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Cite as: [2003] EWHC 1034 (QB), [2003] 3 Costs LR 405, [2003] Lloyd's Rep Med 355

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		Neutral Citation Number: [2003] EWHC 1034 (QB)
		Case No: HQ0101462

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

9 May 2003

B e f o r e :

THE HONOURABLE MR JUSTICE GAGE
____________________

Between:

	A B and OTHERS	Claimant
	- and -
	LEEDS TEACHING HOSPITALS NHS TRUST	Defendant
	- and -
	IN THE MATTER OF THE
	NATIONWIDE ORGAN GROUP LITIGATION

____________________

Mr M A M S Leigh (of Hempsons, Solicitors) for the Defendant
Mr D N Harris (of Alexander Harris, Solicitors) for the Claimants
Hearing dates : 14 April 2003
____________________

HTML VERSION OF JUDGMENT: APPROVED BY THE COURT
FOR HANDING DOWN
(SUBJECT TO EDITORIAL CORRECTIONS)
____________________

Mr Justice Gage:

Introduction:

Before the court is an application by the defendants for an order to cap the costs of the claimants both retrospectively and prospectively. The intention of the defendants to ask for such an order was notified to the court at a case management conference in January 2003. It is acknowledged by both parties that the making of such an order would be a novel procedure. However, whilst not strongly opposing the making of an order in this case Mr Harris, the claimants' solicitor, reserves his position in relation to any future group litigation. The order, if made, would be retrospective in that it is agreed it would start from 10 February 2003 and prospective as it would include all costs, save for specific orders made in subsequent interlocutory proceedings, up to and including the end of the trial. The claimants do not seek any such order in respect of the defendants' costs. At the hearing of this application on 14 April 2003 I sat with Senior Costs Judge Hurst with whom I have discussed the issues in this case and from whom I have received invaluable advice. The Senior Costs Judge has considered this judgment in draft but I alone am responsible for the contents and conclusions.

Background:

The claims arise out of the retention by various hospitals of organs of deceased children and adults. Following the discovery of this practice in 1999 individual claims were made by claimants through many different firms of solicitors against different hospitals throughout England and Wales. The number of claims and the common features of each of them soon made it apparent that they were suitable for grouping together in a group litigation order (GLO). In the event the claims were grouped together in two GLOs. The first GLO was made in respect of claims arising out of organ retentions at the Royal Liverpool Children's Hospital at Alder Hey, Liverpool. The group order for that group was made on 18 December 2000. A second GLO was made on 16 May 2001 in respect of organ retentions at all other hospitals. This group is known as the Nationwide Organ Group Litigation (NOGL). By agreement of the parties it was proposed that lead cases in the Royal Liverpool Group Litigation should be tried first. In the event, following mediation, all but two of the claims in that group were compromised and I made a final order in that litigation on 31 January 2003.

Pending the trial of the lead cases in the RLGL proceedings in the NOGL were stayed. When it became apparent in December 2002 that the claims in the RLGL were likely to be settled the stay on the NOGL was lifted and on 6 February 2003 I made an order giving directions for its future conduct setting out a time-table leading up to a trial starting on 26 January 2004 estimated to last four to six weeks. Several times, I have stressed that the trial date must be met.

As yet pleadings have not been served although the parties are well aware of the issues involved. It is intended that there be four lead cases and that the claims will include causes of action expressed as negligent failure to counsel bereaved relatives; breach of statutory duty; negligent failure to provide information; wrongful interference with a body; and deceit. Damages claimed will include aggravated and exemplary damages; and damages for breach of Human Rights. It is agreed by both parties that the legal issues are complex and may be to some extent ground-breaking. In my view, the factual disputes are likely to be less complicated.

The order of 6 February 2003 allows for seven experts on each side consisting of a psychiatrist or psychologist, two consultant pathologists, three additional medical experts, and an academic ethicist or theologian.

There have been approximately 2100 potential claims notified to the two lead solicitors of which 369 at present are on the Register. The Register closes on 31 July 2003.

