England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
Neutral Citation Number [2002] EWHC 2932 (QB)

		Royal Courts of Justice Strand, London, WC2A 2LL Handed down reasons for Judgment.
		20th December 2002

Mr Justice Morland :

1. On the 13^th November 2002 I dismissed the claimants' appeal against the decision of Costs Judge Campbell dated the 7^th May 2002 and made certain consequential management directions having discussed the issues and considered the advice of my Assessors, Senior Costs Judge Hurst and Mr Tom McKeown. I said that I would hand down my reasons in writing at a later date.

2. At the outset I should like to thank my assessors for their valuable help and although they have considered this judgment in draft I stress that I alone am responsible for the contents.

3. This appeal has revealed in stark terms a trend in litigation, which in my judgment I condemn as deplorable, satellite litigation about costs which is hugely wasteful of both professional time and expensive resources. If the trend were allowed to continue, it would tend to render nugatory the "overriding objective" of the C.P.R.

4. This group litigation involves the claims of 652 claimants including 310 children who took holidays in 1997 and 1998 organised by the defendants at Hotel Aguamar in Majorca. The holidays were disastrous. Many claimants fell ill with salmonella poisoning or other gastric illnesses. Many of the claimants were in family groups. Those, that did not fall ill, still had their holidays ruined because of the adverse effect upon them of the illnesses of other members of the family group. Some recovered from their illness in a couple of weeks but it is said that about 150 claimants continued to suffer for upwards of 12 months and a few may even now continue to suffer.

5. Both the claimants' and the defendants' Solicitors are experienced in group litigation and holiday litigation. It is regrettable that no formal application was made to the Court for a group litigation order and a costs sharing order with a specific judge nominated to case-manage the litigation including exercising control over the expenditure of costs. If that had occurred as it could have happened before the CPR came into force on the 2^nd May 2000, the non-productive satellite costs litigation would not have happened.

6. As I understand the position, it was understood on an informed basis that Judge MacDuff in Birmingham would try contentious issues and indeed he is due to try a number of selected lead cases on the issue of damages in March 2003.

7. In order to have my strictures on the procedures adopted in relation to costs understood, it is necessary to set out the chronology of events.

Chronology.

8.

26.6.98 Letter of Claim. (Bundle C page 573)

16.9.98 Admission of liability "subject to proof of (a) causation (as to which see further below) and (b) quantum, Sunworld Limited are in principal liable in respect of the said claims.

As regards causation, our client has instructed us to say that, in the circumstances, it is prepared to regard causation as being deemed to have been proved in respect of all claims that were properly notified in writing within 28 days of the end of the relevant claimants' holiday. Thus, in these cases, the only issue will be quantum."

26.3.99 Proceedings issued

24.6.99 Mediation took place achieving a substantial measure of agreement.

28.2.00 £200,000 paid voluntarily by defendants by way of interim payment of costs.

5.4.00 Consent order for interlocutory Judgment with damages to be assessed by a High Court Judge with "Costs incurred up to the date of this Order be forthwith subject to detailed assessment if not agreed". (Bundle C. page 500)

11.12.00 Claimants serve generic and individual Bills of Costs in the total sum of £1,085,115.85p plus VAT and disbursements.

24.1.01 Contested hearing before D.J. Cardinal. Further £350,000 interim costs ordered

26.1.01 Claimants issue Notice of Commencement of detailed assessment.

15.3.01 Defendants' Points of Dispute served but later amended.

31.8.01 Claimants' application for further £200,000 interim costs dismissed by Costs Judge Campbell after a hearing of about one hour with the claimants represented by assistant Solicitor and costs draftsman and the defendants by Mr Haddon Cave Q.C.

22-25.10.02 hearing of Preliminary Issues before Costs Judge Campbell in which for 1½ days, very senior and experienced Leading Counsel appeared for the claimants (not Lord Brennan Q.C.) for the rest of the hearing the claimants were represented by a Solicitor. Mr Haddon Cave Q.C. appeared for the defendants.

