ABLE UK LIMITED -v- RELIANCE SECURITY SERVICES LIMITED

Following this commercial litigation the Defendant was ordered to pay £285,000 damages to the Claimant together with the Claimant’s costs on the standard basis to be assessed if not agreed. The Bill of Costs totalled £154,601.26 of which most elements were agreed save for the After the Event Legal Expense Insurance premium which was claimed. At the hearing in the Supreme Court Costs Office before Master Wright the Defendant argued this premium of £60,000 equated to 30% of the limit of indemnity. The Claimant should have contacted other insurance providers in an effort to mitigate costs since it was likely had these quotations been obtained, the other two would have seen the prospects of success as being 75% rather than 70%. The Claimant argued that it was clear the claim would be strongly defended and referred to section11.7 of the Costs Practice Direction, providing that when assessing an additional liability the court will have regard to “the facts and circumstances as they reasonably appeared to the solicitor when the funding arrangement was entered into.”

Based on the information available at the time the Senior Technical Underwriting Manager had considered that a premium of 30% of cover was reasonable and borne out of the way the claim had been defended. The Defendant had defended strongly and no offer to settle had been made until shortly before the date fixed for trial. Master Wright considered that although the future history of the action was irrelevant to the assessment of risk when the funding arrangement was entered into it nevertheless served to confirm the Claimant’s view that the claim would be strongly defended and it was therefore reasonable for the Claimant and its advisers to accept the premium based on 30% of cover with 70% prospects of success. However the more difficult question to answer was whether it was incumbent upon the Claimant to obtain more than one quotation. The judgement of Lord Phillips MR in Callery v Gray was referred to:

When considering whether a premium is reasonable the court must have regard to such evidence as there is, or knowledge that experience has provided, of the relationship between the premium and the risk and also the cost of alternative cover available.

Master Wright considered the Claimant’s submissions that it would have been more expensive for the Claimant to purchase the insurance cover in support of a Conditional Fee Agreement with a success fee. The Claimant’s advisers had considerable experience of commercial After the Event insurance policies and the Defendant had not rebutted the evidence that the Claimant had made a reasonable choice of After the Event insurance. To insist that the Claimant go in search of alternative insurers would have failed to have regard to the overriding objective, bearing in mind the additional expense this would incur.

PASK -v- MCNICHOLAS CONSTRUCTION SERVICES LTD

The Claimant, a leading miner, had suffered severe injury following an accident at work in April 2002. His claim for special damages was substantial. Proceedings were hostile throughout, the costs of the case in February 2004 had been estimated at £40,000 and by December 2004 the estimate had increased to £269,000 with steps not being taken to settle the claim until October 2005. The case eventually settled at a mediation hearing at which the Claimant accepted the Defendants increased offer in the sum of £678,500, with the Defendant to pay the Claimant’s costs on the standard basis.

The case with regard to the costs in this matter was heard in the High Court of Justice Supreme Court Costs Office before Costs Judge Simons, who handed down his judgement on 31 May 2006.
Taking all the factors into account in deciding the amount of costs under CPR 44.5(3), Costs Judge Simons had to consider whether the net amount of costs claimed in the sum of £269,000 were proportionate in a case where £678,500 damages were recovered, where liability was not in issue and the case was settled before trial. Following a detailed consideration of the file and a review of the bill on an item by item basis, the costs were found to be disproportionate, not on the basis of the amount of costs claimed against the damages received but due to a lack of forward planning. The decision in Home Office v Lowndes was applied, with particular reference made to paragraph 23 of the judgement of Lord Woolf:

“In modern litigation, with the emphasis on proportionality, there is a requirement for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which would be necessary and appropriate spent on the various stages in bringing the action to trial and the likely overall cost.”

For the estimated costs to have risen from £40,000 to £269,000 over a period of only ten months indicated to Costs Judge Simons “a total lack of planning about the costs and a failure to carry out this litigation in an economic and proportionate manner.”

LOWNDS -v- HOME OFFICE

This was a determination of a point of principle relating to the assessment of proportionality in costs orders made under the Civil Procedure Rules 1998 SI 1998/3132. An appeal had been made by the Defendant against a decision of His Honour Judge Lightfoot which had itself dismissed an appeal from a costs order made in the first instance. The claimant had brought an action against the secretary of state for clinical negligence caused while he was a prisoner. The claim settled for damages of £3,000, plus costs, which were assessed at £16,784 including VAT. His Honour Judge Lightfoot dismissed the secretary of state's appeal from this assessment. The majority of the costs were incurred before the coming into force of the new Civil Procedure Rules, which came into force on 26 April 1999. The points of principle raised by this appeal were whether the costs to be awarded to a successful litigant might or should be reduced if they were disproportionate to the amount claimed in the action, and whether such costs should be reduced if they were disproportionate to the amount recovered in the action. It was found that the proportionality of costs recovered by the claimant should be determined having regard to the sum that it was reasonable for him to believe that he might recover at the time he made his claim. Further it was held that the proportionality of the costs incurred by the defendant should be determined with regard to the sum that it was reasonable for him to believe that the claimant might recover, should his claim succeed. This principle could and should not be applied retrospectively to cases in which costs had already been assessed. The point of principle determined accordingly.

GIAMBRONE -v- JMC HOLIDAYS

This was a claim brought following a salmonella poisoning incident, where liability had been admitted. A detailed assessment of the claimants costs was ordered in April 2000. The claimants served generic and individual bills exceeding £1 million. At a preliminary hearing it was held that the claimants' bills were not disproportionate as a whole. However, on detailed consideration of the bills at an interim assessment the costs judge disallowed or reduced a number of items, on the grounds that they were disproportionate. The claimants contended that it was not open to him to do so, given the preliminary ruling. The cost judge's ruling at the outset of a detailed assessment that the bill as a whole was not disproportionate did not preclude him from deciding that an item or a number of items were or appeared to be disproportionate having regard to the "matters in issue". The preliminary judgment of proportionality determined the manner of the detailed assessment, but it did not determine the final sum payable to the receiving party. The guidelines set out in Home Office v Lownds (2002) applied to an interim assessment in group litigation.