The Power to make a Costs Cap Order:

It is common ground that the Civil Procedure Rules make no reference to a specific power in the court to make a costs cap order. However, it is clear from the Woolf Report that the court, particularly in Multi-Party Actions, is encouraged to take control of costs just as it is to control the management of issues. The Report makes specific reference to a paper by AAS Zuckerman published during the Inquiry stage which contained a section entitled "Prospective Budget Setting". Paragraph 12 of that paper reads:

"One option to be considered is replacing retrospective taxation with prospective budget setting. Under this regime budgets would be set in advance so that the process would have to conform to budgetary constraints, rather than the cost following the process as at present."

In Chapter 17, Section IV of the Woolf Report, at paragraphs 32, 56 and 57 there is a further reference to the necessity for the court to take hands-on control of costs at an early stage in Multi-Party Actions. Paragraph 57 contains the following statement:

"At every stage in the management of the MPS the judge should consider, with the help of the parties, the potential impact on costs of the directions that are contemplated, and whether these are justified in relation to what is at issue. Parties and their legal representatives, as in other cases on the multi-track, should provide information on costs already incurred and be prepared to estimate the cost of proposed further work."

Recently in Solutia UK Limited v Griffiths [2001] EWCA Civ 736 the Court of Appeal has given further encouragement for the controlling of costs. Sir Christopher Staughton at paragraph 29 stated:

"So surely case management powers will allow a judge in the future to exercise the power of limiting costs, either indirectly or even directly, so that they are proportionate to the amount involved."

And Mance LJ at paragraph 33 stated:

"The present litigation was conducted under the old rules preceding the Woolf reforms. It is to be hoped that subsequent to the Woolf reforms judges conducting cases will make full use of their powers under the Practice Direction about costs, section 6, which appears in the Civil Procedure White Book 43/PD-006, to obtain estimates of costs and to exercise their powers in respect of cost and case management to keep costs within the bounds of the proportionate in accordance with the overriding objective."

Section 51 of the Supreme Court Act 1981 (as amended) contains the following provisions relating to costs:

"(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings … shall be in the discretion of the court.

(2) Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal or other representatives.

(3) The court shall have full power to determine by whom and to what extent the costs are to be paid."

It is clear from this section that the powers of the court are wide. It has been held that, even before the advent of the CPR, these powers together with the power to make orders for costs under Order 62 of the Rules of the Supreme Court included the power to make a pre-emptive order for costs (see Joseph Owen Davies v Eli Lilly & Co 1987 1WLR 1136). More recently the Divisional Court in R v The Prime Minister and Others ex parte The Campaign for Nuclear Disarmament [2002] EWHC 271 made an order limiting to £25,000 the Applicants' liability for costs in the event of costs subsequently being awarded against it. The application was made under CPR 44.3. In that case the power to make the order sought was not in dispute.

CPR 3.1 (as is well recognised) provides the court with extensive and wide-ranging general powers of case management to be carried out in accordance with the overriding objective set out in CPR 1.1. CPR 1.1.(2) states:

"Dealing with cases justly includes so far as is practicable –

(a) Ensuring that the parties are on an equal footing;

(b) Saving expense;

(c) Dealing with the case in ways which are proportionate –

(i) To the amount of money involved;

(ii) To the importance of the case;

(iii) To the complexity of the issues; and

(iv) To the financial position of each party."

CPR 3.1.(2) (m) provides the court with the power:

"to take any other step or make any other order for the purpose of managing the case and furthering the overriding objective."

The notes to Part 3 of the CPR at 3.1.8 refer specifically to "Costs Budgeting" and makes specific reference to Solutia UK Limited v Griffiths.

CPR 19.10 – 15 deals specifically with GLOs but makes no reference to costs. CPR 48.6A deals with the costs in GLOs but makes no reference to cost capping or budgeting.

CPR 43 and 44 deal generally with costs. CPR 43.3 defines summary assessment of costs. CPR 44.3 sets out the circumstances to be taken into account by the court when exercising its discretion as to costs and the orders which the court may make. CPR 44.4 and 44.5 deal with the basis of assessment of costs and the factors to be taken into account in deciding the amount of costs.

