Costs Judges overturned on Appeal – Gary Knight investigates

It is perhaps not the best of times if you are a costs judge with their decisions being overturned on appeal.

Foskett J sitting with the senior costs judge Gordon-Saker overturned 3 decisions made by costs judges when dealing with three conjoined appeals – Kai Surrey (A child and protected party) v Barnet & Chase Hospitals NHS Trust, AH (A protected party) v Lewisham Healthcare NHS Trust and Mehmet Yesil (A child and protected party) v Doncaster & BassettLaw Hospitals Foundation Trust [2016] EWHC 1958 (QB).

On three separate occasions costs judges had, when considering whether it was reasonable to have switched from Public Funding to a CFA with ATE, found that it had been unreasonable disallowing the additional liabilities.

The original challenges before the costs judges had included reference to the fact that Litigation Friends had not been advised that the switch shortly before 1 April 2013 would deprive the Claimants from recovering the 10% uplift on general damages provided in Simmons v Castle [2012] EWCA Civ 1039.

The Defendants, effectively the NHSLA, argued that the decisions to switch to CFAs was based on “materially unreasonable advice” and that a reasonable person in the position of the litigation friend would have been likely, when considering the method of funding switch, to attach significance to the fact that the Claimant would lose the 10% uplift with the Defendants placing reliance on Montgomery v Lanarkshire Health Authority [2015] UKSC 11, where the Supreme Court had reviewed the law on informed consent in the context of a medical practitioner’s duty to inform a patient as to the risk involved in proposed treatment.

In each matter the costs judge accepted the Defendant’s submissions disallowing success fees and after-the-event insurance premiums.

Foskett J, on appeal, held that the reference to Montgomery was a “distraction”. The issue was simply whether the additional liabilities were reasonably or unreasonably incurred. The judge found that the question was one best determined by the test in Wraith v Sheffield Forgemasters Ltd [1998], namely the test was to be applied in the context of the individual circumstances of the particular claimant. The question was whether the CFA represented a reasonable choice for the Claimant at the time, having regard to all of the circumstances applying to him with Wraith applied and LXM v Mid Essex Hospital Services NHS Trust considered. The application of the test would enable a costs judge to decide whether, in a particular case, the failure to mention the 10% uplift would be likely to have made a difference to the decision to switch to a CFA without any direct evidence to the Litigation Friend.  Foskett J considered that in the “vast majority of cases” the costs judge would be likely to consider that the failure would have no difference on the relevant decision thus the additional liabilities were restored in principle.

The case provided a useful procedural framework for the way in which the issue of advice (or the lack thereof) as to the 10% uplift should be dealt with in similar cases in the future.

In two of the three matters the costs judges had made reductions to the ATE premiums, in one case a reduction from £50,681.00 to £31,800.00, in the other £18,881.78 reduced to £15,000.00 with Foskett J finding that the experience of the costs judges over the years had to be respected and their decisions as to the recoverable premiums stood.

However, the experience of costs judges when dealing with premiums was subject to a separate and unrelated appeal heard by HHJ Walden-Smith – the matter being Banks v London Borough of Hillingdon (2016), presently unreported.

The appeal was in respect of a decision of the senior costs judge wherein the ATE premium had been, for want of better description, slashed on assessment.

The matter included a staged ATE premium, the claim was £23,295.00 plus IPT.

The original action was a personal injury claim arising from a tripping incident and the Claimant recovered £6,890.00 damages plus costs.

Perhaps not unsurprisingly the Defendant submitted that the premium was disproportionate, a submission with which the costs judge agreed reducing the premium to £9,375.00 plus IPT.

In advance of the oral provisional assessment hearing the Claimant put in evidence from the Claimant’s insurer in relation to the premium calculation and from the Claimant’s solicitor in relation to the selection of the premium. The Defendant did not put in any evidence to support its challenge to the size of the premium.

The insurance premium was the same type as that sought in Rogers v Merthyr Tydfil County Borough Council [2006] Civ 1134 however in Banks the increased multiplier of the estimated loss was 125%, reflecting the risk to the insurer across their book of business.

When providing his judgment the costs judge stated that he did not consider the court to be “better qualified than the underwriter to rate the financial risk the insurer faces,” but he did not read the Rogers decision as preventing him from judging the reasonableness of the premium sought in very broad brush terms considering that the premium in this case was “obviously disproportionate”.

On appeal the Claimant submitted that the costs judge had been wrong to conclude that the premium was unreasonable having rejected a book-based or “basket of risk” approach to the insurance – the insurer would have faced a liability of approximately £17,000.00 had the claim failed.

The judge highlighted the judgment in Rogers noting the same as a “decision of a strong Court of Appeal” and further noting that The Law Society and other major ATE providers intervened and found that the decision was binding on both the costs judge and the appeal court when allowing the appeal.

The Judge acknowledged that the claim (and indeed the claim in Rogers) involved modest damages but that Rogers established, “that the fact that the ATE premium is large compared with the damages agreed does not necessarily mean that the ATE premium is disproportionate.”

Further the judge held that it was not for the costs judge to re-calculate the premium without access to the whole basket of risk, the costs judge having misdirected himself in determining that Rogers permitted him to judge the reasonableness of the premium on very broad brush terms.  Who’d be a costs judge these days?