Jxc (by His Litigation Friend Cxj) v Nis
| Jurisdiction | England & Wales |
| Judge | Leonard |
| Judgment Date | 21 April 2023 |
| Neutral Citation | [2023] EWHC 1000 (SCCO) |
| Court | Senior Courts |
| Docket Number | Case No: QB-2014-004896 |
[2023] EWHC 1000 (SCCO)
COSTS JUDGE Leonard
Case No: QB-2014-004896
SCCO Reference: SC-2021-BTP-000961
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Thomas More Building
Royal Courts of Justice
London WC2A 2LL
Erica Bedford instructed by Irwin Mitchell LLP for the Claimant's Solicitors
Hearing date: 12 August 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
COSTS JUDGE Leonard
This judgment is concerned with the costs incurred by the Claimant in pursuing a High Court action for damages for personal injury. The Claimant is a protected party, defined in the Civil Procedure Rules (“CPR”) at CPR 21.1(2)(d) as a party who lacks capacity to conduct the proceedings within the meaning of the Mental Capacity Act 2005. His solicitors, Irwin Mitchell (“IM”) are instructed, on his behalf, by his litigation friend CXJ.
Orders and Rules
CPR 21.10 provides that where a claim is made on behalf of a protected party no settlement, compromise or payment in respect of that claim shall be valid without the approval of the court.
On 12 March 2021 the court approved a negotiated settlement of the Claimant's claim for damages. The court embodied the approved terms of settlement in an order which provided for the Claimant to receive from the Defendant a lump sum of £5,118,000 with annual periodical payments of £310,518. The order also provided for further damages to be claimed, should the Claimant develop post-traumatic epilepsy, and for the Defendant to pay the Claimant's costs on the standard basis.
Ms Bedford, counsel for Irwin Mitchell LLP (“IM”), the Claimant's solicitors, advises me that the damages settlement has a total capitalised value of over £14,000,000. This was by any measure a very substantial claim.
CPR 46.4(2)(a) provides that as a general rule, where money is ordered to be paid to a protected party, the court must also order a detailed assessment of the costs “payable by, or out of money belonging to, any party who is a… protected party…”: in other words, the costs payable to the protected party's legal representatives by the protected party. The amount payable to those legal representatives by the protected party will, under CPR 46.4(4), be limited to the assessed sum. CPR 46.4(2)(b) provides that on assessing those costs the court must also assess the costs payable to the protected party by the “paying party”, usually the defendant to the claim.
Exceptions to the general rule at CPR 46.4(2) include cases where the protected party's solicitors waive any claim to costs or disbursements not recovered from the paying party. Disbursements are expenses such as counsel's or experts' fees, and the term “costs”, as defined at CPR 44.1, includes them.
The 12 March 2021 order provides, accordingly, for the costs payable by the Defendant to the Claimant to be assessed, and (at paragraph 13):
“Unless the Claimant's solicitors waive their entitlement to be paid by the Claimant such shortfall in the costs recovered inter parties as they may be otherwise be entitled to under the terms of their retainer, there be a detailed assessment of the Solicitor/Client costs incurred on behalf of the Claimant and of the amount which it is reasonable for the Claimant's Solicitors to recover from the Claimant in all the circumstances such costs to be assessed on the basis provided for in CPR 46.4 and 46.9.”
CPR 46.9 makes provision for the assessment of costs as between solicitor and client. It provides, at CPR 46.9(3) and (4), that:
“(3)… costs are to be assessed on the indemnity basis but are to be presumed–
(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;
(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;
(c) to have been unreasonably incurred if –
(i) they are of an unusual nature or amount; and
(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party…
(4) Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied.”
Paragraphs 6.1 and 6.2 of Practice Direction 46 add:
“6.1 A client and solicitor may agree whatever terms they consider appropriate about the payment of the solicitor's charges. If however, the costs are of an unusual nature, either in amount or the type of costs incurred, those costs will be presumed to have been unreasonably incurred unless the solicitor satisfies the court that the client was informed that they were unusual and that they might not be allowed on an assessment of costs between the parties. That information must have been given to the client before the costs were incurred.
