Payments on account of costs in respect of issues not yet determined
HI v Hull & East Yorkshire Hospitals NHS Trust
Sheffield County Court
25 February 2019
In a clinical negligence claim where liability had been concluded and quantum was yet to be determined, the court made an order for an interim payment on account of the costs of dealing with quantum. Steven Dawson and William MacKenzie consider the implications of this judgment and the likely impact moving forward.
The issues were, first whether the court has the power to make an interim order as to costs in the circumstances of this case and secondly, if the court does have such a power, whether the court should exercise that power.
The claimant suffered catastrophic injuries during his birth in October 2007. In December 2012, Griffiths-Williams J approved a liability settlement giving judgment to the claimant for 90% of the value of the claim and making the following order for costs:
“The defendant shall pay the claimant’s reasonable costs to date, to be subject to detailed assessment in default of agreement and such costs to be paid within 28 days of the agreement or assessment.”
He also ordered the defendant to make an interim payment on account of costs of £100,000.
The claimant was 5 years old when the order was made, and it was apparent that it would be some time before the value of the claim could be quantified. The parties subsequently agreed that the assessment of quantum was unlikely to be achieved until 2022.
A telephone hearing listed in September 2017 was due to hear an application for an interim payment of £200,000 on account of damages and an application for an interim payment of £150,000 on account of costs. Before the hearing, the application for the damages interim payment was agreed subject to the court's approval, but the application for the costs interim payment went ahead.
First instance decision
District Judge Batchelor was made aware that in addition to the £100,000 costs interim payment ordered in December 2012, the defendant had made a further voluntary payment of £115,000, making a total of £215,000. The costs incurred by the claimant to date were said to be around £700,000, of which £500,000 had been incurred since the 2012 order was made. Also since that date, the solicitor with conduct of the claim on behalf of the claimant had moved firms, taking the case with her.
The defendant's argument was that there is no provision under either the Civil Procedure Rules or case law, entitling the claimant to what effectively are quantum costs before the issue of quantum has been resolved, and before there is any order of the court.
The claimant argued that in a case where it was agreed that quantum could not be assessed until 2022, it cannot be right that the claimant, if a private paying client, or otherwise the claimant’s solicitors should have to foot the costs of his own legal advice and experts for that entire period where the defendant has admitted liability.
The claimant further submitted that the order in respect of liability costs entitled the claimant to costs down to January 2013 (when the order was sealed), whilst the further costs incurred since then totalled a further £500,000. The claimant was effectively arguing that this satisfied the “dreadfully out of pocket” test.
District Judge Batchelor did not disagree with the claimant's submissions but was more concerned that there was provision for the detailed assessment of the liability costs and that those costs should have been assessed before this application. On that basis, the judge refused the claimant's application and also refused permission to appeal saying:
“There have been interim payments on account of costs already in the sum of £215,000. The claimant has the benefit of an order dated 10.12.12 made on the determination of liability in his favour which entitles him to liability costs to be assessed if not agreed. He has chosen not to pursue that detailed assessment procedure in respect of those costs. Claimant now seeks a further £150,000 on account of costs. I am not satisfied that would not exceed a reasonable proportion of the costs to which the claimant is entitled. I expressed the view the proper course is for the claimant to follow detailed assessment of his liability costs in line with the order already made. I refused to exercise my discretion to make an order allowing the claimant’s quantum costs in the absence of any order determining quantum.”
Appeal before His Honour Judge Robinson
His Honour Judge Robinson heard the appeal after granting the claimant permission to appeal. He acknowledged that he had the benefit of hearing more comprehensive argument on the issues than DJ Batchelor given the limited time afforded by a telephone hearing.
He then set out the relevant provisions under CPR r.44.2 on the court's discretion as to costs and highlighted three relevant factual issues:
The claimant had received interim payments on account of damages totalling £1.2 million.
It was a near certainty that the claimant would receive a great deal more money than that at trial or earlier settlement;
There was, as yet, no defendant’s part 36 offer.
The power to order an interim payment
On appeal the claimant submitted that, where a court makes an order for costs in favour of the receiving party, it is not necessary for the court also to order a detailed assessment of those costs before it can order a payment on account of those costs.
The defendant maintained that "absent a relevant order for costs, there is no power to make an interim payment on account of such costs, and that a court should not make such an order for costs in respect of an aspect of a trial, in this case quantum, which has yet to be determined."
