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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		03/04/2007

Mrs Justice Swift :

BACKGROUND

1. This judgment is concerned with the determination of the level of solicitors' costs for cases settled under the fast track or optional risk offer schemes (OROS) in the British Coal Corporation Respiratory Disease Litigation (BCRDL). I heard argument at a hearing which lasted from 26 February to 1 March 2007.
2. This litigation was, until June 2006, under the supervision of Sir Michael Turner. There are two groups of claims.  The first group (the live claims) are claims brought by ex-miners who are still alive. The second group (the deceased claims) are claims in respect of miners who have died.  All the claims are by former miners or their widows or estates in respect of respiratory disease caused by inhalation of mine dust. The fast track schemes for live claimants and for the widows and estates of deceased miners are known respectively as LOROS and DOROS.
3. Several hundred firms of solicitors represent claimants within the BCRDL. Those firms are of differing sizes and have widely differing numbers of claims. Many of the firms belong to the BCRDL Solicitors' Group (CSG). The interests of the CSG are represented at hearings by six firms who constitute the Co-ordinating Group (CG). For the purposes of this hearing, the CG was represented by Mr David Allan QC and Mr Ivan Bowley. The interests of the Union of Democratic Mineworkers (UDM) and solicitors acting for its members were represented by Mr James Goss QC, Mr Alan Gourgey QC and Mr Brian Griffiths. The Department of Trade and Industry (DTI) was represented by Mr Michael Spencer QC, Mr John Cooper, Mr Simon Antrobus and Mr Alexander Hutton.

THE CLAIMS HANDLING AGREEMENT

4. In 1999, following the conclusion of the successful lead actions before Sir Michael Turner (or Turner, J, as he then was), the DTI, which had inherited the liabilities of the British Coal Corporation (BCC) on 1 January 1998, entered into an agreement (the CHA) with the CG for handling the outstanding claims (at that time almost 11,000) for respiratory disease. The DTI engaged contractors to process the claims in accordance with the CHA and to set up the necessary arrangements for medical assessment of the claimants.
5. The UDM was not a party to the CHA. It reached a separate agreement with the DTI which provided that solicitors acting for its members would receive a proportion (83.33%) of the costs payable to solicitors under the CHA. Consequently, the UDM has an interest in these proceedings similar to that of the CG.
6. As stated in paragraph 6 of the introduction to the CHA, the parties sought to agree a procedure for the "fair, consistent and expeditious assessment of claims and for the payment of damages where appropriate." The conduct of all claims registered for the purposes of the scheme is governed by the CHA. In order that claims did not proceed other than by an agreed process, the court imposed a stay so that all claims would have to be entered on the register and thereafter proceed through the CHA.  The intention was to create a scheme whereby settlements made would as far as possible meet the claimants' likely result at common law. It was agreed between the parties that no claimant should need to seek a litigated solution until after his claim had been processed through the CHA.  To this end, a disputes procedure was devised to seek to resolve potential grievances.  However it was agreed that recourse to the court by way of seeking removal of the stay (followed by conventional unitary litigation) once the claim had been processed through the CHA was a right that could not be removed by agreement. Changes to the CHA have been made from time to time to reflect changes in the law and experience of the process.

The processes under the original CHA

7. A claim made under the CHA is subjected to an initial process after which it may proceed down one of a number of different process routes to settlement. In certain circumstances, it may move from one route to another before settlement is achieved. Some claims may be withdrawn (e.g. because they are found to be duplicates of claims that have already been made) or may be denied (because they fail in some way to meet the requirements of the scheme). It is necessary briefly to describe some of the routes set out in the original CHA down which a claim could progress to settlement.

The initial process

8. The initial process for claims can be summarised as follows.  After registration, claims are prioritised by means of a points system. Claims are then dealt with in order of priority. In live cases, a claimant undergoes a screening spirometry test to measure his lung function as against predicted values. The screening spirometry procedure enables claimants to be further prioritised for the medical assessment process (MAP) and interim payments to be made as the claimant awaits MAP. In live claims which meet the relevant criteria, an expedited offer of settlement on a risk basis will be made at this stage. 

The full post-MAP settlement process

9. In order for a claim (whether live or deceased) to progress to MAP following spirometry, a "fit for purpose" claims questionnaire (FFP CQ) has to be filled in and submitted to the DTI's claims handlers (currently Capita). This involves the compilation of a work history by the claimant providing information to his solicitor relating (amongst other matters) to the collieries at which the claimant or deceased worked, the nature of jobs undertaken, the extent (if any) of respirator usage, the circumstances of ceasing or transferring work and smoking history.  The information provided in the CQ is then checked against records retained by BCC and a work history is agreed between the claimant's solicitor and Capita. The agreed work history is used post-MAP as part of the apportionment process.
10. In live claims, the MAP involves the claimant undergoing full lung function testing (a clinical investigation which is more extensive than spirometry) under the supervision of a laboratory technician.  The results of the test are given to a respiratory specialist (RS), who will see the claimant and take a history.  The RS then completes a MAP report that identifies whether the claimant suffers from chronic obstructive pulmonary disease (COPD) and, if so, the extent of his disability identified in percentage terms.  In addition the RS will identify any non-compensatable co-morbid conditions. The MAP will also determine whether the claimant has chronic bronchitis (CB) or temporary exacerbation of asthma attributable to his work as a miner. The RS will review the claimant's alleged smoking history against medical records and the extent to which an exhaled carbon monoxide level was obtained during the lung function testing.  The diagnoses, assessment of past and future disability relating to COPD and estimate of life expectancy provided by the MAP report enable a computation to be made in cases where the claimant meets the requirements for an award.  
11. In deceased cases, the only evidence available to the RS is documentary, i.e. (where available) death certificates, post mortem reports, hospital records, general practitioner (GP) records, BCC medical records, employment history (as set out in the CQ) and Department of Work and Pensions records.  There may, in some cases, be evidence of chest X-rays or of lung function testing.  It is the availability of records that determines the ability of the RS to make the same diagnoses and assessments as in live cases. The resultant MAP report contains the same relevant information as in a live claim and forms the basis for the computation of damages. The procedure for expedited payment has never been available in deceased cases.
12. The CHA provides for general damages to be paid by reference to an agreed table of awards based upon the age and level of disability of the miner.  In addition, all aspects of special damages for past and future losses are susceptible to computation by reference to agreed figures referable to age, levels of disability and other agreed factors.  A computer calculator exists for the input of information to produce the final figure.  The inputs depend upon information from the MAP and the CQ.  Elements of discretion may be involved in certain calculations; these relate almost exclusively to loss of earnings.  A separate computer calculator exists for what may be complex calculations relating to pension loss.
13. The award made is apportioned to reflect the findings of the judge in the lead cases relating to:

i) exposure prior to 4 June 1954 (4 June 1949 in Scotland);

ii) the effects of smoking; and

iii) inevitable exposure to an irreducible minimum level of dust ('non-tortious dust') including the impact in an individual case of the use/non use of respiratory protection. 

14. The computer calculator has been devised so that an individual's work and smoking history can be inputted and an overall recoverable proportion of damages calculated by reference to an agreed formula. Tortious values are provided for geographical areas and job factors are applied to reflect the likely relative occupational exposure to levels of dust in different occupations underground.  The smoking history is taken from the MAP.  A dust reference panel (DRP) advises as to the appropriate data to input into the dust model and as to any disputes arising.
15. After the apportionment process has been completed, a final offer is sent out to the claimant. The offer will be checked by the claimant's solicitor, who will then advise the claimant whether or not it should be accepted.

Expedited offers of settlement

16. The CHA provides a shortened process route for the payment of damages in live claims which fulfil certain specified criteria. In such claims, a claimant will receive an expedited offer of settlement after spirometry and before he embarks on the MAP process.
17. In order to qualify for an expedited offer, a claimant must establish at least five years' underground work for the BCC, together with a forced expiratory volume (FEV1) of less than 90% of the predicted value. The FEV1 is measured at spirometry and will indicate whether or not the miner has suffered a loss of lung function. If an expedited offer is made and the claimant wishes to accept it, this must be done before the point when the claim would otherwise move on to the next part of the process, i.e. the submission of the CQ. Despite the fact that no CQ will have been submitted before acceptance of an expedited offer, it will have been necessary for the claimant's solicitor to obtain from the claimant all, or virtually all, of the information needed to complete the CQ in order to advise him whether his interests would best be served by accepting the offer of an expedited settlement.
18. As at 28 February 2007, 20,722 claimants had accepted expedited offers and 121 expedited offers remained outstanding.

THE FAST TRACK (OROS) SCHEMES

The increase in the number of claims

19. By March 2003, 221,573 claims had been registered pursuant to the CHA. On 21 March 2003, it was decided by the court, with the agreement of the parties, that a cut-off date for registration should be determined and announced.  A year of lead-in time up to the cut-off date was given. Extensive publicity was conducted in an attempt to ensure that all claims outstanding were brought inside the BCRDL. By the date of the cut-off, on 31 March 2004, the number of claims registered had increased to 557,000. The proportion of deceased to live cases had increased from 33% to 55% of the total claims.