26.10.01 Costs Judge Campbell delivered a 38 page judgment (Bundle C 813) which was followed by some further argument when the claimant were represented by Junior Counsel and Solicitor and the defendants by Mr Haddon Cave Q.C.

11.12.01 Claimants lodge appeal against four parts of Costs Judge Campbell's judgment.

15.2.02 Order for Directions by Costs Judge Campbell (Bundle E 499). Claimants represented by Solicitors and the defendants by Mr Haddon Cave Q.C.

15,18,22.3.02 Appeal against Costs Judge Campbell's judgment of 26.10.01 determined by Nelson J. (Bundle E 1487. Claimants represented by their Leading Counsel and the defendants by Mr Haddon Cave Q.C.

21.3.02 Judgment of Court of Appeal in Home Office v. Lownds [2002] 4 AER 775. Senior Costs Judge Hurst sat with the Court of Appeal during the hearing.

4.4.02 Further directions hearing and argument on indemnity principle before Costs Judge Campbell. The claimants represented by Leading Counsel and Junior Counsel and the defendants by Leading Counsel.

11.4.02 Costs Judge Campbell delivers judgment (Bundle E 1496) on indemnity principle.

29.4.02 Detailed assessments of costs were scheduled to take place

To over this three week period covering

17.5.02 both Aguamar and Non-Aguamar group litigation because of alleged overlap. This did not take place because the defendants consequent upon Lownds wished to argue disproportionality as a further preliminary issue. Detailed assessment re-scheduled for April 2003

29,30,and Hearing on proportionality before Costs Judge Campbell.

31.10.02 The Claimants represented by Leading Counsel and the defendants by Mr Haddon Cave Q.C.

7.5.02 Oral judgement delivered by Costs Judge Campbell on proportionality (Bundle I p.1.) Claimants represented by Leading Counsel and the defendants by Mr Haddon Cave Q.C.

9.5.02 On hearing Leading Counsel for both parties Costs Judge Campbell gave permission to appeal.

12,13.11.02 Hearing before myself with two assessors. Claimants now appearing by Lord Brennan Q.C. and Mr Jeremy Morgan and the defendants by Mr Haddon Cave Q.C. Appeal Dismissed and Case Management Order in relation to costs made.

 

9. From this chronology it can be seen that upwards of 18 days of judicial time has been spent on what I consider can fairly be described as legal skirmishing and the three year anniversary of the order of the 5^th April 2000 is approaching and no detailed assessment, of what has been described as the claimants' first tranche of costs, has taken place, the negation of proceeding "quickly and efficiently". It had been envisaged that the claimants would be seeking second and third interim tranches of costs and then a final assessment of costs at the conclusion of the group litigation. As the group litigation almost certainly will be concluded in the late summer of 2003 by my case management order there will be one detailed assessment at the conclusion of the litigation. Hopefully endowed with realism and consistent with their duty to seek to achieve the overriding objective the Solicitors to this group litigation will eventually be able to agree costs and so obviate the need for many days of court time being spent on a detailed assessment.

10. In my judgment in almost all group litigation cases there should be no need for any detailed assessment of costs until the conclusion of the group litigation. Solicitors engaged in group litigation will be specialists and experienced in the field. Solicitors for claimants are fully entitled to an adequate cash flow from the defendants once the general issue of liability has been admitted or determined in the claimants' favour, similarly on determination of generic issues in the claimants favour and on the assessment or settlement of awards of damages to individual or batches of claimants.

11. It is to be hoped that in most cases defendants' Solicitors would agree to pay at various stages in the group litigation a realistic interim amount on account of a final detailed assessment of costs if necessary.

12. If agreement cannot be reached as to an interim payment of costs, it should be dealt with cheaply and shortly by the nominated trial Judge who will be familiar with the general issues in the case and the realistic overall size of the claim under his powers under CPR 44.3(8). The Costs Judge's or District Judge's powers are more limited although he may issue an interim costs certificate pending a detailed assessment (See CPR 47.15).

13. If on application to the nominated judge he is provided in writing beforehand with a summarised schedule of costs to date together with a succinct skeleton of the issues and rival contentions of the parties, he may be able to make or refuse an interim award of costs on account on paper giving the parties liberty to apply for an oral hearing.

