Proper planning prevents proportionality pain
Lawyers cannot just follow their usual procedures without considering the prospect of a disproportionate outcome, explains Steven Davies
We all know the old proverb ‘he who fails to plan, plans to fail’, but in the post-Jackson era we can amend that to ‘he who fails to plan ends up on the wrong end of the proportionality test’. Or maybe a new version of the ‘five Ps’ – ‘proper planning prevents proportionality pain’.
Much of the commentary on the proportionality test has been on what happens at assessment, but a decision in February by Master Simons in the Senior Courts Costs Office rightly puts the focus on what happens much earlier, before the case has really got going.
Rezek-Clarke v Moorfields Eye Hospital NHS Foundation Trust  EWHC B5 (Costs) was brought as a result of the defendant’s failure to refer the claimant for imaging. It was alleged that, had the defendant done so, a pituitary tumour would have been found nine months earlier than was the case. The claimant’s solicitors recognised that damages would not exceed £5,000 and the claim settled for £3,250.
The claimant sought costs of £72,320, which on provisional assessment the master reduced to £24,604; in particular, he slashed the after-the-event insurance premium from £31,976 to £2,120 (although there was an unresolved issue about whether the premium had been miscalculated), and four fees for medical reports totalling £18,036, including VAT, to £7,500 plus VAT. The claimant requested an oral hearing, but little changed as a result.
Master Simons cited the Court of Appeal in Jefferson v National Freight Carriers Plc  EWCA Civ 2082, which in turn quoted the judgment of His Honour Judge Alton in Birmingham County Court in an unnamed case the year before.
HHJ Alton said: ‘In modern litigation, with the emphasis on proportionality, it is necessary 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 will be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost.
‘While it is not unusual for costs to exceed the amount in issue, it is, in the context of modern litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.’
Master Simons said: ‘That statement by Judge Alton, although made some years ago, is even more relevant today as the rules regarding proportionality are now much more onerous. I looked through the solicitor’s file, both at the provisional assessment and prior to the hearing today, and I could see no evidence of any planning in the manner described by HH Judge Alton. The claim was always going to be low value.’
What caused particular difficulty for the claimant was that he had been unable to produce evidence of any planning or consideration of the costs to be incurred, and that the approach did not change even as reviews indicated that previous damages expectations were optimistic.
‘Notwithstanding the solicitors’ knowledge of the low value of the claim, they proceeded to instruct expensive medical experts to prepare reports the costs of which totalled almost £20,000.’ Five experts in all, and the judge said that as well as reducing the costs of some on the grounds they were disproportionate, he was unconvinced whether others were necessary at all.
He was similarly critical of the failure to consider whether this was the most appropriate ATE policy given the impact of the number of experts on the premium. Just because it was insurance the solicitors typically used, they ‘would have been aware that there are many other insurance products on the market that may have been more appropriate to this particular low value case, but no attempt was made by them to investigate this’.
Master Simons acknowledged it was necessary for costs to be incurred to enable an investigation be carried out. But he said that ‘to be recoverable from the paying party, the costs must be proportionate whether or not they were reasonably or necessarily incurred’.
He concluded: ‘Costs of £72,320.85 for a low-value medical negligence claim are disproportionate. They do not bear any reasonable relationship to the sums in issue in the proceedings. The litigation was not particularly complex, no additional work was generated by the conduct of the paying party and there were no wider factors involved in the proceedings such as reputation or public importance.’ The only reason proceedings were issued, he said, was because the solicitors were concerned about limitation.
The judgment supports the much-publicised BNM decision that, post-April 2013, ATE premiums will be subject to the proportionality test. The Court of Appeal will have a definitive say on that later this year.The lesson is clear – even in routine litigation, lawyers cannot just follow their usual procedures without considering whether that will lead to a disproportionate outcome. The new test needs to be in litigators’ minds from the get-go.
Steve Davies is a council member of the Association of Costs Lawyers and head of costs at the Medical Protection Society