The purpose of the OROS schemes

20. The large influx of claims registered in 2003/4 gave rise to serious problems in processing claims within a reasonable period of time. There were an insufficient number of suitably qualified RSs to carry out MAPs in all the claims within a reasonable timeframe. The absence or paucity of medical records made medical assessments very difficult in many deceased cases. It was estimated that, if cases were left to progress through the full MAP process (the only process appropriate for all the deceased and many of the live claims), the closure date for live claims was likely to be the end of 2009 and for deceased claims the end of 2011. That timescale was unacceptable to the parties and to the court. There was some argument before me as to whether, by 2004, the scheme had become 'unworkable'. What is clear is that it was unable to meet its stated objective of providing an 'expeditious' procedure for the assessment of claims and for the payment of damages.

The development of the OROS schemes

21. These problems were discussed at a workshop held in September 2004 (the September workshop) and attended by Sir Michael Turner. It had become clear that a fast track process was required which would enable a large number of claims to be settled without going through the MAP. That would free up the available RSs to carry out MAPs on those claimants for whom the fast track process was not appropriate. It was recognised that, in order to achieve this, steps would have to be taken to identify (from data relating to previous claims settled under the CHA) those categories of cases least likely to require medical input. It was agreed between the parties that such cases would involve claimants who were statistically likely, after a MAP, to be diagnosed with CB only, or with only low levels of COPD. Risk (OROS) offers could be made to claimants in those cases before they got to the stage of undergoing a MAP. The offers could be pitched at a relatively low level since they would be made in cases which would be expected to attract only low awards of damages if they proceeded to a post-MAP settlement.
22. After the September workshop, the parties submitted Position Papers and, within a short time, they had agreed the arrangements for the fast track schemes, subject to certain questions which, at the request of the parties, were determined by Sir Michael Turner following oral argument. In the case of both live and deceased claims, the claimant/miner had to meet basic eligibility criteria. Those criteria included a minimum employment requirement, namely a requirement that the miner must have had one day's employment underground after 4 June 1954 in England (4 June 1949 in Scotland).
23. The main category of case in which LOROS offers were to be made were claims where the claimant had a FEV1 of more than 90% of the predicted value. The 'predicted value' is the mid point of the normal range. Many people with a FEV1 of 90% or more will have no respiratory disability. Some people will start with a FEV1 in excess of the predicted value so that a reduction to 90% of the predicted value may result in them having a low level of disability attributable to COPD. In addition, LOROS offers were made to claimants whose spirometry readings were avoidably unreliable, demonstrated failed reversibility or demonstrated ratio failure. The respective criteria for eligibility for an expedited offer and a LOROS offer meant that the two processes were mutually exclusive or virtually so.
24. The DOROS scheme comprised two alternative flat offers, one (of £1,200 in 2005/6) in widows' claims and the other (of £1,000 in 2005/6), in estate claims. DOROS offers were made in what were termed "category 3" cases, i.e. cases where there is no mention of COPD on the death certificate.

The start of the OROS schemes

25. The LOROS and DOROS schemes began operation on 28 February 2005 and 1 September 2005 respectively.

The effect of the OROS schemes

26. The effect of the fast track scheme for live cases was that claimants would receive a LOROS offer at the same point in the process at which, in cases eligible for an expedited offer, an expedited offer would be made. In deceased claims, there was of course no system of expedited offers but a claimant could choose to opt into DOROS before submitting a CQ and progressing to a MAP assessment. Provided that he fulfilled the necessary criteria, he would then be given a DOROS offer. In both live and deceased claims, the claimant retained the right to go to MAP, if he was dissatisfied with the OROS offer made.  

The progress of the OROS schemes

27. The OROS schemes have been very successful in achieving their objective of increasing the throughput of claims. Entry to the LOROS process has been closed for some time now. As at 28 February 2007, 71,641 claims had been settled under the LOROS scheme and only 95 LOROS offers remained outstanding. The last date on which claimants could opt into the DOROS scheme was 28 February 2007. As at that date, 99,400 claimants had done so and 59,580 DOROS offers had been paid.

COSTS UNDER THE CHA 

28. A tariff of costs payable to claimants' solicitors in respect of claimants who received damages under the CHA was provided for in the CHA itself. This tariff was agreed in May 1999 (at a time when work under the CHA had not yet begun), after negotiations between the DTI and the CG. I shall refer further to those negotiations in due course. The figures were agreed on the basis of a flat sum according to the outcome of the claim and have not subsequently been varied (with the possible exception of transitional arrangements to deal with anomalies arising from a revision in the arrangements for making expedited payments, to which I shall return briefly), save to reflect inflation. Since the costs payable under the CHA are fixed, most of the claimants' solicitors' firms have not operated the usual procedures for keeping records of work done and time spent on each claim. This fact has caused difficulties when attempts have been made retrospectively to assess how much time has been spent on a claim.
29. At the time when the costs were agreed, no one knew how many claims there would eventually be.  It was, apparently, anticipated that there might be some 100,000 claims.  In the event, as I have indicated, there have been almost six times that number.
30. Paragraph 60 of the CHA provides that:

"Costs and disbursements will be paid in accordance with Schedule 17."

Schedule 17 sets out the agreed tariff of costs and disbursements which are uplifted annually by reference to the Retail Prices Index (RPI). It is necessary only to refer to some of the fixed costs set out in the Schedule. I shall set them out in tabular form, using the figures for the year 2005/6 (i.e. the first year in which OROS costs were paid).

Table 1:

Type of claim and outcome	Sum(s) payable (as at 2005/6)
Live post-MAP settlement	£2,023 + VAT + reasonable disbursements
Deceased post-MAP settlement	£2,023 + VAT + reasonable disbursements
Live expedited settlement	£1,041 + VAT + reasonable disbursements
Deceased claim limited from the outset to CB-only	£579 + VAT + reasonable disbursements
Live CB-only claim, settled before spirometry by expedited payment	£579 + VAT + reasonable disbursements
Live CB-only claim, settled after spirometry by expedited payment or by CB-only MAP	£1,158 + VAT + reasonable disbursements

Throughout this judgment, I shall be referring to base costs (i.e. without V.A.T and disbursements).

Withdrawn and denied claims

31. In the event that a live or deceased claim is withdrawn or denied and no damages are paid, the CHA provides that no costs are payable. The fact that a claim has been registered under the CHA and work has been done on the claim does not, therefore, of itself entitle the claimant's solicitor to payment from the scheme. Payment depends on the outcome of the claim.

Costs for CB-only claims

32. As can be seen from Table 1, the CHA provided for costs of £579 in cases where a live or deceased case had been identified as a CB-only case from the outset and where settlement was reached without the need for screening spirometry. A higher level of costs (£1,158 in 2005/6) was payable in a CB-only live claim which was the subject of an expedited settlement after spirometry. I was told that the reason why the costs in this type of claim were greater than in a 'usual' expedited settlement case was that the claimant's solicitor would have to examine the miner's medical records in order to see whether he had suffered the symptoms of CB over the period necessary to establish that he was suffering from that condition. Examination of the medical records would not be necessary in the usual expedited payment claim. In the event, no CB cases have settled prior to spirometry and very few cases have been dealt with under the CB-only processes.

Additional payments

33. Schedule 17 provides for additional payments to be made to claimants' solicitors over and above the tariff costs in certain circumstances. Two such circumstances are particularly relevant to the OROS costs issue. First, where a claim includes a 'complex special damages claim' (i.e. where a loss of earnings claim is payable or the total respiratory disability is or will become 50% or greater), additional costs (the complex special damages uplift: £579 in 2005/6) are paid. Second, in deceased claims, a sum (£232 in 2005/6) is paid to cover obtaining letters of administration or grant of probate (for ease, I shall refer to both as 'probate') where it is necessary to do so for the purposes of the claim. These additional payments are paid in addition to V.A.T and reasonable disbursements incurred in connection with carrying out the additional work.

Costs payable when an award of damages is discounted

34. The CHA provides that, in deceased cases, the award of damages should, in certain circumstances, be discounted. This applies when, because of the absence or paucity of the medical records, the RS is unable to make a judgment on respiratory disability. The amount of the discount varies depending on the precise extent of the information available. Where an award is discounted, a lower level of costs (£1,445 in 2005/6) is payable. It is accepted by the CG that some of the cases that have settled pursuant to the DOROS process would otherwise have resulted in discounted damages and hence discounted costs.

The procedure for resolving disputes about costs

35. Schedule 17 provides for any disputes about costs to be referred to the disputes procedure set out in the CHA. If the issue remains unresolved, it is to be referred to an independent costs draftsman to be agreed by the parties or, failing agreement, to be appointed by the President of the Association of Law Costs Draftsmen.
36. There is provision within the CHA for any dispute relating to costs in the litigated or lead cases to be resolved by means of assessment of costs by a County Court assessing officer. The same arrangement applies where the claimant is a patient and a dispute arises as to the quantum of costs incurred as a result of his or her incapacity to pursue the claim in the normal way. However, those are the only circumstances in which the CHA provides for a detailed assessment of costs.

THE HISTORY OF THE OROS COSTS ISSUE

At the time of the development of the OROS issue

37. The introduction of the OROS schemes meant that a decision had to be taken as to the level of costs to be paid in respect of claims dealt with under OROS.
38. In its written proposals, submitted after the September workshop, the DTI initially proposed fixed rate costs of £700 + V.A.T for LOROS cases and £450 for DOROS cases to reflect the 'modest amount of administrative work' which it was said would be involved in processing the OROS cases. They proposed also that, if agreement on the issue of costs could not be reached, the court should seek guidance from a Costs Judge. In the event, that course was not adopted and the parties agreed that the determination of the level(s) of costs to be paid should be left to Sir Michael Turner. That agreement was not made in writing and it is not easy to identify precisely when the agreement was made. It is, however, common ground that no express terms were agreed between the parties as to the basis on which the level(s) of costs for OROS claims should be determined.