The judge accepted the claimant's submissions, making the following findings:
On his reading of CPR r.47.1, even if an assessment is not ordered immediately, the court can still order a payment on account of costs, so an order for detailed assessment is not a pre-requisite of the making of an order for a payment on account of costs.
However, that does not address the issue whether there is the power to make an order for payment of costs to date in respect of an issue which is still proceeding. On that question, HHJ Robinson was not persuaded that the cases cited by the defendant, where the courts had refused to make pre-emptive costs orders, were similar to the situation in question. Whereas there were more similarities with the case, cited by the claimant, of Giambrone v JMC Holidays Ltd (unreported Dec 2002) concerning holiday sickness group litigation. In that case, Moreland J recognised that even though "there should be no need for any detailed assessment of costs until the conclusion of the group litigation… Solicitors for claimants are fully entitled to an adequate cash flow from the defendants once the general issue of liability has been admitted or determined in the claimants' favour…" Whilst Moreland J hoped defendants' solicitors would make voluntary interim payments, if no agreement could be reached, he envisaged that the appropriate order could be made by the trial judge quickly and cheaply using powers under the CPR at that time.
On that basis, in relation to the question of whether the court has the power to make the order for an interim payment on account of costs, HHJ Robinson concluded (paragraphs 30 & 31):
"In my judgment, rules 44.2(1) and 44.2(2) are wide enough to allow the Court to make an order for costs of the kind sought by the Claimant:
1. The discretion conferred by rule 44.2(1) relates to the questions whether costs are payable, the amount and when the costs are to be paid.
2. Rule 44.2(2) sets out the general rule that the unsuccessful party pays the costs of the successful party.
Rule 44.6(c) gives the court power to order payment of costs “from or until a certain date only”.
Should the power be exercised in this case?
On this issue, the three factual issues cited above were relevant.
The judge at first instance had also not fully appreciated the point that the claimant's current firm of solicitors (i.e. the fee earner's new firm) had not benefited from the December 2012 order. Because she had not therefore given any weight to this factor, the exercise of her discretion was flawed.
She was also wrong to determine that a total interim payment of £200,000 on account of costs might exceed a reasonable proportion of the costs to which the claimant's solicitors would be entitled.
Exercising his discretion afresh, HHJ Robinson found the following factors to be of importance:
The defendant's contesting of three (damages) interim payment applications were relevant to the question of conduct under CPR r.44.2(5);
The claimant's obtaining of damages interim payments totalling £1.2 million constituted a partial success within CPR r.44.2(4)(b);
The very significant delay between the determination of liability and the determination of quantum, and the potential consequence of solicitors not taking on these types of cases in future if there is a failure to secure adequate cash flow;
There was minimal risk of an overpayment to the claimant's (current) solicitors. In the worst case scenario where the claimant fails to beat a Part 36 offer, there is a risk following costs set off that the claimant might end up owing costs to the defendant. Not only is this eventuality extremely unlikely, but there is a remedy for the defendant by way of deduction from damages.
Again acknowledging the inherent difficulties of the original telephone hearing, HHJ Robinson found that the district judge had fallen into error. He therefore allowed the appeal and indicated he was inclined to order a further payment on account of £150,000.
Court of Appeal
The defendant sought permission to appeal from the Court of Appeal but this was refused by Irwin LJ who gave brief reasons for the refusal:
The jurisdictional argument (i.e. whether the court has the power to make such an order) must fail. The "general rule" in CPR r.44.2(2)(a) has to be interpreted as meaning that in a suitable case a judge may award costs to an unsuccessful party. In any event the terms "unsuccessful" or "successful" cannot be defined to binary outcomes of the whole case. "Here the term may readily be refined to mean "will succeed sufficiently to justify the further costs sought".
Turning to whether this was a proper case for an order such as this, Irwin LJ said it clearly was, for the reasons formulated by the judge taking into consideration the highlighted factual issues: "It must be right that in such a case a key consideration is to preserve security for a defendant, so that there is no appreciable risk of a need to repay costs paid on an interim basis. Subject to that principle, it seems entirely proper to me to order interim costs payments with a view to the cash flow of solicitors in very long-lasting litigation, where very significant liability has been conceded. That must particularly be so in the case of specialist solicitors who may be facing such problems in a range of cases."
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