has changed as a result of the introduction of CPR or, indeed, as a result of the introduction of the CFA Regulations, and therefore that element of this bill in which the Claimant seeks to recover its funding costs, fails.

5. THE WAY AHEAD

135. It is to be hoped that after three full days of hearing and two lengthy reserved judgments it may be possible for these costs to be resolved without the necessity of a further hearing in the light of the decisions I have taken in this judgment.
136. However, if that is not the case, then I will obviously give directions for the hearing of the balance of the detailed assessment when this judgment is formally handed down, as well, of course, as dealing with the costs of these preliminary issues and any other matters the parties may wish to raise before me on that occasion.

Note 1   Mr Barham’s witness statement dated 29th January 2007 – para 11    [Back]