The first hearing of the LOROS costs issue in November 2004

39. The issue of the level of costs to be paid in LOROS cases came before Sir Michael Turner on 18 November 2004. No evidence was called by either party and the matter proceeded on the basis of skeleton arguments and submissions.
40. At the hearing, the CG argued that the starting point should be the levels of costs contained in the CHA. In paragraph 2 of their skeleton argument prepared for the hearing, they observed that the level of costs which provided the most useful guidance was the amount payable in the case of an expedited settlement. They argued, however, that certain factors meant that the costs for LOROS cases should be paid at a higher rate than for expedited settlements. First, they contended that the advice which would have to be given to a claimant would be more complex in a LOROS case than in an expedited case. Second, they argued that Sir Michael should take account of the fact that if, after receiving advice, a claimant did not accept a LOROS offer and instead proceeded to MAP, his solicitors would not be remunerated for the advice given in connection with the LOROS offer. Third, they referred to additional work undertaken by claimants' solicitors which had not been foreseen when the costs provisions of the CHA were agreed and which they said should be taken into account when the OROS costs were set. Fourth, they contended that the introduction of the OROS schemes would necessitate additional expense being incurred by solicitors in the provision of increased office space, staff and training, which should be taken into consideration. Finally, they contended that the shortening of the scheme as a whole would lead to redundancy costs being incurred by claimants' solicitors.
41. The DTI's primary case was that the figures in Schedule 17 of the CHA were irrelevant to the assessment of costs for claims settled under the OROS schemes. They contended that, instead, Sir Michael should assess the time which would reasonably be taken to carry out the work necessary to process an OROS claim and should then apply the rates payable to fee earners of the appropriate grade(s) and award a figure based on that calculation. In other words, they were advocating a detailed assessment of costs.
42. In a brief ruling, delivered on the day of the hearing, Sir Michael assessed the appropriate level of costs for LOROS cases at £1,478. In doing so, he suggested that there was a saving of time of about two hours when a claim was dealt with under LOROS when compared with the time which would have been taken had the case proceeded to settlement under the CHA (by which it is clear he meant post-MAP, rather than by way of an expedited settlement). It was evident both from his brief ruling and his subsequent, longer, judgment delivered on 3 December 2004 that he believed that the CHA was the appropriate starting point for determining the appropriate level of costs and that the court should not approach the issue by way of a conventional detailed assessment (what has been termed the 'bottom up approach').

The hearing of the DOROS costs issue in January-February 2005

43. The issue of the assessment of costs to be paid in claims settled under DOROS came before Sir Michael on 28 January and 2 February 2005, the DTI having made an unsuccessful application to adjourn the hearing in order that certain information and evidence could be collected and made available to the court. On 22 February 2005, he delivered a written ruling in which he decided that a fair figure for DOROS claims would be £1,675. Again, he took the costs payable under the CHA for a case which settled post-MAP as a starting point and rejected the 'bottom up approach'.

The 2005 appeal

44. Sir Michael's assessments of costs under both OROS schemes were the subject of successful appeals by the DTI. I shall refer to the judgment of the Court of Appeal, dated 21 December 2005, in more detail shortly. Suffice it to say here that the primary reason for allowing the appeal was Sir Michael's refusal to allow the DTI's application for an adjournment. The matter was remitted back to Sir Michael for re-hearing. Meanwhile, the DTI continued to pay solicitors on an interim basis at the rate set by Sir Michael. Those payments have continued ever since, having been uprated annually by reference to the RPI.

The directions of 19 January 2006

45. On 19 January 2006, Sir Michael gave directions (his order was dated 31 January 2006) for the re-hearing of the OROS costs issue. The DTI contended that, in order to provide evidence upon which he could base his decision as to the appropriate level of costs, there should be an audit of a randomly selected group of claims and that bills of costs should be prepared in each case, identifying the time spent, the grade of fee earner involved and the work being undertaken. Sir Michael rejected that idea. Instead, he ordered that six named firms of claimants' solicitors (chosen to provide a spread of firms doing large, medium and small numbers of claims) should select cases in which the work content was (i) least (ii) average and (iii) exceptional in each of five categories. The categories ('the five categories') were:

(a) live claims which settled after MAP (live MAP);

(b) deceased claims which settled after MAP (deceased MAP);

(c) claims which settled by expedited payment;

(d) LOROS claims; and

(e) DOROS claims.

46. In respect of the selected cases, the firms were ordered to provide information about the name and grade of each fee earner who had worked on the claim, the amount of time incurred by each fee earner on each file and the manner of the division of the work as between fee earners. They were also required to provide information about their arrangements for dealing with OROS cases. The directions provided for the DTI to challenge the representative nature of the cases selected.
47. There was also provision for the six firms to serve comparative financial management information in respect of CHA and OROS claims.

The orders for directions of 3 and 17 May 2006

48. The named firms of claimants' solicitors filed and served information about their selected cases, together with witness evidence from a representative of each firm. The DTI served written objections to the manner of selection of cases, claiming that the cases selected were unrepresentative. They repeated and developed their previous contention that an audit of randomly selected claims should be carried out.
49. At a hearing on 6 April 2006 (the relevant order is dated 3 May 2006), Sir Michael once again rejected the DTI's primary contention and dismissed their objections that the selection of cases was unrepresentative. He did, however, give the DTI permission to seek further information from the six nominated firms of solicitors as to the basis of their case selection. His directions provided for the issue of case selection to be referred back to the court for resolution if necessary.
50. Provision was made for the six solicitors' firms to categorise their total caseloads as between the five categories over the lifetime of the scheme and to categorise their open cases over a specified six-month period. There was also a direction for the provision of information about the comparative profitability of claims conducted under the CHA and under OROS.
51. On 17 May 2006, further orders were made about the filing and service of evidence relating to the comparative profitability of the five categories of cases and the categorisation of the individual firms' caseloads.

The 2006 appeal

52. Meanwhile, the DTI had issued a notice of appeal, seeking permission to appeal from the Court of Appeal against that part of Sir Michael's order of 3 May 2006, which dealt with case selection. Permission to appeal was granted on 26 June 2006 and a stay of execution of the relevant directions was granted on 10 July 2006.
53. Subsequently, the appeal was compromised on the CG conceding that there should be an audit of randomly selected cases. In making this concession, the CG did not concede that an analysis of randomly selected cases would provide the best evidence for the determination of the OROS costs issue.

The order for directions of 28 July 2006

54. I took over responsibility for the BCRDL on 1 June 2006. The matter came before me on 28 July 2006. The parties put before me proposed directions which were, save for one matter, agreed. The resulting order for directions had the effect of varying by substitution the orders of 19 January 2006, 3 May 2006 and 17 May 2006. It provided for the random selection by Capita of 100 settled cases in each of the five categories of case referred to at paragraph 45 from the caseloads of five of the six firms originally identified in the order of 19 January 2006, together with another firm to be agreed between the parties. (The sixth firm had by this time gone out of business. The firm which took over its caseload was subsequently chosen as the replacement sixth firm). The relevant solicitors' firms were to provide estimates of time for the work done on each of the cases selected, together with full particulars of the basis on which the estimate had been made, verified by witness statements. A pre-trial review was fixed for 29 November 2006 and the hearing of the issue fixed for 11 December 2006.
55. The one aspect of the directions that was not agreed was whether I would be assisted at the hearing of the OROS costs issue by the advice of a Costs Judge. The DTI were in favour of a Costs Judge being involved; the CG adopted a neutral stance on the question. I decided that I would seek the assistance of a Costs Judge at the pre-trial review and would then take a decision as to whether to ask him to sit on the substantive hearing.
56. It will be noted that the directions of 28 July 2006 made no provision for the filing of evidence about the comparative profitability of the various types of case, nor for the categorisation of the various firms' caseloads. I was told that the CG no longer intended to rely on evidence about the additional overheads incurred by claimants' solicitors as a result of the OROS schemes, nor on evidence relating to profitability.

The pre-trial review of 29 November 2006

57. Master Hurst, Senior Costs Judge, sat with me at the pre-trial review as assessor. At that hearing, I acceded to the DTI's submission that the court should undertake a wider exercise and should call for the files in a number of the randomly selected cases in each of the five categories of case so as to enable the Senior Costs Judge to examine those files and make a quantitative and qualitative comparison of the work done under the CHA and under the OROS schemes. It seemed to me that, if no such examination were to be undertaken, the only material about the individual claims before the court at trial would be a list of brief descriptions of items of work done on each claim, together with an estimate of the time spent on each item. The estimates of time had not been given by the persons who had actually done the work. Thus, the claimants' solicitors who gave evidence would not have any personal knowledge of the individual files. I considered that these limitations on the available evidence would make it difficult for me to form any reliable view as to the difference (if any) between the work which was reasonably required to deal with a claim in each of the five categories.
58. I therefore gave the CG and the DTI permission to nominate ten cases in each of the five categories (making a maximum total of 20 cases in each category) and that the files in those cases should be produced, together with explanatory notes, for the Senior Costs Judge to examine. He would then prepare a written advice for me, copies of which would be disclosed to the parties in advance of the hearing. Because there was insufficient time for this process to take place before 11 December, I adjourned the hearing to 26 February 2007. I directed that the DTI should serve Points of Objection to the reasonableness, accuracy and reliability of the claimants' solicitors' time estimates.
59. Before the pre-trial review, the CG had served evidence relating to a further 500 or so settled claims which had been selected by the claimants' solicitors on a non-random basis and without consultation with, or the prior knowledge of, the DTI or the court. It seemed to me that this evidence would add nothing to the information available from the randomly selected claims, that it would impose an unreasonable additional burden on the court and that it would be susceptible to attack by the DTI on the ground that the selected cases were not randomly chosen and were unrepresentative in nature. I ruled therefore that the CG were not entitled to rely on this evidence. It was agreed, however, that the parties would be entitled to rely on evidence relating to cases identified pursuant to Sir Michael Turner's order of 19 January 2006.
60. In accordance with my directions, the DTI identified ten cases in each of the five categories. The CG nominated only seven cases in all. The files in these 57 cases were passed to the Senior Costs Judge for examination. The DTI served their Points of Objection pursuant to my order of 29 November 2006. On 21 December 2006, I ordered that the CG should serve on the DTI a Response, if so advised, to the Points of Objection and this was served on 5 February 2007.