Section 6 of the Practice Direction about Costs under the heading "Estimates of Costs" provides that parties and their legal representatives must take certain steps to keep the parties informed about their potential liability to costs and in order to assist the court to decide what, if any, order to make about costs and case management.

Having referred to section 51 of the 1981 Act, to the various Parts of the CPR which deal with costs, and giving full effect to the overriding objective of the CPR, in my judgment, the court has power to make a costs cap order. In my opinion the general powers of case management and in particular CPR 3.1(2)(m) and 44.3 are sufficiently wide to encompass the making of such an order in both GLOs and other actions. In addition, the provision for Estimates of Costs in the Practice Direction about Costs is, in my view, in keeping with such a power. Further, I am fortified by the encouragement provided by the Court of Appeal in Solutia UK Limited v Griffiths to conclude that in appropriate cases, of which GLOs are prime examples (see those parts of the Woolf Report to which I have previously referred), the court should do so.

In my judgment, in cases where GLOs are concerned the desirability of ensuring that costs are kept within bounds makes it unnecessary for the court to require exceptional circumstances to be shown before exercising its discretion to make a costs cap order. I note that in claims in the administrative field it has been held that there must be exceptional circumstances before a pre-emptive order for costs is made (see ex parte CND). However, I see no reason for such a requirement where a costs cap order is sought in a GLO, particularly where there is a risk that costs may become disproportionate and excessive.

Factors to be taken into account in this case:

Mr Leigh, the solicitor acting for the defendants, submits that the NOGL is a prime candidate for a cost cap order. He refers to the fact that up to 7 February 2003 solicitors for the claimants have already spent £1.45 million on generic issues. He submits that costs which the claimants estimate they will need to spend additionally up to and including trial of approximately £1 million are wholly disproportionate and in any event unreasonable.

Mr Harris accepts that I am likely to make an order but stresses the need for the court to be slow to set a cap which handicaps or restricts the claimants from properly presenting their case. He submits that to impose a cap which is too draconian would be a breach of the claimants' Human Rights. He urges me to adopt the framework of costs agreed to by the Legal Services Commission in case plans put forward by the claimants.

I accept that the court should make a cost cap order in this case. It is common ground that the claimants costs on generic issues have already run to the sum of £1.45 million to which I have previously referred. In addition, a substantial sum in costs has already been incurred in respect of the cumulative costs for each individual claimant. The case plans agreed by the Legal Services Commission show that it is envisaged that further large sums in costs may be incurred by the claimants up to and including the trial. In my opinion, in group litigation such as this there is a clear risk that costs may become disproportionate and excessive. The large sums already spent and the estimate for future costs make it necessary for the court to make a cost cap order so that the costs are kept within bounds.

In making the order I take into account the following matters. Firstly, the order for costs must be proportionate with the amount at stake and the complexity of the issues. Proportionality is to be judged by a two-fold test namely, initially, whether the global sum is proportionate to the amount at stake. Next, if the global sum is disproportionate the court should look at the component parts in order to determine if they are proportionate (see Lownds v Home Office [2002] EWCA Civ 365).

Here the claimants put the total sum in damages in excess of £15 million. It is accepted that this may very well be discounted by anything between 25% and 33% for claims which may fail on the facts.

The defendants estimate the total sum in damages at no more that £3 million. It is submitted that even if successful the sums recovered by the claimants will in each case be small.

In my judgment, if successful, the claimants' figure for damages, allowing for a proportion of failed claims, is more realistic than that of the defendants. Taking the number of claimants as 2100, the average sum in damages is just over £7,000 for each claimant on a total of £15 million. This seems to me to be a not unreasonable figure.

The factual issues are relatively simple, but the legal issues are, undoubtedly, complex.

Secondly, it is agreed, and I accept, that the costs cap should only relate to the costs incurred in relation to generic issues.

