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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Manchester Civil Justice Centre Manchester M60 9DJ
		14/05/2014

Mr Justice Cranston:

Introduction

1. This case raises for the first time whether under the pre 2013 Civil Procedure rules a costs judge is entitled to consider if individual items of costs claimed were proportionate and necessary for the conduct of litigation, even if the costs of the litigation overall appeared proportionate. The applicant's contention is that in these circumstances a costs judge is confined to applying the less onerous test of whether individual items of costs were reasonably incurred.

Background

2. Finglands Coachways Ltd, the applicant, seeks permission to appeal against the order made on 2 May 2013 by District Judge Iyer at a detailed assessment hearing on costs. As its name suggests it is a company which provides coach services. It was the defendant in a personal injury action brought by the respondent to this application, who for convenience I will call the claimant throughout the judgment. He was a 23 year old man who suffered injuries following a serious road traffic accident at around 3.10am on 17 March 2007. He was travelling home after finishing a night shift albeit the evidence suggests he had consumed 1 or 2 drinks after he had finished his shift. His Honda Civic motor car collided with the applicant's double decker Adonis Trident bus on the A34, Kingsway, Manchester, at its junction with Fog Lane. The junction is controlled by traffic lights. The claimant suffered significant and extensive brain injuries with associated past and future losses and quantum valued in the region of £3-4 million.
3. The claimant brought his claim on the grounds that the applicant's driver had driven through a red or amber light into the claimant's correctly proceeding vehicle, or that the driver failed to take evasive action in sufficient time to minimise the impact of the accident and reduce the claimant's injuries. The applicant denied liability and contended that it was the claimant who had driven through a red light. In doing so the applicant's case was that the claimant had denied the applicant's driver any opportunity to take evasive action such that the accident could have been avoided or the impact reduced.
4. Permission was granted for accident reconstruction evidence. The matter was listed for a two day liability trial on 7 and 8 February 2012, but at a joint meeting between the respective accident reconstruction experts, the claimant's expert altered his opinion and in the subsequent joint expert report supported the applicant's position. Consequently, 11 days before the proposed trial the claimant discontinued his claim.

Detailed assessment of costs

5. The applicant served its bill of costs on 25 April 2012, totalling £60,101.80. The claimant served points of dispute on 9 May 2012. The detailed assessment hearing occupied the whole of 26 April 2013 and was resumed on 2 May 213, when it ran into the afternoon. The judge had the points of dispute, a joint statement and a schedule and counterschedule of disputes. He invited the claimant's representative (not Ms Reeves on that occasion) to develop his points. After two preliminary issues, dealt with in short order, the claimant's representative proceeded to advance objections on an item by item basis.
6. The first related to a conference with the applicant's QC on 16 November 2010; the claimant's counsel raised why the conference was necessary. Ms Bedford commented that this would appear to be going outside the points of dispute. The judge said the obvious point was why it was necessary to have a conference with counsel at that stage. After discussion the judge said that he was minded to allow the items, given that it was a large claim and the various issues involved: "This does seem to be reasonable". In terms of attendance at that conference of two of the applicant's representatives – a second group of items challenged – the judge said that "in terms of whether it was necessary or reasonable for both of them to attend", little would have been saved if only one had attended and then had to report to the other. He allowed the relevant items.
7. The third group of items the claimant's representative challenged related to a further conference with the applicant's QC on 23 September 2011. In the course of the dialogue about this the judge commented on the justification of the conference and the need in the light of it "to look very vigilantly at the next two conferences to see what was the need for them". After further dialogue the judge allowed the conference, but was not satisfied "it was reasonable and necessary for all these people to have attended and I think that the conference was excessively long". Thus he allowed only one and a half hours for it. In response the claimant's representative then submitted that if the conference time was to be reduced, it followed that the QC's fee should be reduced accordingly. At this point Ms Bedford intervened, that the discussion was moving away from the points of dispute.
8. The fourth group of items concerned a third conference with the applicant's QC on 20 October 2011. The claimant's representative raised the issue of its purpose, coming less than a month after the previous conference. The judge commented that he "was not sure if it was necessary for all three" of the applicant's representatives to attend. He disallowed the attendance of one of the representatives.
9. The fifth item related to a yet further conference with the QC on 15 November 2011. Ms Bedford submitted that it was simply a matter of the judge deciding whether "it was reasonable to have a conference" within 2 months of trial. The dialogue continued:

"The District Judge: Again the paying party says they reserve their position. I interpret that to mean that they reserve the right to say that this was unnecessary, to challenge it.