THE EVIDENCE

61. Pursuant to the directions of 28 July 2006, the CG filed and served witness evidence from solicitors representing the six nominated firms of claimants' solicitors, together with time estimates and details of work done on the random selection of cases. They did not rely on expert evidence.
62. The DTI relied on witness evidence from various personnel at Capita and (in relation to the pre-CHA negotiations) from the former director of the Coal Health Claims Unit at the DTI.
63. The DTI obtained expert evidence from Mr Christopher Lemar, a fellow of the Institute of Chartered Accountants and partner in the UK firm of PricewaterhouseCoopers LLP (PwC). He is experienced in extracting, analysing and collating data and in drawing conclusions therefrom. He prepared a Preliminary Report dated 27 October 2006, a subsequent Report dated 22 November 2006 and an Addendum dated 7 February 2007. He analysed the information provided by the claimants' solicitors about the work done on the random selection of 500 claims. He did not of course have the expertise to judge whether the time said to have been spent on each individual claim or category of claim was reasonable or not. His analysis was therefore conducted on the basis that the times estimated by the solicitors were fair and accurate. He made various comparisons of the work said to have been carried out on the five categories of claim. He analysed and compared the performance of the six solicitors. He also compared the payments made under the CHA for the various categories of claim with the court rates which would be payable.
64. In the event, Mr Lemar's evidence was to a large extent superseded by the exercise carried out by the Senior Costs Judge. It is not, therefore, necessary for me to deal with it in any detail.

THE SENIOR COST JUDGE'S REPORT

The analysis

65. The Senior Costs Judge prepared analyses of the 57 files received from the claimants' solicitors, dealing separately with the files submitted by each firm. From the material contained within the files, he made an assessment of the time that should in his opinion reasonably have been spent on each of the five categories of claim. In carrying out that exercise, he took account of the relevant witness evidence and of the contents of the DTI's Points of Objection and the CG's Response thereto. His findings are set out fully in his Report.
66. Having analysed the individual files, the Senior Costs Judge calculated what seemed to him to be reasonable and proportionate times for dealing with the work required for each of the five categories of case. In order to do this, he averaged the time he found to be reasonable in respect of each firm for each category of case and then averaged the time across all the firms. To that average time he added a further 30 minutes to reflect the fact that he may have overlooked certain times which would be legitimately allowable. He then allocated the times in a way that he considered reasonable as between the various grades of fee earner.

Conclusions

67. As a result of this exercise, the Senior Costs Judge concluded that the appropriate figures for costs, applying the normal tests of reasonableness and proportionality used on detailed assessment, would be:

Table 2

Category of Case	Costs (at 2005/6 rates)
Live post-MAP settlement	£922.50
Deceased post-MAP settlement	£985.50
Expedited settlement	£725.50
LOROS	£788.50
DOROS	£836.00

68. He concluded by saying that, if he were carrying out a detailed assessment of costs in LOROS and DOROS cases, he would recommend that the claimants' solicitors should be paid (at 2005/6 rates) £790 per completed LOROS claim and £836 per completed DOROS claim. He recommended that I should use those figures as a starting point when reaching my decision.

The message contained in the Report

69. The Senior Costs Judge's Report made clear that the costs payable under the CHA are very substantially in excess of the levels of costs that would be awarded following a conventional detailed assessment. The difference in levels (at 2005/6 rates) can be illustrated thus:

Table 3

Category of Case	Senior Costs Judge's Assessment	Costs Payable under the CHA
Live post-MAP settlement	£922.50	£2,023
Deceased post-MAP settlement	£985.50	£2,023
Expedited settlement	£725.50	£1,061

The effect of the Report

70. Subject to certain clarifications and corrections made in response to queries from the DTI, all parties indicated their general acceptance of the results of the analysis contained within the Report. It had the effect of resolving many of the issues of fact (concerning the reliability of the estimates provided by the claimants' solicitors and the work involved in processing each different category of claim) which had previously existed. Indeed, following receipt of the Report, the parties agreed that it was unnecessary to call evidence at the hearing, which proceeded on the basis of argument only.
71. It is only right that I should record my thanks to the Senior Costs Judge for his careful analysis. It led to a considerable saving of Court time, in addition to providing considerable assistance to me in reaching my decision. It was unfortunate that, as a result of illness, it was not possible for the Senior Costs Judge to sit with me on the final hearing of the costs issue. I was, however, indebted to Master O'Hare who deputised for him as assessor on that occasion.

THE COURT OF APPEAL JUDGMENT

72. Before I go on to deal with the arguments raised at the hearing of the OROS costs issue in February 2007, it would be convenient for me to refer to the decision of the Court of Appeal in December 2005, whereby it allowed the DTI's appeals against Sir Michael's decisions in respect of LOROS and DOROS cases and remitted the matters back to him for hearing. Much of the argument at the February 2007 hearing centred around certain key passages of the Court of Appeal's judgment.
73. In reaching his decision about the level of costs appropriate for LOROS and DOROS cases, Sir Michael Turner had adopted the approach advocated by the CG and used the levels of costs payable under the CHA as a starting point. In his ruling on the LOROS issue, he said at 70G:

" … the CHA cannot and should not be ignored as providing the governing basis for the assessment of fair and reasonable remuneration for solicitors and other claimants' representatives when performing work under the fast-track scheme which, it must be remembered, is a development or modification of the CHA itself."

74. In his ruling on the DOROS costs issue, he said, at paragraph 4:

" … the concept of fast track is a modification of the CHA procedures. Hence, the logical starting point for determining what the costs should be in the fast track situation has to be found in the provisions of the CHA which specify the costs which fall to be paid in three separate categories in deceased cases. I say the "logical" starting point because of the fact that the fast track schemes represent a modification of the CHA under the auspices of which, of necessity, all solicitors will already have made their engagement with the client."

75. And at paragraph 16:

"In my judgment the relevance of the costs schedule in the CHA should not be overlooked. Not only is the work which claimants' solicitors will have to perform in fast track cases broadly analogous to what they do now in processing claims under that agreement, but also the basis upon which they were retained by the claimant will have been at a time before fast track was under consideration, and of [sic] will have been the same. It is not for the Court to determine whether, in terms of costs, the CHA was advantageous to the CG or not."

76. The Court of Appeal approved Sir Michael's approach. In the Court's judgment, delivered on 21 December 2005, Sir Anthony Clarke, Master of the Rolls, said at paragraph 91:

"The judge was right to reject the submission that he should have assessed a figure on a bottom up basis without reference to the figures in the CHA.  Those figures had been negotiated between the parties on a broad brush basis in 1999 and still had contractual effect in 2004, as they do today.  It is not for the court to say that the bargain reached in 1999 was a good or bad bargain from the point of view of one side or the other.  The judge was entitled to place considerable reliance on the agreed figures for the reasons he gave.  The FTO [fast track offer] was an amendment or a variation of the CHA. All the claimants had registered under the CHA before the cut-off date in March 2004. The solicitors had been engaged under the CHA and many of them had already done work under it.  It has been famously said that in law context is everything.  Here the broad context of the FTO was the BCRDL and its immediate context was the CHA, which was varied by the new scheme.  In these circumstances the underlying approach of the judge was in my judgment correct."

77. The reference to the 'good bargain' or 'bad bargain' referred to the suggestion by the DTI that the work involved in conducting cases under the CHA was not as onerous as had been anticipated and that the costs being paid were over-generous. The CG on the other hand were contending that more work was involved than had at first been anticipated and that claimants' solicitors were therefore being underpaid.
78. The Master of the Rolls then dealt with Sir Michael's failure to grant an adjournment of the DOROS costs issue to enable the DTI to seek information about the name and grade of fee earners employed upon claims, the time spent on each claim, the numbers and grades of fee earners employed on COPD claims and the organisation of their work. It was clear that Sir Michael had considered that such information would be relevant to the decision he had to make, even if he were to reject, as he had already done at the hearing of the LOROS costs issue, the 'bottom up approach' advocated by the DTI. Nevertheless he had refused the adjournment on the grounds that the DTI had only sought the information shortly before the hearing.
79. At paragraph 96 of his judgment, the Master of the Rolls said:

" … in my opinion he [i.e. Sir Michael] was right to regard the actual facts as potentially relevant.  Although the starting point was the figures in the CHA, the CHA had been negotiated in 1999 and this new work was to be done in 2005 and thereafter. The parties did not specify the basis on which the fees should be fixed.  They were at large.  In these circumstances the court should in my view in principle consider all the circumstances of the case, including what grades of fee earners would be likely to be used and their costs.  The answers to these questions could properly be informed by what the solicitors had actually done under the CHA and who had carried out the work."