Thirdly, both sides suggest, and again I accept, that in conducting a cost cap exercise I must adopt a broad approach. It is not possible, nor would it be cost effective, for the court to go into the minutiae of each item.

Fourthly, I must be careful not to fall into the trap of assessing the claimants' costs solely on the basis of the sum for which the defendants' solicitors and counsel have agreed to conduct the litigation. The latter may provide a guide, and in some respects a good guide, to costs but it should not be the sole or dominant factor. Similarly, the basis upon which the claimants have agreed costs with the Legal Services Commission is only a guide but not a determinative factor when making this order.

Fifthly, assessing the global figure at which costs will be capped I do so on the basis that the trial will last no longer than four weeks. If it lasts for longer this will be a factor which may give rise to an application to vary this order.

Sixthly, having assessed the global sum comprising the various component parts, at the conclusion of the trial, I shall hope to be able to make an order for costs which will avoid the necessity for most, if not all, of the costs to be the subject of a detailed assessment. The order will, of course, only be in respect of costs actually incurred up to the limit of the cost cap.

Seventhly, I shall give liberty to each party to apply to vary the order in the event of any unforeseen and exceptional additional costs arising; or in the event of an unforeseen event leading to a reduction in costs.

With these factors in mind I set out my findings in relation to the four component parts in the total estimated figure for costs in this case.

The four component parts:

They are:

1. Solicitors' costs;

2. Experts' fees;

3. Counsels' fees;

4. Other Disbursements

I shall deal with each separately.

Experts:

There is no dispute in respect of the experts' fees. The order of 6 February 2003 provides for a total of seven experts on each side. Both the claimants and the defendant have provided a figure of £50,000 as fairly representing the costs attributable to instructing, obtaining reports and securing the attendance of experts at trial. This is an inclusive figure for all the fees in respect of experts up to and including the trial. As I have made clear earlier in this judgement the cost cap will be for a four-week trial. The claimants' figure of £50,000 is in respect of a six-week trial but I make no reduction of this sum since the defendants' estimate for experts' fees of £50,000 is on the basis of a four-week trial.

Other Disbursements:

The sum sought by the claimants under this head includes such items as: travelling expenses and overnight accommodation for hearings; conferences; proofing witnesses; attending meetings; and attending the trial. The figure is £15,000, a sum which the defendant accepts as reasonable. I see no reason to do other than accept this sum as fairly reflecting such expenses. In respect of all disbursements, including counsels' and experts' fees, the amount actually recoverable will, in any event, be the amount actually paid up to the ceiling imposed by this order.

Solicitors costs:

This item provides the major area of dispute between the parties. The claimants' figures have been based on two Case Plans submitted to the Legal Services Commission in respect of two periods, namely:

(i) The period 10 February 2003 to 30 April 2003; and

(ii) The period 1 May 2003 to 31 July 2003.

In addition there is a case plan prepared for the purpose of this cost cap application for the period February 2003 to April 2003. And a schedule of work to be undertaken in the period starting on 1 August 2003 and ending on the last day of a six-week trial.

The claimants' witness statements show that the number of hours estimated as required to be undertaken by solicitors for all these periods has varied. Mr Leigh in his analysis of the claimants' costs demonstrated that the total figure varied between a minimum of 3,410 and 4,220 hours. In his final witness statement and in submissions Mr Harris opted for the lowest figure of 3,410 hours. I should say that these estimates are inclusive of all items including such matters as correspondence.

There are some areas of agreement between the parties in respect of these costs. It is recognised that work will be undertaken by different levels of solicitors and legal executives. These levels have been divided into four agreed grades as follows:

Grade A: A solicitor of over 8 years post qualification and including at least 8 years litigation experience;

Grade B: A solicitor or legal executive of over 4 years post qualification and including at least 4 years litigation experience;

Grade C: Other solicitors and legal executives and fee earners of equivalent experience;

Grade D: Trainee solicitors, paralegals and other fee earners.