Miss Bedford: In relation to the necessity or not, sir, the receiving party, the paying party, sorry, sir, has not actually raised proportionality so we have not actually gone on to an issue of whether it is necessary or not. We are wholly assessing whether this is reasonable.

The District Judge: Yes. Well proportionality comes in both the preliminary point and also as part of the considerations for reasonableness, does it not?

Miss Bedford: Indeed, sir, it does.

The District Judge: So I still have to consider proportionality.

Miss Bedford: No, sir, sorry. It's just that you have used the necessity or not as the second [limb of] proportionality and that is not in issue.

The District Judge: Anyway, I need the instructions to counsel and the notes for this."

A little later the judge commented that the need for this conference seemed to be weak but he had not seen the instructions to counsel. It might be a case where the product of the conferences "does not necessarily make the need for the conference unnecessary …" After further dialogue the judge concluded that he was not satisfied that there were sufficient new developments to mean that the conference was needed. He disallowed the item.

10. The hearing then considered the attendances in the bill. One issue, as stated by the judge, was why was it "necessary" to travel to see the driver – could the driver not have attended the solicitor's office?
11. After the luncheon adjournment the claimant's representative turned to what he calculated was 139.3 hours spent on documents, and submitted that the time spent should be much reduced. Ms Bedford interjected her concern about reducing the bill by over 50 percent in this regard on a broad brush basis when proportionality had not been challenged. There followed detailed discussion. In relation to an item on 18 December 2009, the claimant's representative submitted that it was "excessive and unreasonable". A short time after this Ms Bedford commented:

"Miss Bedford … [A]gain my friend keeps referring to work unnecessarily incurred, that was the second stage, sir, of the proportionality test against which my friend has not raised and nor in fact has the court made a ruling on it and as such we are only assessing as to what is reasonable rather than what is necessary. So I think we need to be careful there, sir, not to move past that. However, in relation to the time, as to whether it is reasonable or not, sir, I do accept that there has to be some or there will be some reductions based on a reasonableness nature."

12. In relation to another matter the judge wondered whether the work was reasonably done, although a few minutes later, on the same matter, he commented that just because work was done "does not automatically mean it was necessary and reasonable". With her characteristic tenacity Ms Bedford politely commented: "Reasonable, sir".
13. Later when considering the time taken to redraft an attendance note, the judge said that the work was done and asked was it necessary? Ms Bedford replied "it was reasonable; we are not assessing it on a necessary basis". The judge then asked: "was it reasonable for the attendance to have taken place?" After the claimant's representative had pointed out that counsel's fee for advising and consultation in relation to that attendance note had already been disallowed, the judge concluded that time on the attendance note would be disallowed as well.
14. In relation to the report by the applicant's expert, Mr Sorton, the judge gave a short ruling that it was a typical report in this type of case. It had been crucial – the claimant's expert had ultimately agreed with it – but that did not mean it had a higher financial value. Mr Sorton had not kept details of his notes and time spent and had alleged, incorrectly, that he was asked to destroy them by the applicant's solicitors. Some of the work Mr Sorton did could be said to be unnecessary. The judge said that having considered the work required with regard to this type of case, he would allow £2,500 for the report, £500 for a conference with counsel and £1,000 for the joint statement.
15. The upshot of the detailed assessment hearing was that the applicant's costs were assessed in the sum of £37,803.89 plus interest of £1,425.73. Ms Bedford sought permission to appeal. She submitted that the judge had misdirected himself in law in applying the test of necessity rather than reasonableness when there had been no finding of disproportionality in relation to the applicant's bill. The judge immediately conceded that he may not have used the word "reasonable" during the course of the assessment. If he had not, he should have and he directed that his decisions were based on what was reasonable as well.
16. On 23 May 2013 the defendant lodged an appeal notice against the decision. The cheque accompanying the appeal notice was not signed. The court returned it to the applicant's solicitors' office and it was received on 4 June 2013. That same day the cheque was signed and delivered to the court. The application was now late and the same day HH Judge Platt struck out the appeal. Relief from sanction was later granted by Turner J.