80. He went on to observe at paragraph 97:

"It is not possible to say how such evidence would have altered the result, if at all. However, it is in my opinion sufficient for present purposes to say that there is a real prospect that it would have done."

81. He said that, for that reason, the appeal would be allowed in relation to the DOROS costs issue and the matter remitted to the judge. He stated at paragraph 99:

"I should emphasise that … I am not saying that the judge's figure was wrong, simply that, as he himself accepted in principle, if the court has the means to proceed in an evidence-based fashion, it should do so."

82. The Master of the Rolls went on to consider the issue of whether the appeal against Sir Michael's decision on the LOROS costs issue should also be allowed. He concluded that it should, saying at paragraph 106:

"I only add that it does not follow that the figure was itself wrong. What an appropriate figure will be is a matter for the judge after considering such further information as is put before him.  It does appear to me that, in reaching a figure, it might be helpful to compare the work done and advice to be given in an FTO case with the position in the case, not only of an MAP settlement, but also of an expedited settlement."

THE PARTIES' CONTENTIONS ON THE FIGURES

83. As I shall explain, the parties advocated different approaches to the determination of the appropriate level of costs for OROS cases. Those different approaches resulted in widely varying figures. Having regard to the number of claims involved, even a modest difference in the costs payable in an individual case will result in a very substantial increase or decrease in the total sums to be paid by the DTI to claimants' solicitors. The issue of the amount of costs to be paid is, therefore, of considerable importance to the parties and also (since the costs will be paid from public funds) to the wider public.

THE APPROACH TO BE ADOPTED

The CG's case

84. For the CG, Mr David Allan QC, contended that the judgment of the Court of Appeal sets out in the clearest terms the approach that the court should take, namely to take as its starting point the levels of costs agreed in the CHA. He referred in particular to paragraph 91 of the judgment: see paragraph 76 above. He submitted that the Court of Appeal's decision as to the correct approach is binding on me or, if not binding, must at least be regarded as highly persuasive. He argued that the issue of OROS costs must be viewed in the context of the CHA. All the claims dealt with by means of the OROS process had been registered under the CHA before OROS was introduced. A considerable amount of work had been done on the claims before LOROS and DOROS were implemented. He submitted that the correct approach was to look at the amount of work required in cases settled post-MAP under the CHA and to compare it with the amount of work done in OROS cases. He said that that comparison should then be used to arrive at an appropriate level of costs for OROS cases.
85. Mr Allan raised the question of what would have happened if, at the time that the OROS schemes were introduced, it had been accepted on all sides that the amount of work it would take to process an OROS case was identical to the time taken to achieve a post-MAP settlement. In those circumstances, he argued, fairness would plainly have demanded that the claimants' solicitors should be paid the same amount for both types of case. Yet, applying the DTI's approach, the DTI would presumably have argued that they were entitled to value the work afresh, to ignore the fact that the amount of work involved in each case was identical and thus to escape from the bargain they had reached in 1999. He said that this could not be right. Instead, the approach must be to start with the remuneration that was agreed for the original work and vary that price to reflect any reduction or increase in work that has to be carried out under the new process.
86. Mr Allan emphasised the Master of the Rolls' observation that it was not for the Court to decide whether the tariff of costs agreed in 1999 had resulted in a good or a bad bargain for the respective parties. It was not, he submitted, for the Court to embark upon a detailed assessment of OROS costs. To do so would be to ignore the Court of Appeal's rejection of the 'bottom up' approach at that time being advocated by the DTI. It would also disregard the parties' deliberate decision (reflected in the CHA) not to make the costs subject to detailed assessment even in the event of an unresolved dispute.

The UDM's case

87. The UDM also contended that I was bound by the Court of Appeal's approval of the approach adopted by Sir Michael Turner or, at the least, that its view was highly persuasive. Mr Gourgey submitted that I was dealing with a variation to an existing contract in which the parties had agreed lump sum payments for the work to be done. The OROS process is not a process separate and distinct from the CHA. It merely affords, to cases that meet certain criteria, an exit from the scheme at an earlier stage than a settlement post-MAP. He argued that the correct approach was to use the figures in Schedule 17 as a starting point and to make adjustments to reflect savings of time and costs and any other benefits that the claimants' solicitors will gain when a case goes down the OROS route.
88. Mr Gourgey said that agreement on the costs tariff in the CHA had been reached at a time of uncertainty. Both parties had assumed the risk that their bargain might be a good or a bad one for them. It had been open to them agree that, in the event of dispute, there should be a right to have a detailed assessment of costs. They had chosen not to take that course and it would be wrong to adopt that approach now.

The DTI's case

89. For the DTI, Mr Spencer did not dispute that, following the Court of Appeal's decision, I must use the levels of costs in Schedule 17 as a starting point in my determination of the appropriate level of costs for OROS cases. However, he argued that the CHA costs are only a starting point, not determinative, and that I must assess what weight I should give to them and their relevance. If I were to find that they have no relevance, I should put them aside and start afresh. He relied on the reference (at paragraph 96 of the judgment of the Master of the Rolls) to the need to consider 'all the circumstances of the case' and to the observation at paragraph 106:

"What an appropriate figure will be is a matter for the judge after considering such further information as is put before him."

90. He argued that the reference in that same paragraph to the possible assistance to be derived from a comparison exercise between the work to be done in an OROS case and in post-MAP and expedited settlement cases was made by way of a suggestion only and is not binding on me.
91. Mr Spencer argued that it is necessary to read the Court of Appeal's judgment in the context of the state of the evidence on the OROS costs issue as it was in late 2004/early 2005, at the time when Sir Michael made his original rulings. At that time, neither of the OROS schemes was yet in operation and there was therefore no evidence on which to base a meaningful comparison of the work done under the CHA and the OROS schemes. That is no longer the case. There is now ample evidence available to the court about the work required in order to deal with both types of claim. Mr Spencer submitted that what the Court of Appeal was doing was considering the correctness or otherwise of what Sir Michael had been endeavouring to do at a time when he had no information available to him. He argued that, insofar as the Court of Appeal endorsed what he did, that endorsement indicated only that he had done the right thing in the circumstances that then prevailed. It did not mean that it would be the right thing to do in the circumstances as they now are.
92. Mr Spencer argued that the Senior Costs Judge's Report had shown that the figures in Schedule 17 significantly exceed the amounts that would be awarded on a conventional assessment by the Court. The CHA figures must reflect either hourly rates that are greatly in excess of rates that a court would order or (as is, he said, shown by the Costed Costs Model (see below) to be the case) that claims are taking far less time to process than was originally considered reasonable. It would be inappropriate, therefore, for me to base my determination of the appropriate level of OROS costs on a comparison between the work done under the CHA and in the OROS process. He relied on the observation of the Senior Costs Judge at page 147 of his Report:

"Since the figures for time spent produce costs which are very different from the agreed figures in the CHA … comparing my figures for LOROS and DOROS with the agreed CHA figures would not in fact be helpful …"

93. Mr Spencer submitted that I should adopt and accept the Senior Costs Judge's approach and find that the figures in the CHA have no weight or relevance and are not, therefore, an appropriate starting point for the determination of OROS costs. He submitted that I should use as a starting point the figures resulting from the Senior Costs Judge's assessment of the times which it would have been reasonable to spend in processing OROS claims. I should then adjust those figures to take into account the benefits and detriments to the claimants' solicitors of cases being dealt with by way of OROS. He submitted that to take this course would not be inconsistent with the judgment of the Court of Appeal since the Senior Costs Judge had, in his assessment, taken full account of the fact that he was dealing with group litigation so that the assessment would not be 'without reference to' the CHA.
94. Mr Spencer also argued that I should have regard to the principle of proportionality. He referred to the case of Home Office v Lownds [2002] EWCA Civ 365. He pointed to the low level of awards payable in LOROS and DOROS cases. He argued that proportionality was another reason why I should adopt the Senior Costs Judge's assessment as my starting point. In response, the CG submitted that, given the fact that I am determining OROS costs in the context of the CHA and not by way of a unitary detailed assessment, the principle of proportionality has no application.
95. In addition, Mr Spencer urged me to take account of the evidence adduced by the DTI relating to the negotiations which had led to the agreement on the tariff of costs contained in the CHA. At the time of the hearings before Sir Michael and the Court of Appeal, that evidence was not available and the Court of Appeal was told by the CG and the DTI that the figures had been reached by a process of 'horse trading'. The evidence has come to light recently and Mr Spencer submitted that it was highly relevant to the issues I had to consider.