14. If an oral hearing does take place, other than in a most exceptional case I would expect the nominated judge to deal with the application in less than an hour.

15. In fairness to the Solicitors in this group litigation they may well have had good intentions when they embarked upon the trial of preliminary issues of principle as to costs. Nonetheless the benefits were limited.

16. I note that Costs Judge Campbell said in his judgment of 26.10.2001 (Bundle C p.812):-

"This judgment addresses the seven remaining issues of principle which the parties have agreed are to be determined at the commencement of the detailed assessment of the claimants' costs in this group litigation"

"the issues are of importance to the parties because there are in the pipeline further claims against the defendants brought by other claimants for whom Irwin Mitchell act. It is hoped that the determination of the preliminary issues will assist in the resolution of the costs in those disputes."

17. The seven issues of principle and Costs Judge Campbell's decisions were as follows and I quote:-

"Issue 1. The extent of the overlap between generic and individual bills."

"Mr Haddon Cave contends that there was no need to incur any individual costs in any of the cases; the matter could and should have been dealt with on a purely generic basis using the client questionnaires and schedules; running up costs on individual cases was wasteful; the claim for such costs in the context of multi-party litigation was not reasonable or proportionate."

"I accept it was reasonable to keep individual files. I accept that each client was entitled to have a file on which could be recorded any special or discrete work attributable to him or her, for example, as I have said, correspondence with his employer or GP. I therefore reject the submission that I should disallow the entirety of this time"

"Mr Haddon Cave's secondary submission was that if I was against him on full disallowance, I should at least reduce the item by a proportion. In my judgment, in view of the sum involved and the fact that this is a detailed assessment, it would not be dealing with the case fairly to adopt a broad-brush approach in this way. If the defendants wish to renew this challenge, they must do so at the full hearing of the detailed assessment and not as a preliminary issue".

"Issue 2. The extent of overlap in the generic bill itself.

The defendant contends that £300,000 should be disallowed from the generic bill. The allegation is duplication and overlap."

"they must raise it on the detailed assessment and not as an issue of principle"

"Issue 3. Claims made in respect of documents.

The sum in question here is £336,461."

"the defendants must raise this issue on the detailed assessment and not as a preliminary issue.

Issue 4:

Circular or generic letters"

"The defendant has offered £1 instead of £10. I consider that to be a fair and reasonable sum and I allow it".

"There is a subsidiary point that babies and children should not have received letters."

"I reject that submission"

"Issue 5.

Mail merge

"This forms an additional charge of £29,187"

"the inputting of such data was done by paralegals to preserve the integrity of the database and to avoid it being corrupted. I do not consider this to be fee-earners' work. It seems to me that a competent secretary could have been entrusted to undertake work of this nature"

"Issue 6:

Team meetings

"Approximately 400 hours, amounting to £117,129, have been claimed in the bill for team meetings."

"That again is a matter for detailed assessment and not one which can be decided as an issue of principle:"

"Issue 7:

Hourly rates and uplift in Group Litigation.

"The generic bill claims the following: For partners £120 plus 200%, total £360 per hour. For assistants £90 plus 200%, total £270 per hour. Paralegals £60 plus 200%, total £180 per hour. The individual bills in contrast claim uplifts of 100%. So on that basis the partner would get £240, if allowed, and the paralegal £120, if allowed."

"The decision in Griffiths v. Solutia (CA 26.4.01). At paragraph 30 Sir Christopher Staughton said:

"It would seem that particular care should be paid to the costs likely to be incurred in group litigation cases if they may in the course of proceedings be likely to become disproportionate to the amount at stake. Such actions, as we have been told, may involve a considerable amount of administrative management, which do not perhaps require any legal skill. That in itself could give rise to disproportionate expense unless controlled. I would hope that in such cases more control will be exercised by way of case management than apparently has been in the past"

"So far as the hourly expense rates are concerned, the bills have been drawn in the manner customary before the introduction of the Civil Procedure Rules on 26^th April 1999. There is an "A" factor, that is to say the hourly expense rate or cost rate, and then the "B" factor which reflects care and conduct, that is to say an uplift to take into account the factors set out in Part II of Appendix 2 of old Order 62, now replaced by Civil Procedure Rule 44.5 to which I have referred."