Application to appeal

17. In the appeal before me Ms Bedford elaborated the objection she had raised before the judge. In careful and attractively put submissions she contended that the judge erred in principle by assessing the costs by reference to the stricter test of necessity, as opposed to reasonableness (ground 1). That error was clear from his constant references to necessity and need in considering items. Yet there had been no finding or any argument about the costs being disproportionate, which was the legal prerequisite to considering necessity. Indeed costs of just over £60,000 could not sensibly be said to be prima facie disproportionate in a heavily fought claim valued at a minimum of £3 million. Nor was there any argument that any particular item or group of items were disproportionate. In Ms Bedford's submission the failure to apply the correct test was a serious procedural irregularity. The judge's error pervaded the entirety of the assessment such that the final assessment was reached in a manner which was fundamentally wrong and unjust.
18. With grounds 2-4 Ms Bedford submitted that the judge stepped significantly outside the ambit of his discretion upon which reasonable agreement was possible in relation to three specific matters: the time allowed for the applicant's grade A and grade D solicitors, given the value and substance of the litigation; the allowance for work on documents, in light of the complexities of the case; and what was allowed for Mr Sorton's report against the complexity of the issues, the time reasonably required to undertake such a difficult task and the report's content. The judge's findings on these matters meant, for instance, that it was reasonable for catastrophic injury claims involving complex issues of both liability and causation to be handled in the main by a grade D fee earner with minimal supervision from a grade A fee earner.

Legal principles

19. Before the changes in the rules in 2013 the starting point for assessing costs on a standard basis was CPR r. 44.4(2): (a) the court would only allow costs proportionate to the matters in issue and (b) would resolve doubts as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party. The court was to have regard to all of the circumstances of the case and to the specific factors, such as the value of a claim, specified in CPR r. 44.5. In relation to CPR r.44.5, paragraph 11.2 of the Costs Practice Direction provided that in any proceedings there will be costs inevitably incurred and which were necessary for the successful conduct of the case.
20. In giving the judgment of the court in Home Office v Lownds [2002] EWCA Civ 365, a clinical negligence case, Lord Woolf CJ (with Laws and Dyson LJJ and Master Hurst) underlined at the outset the importance of proportionality: [3], [8]. He also noted the difficulties facing practitioners in applying the concept of proportionality: [10]. He said that the reference in the Costs Practice Direction, paragraph 11.2, to costs "which are necessary" was the key to how judges in assessing costs should give effect to the requirement of proportionality. If the appropriate conduct of the proceedings made costs necessary the requirement of proportionality does not prevent all the costs being recovered either on an item by item approach or on a global approach: [28].

"[30] In his advice the Senior Costs Judge drew attention to the problems that can arise from "double jeopardy"; in other words from making a deduction when considering the bill item by item and then looking again at the situation as a whole and making a further global deduction. This danger will be avoided if a party receives at least a reasonable sum for the items of costs which were necessarily incurred.

[31] In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable".

21. Giambrone v JMC Holidays Ltd [2002] EWHC 2932 was a group litigation case where the costs judge had found an appearance of disproportionality in terms of value and time spent. On appeal Morland J, sitting with Master Hurst, considered the judgment in Lownds and said this early in his analysis:

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

He then said that the preliminary judgment of proportionality determines the manner of the detailed assessment. A finding of disproportionality entails the receiving party being put to a stringent test, the dual test of sensible necessity and reasonableness of amount for each item. In the unlikely event a costs judge at the initial stage is unable to say whether the bill viewed as a whole is proportionate or disproportionate he is obliged to carry out a detailed assessment applying the dual test: [33]. Later in his judgment Morland J said:

"[54] … Even if the Costs Judge has reached the preliminary view that the bill as a whole is proportionate, in my judgment that preliminary view does not disentitle the Costs Judge from concluding that certain items appear disproportionate and applying the [dual] test of sensible necessity and reasonableness to that item."

22. Motto & Others v Trafigura Limited & Another [2011] EWCA Civ 1150 was large group litigation where the costs judge had ruled that the claimants' base costs (excluding the success fee and insurance premium) were £40 million and that this figure appeared to be disproportionate. However, he said that that did not preclude him from deciding that an item or number of items were not in fact proportionate and thus the test of necessity should apply to them. It was this the defendants challenged on appeal. In their submission every item had to meet the test of necessity before it was recoverable.
23. Lord Neuberger MR (with whom Maurice Kay and Hughes LJJ agreed) said that proportionality was central when assessing costs: [37]. It was a rare case where the value of the claim was not a significant figure in proportionality: [42]. Citing paragraph [31] of Lownds, Lord Neuberger MR stated that if costs as a whole were disproportionate, the courts had to be satisfied that work in relation to each item was necessary and, if necessary, the cost of each item was reasonable: [45]. Morland J's remark in Giambrone at paragraph [54] was directed at the converse situation and concerned with a different issue: [46]. Lord Neuberger MR said that in Giambrone the total sum was not disproportionate. (In that regard Lord Neuberger was, with respect, in error, since in Giambrone there had been a finding of disproportionality). Lord Neuberger added:

"[46] Anyway, merely because an item may be disproportionate even if the total sum is not, does not mean that, if the total sum is disproportionate, the test of necessity need not be applied to each item in the bill."