In addition, the rate per hour for each grade has been agreed at:

Grade A: £185.00

Grade B: £155.00

Grade C: £120.00

Grade D: £ 90.00

Finally, following submissions by both sides Mr Harris agreed that the court in arriving at the cap should take a figure of £155.00 per hour as representing a fair assessment for each hour of work undertaken rather than attempt to calculate the number of hours to be worked by each individual grade. In keeping with the principle of adopting a broad approach to the assessment of the costs cap, in my view, this was sensible and realistic.

I turn to the difficult issue of deciding what is a proper figure for the number of hours to be undertaken for the period 10 February 2003 to the end of the trial. I do not propose to assess the number of hours for specific periods within this period; nor do I intend to make findings in respect of specific items. In my judgment to do this would be to undermine the principle that I should carry out this exercise on a broad basis. However, in assessing broadly what work has been done and what work is to be done I am bound to keep in mind incidences where in my judgment the estimate for hours of work required has either been exaggerated or under-estimated.

The starting point seems to me to be the hours contended for by either side. I have already stated that the claimants' contend for a total of 3,410 hours (Mr Harris' 3^rd witness statement, paragraph 6). Of this figure Mr Harris estimates that 1,552 hours will be undertaken in the period for 1 August 2003 to the end of a six-week trial. The balance of 1,858 will be undertaken between 10 February 2003 and 31 July 2003.

Mr Leigh estimates that work undertaken by his firm will amount to 925 hours which he rounds up to 1000 hours for the period up to the end of the trial. In his witness statement of 21 March 2003 he states that these hours will be spent "between now and the trial of the lead action." He does not state what, if any, work has been undertaken before that date, but I assume it was his intention to deal mainly with prospective work which he believes will be comparable, if not exactly similar, to work to be undertaken from this date by the claimants. In argument he told me that his firm had already logged 555 hours to the date of this cost cap hearing. Following the hearing Mr Leigh wrote to me stating that the figure of 555 hours was incorrect. He stated that hours logged had been incorrectly logged as work carried out on generic issues. The true figure was 330 hours. His letter to me was copied to Mr Harris who has disputed the new figure. In correspondence he asserts that the defendants' most recent figures show an error in the allocation of hours to generic issues and individual cases. By inference, he submits that the first figure is correct. It is impossible for me to resolve this dispute and it would, in any event, have been impossible to resolve it even had the matter been fully ventilated at the hearing. Mr Leigh argues that the work to be undertaken by his firm will be greater than that required of the claimants' solicitors. In the circumstances, he contends that the claimants' solicitors costs should be capped at a 1000 hours.

My overall view of the claimants' estimate of the numbers of hours required to be undertaken on strictly generic issues is that their figure represents a substantial over-estimate of what is fair, reasonable and proportionate. The following factors lead me to this conclusion:

(1) Each of the two case plans prepared for the Legal Services Commission provides a stage (Stage 1) for provision of quarterly costs estimates. In each case the estimate for the time for this work to be carried out is a total of 30 hours being 10 hours of a partner's time and 20 hours of an assistant's time. Mr Leigh criticised these figures stating that all that was required was a figure to be taken off a computer: say 15 to 30 minutes. When challenged on the figure of 30 hours Mr Harris was constrained to concede that the figure was excessive. He declined to accept the description of grossly excessive but his own estimate was 8 hours. In my view a time estimate much closer to Mr Leigh's estimate for this item is reasonable, fair and proportionate.

(2) Much of the argument on the amount of hours required to be undertaken focuses on the issue of work to be done in sorting out and selecting the four lead cases. The order of 6 February 2003 provided that a list of 8 cases nominated as potential Lead Cases should be served by the claimants on the defendant by 2 May 2003. Because the time-table for identifying 4 hospitals has slipped I have granted an extension of that time, but it is the defendants' contention that much of the work to select the potential Lead Cases must or should have been done already.