The pre-CHA negotiations

96. The CHA did not set out the basis upon which the tariff of costs set out in Schedule 17 was agreed. The costs were expressed as lump sums and were not dependent on matters such as the number of hours worked, grade(s) of fee earner(s) carrying out the work or the hourly rate(s) to be used.
97. The DTI now places particular significance on a document which has become known as the 'Costed Costs Model' [TBJ/22 et seq]. This document was sent (on a without prejudice basis) to the DTI on 24 March 1999 in anticipation of a meeting which was to take place the following day, prior to a court hearing on 26 March 1999. The covering letter explained that the Costed Costs Model was the work of a solicitor from one of the firms comprising the CG, Mr Peter Evans of Hugh James, and had not yet been considered by other members of the CSG. It is clear that the figures set out in the Costed Costs Model were intended as a basis for discussion at the next day's meeting.
98. The document listed the tasks likely to be necessary at every stage of a claim and contained suggested times for the performance of each task. The author suggested levels of costs to cover the work done, depending on the eventual outcome of the claim (i.e. settlement after MAP or under the expedited process) and the complexity of the claim. Those levels of costs appear to have been reached by applying hourly rates (at the top end of the guideline rates current in 1999) for the relevant grades of fee earners to the total time estimated for processing each category of claim. The resulting figure was then rounded down. The Costed Costs Model contemplated (according to calculations carried out by the DTI, which are not disputed) that post-MAP settlements would involve about 22.5 hours' work and that expedited cases would take just over nine hours. These estimated times are considerably in excess of the times assessed by the Senior Costs Judge as being reasonable for the work.
99. On 25 March 1999, the DTI sent a detailed written response to the Costed Costs Model. After that time, there were continued negotiations between the parties which did not always progress smoothly. Agreement on some matters was reached at the meeting on 25 March 1999 but there was dispute as to the extent of agreement. On 13 May 1999, the CG wrote to the DTI, enclosing a revised version of the Costed Costs Model which omitted (save at one point) all references to timings and which compared the work said to be required on a live claim with that necessary for a deceased claim. Final agreement on the figures for costs payable under the CHA was eventually reached on 20 May 1999. The figures agreed were less than those contained in the original Costed Costs Model.
100. The DTI contended that the Costed Costs Model demonstrates that, when Schedule 17 was negotiated, it was envisaged that far more work would be involved in processing claims than has proved to be the case. It was also anticipated that the work would be carried out by higher grades of fee earner than have in fact been employed on it. Thus, it was said, it provides further support for their contention that I should reject the tariff of costs contained in Schedule 17 as the starting point for my determination.
101. Mr Spencer contended also that the Costed Costs Model establishes that, at the time Schedule 17 was negotiated, the claimants' solicitors were valuing their services at the top end of the guideline rates current at the time. Their expectation was clearly that they would receive reasonable remuneration (and no more than reasonable remuneration) for the time spent on CHA claims. He argued that the effect of the information contained within the Costed Costs Model was to place a 'cap' on the hourly rate they could now claim as reasonable. They should not be awarded any more than the guideline hourly rates, updated as appropriate, and applied to the times that the Senior Costs Judge found to be reasonable
102. For the UDM, Mr Gourgey submitted that in law the material relating to the negotiations (in particular the Costed Costs Model) was not admissible, whether to add to the agreement or to explain or interpret its terms. He argued that the court was faced with an agreement containing lump sum figures for particular pieces of work and that the pre-agreement documents could not be used to go behind the CHA. Mr Allan also submitted that the material was inadmissible. He referred in particular to the DTI's contention that the effect of the Costed Costs Model was to impose a cap on the hourly rates that could be awarded. He argued that, in making that contention, the DTI were seeking – contrary to their stated position – to invest the Costed Costs Model with contractual significance. The document could not be admissible for that purpose.
103. In the event that the pre-CHA material was held to be admissible, both Mr Gourgey and Mr Allan contended that it was clear from the documents that there was no agreed basis for the final figures in the CHA. Those figures were reached – as the parties had told the Court of Appeal – as a result of 'horse trading' and not by means of a calculation based on hours and rates of pay. Mr Gourgey argued also that, even if the material relating to the negotiations was judged to be relevant and admissible as regards the parties to the CHA, it could not be relevant to the position of the UDM who were not involved in those negotiations. It would, he said, give rise to a most unsatisfactory position if there were to be separate bases for assessing the OROS costs to be paid to the UDM and their solicitors and those payable to other solicitors represented by the CG.
104. The Costed Costs Model contemplated that, as a final resort, any dispute about costs would be resolved by detailed assessment at the appropriate County Court. In the event, as I have said, the parties elected not to specify detailed assessment as the process for resolving disputes save in two specific and limited circumstances. Mr Allan emphasised that it was significant that, during the course of the negotiations, the parties had specifically rejected the option of detailed assessment as the process by which disputes should be resolved.
105. It seems to me that the DTI is seeking to use the material relating to negotiations leading up to the making of the agreement (in particular, the Costed Costs Model) in order to explain and interpret the terms of the contract in Schedule 17 and/or as evidence of the intention of the parties at the time the contract was made. In its submissions relating to the 'cap' on hourly rates which they say should be imposed as a result of the document, the DTI is seeking to give the CCM contractual significance. I accept the contentions of the UDM and the CG that the material is inadmissible for these purposes.
106. In any event, it does not seem to me that the material adds significantly to what is already clear from the Senior Costs Judge's Report. The disparity between his assessment of the costs that would be reasonable for the work and the level of costs provided for in Schedule 17 gives rise of itself to the strong inference that the work done under the CHA has been significantly less onerous than had originally been anticipated. This inference is supported by the fact that, even at the time of the Court of Appeal hearing, the CG were arguing that OROS claims would occupy claimants' solicitors for times significantly in excess of those assessed as reasonable by the Senior Costs Judge.
107. Furthermore, the use of the hourly rates referred to in the Costed Costs Model as a 'cap' would be inconsistent with the approach which I propose to adopt to the determination of OROS costs. In short, my decision would have been the same even if I had found that the material was admissible.

Conclusions as to the correct approach to the determination of OROS costs

108. I cannot accept that the approach advocated by the DTI is correct. The Court of Appeal's observations as to the approach to be adopted, although not in my view binding upon me, must undoubtedly be regarded as highly persuasive. At paragraph 91 of his judgment, the Master of the Rolls specifically approved Sir Michael's approach and his rejection of the 'bottom up approach' contended for by the DTI.
109. I do not accept the DTI's contention that the judgment of the Court of the Appeal was directed wholly at the position as it was at the time that Sir Michael made his decision. The points made at paragraph 91 (namely the fact that the figures had been negotiated on a broad brush basis in 1999 and continued to have contractual effect; that the OROS schemes were an amendment to or variation of the CHA; that the claims had been registered under the CHA before the OROS schemes were introduced and that the solicitors had been engaged under, and done work under, the CHA before implementation of the OROS schemes) are as applicable today as they were in December 2005.
110. At the time the Court of Appeal heard the appeal, the Court was aware that many thousands of cases had already been dealt with under LOROS and an increasing number of DOROS opt-ins were being received. It must have been clear even at that time that a great deal of additional evidence about the work involved in processing OROS claims would be available. If, when the Court remitted the case back to Sir Michael for re-hearing, its members had expected him to undertake a completely different exercise from that which would have been appropriate on the previous occasion, I would have expected them to make that clear. There is nothing in the judgment to suggest that he should adopt an approach different from that which had been specifically approved at paragraph 91 thereof. I accept the submission made on behalf of the UDM and the CG that the additional evidence now available should not affect my approach to the selection of the starting point for the determination of the appropriate level of OROS costs. It does, however, provide valuable material for use when carrying out the exercise of comparing the work involved in processing OROS claims with that involved in processing other categories of claim.
111. The point that the CHA was over-generous to the claimants' solicitors is not a new one. The DTI contended as much before the Court of Appeal, while the CG argued that the figures in the CHA were disadvantageous to them since more work than had originally been anticipated was involved in processing claims. There is no suggestion in the judgment that, if evidence demonstrated that the CHA figures were far too high (or low), some mechanism for determining OROS costs other than by reference to the CHA (or an approach different to that approved at paragraph 91 of the judgment) should be used. Indeed, at paragraph 91, the Master of the Rolls specifically said that:

"… it was not for the court to say that the bargain reached in 1999 was a good or a bad bargain from the point of view of one side or the other."