24. Referring to Lord Justice Jackson's report on costs, Lord Neuberger MR observed that, on one view, paragraph [31] of Lownds might be too generous in allowing an award of costs which was disproportionate; that was another reason for rejecting the claimant's case for a more expansive approach: [49]. Lord Neuberger MR then added:

"[50] For the claimants, Mr Butcher further suggested that, even if the defendants were right about the approach laid down in Lownds [2002] 1 WLR 2450, para 31, it was not applicable in all its stark simplicity in a complex case such as this. He suggested that it would be appropriate to apply the approach in a case such as this in relation to each section of the Bill, or to each group of items in the Bill, rather than to the contents of the Bill as a whole. While that is an attractive submission, I would reject it. First, while it is obviously engaged when considering individual items in a bill of costs, CPR 44.4 is ultimately concerned with the total figure to be recoverable from the paying party by way of costs. Secondly, commercial reality is also ultimately concerned with the overall figure. Thirdly, there may well be some give and take between the work included in, or the sum allocated to, different items in the same bill. Fourthly, to hold that the approach in Lownds [2002] 1 WLR 2450, para 31 applies in some cases on an overall basis, but in other cases on a group of items or other basis would lead to sophisticated, costly and time-consuming arguments as to whether a case is one to which Lownds [2002] 1 WLR 2450, para 31 should be applied to the totality of the costs claimed, and, if not, how it should be applied. Fifthly, as already mentioned, the overall approach embodied in Lownds [2002] 1 WLR 2450, para 31 should concentrate the minds of lawyers on keeping litigation costs proportionate, and I would be reluctant to dilute it for that reason as well."

Each item in the bill had to meet the test of necessity: [51]. Whether an item was necessarily incurred was a higher hurdle than whether it was reasonably incurred, but did not carry with it the strictest sense of necessity: [52].

25. It is clear that in Motto Lord Neuberger MR was concerned with the situation where overall costs were disproportionate. He held that paragraph [31] of Lownds meant that if total costs appeared to be disproportionate, to render them proportionate each item in the bill was subject to the test of necessity, and then only in a reasonable sum: [47]. Even in complex cases like Motto each item was subject to the dual test of necessity and reasonableness. However, Lord Neuberger MR was not addressing directly the situation where overall costs appeared proportionate. As he observed Giambrone was concerned with that different issue. Lord Neuberger MR's error in thinking that the overall costs in Giambrone were proportionate does not affect his observation, although the true position in Giambrone means that Morland J's analysis in paragraph [54] of his judgment was obiter. The fourth point Lord Neuberger MR made in paragraph [50] – that it would be costly and time consuming to hold (as the claimants submitted) that the approach in Lownds applied in some cases on an overall basis, but in others to a group of items or otherwise – was made in the context of a complex case and costs being disproportionate. It is evident from his judgment that Lord Neuberger MR saw the claimants' submissions as diluting the force of Lownds, namely that if overall costs are disproportionate each item of the bill has to meet the dual test. He was not addressing the issue of any possible strengthening of the Lownds approach.