"I consider that in this case the rates which Irwin Mitchell have proposed are reasonable, albeit that they are higher than the going rates for the court in question."

"The "B" factor for care and conduct"

"I mentioned to the parties that care and conduct would usually be dealt with at the end of a detailed assessment. However, they wish me to deal with it now. I consider I can do so, having had a reading day and heard three days of submissions by leading counsel and solicitors:"

"this was and remains a difficult and exceptional case. I propose to allow 120% for the partners' time in the generic bill and 65% for paralegals' time in the generic bill, since it was mainly the partners who were involved in that aspect of the litigation.

"So far as the individual bills are concerned, …..Mr Haddon Cave initially offered 65%. I think that is a fair figure and it is the figure I allow."

"insofar as rates and uplift are concerned, I stress that is care and conduct relates solely to this part of the bill. Higher or lower uplifts may be appropriate to the remaining claims which are proceeding to trial when those bills come to be assessed."

"I think a fair rate to allow would be 50% uplift on all the travelling time, which will give a partners' rate of £180 per hour"

18. The final eight pages of the judgment dealt with the 7^th issue the application of the indemnity principle and a direction to a partner of the claimants' Solicitors to make disclosure of letters to the claimants. That issue is not relevant to this appeal.

19. I have set out extensively passages in this judgment because they show the detailed knowledge that Cost Judge Campbell had accumulated by the time that he came to his decision of disproportionality which is the subject of this appeal.

20. The judgment of Nelson J. on the claimants' appeal against the judgment of 26.10.01 is in Bundle E pages 1487 to 1495. I quote:-

"There are four parts of the Cost Judge's decision which are under appeal:-

i) the award of an additional £1 per letter in respect of paralegals work in relation to generic/circular letters. The amount should have been £10 per letter.

ii) his award of 65% uplift for paralegals on their hourly rate for generic work. The uplift should have been 120% as was awarded in relation to partners and solicitors.

iii) his award of 65% uplift for paralegals hourly rates for individual work when he should have awarded 100% uplift.

iv) his order that the Appellants serve upon the Respondent a witness statement by a partner of the Appellant's solicitors exhibiting relevant documents showing whether the indemnity principle had been complied with."

21. Nelson J. allowed Ground 1 increasing the allowance per letter from £1 to £3.30p.

22. He dismissed Grounds 2 and 3. With regard to Ground 3 he said:-

"I am satisfied that the Judge made no error in considering the matter or in the conclusion he reached. He plainly had a good grasp of the facts of the case and there is no proper basis on the material before us for indicating that he misconstrued any of those facts. The paralegals were dealing with the small claims on an individual basis with some limited degree of supervision. Those claims were either simple or relatively simple and the mark up of 65% permitted by the Judge was entirely appropriate."

24. The judgment of Costs Judge Campbell, the subject of this appeal to me, in Core Bundle 1 pages 2-23. At the outset of his judgment he said:-

"Following Lownds the parties agreed at the commencement of the detailed assessment that I should deal with the issue of proportionality as a further point of principle before hearing their submissions about the detailed items in the bill. Both sides were represented by Leading Counsel and the arguments lasted the best part of two and a half days at the conclusion of which I reserved my judgment"

25. He set out and reminded himself of C.P.R. 44.4.2, 44.5.1, 44.5.3 and Cost Practice Directions 11.1 & 11.2.

26. He considered the judgment of the Court of Appeal in Lownds saying:-

"the decision in Lownds requires that a preliminary judgment as to the proportionality of the costs as a whole be made at the outset of the detailed assessment;"

"…..The process is in two stages, first a global approach having regard to all the circumstances to see whether the total sum claimed is or appears to be disproportionate having regard to the considerations which CPR 44.5.3 states are relevant; second, an item by item approach applying the dual test of (a) necessity and (b) reasonableness if the total costs are disproportionate and normally the single test of reasonableness if they are not disproportionate."