Mr Leigh points to the fact that £1.45 million has already been incurred in costs by the claimants' solicitors on generic issues before the cost cap period starts on 10 February 2003. In addition, the claimants' solicitors estimated that £1,000 has been spent on each individual case. Mr Leigh further analysed the hours claimed by the claimants' solicitors in the two case plans in respect of this work. Taking the various stages detailed in the case plans the total hours required to reduce 2,100 claims to 4 Lead Cases was estimated at 935 hours involving 53.5 hours of each witnesses' time (see schedule 5 to the defendants' skeleton arguments). He submitted the estimated number of hours had been grossly exaggerated.

Mr Harris did not seek to argue with the detailed analysis but he did not accept the conclusion that the hours were excessive or exaggerated. He contended that the question of case selection was one of the most important tasks which had to be performed by the claimants' solicitors. He submitted that every single claim had to be scrutinised and the cases selected at each stage carefully worked up. He did not accept Mr Leigh's submission that much of the work had already been completed.

Late on the day of the hearing a schedule of generic work already undertaken was produced by Mr Harris. This showed that, among other things, case summaries had been prepared and 25 potential Lead Cases worked up "prior to mediation". In addition, Claire Stoneman, a solicitor associate, is said to have undertaken:

"Screening, selecting and working up Lead Cases, risk analysis, selection of lead hospitals, assisting Mervyn Fudge."

In my view the analysis of the hours to be undertaken carried out by Mr Leigh, the schedule of work undertaken on generic issues, and the value of the work undertaken on generic issues before 10 February 2003 all indicate that the hours which are claimed as necessary for case selection in the two case plans are considerably exaggerated.

(3) Item 13 in Case Plan 1 claims 21 hours for solicitors with 30 hours travelling time in connection with instructing a psychiatrist. Mr Leigh pointed out that a similar item appeared in Stage 3 of Case Plan 2. Mr Harris accepted that there was an element of double counting and conceded that Item 13 in Case Plan 1 should not have been included. This still leaves a claim in Stage 3 of Case Plan 2 for instructing and evaluating the psychiatrist's reports which amounts to a total of 81 hours of solicitors' time.

The concession that item 13 in Case Plan 1 was incorrectly included and the number of hours in Stage 3 of Case Plan 2 in respect of instructing one psychiatrist in my judgment throws very considerable doubt generally on the credibility of the case plans.

(4) Appendix A to Mr Harris' 3^rd witness statement contains his estimate of the hours necessary to complete the work from 1 August 2003 to the end of the trial. Mr Harris sought to justify the number of hours for a number of items which he accepted seemed high. In particular 125 hours is estimated as the time necessary for preparing the claimants' witness statements. This represents over 40 hours or 5 eight hour days for each claimant. Despite Mr Harris' valiant efforts I fail to understand how such a task can take that length of time. The Appendix also includes 75 hours for all conferences and instructions to leading and junior counsel including preparation and attendances on lead clients for such conferences; with a further provision of 160 hours for a 5 day pre-trial conference with clients, experts and counsel. The latter was described by Mr Harris as a "brain-storming" exercise. In my view these items are excessive and not proportionate for a case such as this.

(5) In the course of submissions when pressed about some of the above matters Mr Harris explained the estimates of the number of hours required should be regarded as a "long-stop" position to cater for all eventualities; or were best estimates to safe-guard the claimants' position on costs and were "not necessarily figures for the hours which would be necessary". These concessions came late in the argument and are to be contrasted with the last two paragraphs of Mr Harris' 3^rd witness statement dated 9 April 2003. In the paragraphs in that statement headed Conclusions, Mr Harris asks the court to impose a cap of £870,000, such sum being reasonable, proportionate and wholly necessary to enable the litigation to be conducted properly. Mr Harris further requests in the same paragraph that an additional 10% be added to allow for unforeseen circumstances notwithstanding a yet further request that the court reserve the right to extend the figure in the event of any major unforeseen circumstance arising.

(6) The total figure for which the claimants' contend is therefore £957,000 exclusive of VAT to which £1.45 million must be added as costs already incurred before the date on which the cost cap is to start. Important and anxious as this litigation is, in my view, such a total is wholly disproportionate for this action.