Discussion

26. At the outset I must express some surprise that it could take two days to deal with a £60,000 bill. Moreover, on a number of occasions in the course of the assessment the judge used the terms "necessary" and "need" indiscriminately. After initial hesitation I have concluded that is not fatal. First, the context often suggests that he was using those terms in one of their ordinary senses to convey a notion of justification, for example, the justification for a conference with the applicant's QC, for an attendance or for the time claimed to be spent on a document. In using the term the judge should not be taken as applying the test of necessity as laid down in the authorities. In effect he was inquiring whether the costs were justified in the sense of being proportionate. Secondly, in assessing particular items of costs the judge almost always used the term "reasonable", sometime coupled with "necessary" ("reasonable or necessary"; "reasonable and necessary"), albeit that on occasions this is at Ms Bedford's prompting. Thirdly, I accept Ms Reeves' submission for the claimant that it should not be surprising in the course of this two day hearing if occasionally the judge slipped into using the word "necessary" when applying the objective justification test of reasonableness. In my view Ms Reeves correctly submitted that the judge's use of the word "necessary" has to be judged in this context and in circumstances where, at the end of the hearing on Ms Bedford's application for permission to appeal, the judge confirmed that he applied a test of reasonableness.
27. Even if the judge did apply the test of necessity, in my judgment he was not wrong to do so. To my mind CPR 44.4(2) of the old rules meant that the court would of its own initiative disallow disproportionate costs even if the paying party had not raised the point. That follows from paragraph [28] of Morland J's judgment in Giambrone. Morland J also said even if a bill overall does not appear to be disproportionate, that does not preclude a judge from concluding that specific items are disproportionate and then applying the dual test of necessity and reasonableness to those items. As explained earlier Lord Neuberger MR in Motto did not disapprove that dictum and nothing in Lord Woolf CJ's judgment in Lownds rules out such an approach. Lord Woolf CJ certainly contemplated that normally, if costs as a whole were proportionate, all that was normally required was that each item should be reasonably incurred. But use of the qualification "normally" makes clear that this was not a hard and fast rule. Nor could it be given that, even under the pre 2013 rules, proportionality was the centrally important factor when assessing costs – a point Lord Woolf CJ began with in Lownds and reiterated by Lord Neuberger MR in Motto – and that, as Lord Woolf CJ said in Lownds, under paragraph 11.2 of the Costs Practice Direction whether costs, in a general sense, were necessary was integral to whether they were proportionate. There is nothing I can see which confines the proportionality template to costs as a whole and excluded its application to individual items.
28. In my judgment, therefore, in assessing costs under the old version of the CPR a court could consider on an item by item basis whether a particular item of costs was proportionate and necessary even if costs were proportionate on a global basis. As demonstrated by this case there is nothing difficult in deciding whether particular items of a bill of costs are proportionate or necessary to the conduct of litigation. That to my mind is how the judge conducted the detailed assessment here: in considering the justification for the items challenged he was essentially considering whether they were proportionate and necessary for the conduct of the litigation. Thus I have concluded that the judge did not misdirect himself in law and nor, contrary to Ms Bedford's submission, was his approach wrong, procedurally irregular or unjust.
29. As to grounds 2-4 of Ms Bedford's attack in relation to specific items, she accepted that she had to surmount a high threshold for the court to interfere with the judge's exercise of discretion. In my judgment she has not done so. The judge allowed 21 hours for the Grade A solicitor, which he reached after an item by item consideration. The same applied to the time spent by the Grade D solicitor; in particular, there was no finding that the defence of this action could have been delegated to a Grade D solicitor. In relation to both the time fee earners of different grades spent, and what the judge allowed for the documents, I can see nothing in the transcript to suggest that the judge went wrong in the factors he took into account as he went through each of the items challenged during the course of the 2 day hearing, considering the submissions on both sides in relation to them.
30. In his ruling on Mr Sorton's report, the judge explained the reasoning behind the figures he allowed. He was not provided with a breakdown or records of the time Mr Sorton spent for the reasons I set out earlier. Since Mr Sorton failed to provide an adequate breakdown of the hours claimed and work done, pursuant to CPR r. 44.4(2)(b) any doubt as to whether his fees were reasonably incurred or were reasonable in amount was to be resolved in the claimants' favour.
31. Appellate courts must afford costs judges a generous ambit of discretion: see the authorities collected in P Hurst, Civil Costs, 5^th ed, 2013, chapter 12. They are perfectly entitled, indeed expected, to draw on their experience. In this day and age, they are expected to take a robust approach to bills solicitors submit. In this case the judge examined the costs and disbursements claimed and the work undertaken over the course of a hearing that ultimately spanned over 2 days. He examined documents from the applicant's file and heard submissions from both parties. This appeal is not a re-hearing. I am in no position to scrutinise or evaluate the costs in the same way as the judge did with his benefit of his examination of the documentary material. Nothing I have heard or seen suggests that the judge exceeded the generous discretion conferred on him or was wrong in his approach to the assessment of the individual items Ms Bedford identified in her grounds 2-4.

Conclusion

32. For these reasons the application for permission to appeal, and the appeal itself, is dismissed. The applicant must pay the claimant's costs of the appeal.