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Claimants' costs budget is reduced by £2m in class action

Following on from a rare instance of the Court conducting the costs budgeting process by way of written submissions, the Claimants' estimated costs in a class action were reduced by over £2m after arguments advanced by the Third Defendant. In Kalma & Ors v Tonkolili Iron Ore & Ors (2017), the Claimants' estimated costs were reduced from £4.47m to £2.43m

In this article, we look at the judgment and the areas where the savings were made. The Claimants were represented by Leigh Day and the Third Defendant by DWF LLP. This claim flows from allegations that the Claimants suffered injuries following two separate incidents of unrest at an iron ore mine in Tonkolili, Sierra Leone. Liability is in dispute.

Overview

This case demonstrates that since its introduction in April 2013, the costs management process has been constantly evolving.  Four years on from the Jackson reforms, litigators are becoming more familiar with the costs management process and the occasional curveballs it throws up, Claimants and Defendants alike. 

Following the decisions in both Merrix v Heart of England NHS Foundation Trust (2016) and the Court of Appeal decision in Harrison v University Hospitals Coventry & Warwickshire NHS Trust (2017) (handed down on the same day as Kalma), greater importance should now be placed on prospective costs management hearings.

Costs budgeting must take precedence over detailed assessment, the Court of Appeal has ruled and so it is imperative that parties understand the importance of costs management from the outset, otherwise clients may be faced with significant costs exposure at the end of the case as they are left unable to raise substantial challenges at detailed assessment.

The consequence of the decisions in Merrix and now Harrison is that, done properly, the costs budgeting process has the potential to influence the outcome of a case and has the potential to deliver greater levels of savings to clients than might actually be possible in the substantive action. 

The Third Defendant was able to achieve significant savings by reducing the Claimants' costs budget from £7.46m to £5.42m. Of the total claimed by the Claimants' solicitors, £2.99m comprised incurred costs, with £4.47m representing the estimated costs.  Following the judgment of Senior Master Fontaine, estimated costs were reduced from £4.47m to £2.43m, representing a significant reduction of £2.04m or 54%.

Background

A total of 142 Claimants made claims for personal injury. For the purposes of the litigation, the Claimants were split into six categories based on severity of injury. Of the original 142, 101 Claimants settled their claims before the costs budgeting process began by accepting Part 36 offers, leaving 41 claims outstanding.

Once the Court had given directions, leading to a trial, beginning in January 2018, Foskett J, the presiding Judge in the High Court of Justice, Queens Bench Division called upon Senior Master Fontaine to assist in dealing with the costs management process in this case, given her expertise in this field.

The Court decided that costs management would be dealt with on paper as opposed to an oral hearing. The rationale behind this was to ensure that time and expense was not wasted in dealing with costs management. Whilst unusual, it is in fact consistent with CPR r.3.16 (2) which states:

'Where practicable, costs management conferences should be conducted by telephone or in writing.'

The Budgeting exercise

Senior Master Fontaine stated 'In the case of personal injury claims of the estimated value of these claims it is, at first blush, a wholly disproportionate sum'.  On estimated costs for the trial preparation, the Senior Master stated 'Mr view is that these figures are very high and disproportionate'. 

Senior Master Fontaine stressed that a measured, sensible approach was needed when considering proportionality, having regard to the number of Claimants involved and the geographical difficulties. 

The Judgment

Incurred costs

In her Judgment, Senior Master Fontaine was of the view that the act of applying proportionality would be a balancing exercise given the factors affecting this particular case.  When considering proportionality, she took the view that these wider factors had more weight than the monetary value of the claims.

In submissions the Third Defendant's solicitors sought a recording from the Court that the incurred costs of £2.99m were disproportionate and/or were unreasonable in amount. The Senior Master felt that the costs were so significant and, given that she was not the primary case managing Judge, that she was not best placed to comment on how the factors in play in this case; the geographical location of the Claimants, complexity of the legal issues, difficulties with language etc. might have been factors that had increased costs. Accordingly the incurred costs were not approved.

Hourly rates claimed

Similarly, Senior Master Fontaine did not look to approve the rates claimed nor did she set allotted hours for the individual phases. Instead she considered what was reasonable and proportionate for each phase and made a comment that the hourly rates claimed by the Claimants' Solicitors "were too high for the claims in this case. "

Estimated costs

Throughout the phases of the Claimants' budget, trips to Sierra Leone were factored in where their solicitors felt it would be necessary to attend on their clients in order to progress the case. In order to reduce costs, the Third Defendant's solicitors suggested that trips could be merged and decreased overall in order to reduce litigation spend. It was also suggested that local agents could be instructed to support the Claimants in respect of a number of the action points across all phases rather than solicitor time being incurred on these. This was particularly important bearing in mind the overall objective of proportionality in costs.

Despite it being clear that this is a complex and large claim, the Court was not willing to allow a disproportionate level of costs. For example, the Claimants' Solicitors took the view that three further trips would be necessary in the Witness Statements phase and they also made provision for rebuttal evidence to be filed in response to the Third Defendant's witness evidence.  The Third Defendant's solicitors argued that it was unreasonable for the additional trips to be allowed and that the directions made no provision for rebuttal evidence. The Court agreed on these points, with Senior Master Fontaine stating: "...if costs were no object then such an approach could be adopted". This reemphasises the need for proportionality. For this phase, the estimated costs were reduced from £480,830 to £274,000, a saving of £163,170 for this one phase alone.

Further reductions were also made in respect of the Experts Reports phase. The Claimants' Solicitors were seeking the costs of fee earners chaperoning the Claimants to Ghana in order for medical examinations to take place. It was argued by the Third Defendant's solicitors that the Claimants would be able to travel unassisted and local agents could be utilised as chaperones if necessary. The Court agreed and this led to a significant reduction in profit costs for this phase, totalling over £200,000.

The other phase which saw notable reductions was the trial phase. The parties had agreed that the length of trial was to be six weeks; Counsel's fees had been estimated based on this assumption, however the Claimants' fees were considered disproportionate.  The Claimants' sought to justify the level of fees claimed on the basis of the Third Defendant's Counsel not being as senior and the fees claimed by the Third Defendant being unrealistically low.  Notwithstanding that, the Court agreed with the Third Defendant's submission in principle in that there should be parity between the parties and the Claimants' Counsel will have had substantial involvement in the case.  Senior Master Fontaine said "Claimant Counsel's fees are considerably too high and disproportionate" which meant that Counsel's fees were reduced from a combined total for leading and junior counsel of £892,500 to £517,000, a significant saving of £375,500.

Conclusions

Whilst the majority of costs management orders will be made following an oral hearing, this is a situation where a costs management order has been made, following submissions by the parties on paper.

The advantages of dealing with costs budgeting in this way were two-fold:

• Both parties were able to provide thorough submissions on budgets without the constraints that would exist in a time limited hearing.
• Equally, in dealing with the submissions on paper, Senior Master Fontaine was not under any time pressures. During the course of Lord Justice Jackson's review of the fixed recoverable costs regime it has been made clear that the Judiciary support costs management and that it is here to stay.

This decision and the decisions in Harrison and Merrix highlight the critical importance of the costs budgeting process and the importance of getting the process right. The same can be said whether a party is looking to maximise costs recovery or limit costs exposure. In this case significant reductions were made

Contact

For further information please contact Will Mackenzie, on 020 7645 9507 or Sukhjit Dhadwal, on 020 7645 4132

By Will Mackenzie and Sukhjit Dhadwal

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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