And citing from the Lord Chief Justice

"In a case where proportionality is likely to be an issue a preliminary judgment (his emphasis) as to the proportionality or the costs as a whole must be made at the outset"

"Once a decision is reached as to the proportionality of costs as a whole the judge will be able to proceed to consider the costs item by item applying the appropriate test to each"

"Both counsel were in agreement that when the question of proportionality is raised, it is to be dealt with once and once only as to the global approach stage when the preliminary judgment as to proportionality is made"

27. He then said:-

"I express no opinion as to whether counsel are correct that proportionality cannot be raised again if the preliminary judgment at the global stage is in favour of the receiving party"

"What their interpretation of Lownds has meant in this case, however, is that both sides felt compelled to address the court at length and in great detail over nearly two and a half days"

28. For my part I do not accept that if a Costs Judge has ruled at the outset of a detailed assessment that the bill as a whole is not disproportionate he is precluded from deciding that an item or a number of items are or appear disproportionate having regard to the "matters in issue".

29. With regard to an item the Costs Judges do and should consider whether it was proportionate and reasonably incurred and proportionate and reasonable in amount.

30. As I understand the judgment in Lownds, in my judgment the effect of a preliminary finding of disproportionality is like unto traffic lights at red. The receiving party will then face a stringent test to justify with regard to each item that it has been "proportionately and by a sensible standard necessarily incurred" and "proportionate and reasonable in amount"

31. In my judgment this approach should cause no injustice to the receiving party who is only entitled to costs proportionate to the matters in issue

32. A preliminary finding of disproportionality must not be regarded as penalising the receiving party in terms of the amount ultimately awarded because the overriding objective requires that a case is dealt with justly and fairly.

33. The preliminary judgment of proportionality determines the manner of the detailed assessment. It does not determine the final sum payable to the receiving party but a finding of disproportionality does entail the receiving party being put to a stringent test, the dual test of sensible necessity and reasonableness of amount for each item. (Paragraphs 31 and 37 of the judgment in Lownds [2002] 4 AllER 775 at p. 782 and 783). In the unlikely event that a Costs Judge at the initial stage is unable to say whether the bill viewed as a whole is proportionate or disproportionate he will be obliged to carryout a detailed assessment applying the dual test (CPR 44.5).

34. Lownds should have the efficacious result of keeping solicitors conducting group litigation appropriately economical because a disproportionate bill may result in the receiving party's Solicitors being deprived of the whole or of part of the costs of the detailed assessment.

35. On page 8 of his judgment Costs Judge Campbell said:-

"The evidence before me included all the witness statements before the court for the October hearing together with further witness statements by Mr Stewart of Field Fisher Waterhouse for the defendant dated 22^nd March 2002. Those statements included an explanation of how group litigation works and why it is likely to lead to savings in costs for example through economies of scale. In addition there were two skeleton arguments and two chronologies, plus the claimants' papers (10 boxes of lever arch files), the bills running respectively to 104 pages (generic) and 234 pages (individual), the points of dispute, 169 pages (generic) and 39 pages (individual) and the points of reply, 30 pages (generic) and 7 pages (individual)."

36. He then listed 12 guidelines, which he extracted from Lownds.

37. In my judgment the Court of Appeal never envisaged that a Costs Judge before giving a preliminary judgment on proportionality of the costs as a whole would plough through in detail this gargantuan mass of material.

38. In my judgment even in very complex group litigation an experienced Costs Judge if provided with succinct skeletons of the parties' contentions beforehand should be able to determine overall proportionality within an hour or less despite Costs Judge Campbell's rejection of the "broad brush approach" in paragraph 27 of his judgment.

39. Costs Judge Campbell reached the following conclusions

"1. That the Lownds guidelines do apply to an interim assessment in group litigation"

I agree.