112. As I have said, the DTI argued that I should conclude, on the basis of the Senior Costs Judge's Report, that the CHA figures provide no assistance in determining the proper level of costs for OROS cases and should, therefore, be regarded as irrelevant. It seems to me that they were in effect saying that the Report establishes that the CHA figures represent such a good bargain for the claimants' solicitors (and such a bad bargain for the DTI) that no reliance should be placed on them. That does not accord with the approach approved by the Court of Appeal.
113. As to the observation made by the Senior Costs Judge about the lack of assistance to be derived from a comparison between the figures for LOROS and DOROS and the agreed figures in the CHA, I do not regard it as in any way binding on me. His function in this case is very different from mine. While I can well see that such a comparison may have been of no assistance to him when carrying out his assessment of costs, that does not mean that it is not relevant to, and helpful for, the exercise I have to perform.
114. The UDM and the CG contended that the approach that the DTI urged on me – namely to take the assessment of reasonable costs contained in the Senior Costs Judge's Report as a starting point – represents a return to the "bottom up approach" disapproved by the Court of Appeal. Mr Spencer disputed that. He contended that, in making his assessment, the Senior Costs Judge took full account of the context, namely that the assessment was being made in generic group litigation governed by the CHA. Thus, he contended, the figures were not assessed 'on a bottom up basis without reference to the figures in the CHA [my emphasis]' which is the approach that the Court of Appeal said that Sir Michael was right to reject. He argued that, in contending for an approach based on the Senior Costs Judge's assessment, the DTI has moved away from the 'bottom up approach'.
115. Mr Spencer identified three ways in which he contended that the Senior Costs Judge had taken the CHA into account. First, he had added 30 minutes to the average times spent on each type of claim in order, as he explained, to reflect the fact that he may have overlooked certain times which would be legitimately allowable. Second, he had concluded that the average time for processing expedited cases was too short when calculated mathematically and had therefore increased it from five-and-a-half hours to six hours. Third, he had reached his own view about the appropriate time to be allocated to different grades of fee earners. Mr Spencer said that the Senior Costs Judge would not have taken these steps if he had been carrying out a conventional detailed assessment of costs. The fact that he did so demonstrates the fact that he was taking into account the special circumstances in which the assessment was being made and was having regard to the CHA.
116. I cannot accept the DTI's submissions on this point. The Senior Costs Judge was unable to carry out a conventional detailed assessment because there were (in the case of all but one of the firms of solicitors whose cases he examined) no bills of costs or records of work done available to him as there would be in the usual case which came to him for assessment. All he had in respect of most of the files he examined was a retrospective estimate of the work done. It was no doubt for that reason that he felt it necessary to adjust the times he used when making his assessment so as to ensure that they reflected, as far as possible, the work that he regarded as reasonable. Insofar as the grades of fee earners are concerned, the Senior Costs Judge made it clear in answer to a query that he had made his own assessment of the time that it would have been reasonable for each grade of fee earner to spend on each category of claim, having regard to the need for supervision and the specialist expertise possessed by many junior fee earners. He took the three steps I have identified in an attempt to make his assessment of the reasonable costs for the various categories of claim as fair and accurate as possible. Those steps cannot in my view be construed as adjustments to the assessment with a view to placing it in the context of the agreed levels of costs set out in the CHA.
117. Furthermore, while the issue of the relationship between the awards of damages received by individual miners and the levels of costs payable to their solicitors may be a legitimate matter of public concern, it is not in my view a matter to which I can have regard when deciding this issue. I am not conducting a conventional assessment of costs in an individual case. I am undertaking a different exercise within the context of the CHA. In those circumstances, the principle of proportionality does not in my view have any application.
118. I do not consider that, in reality, the DTI have moved from the 'bottom up approach' that they originally advocated before Sir Michael and the Court of Appeal. That approach was specifically disapproved by the Court of Appeal. Moreover, it does not in my view accord with the justice of the case. I therefore decline to adopt it. I shall instead take as my starting point the levels of costs agreed under the provisions of the CHA. I bear in mind, however, that the CHA can only be a starting point in my considerations and that I must take into account all the circumstances of the case.

THE STARTING POINT

Costs for post-MAP or expedited settlement?

119. Having accepted, as I do, that my starting point for the determination of the appropriate level of OROS costs must be the CHA, the question then arises: which of the various levels of costs specified in Schedule 17 of the CHA? In the Court of Appeal, the term 'CHA figures' was plainly used to mean the figures payable for a live or deceased claim settled post-MAP. However, the Master of the Rolls did suggest (at paragraph 106) that, "it might be helpful to compare the work done and advice to be given in an FTO [i.e. OROS] case with the position in the case, not only of a post-MAP settlement, but also of an expedited settlement." In reality, the choice of starting point lies between those two types of claim.
120. It is now possible to undertake this comparative exercise using the times contained in the Report of the Senior Costs Judge. The times he found reasonable for the work required in each category of case are as follows:

Table 4

Category of Case	Times
Live post-MAP settlement	7 hours 30 minutes
Deceased post-MAP settlement	8 hours
Expedited settlement	6 hours
LOROS	6 hours 30 minutes
DOROS	7 hours

121. The difference in the costs payable under the CHA for a live or deceased claim settled after MAP and those payable for a claim (live only) which is the subject of an expedited settlement is very substantial: see Table 2. Yet a live post-MAP settlement case should take only one and a half hours longer than an expedited case and a deceased post-MAP settlement two hours longer. The decision as to which should be used as the starting point is, therefore, of critical importance.

The Parties' Cases

122. The CG and the UDM contended that the proper comparator is the level of costs payable on full post-MAP settlement under the CHA. They advanced a number of reasons for this.
123. First, they pointed out that the majority of claims dealt with by means of the OROS schemes would, until the introduction of that process, have proceeded to MAP. All deceased claims would have done so since the expedited process applied only to live claims. Since the expedited and LOROS processes were aimed at mutually exclusive groups of claimants, the vast majority of LOROS claims would not have been eligible for expedited payments. At the time when these claims were registered and the solicitors entered into retainers, they would have been expecting to receive the full post-MAP costs in all but a small minority of claims which would have been withdrawn or denied. Statistics produced by the UDM showed that, in LOROS cases, an average of 40% of work was done before the decision to introduce LOROS was taken and a further 12% before implementation of the LOROS scheme. In DOROS cases, 62% of the work had been done before implementation of the DOROS scheme.
124. Second, Mr Gourgey argued that, in order to preserve for claimants' solicitors the benefit of the bargain under the CHA, the costs of a post-MAP settlement would be the relevant benchmark for comparison. In cases which were dealt with by means of the OROS process, the solicitors had lost the fees they would have received had the case progressed to MAP and would instead receive OROS costs. He submitted that OROS costs should be fixed so as to ensure that the profitability in OROS cases was commensurate with that in cases which attracted costs payable under the CHA. To do otherwise would, he said, be unfair since it would deprive the claimants' solicitors of the advantages they had derived from the original bargain contained within the CHA. He referred to paragraph 88 of the Court of Appeal's judgment:

"It was not in dispute that he [Sir Michael] correctly directed himself ... that he should fix a figure that was as fair as circumstances would permit and which would not put either side at an unnecessary disadvantage in relation to the other whilst at the same time furthering the objects of the fast-track scheme."

125. Despite their contention that the relevant starting point is the level of costs payable for a post-MAP settlement, the CG, in their calculations of the appropriate level of LOROS costs, attempted to 'bridge the gap' between the full post-MAP and expedited settlement figures. They did this by adopting an average figure for costs which was weighted to reflect the proportion of live claims which have in the past proceeded down each route. For deceased claims, they contended that I should take the post-MAP settlement figure, weighted to reflect the fact that a large proportion of claims would have received the complex special damages uplift. The UDM also sought to reflect the fact that some cases would have been dealt with by way of expedited payment. They adopted a straight (rather than a weighted) average figure for LOROS costs.
126. In the event that they fail in their primary contention, the DTI submitted that the costs payable on an expedited settlement provide the best comparator when determining OROS costs. They argued that it was not the court's function to compensate the claimants' solicitors for the loss of the opportunity of recovering a higher level of costs if the case had been pursued to a different outcome. They pointed out that OROS claims are settled at the same point in the CHA process as are expedited cases.

Conclusions as to the starting point

127. In my judgment, the starting point for determining the appropriate level of costs for LOROS claims should be the costs payable under the CHA for claims settled by means of the expedited process.
128. The LOROS scheme provides an alternative exit for live claims by offering settlement at the same point in the CHA process as the expedited process. The effect of the introduction of OROS was in effect to provide a new type of expedited process. Although the two processes have different (and largely mutually exclusive) criteria for eligibility, the work done in processing the claims is in many respects similar. I was told that the flow chart which depicts the steps in the LOROS process could be used equally appropriately to illustrate the steps in the expedited settlement process. The Senior Costs Judge has found that it should reasonably take half an hour longer to process a LOROS case than an expedited case. This probably reflects the fact that, as the CG have always contended, the task of advising a claimant in a LOROS claim is in general more complex than in an expedited case and therefore takes longer.
129. I do not accept the suggestion that, because many of the live claims would have otherwise proceeded to MAP and resulted in higher payments to claimants' solicitors, the court should use those higher payments as a starting point. It does not seem to me that it is for the court to strive to preserve the level of profitability which the claimants' solicitors would have enjoyed had the majority of the claims proceeded to post-MAP assessment. Even if I were minded to undertake that task, I have no evidence about the relative profitability of the different categories of claim to assist me.
130. It seems to me in addition that, in considering the fairness between the parties of adopting one starting point rather than the other, I am entitled to take account of the Senior Costs Judge's assessment of the costs which he would regard as reasonable for a LOROS claim. In doing so, I am not considering whether the figures in the CHA represented a good or a bad bargain. I am merely using as a check the Senior Costs Judge's assessment of the costs appropriate for OROS claims. That assessment demonstrates that the costs payable under the CHA for a post-MAP settlement (£2,023 in 2005/6) would be greatly in excess of the amount that he considered reasonable for a LOROS claim (£788.50 in 2005/6). The Senior Costs Judge's figure is much nearer to the CHA figure for an expedited settlement (£1,041). That is an additional reason for selecting the expedited, rather than the post-MAP, figure as a starting point. The Senior Costs Judge's figure also provides reassurance that the level of costs in the CHA for expedited settlements would constitute adequate – indeed generous – remuneration for an 'average' LOROS claim. Thus, it does not seem to me that it can be unfair to the claimants' solicitors to take the figure for expedited claims as a starting point. Nor, in my view, having regard to the agreement they reached in 1999 as to the costs to be paid for expedited claims, can it be unfair to the DTI. I am satisfied that, for live claims, the CHA costs payable for expedited settlement provide the starting point which achieves the greatest fairness as between the parties.
131. What about the deceased claims? The CG and the UDM say that, since there is no expedited process available for deceased claims under the CHA, the only available comparator in the CHA is the costs available for post-MAP settlements. Therefore, it is said, I must use those costs as a starting point in deceased claims. The DTI argue that DOROS settlements are similar in nature to claims dealt with by means of both the expedited and LOROS processes in that they occur at the equivalent stage of the CHA process and are risk offers. They say that it would be logical to deal with LOROS and DOROS claims in a similar manner, having regard to the fact that the costs for live and deceased post-MAP claims are the same.
132. DOROS is an expedited process similar in character to the expedited process contained within the CHA and LOROS. I agree with the DTI that it would not be logical to use the costs payable in a post-MAP settlement as a starting point in a DOROS claim and not in a LOROS claim. Live and deceased claims should be treated in essentially the same way, as they are under the CHA. Once again, I have used the Senior Costs Judge's assessment of the costs that he would regard as reasonable for a DOROS case as a check. Having done that, I am satisfied that, for deceased claims as well as live claims, the CHA costs payable for expedited settlement provide the starting point which achieves the greatest fairness as between the parties.
133. The CG and the UDM contended that, if I were to adopt as a starting point the level of costs paid in respect of expedited settlements, I should take one of the revised figures (£1,150 or £1,300) which were paid on a transitional basis after amendments had been made to the expedited process in 2000. I decline to do so. Those figures were agreed in order to deal with a specific situation which arose as a result of the amendments to the process. They were paid for a limited period only. It would not in my view be right to invest them with any wider significance. In any event, any additional work involved in an OROS claim over and above that required to process a 'usual' expedited claim will have been taken into account by the Senior Costs Judge in his assessment.
134. Nor do I accept the argument at one time advanced by the DTI to the effect that I should adopt – not the level of costs for expedited claims set out in the CHA – but a level of costs based on the hours assessed as reasonable by the Senior Costs Judge. To take that course would in effect be to decide that the level of costs for an expedited settlement agreed in the CHA represented such a good bargain for the claimants' solicitors that it must be reduced. For the reasons I have previously explained, that is not in my view the correct approach
135. I therefore conclude that my starting point for determining the appropriate level of costs for both types of OROS claims should be the costs payable under the CHA for claims settled by means of the expedited process, namely (at 2005/2006 figures) £1,041.

