PAYMENTS ON ACCOUNT OF COSTS DO NOT BREACH BREACH INDEMNITY PRINCIPLE AND SHOULD BE A “REASONABLE SUM”

In XYZ -v- Transform Medical Group (CS) Limited [2015] EWHC 1151 (QB) Mrs Justice Thirlwall DBE considered several issues in relation to payments on account of costs.

THE CASE

The action is a group action in which nearly 1000 women seek damages from companies running private hospitals for supplying defective implants. In September 2014 the judge granted the Defendants’ application to adjourn the trial. It was ordered that the defendants pay the costs of  the application and those costs occasioned by the adjournment. There was an order that the defendants make a payment on account of their costs liability, to be assessed by the managing judge if not agreed.

The claimants served a costs schedule totalling £705,933.93.

KEY POINTS

  • Ordering the defendant to pay the claimant’s costs costs of an interim application did not breach the indemnity principle when the claimant was on a CFA.
  • An order for interim costs will normally be made unless there is a good reason not to make that order.
  • The court would order a reasonable sum based on a proportion of the sums likely to be awarded.

THE STARTING POINT

  1. The starting point is CPR 44.2 (8) (as amended): “Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to.”The issues for me therefore are: i) is there a good reason not to order that Transform and Travelers pay a reasonable sum on account of costs? If no,ii) what is a reasonable sum?

THE DEFENDANTS’ ARGUMENT THAT NO PAYMENT SHOULD BE MADE BECAUSE THIS WAS A CFA CASE

The judge readily rejected an argument that a payment should not be made because the claimants were on a CFA and had not yet “won”.

  1. Travelers and Transform submit that since the claimants are being represented on conditional fee agreements they have no current liability to costs because they have not yet “won”. To order payment now would be a breach of the indemnity principle. Mr Harvey, solicitor for the claimants, sets out the following clause from the claimants’ conditional fee agreements. It reads “Where a summary assessment of costs or payment on account is made in your favour, you are immediately liable to pay your share of Hugh James’s charges to the extent of the relevant summary assessment or payment on account”. As he points out this clause is commonly found in CFAs as detailed in the Law Society model conditional fee agreement, “if on the way to winning or losing you win an interim hearing, then we are entitled to payment of our basic charges and disbursements related to that hearing together with a success fee on those charges if you win overall”. It is clear that the interim award of costs prior to the final completion of the case may be charged and recovered irrespective of the requirement to win the case at trial or later final determination.
  2. In my judgment a payment on account of costs here would not involve a breach of the indemnity principle.

NOT SOMETHING THAT SHOULD BE LEFT TO THE TRIAL JUDGE

  1. Transform and Travelers submit that I should make no order and leave the matter to the costs judge. They rely on the decision of this court in Dyson Ltd v Hoover Ltd (no 4) (Ch D). There, a successful party at trial made an application for an interim payment to a judge who was not the trial judge. That is not this case. I have been managing the litigation since October 2012. As recently as September 2014 I ordered that it should be the managing judge who considered the amount of the interim payment on the papers. Nothing has changed since then, other than the service by the claimants of the costs sought. There is nothing unusual about this application, no novel point of law arises. The application is not complex. There is no good reason not to order that Transform and Travelers pay a reasonable sum on account of costs.

WHAT WAS A REASONABLE SUM?

  1. I turn to the second question, what is a reasonable sum?

Counsels’ fees

  1. There are two leaders and two juniors. Transform make the point that they have one leader and one junior, both of whom are senior to their opposite numbers for the claimants. They have only one client. Travelers is separately represented (there have been a number of leading counsel and one, consistent junior). A third set of solicitors (Bevan Brittan LLP) were involved on Transform’s behalf in the hearings in respect of insurance cover. Separate leading counsel was instructed there. Bevan Brittan LLP submitted a statement instead of submissions on behalf of Transform on this issue. Each of the other defendants have their own legal teams. Plainly the workload is much heavier on the claimants’ legal team. There are several hundred claimants and numerous defendants and third parties who participate at different levels. I see no difficulty in principle with a team of two leaders and two juniors.
  2. The brief fees (which do not include success fees) are £150,000, £125,000 (leading counsel) and £150,000 and £110, 000 (junior counsel). This is over four times the total brief fees agreed by Transform which were £80,000 for leading counsel and £40,000 for junior counsel, payable in stages. Transform’s position is, effectively, that absent any detailed breakdown by way of justification I should not grant anything above the sums agreed on their side. Transform further submit that the brief fees should have been payable in stages, as they were to counsel for Transform. This wholly overlooks the fact that at each case management hearing Mr Preston QC repeatedly reminded the defendants of the claimants’ willingness to engage in mediation. He reminded them that there would come a time when briefs would be delivered. Transform entered into stage payments with their solicitors and counsel presumably on the basis that they considered that settlement was possible. That settlement became impossible was not the fault of the claimants. An earlier mediation would have brought to light – for the claimants – that there was an intractable problem that needed to be resolved. The defendant and its insurers knew for months about the difficulties between them. The claimants’ team did not. In those circumstances there can be no legitimate complaint about the delivery of the briefs with full fees.
  3. As to the brief fees, this was to be a 20 day trial. I know the issues. Counsel must have cleared their diaries for (as a minimum) the month of September, as well as for the trial itself. Work would have been done by some in August. Given the case management decisions made in the run up to September the claimants’ representatives could not have been completely confident (after the failure of the mediation on 29th August) that the trial would be adjourned although they must have thought it very likely. What is not clear to me, however, is the division of labour as between silks and juniors. At first blush the payment of a higher brief fee to a junior than to his leader is unusual and whilst it may well be to reflect a greater number of hours work done, albeit at a lower rate, it is not for me to speculate, even on an informed basis at this stage.
  4. I take Mr Harvey’s point that the general rule is that sums of in the region of 70% are paid on account of costs in this sort of situation. I am not persuaded that I should take so high a percentage given the disparity between the individual fees for the barristers on the two sides (irrespective of the difference in the size of the teams). I have decided therefore that in respect of counsels’ fees the sums payable on account shall be one half of the brief fees as agreed. That is a total of £267,500. I make no separate allowance in respect of the costs of the application to adjourn the trial. I accept Transform’s submission that this risks double recovery at this stage.

Solicitors’ costs

  1. Travelers’ submissions in respect of the solicitors’ costs of £20,000 are unhelpful. The rate claimed by the solicitors is well within the band of fee rates to be paid to solicitors conducting group litigation of some complexity on behalf of many hundreds of claimants. The submission to the contrary is unarguable. The sum claimed is plainly reasonable; Transform do not really suggest it is not. The overwhelming likelihood is that this sum will be awarded in full. Out of an abundance of caution I award 80% of it, £16,000.

Conference fees

  1. Mr Preston put it very simply: the conference was arranged so that the case would be ready for trial. By the time of the adjournment it was too late to cancel (without incurring the costs in any event). The costs have therefore been thrown away. Transform and Travelers argue that the conference will be necessary in any event and the claimants will have the benefit of it. It may not be necessary to repeat it. Mr Preston argues that if it is not necessary to repeat it there will be no further costs arising and so there is no difficulty. If it is necessary to hold a further conference then there will be further costs to be adjudicated upon. This overlooks the fact that if no further conference is needed and the defendants succeed at trial they will have paid costs which were not truly thrown away and for which they were not liable. That is not to say that the claimants may not, in the end, be entitled to these costs, but at this stage I am not prepared to order an interim payment under that head.

Decision

  1. Accordingly I direct that there be an interim payment on account of costs by Travelers and Transform in the sum of £283,500. I await an agreed order from the parties.

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