40. "2 That the correct starting point was the original size of the Bills £1.2 Million subject to any cut-off for pre – CPR work rather than £991,000 following the decisions of Cost Judge Campbell on 26.10.01 as varied by Nelson J. on 22.3.02"

41. It was argued by the claimants that costs incurred pre CPR should be left out of account when considering whether the costs claimed are proportionate. It seems to me that it would be clearly wrong to leave those costs out of account since they must form part of the global view. The transitional arrangements merely provide that there should be a general presumption that no costs for work undertaken before 26^th April 1999 would be disallowed if those costs have been allowed in a taxation before that date (CPR 51 paragraph 18).

42. In Jefferson v. National Freight Carriers Plc [2001] 2 Costs LR 313 Lord Woolf C.J. sitting in the Court of Appeal on circuit reached no definitive conclusions as to the incidence of VAT in relation to proportionality (see paragraphs 48 to 50 of the Lord Chief Justice's judgment).

43. In my judgment VAT should be excluded from the starting point figure because it is a percentage tax levied on the cost of the service provided. The impact of the tax has no bearing on the steps taken in the litigation or the cost of them.

44. 43 P.D. 5.4 reads:-

"The receiving party has responsibility for ensuring that VAT is claimed only when the receiving party is unable to recover the VAT or a proportion thereof as input tax"

45. This will normally be the case with non-professional and non-commercial claimants.

46. Although I consider that the lower figure of £991,000 less VAT should have been the starting point, I do not consider that Costs Judge Campbell's conclusion invalidates his final decision on proportionality.

47. "3. That the Lownds guidelines apply to an interim assessment."

48. I agree although I do not consider it appropriate except exceptional cases to have detailed assessment of costs by tranches in group litigation

49. Costs Judge Campbell in determining that there was disproportionality made certain findings:-

1 On the value of the claims that the bills give the appearance of being disproportionate

He was surprised that in the case of modest claims by those not ill at all and by those who recovered within 14 days the average individual costs were over £1600.

He was also struck that in the generic bill which claimed many hours of fee earners' time there was an absence of all but the occasional attendance note.

2 Viewed globally it was not established having regard to the importance of the matter to the parties that the costs claimed were disproportionate.

3 The factors of complexity and of specialised knowledge and responsibility did not assist either way.

4. "There is ample evidence I have seen in the material to give rise to a suspicion of overkill or even a mob-handed approach to the litigation so far as the time spent on the case concerned"

50. Costs Judge Campbell reached this conclusion:-

"The defendant has satisfied me that upon the application of the guidelines in Lownds and CPR 44.5 the costs claimed by reference to value and time spent give the appearance of being disproportionate."

51. Lord Brennan particularly attacked Cost Judge Campbell's approach in relation to the individual small claims, which were settled. It was small claims that were the focus of these first interim bills. It had been agreed between the parties on the 20 September 1999 :-

"that costs in the Less than 14 Days Claims should be assessed on the High Court scale and that, to date, all costs in the Less that 14 Days Claims be regarded as common costs."

52. While I entirely accept that in group litigation very small claims should not result in very small costs, still there should be economies of scale even when each individual claimant has to be individually dealt with. I am not satisfied that Costs Judge Campbell's approach to what he described as "modest claims" was wrong.

53. Nor do I accept Lord Brennan's argument that disproportionality has to jump off the page or be obviously disproportionate. I do not consider that Lownds requires the import of any qualification.

54. In my judgment if certain facets of the bills of costs strike the Judge as being disproportionate he is entitled as Costs Judge Campbell did to rule that the bills as a whole fail the proportionality test and carry out the detailed assessment on the basis of the dual test. Even if the Costs Judge has reached the preliminary view that the bill as a whole is proportionate, in my judgment that preliminary view does not disentitle the Costs Judge from concluding that certain items appear disproportionate and applying the duel test of sensible necessity and reasonableness to that item.

55. The appeal to me was by way of review and not a rehearing. I was not satisfied that Costs Judge Campbell's decision was wrong in this group litigation where the only issue was quantum. So the appeal failed.

56. By way of postscript I express the hope that it should be almost never necessary to appeal the preliminary decision, at the first stage, of proportionality. I would advocate active discouragement of such appeals.