ADJUSTMENT OF THE STARTING POINT

136. I must now consider those factors that might justify adjustment of that figure upwards or downwards.

Factors which might support an adjustment upwards

137. The factors which might support an adjustment upwards are:

a) The Senior Costs Judge found that the time reasonably spent on a LOROS case is 30 minutes more than the time reasonably required to process an expedited case. He found that a DOROS case would reasonably take an hour longer than an expedited case.

b) The problems being encountered in many DOROS claims – in particular, estate claims – in obtaining probate. These problems have been described in the evidence of Mr Gareth Morgan, of Hugh James, and in a Report entitled 'Why are so many claims held up awaiting probate?', provided to me by the CG last autumn. Of course, problems with probate can arise in a deceased claim which goes to MAP, as well as in a DOROS claim. However, Mr Morgan's evidence is that the incidence of problems (e.g. those caused by remarriage, lost wills, death of executor) is much higher in DOROS than in MAP cases. He suggests that this is because the deaths in DOROS claims tend to have occurred further in the past than in MAP claims. According to his evidence, as many as 45% of the remaining DOROS claims are likely to have probate problems.

The additional sum payable in deceased MAP claims where probate is required for the purposes of the claim (£232 in 2005/6) will be paid in DOROS claims also. Nevertheless, that payment will not, it is said, be sufficient to cover the work required in a case with difficult probate problems. These problems would not necessarily be reflected in the cases examined by the Senior Costs Judge since many of the cases which have these problems have not yet settled and would not, therefore, have been eligible for random selection.

c) The employment verification protocol which was introduced some time after the CHA had been agreed resulted in additional work for claimants' solicitors. A large number of deceased cases are at present held up in the process of employment verification. In many of those cases, solicitors may have to provide witness statements and other documentation - work which was not anticipated when the tariff of costs set out in the CHA was originally agreed. It is not at present possible to quantify the number of cases in which this is likely to occur. Once again, cases with these problems will not necessarily have been reflected in the files examined by the Senior Costs Judge.

d) Complex special damages uplifts. In the light of the fact that I am using the level of costs payable for expedited claims as my starting point, it would not be appropriate to make any allowance for complex special damages uplifts. Such uplifts were not payable for claims settled by means of the expedited process.

Factors which might support an adjustment downwards

a) The DTI contended that account should be taken of the fact that cases proceeding under OROS would have a reduced failure rate. They asserted that many of the cases which had proceeded through the OROS schemes were claims that would otherwise have failed. If true, this would mean that the solicitor would receive OROS costs whereas, had the claim proceeded to MAP and failed, no costs would have been payable. The CG and the UDM took issue with the assertion, contending that the OROS schemes had been aimed at claims in which the claimants had non-disabling CB. Such claims would be of low value but would nevertheless have attracted a payment post-MAP. They argued that the proportion of cases that succeeded in OROS but would have failed after MAP was much smaller than that suggested by the DTI.

In the event, the DTI's contention was not borne out by the evidence. The UDM produced statistics which established that the proportion of cases failing on medical grounds had remained constant over the years at about 10%. It was accepted by counsel for the UDM and for the CG that a small minority of that 10% might succeed at OROS whereas they would otherwise have failed. The DTI contended that the majority of the 10% would have fallen into this category.

The CG contended that the introduction of the employment verification protocol meant that some cases that would have succeeded previously would now fail. They were unable to say how many cases were likely to be affected.

b) The DTI argued that accelerated payment of costs should be taken into account. They submitted that the introduction of the OROS schemes has resulted in claims being processed more quickly than if they had proceeded to MAP and thus the claimants' solicitors have enjoyed the benefit of accelerated payment of costs. The DTI submitted that a reduction to reflect accelerated payment was appropriate, even if I took the costs payable for expedited (rather than post-MAP) settlements as my starting point. This cannot in my view be right. It is in the nature of an expedited case that is completed quickly and that payment of costs will follow settlement. Therefore, given that I am taking the CHA payment for expedited cases as my starting point, it does not seem to me that any adjustment should be made for this factor.

c) Since I have taken as my starting point the level of costs payable for expedited settlements, it would not be appropriate to make any deduction for cases that might, but for the OROS schemes, have attracted discounted costs. The amount of costs payable in such circumstances would exceed the level payable for an expedited settlement.

Conclusions

138. The weighing of these various factors is not an exact process admitting of a mathematical solution. I must look at the overall picture and do my best to achieve fairness as between the parties within the context of the CHA.
139. I accept that there will be cases where the obtaining of probate will require work in excess of that for which the claimants' solicitors will be compensated by the additional payment payable under the CHA. It is suggested that this may be so in a large proportion of DOROS claims. I have no information about the amount of additional time that is likely to be required for such work. It is clear from the CG's Report and Mr Morgan's evidence that the problems can, in some cases, be formidable. There will, however, also be cases where the obtaining of probate is straightforward and where the additional payment represents generous remuneration for the work done. There will inevitably be an element of 'swings and roundabouts'.
140. I accept also that there will be some additional work involved in employment verification, although it is not possible to say how much additional work is likely to be involved. This will affect both LOROS and DOROS claims although there are likely to be greater problems in acquiring the evidence – and therefore more work – in DOROS claims.
141. When the claimants' solicitors agreed the fixed tariff of costs, they assumed the risk that, in processing claims, they might have to perform some work over and above that which they had expected. In agreeing the rates for probate work, they had clearly not anticipated that the problems they would confront would be as complex as has proved to be the case. Their complaint is, in effect, that they made a bad bargain. As I have previously observed, that is not a matter to which this court should have regard. In any event, I take into account the fact that, on the basis of the Senior Costs Judge's assessment, the level of costs which would represent reasonable remuneration for the work required in the 'average' OROS case would be significantly lower than the £1,041 (in 2005/6) payable under the CHA for expedited cases. Thus, even if some additional work were necessary in respect of probate and employment verification, it is likely that the expedited rate would still represent fair and reasonable – even generous - remuneration for the work done in all but the most intractable of cases. In the circumstances, I do not consider it appropriate to make any adjustment upwards to reflect the additional work referred to.
142. I do, however, regard it as appropriate to make some adjustment upwards in order to reflect the additional time assessed by the Senior Costs Judge as reasonable for processing OROS claims over and above that required for expedited claims. In doing so, it is appropriate to make a distinction between LOROS and DOROS claims to reflect the fact that the latter take more time to process.
143. As to the factors tending to support an adjustment downwards, I am satisfied that there will be some claims that will succeed in obtaining a payment under the OROS processes whereas, had they proceeded to MAP, they would have failed and no costs would have been payable. It is impossible to quantify the proportion of claims to which this will apply. It seems to me likely that, as the CG and UDM contend, the proportion will be significantly less than 10%. I take into account here also the fact that there may also be some claims which, due to the introduction of the employment verification protocol, will fail. I consider it appropriate to make a modest adjustment downwards to reflect the fact that there will overall be a greater success rate than there would have been had the OROS schemes not been introduced.
144. The Senior Costs Judge's assessment of time suggests that a LOROS claim necessitates just over 8% more work than an expedited claim. A DOROS claim involves a little more than 16.5% more work than an expedited claim. I have reduced those percentages slightly to take account of the greater success rate referred to above. In all the circumstances, I consider it would be fair and just to set the level of costs (at 2005/6 rates) for LOROS cases at £1,103 and for DOROS cases at £1,192. The additional payment of £232 (as at 2005/6) will still be payable in those DOROS cases where it is necessary to obtain probate for the purposes of the claim.