6.2 Costs as between a solicitor and client are assessed on the indemnity basis. The presumptions in rule 46.9(3) are rebuttable.”
In the great majority of cases where costs are assessed between opposing parties in litigation, they are assessed on the standard basis. It takes something out of the ordinary to justify an order for costs to be assessed between opposing parties on the indemnity basis. In contrast, as the rules set out above make clear, costs as between solicitor and client are always assessed on the indemnity basis.
There are two important distinctions between costs assessed on the standard basis and costs assessed in the indemnity basis, which have some bearing upon the issues to be addressed in this judgment.
On either basis, costs will only be allowed on assessment if they have been reasonably incurred and are reasonable in amount. If however costs are assessed on the standard basis, any doubt as to whether costs were reasonably incurred and are reasonable in amount will be resolved in favour of the paying party. If they are assessed on the indemnity basis, any such doubt will be resolved in favour of the receiving party.
That is the first distinction. The second distinction is that costs assessed on the standard basis are subject to an overall requirement of proportionality, so that even if reasonably incurred and reasonable in amount, they may still be disallowed insofar as they are disproportionate, by reference to criteria set out in the CPR.
Where (as in this case) the protected party's solicitors have negotiated a satisfactory settlement of the protected party's claim for costs, the requirements of CPR 21.10 and CPR 46.4(2)(b) are usually met (as they will be in this case) by an order assessing the protecting party's costs at the agreed figure. The court's attention, for assessment purposes, will be focused on any claim made by the protected party's solicitors for costs and disbursements above and beyond those recovered from the paying party, which will usually have to be deducted from the protected party's damages.
Where such a claim is made the court's role is to undertake an independent assessment of the costs claimed by the solicitor against the client and if appropriate to reduce them to a figure that, by reference to CPR 46.9, represents costs and expenses reasonably incurred and reasonable in amount. Acceptance by the litigation friend and by any court-appointed Deputy of the amount sought by the solicitors is, for the purposes of that exercise, relevant, but it is not decisive.
Deductions from the Claimant's Damages
The contract of retainer between IM and the Claimant is a Conditional Fee Agreement (“CFA”) which provides for a success fee. Success fees in personal injury claims have, since April 2013, been irrecoverable under orders for costs, the loss of the right to recover having been counterbalanced by measures including an increase in awards of general damages.
Another common element of legal costs which has, since April 2013, been irrecoverable under an order for costs is the premium payable for an “After the Event” (ATE) insurance policy which, as in this case, may be taken out to indemnify the Claimant against any costs that he might have been required to pay to the Defendant, and any irrecoverable disbursements.
In this case, the ATE premium payable by the Claimant was £1,629.60 inclusive of Insurance Premium Tax. This seems to me self-evidently to be a reasonable premium, and it falls to be paid out of the Claimant's damages.
That leaves two matters to be addressed by this judgment. The first is the assessment of the success fee payable to IM by the Claimant. The other is the assessment of the “base costs” (costs and disbursements excluding the success fee) claimed by IM from the Claimant under the terms of the CFA, which is in excess of the sum recovered from the Defendant under the costs settlement.
Because the success fee is calculated as an element of base costs, I will deal with the base costs first.
Before going further I should first express my thanks to Ms Bedford for her thorough and detailed submissions on behalf of IM (including several that have helped me correct and clarify the first draft of this judgment) and second acknowledge IM's role in bringing a very substantial and complex claim to a favourable conclusion for the Claimant.
The Background
This was a tragic case. The Claimant, a 19 year old Marine Commando, sustained catastrophic head injuries when he fell a distance of approximately 20 feet during a training exercise.
IM were instructed under a CFA dated 30 August 2013. Liability for the accident was admitted by the Ministry of Defence on 12 February 2014 in...
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