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||Neutral Citation Number:  EWCA Civ 184
||Case No: A2/2011/1258, A2/2011/1637 & A2/2011/0532
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BIRMINGHAM COUNTY COURT
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE LINCOLN COUNTY COURT
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BOW COUNTY COURT
||Royal Courts of Justice
Strand, London, WC2A 2LL
||24th February 2012
B e f o r e :
LADY JUSTICE ARDEN
LORD JUSTICE CARNWATH
LORD JUSTICE PATTEN
|| MASTER CORBY DOCKERILL
(a Minor by his mother and Litigation Friend Mrs Zoe Dockerill)
(a Minor by her mother and Litigation Friend Mrs Zoe Dockerill)
||- and -
||MR S. TULLETT
||MASTER PADDY MACEFIELD
(a Minor by his Litigation Friend Paula Macefield)
||- and -
(by her Litigation Friend Mrs D Westwood)
||- and -
(Transcript of the Handed Down Judgment of
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Nicholas Bacon QC (instructed by Sheldon Davidson Solicitors) for the Appellants Dockerill and Healey and (instructed by Lyons Davidson Solicitors) for the Appellant Macefield
Roger Mallalieu (instructed by Taylor Rose Law) for the Respondents Tullett and Bakos
Roger Mallalieu (instructed by Taylor Rose Law) for the Appellant Sarwar
Dickon Edwards (instructed by Donns) for the Respondent Tubridy
Hearing date : 23rd January 2012
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Patten:
- The common feature of these appeals is that they all involve claims by minors (by their litigation friends) to recover the costs of proceedings brought by them under CPR 21.10(2) for the approval of the compromise of their claims for damages for personal injuries. In Dockerill v Tullett ("Dockerill") and in Macefield v Bakos ("Macefield") the principal issue is whether those costs are to be calculated in accordance with the fixed costs regime under CPR 45 Part II or whether they are to be subject to a process of detailed assessment in accordance with CPR 44.5. If detailed assessment is the appropriate regime then a further issue arises as to how such an assessment should be carried out where (as in these cases) the claim for damages did not exceed £1,000 and would ordinarily have been allocated to the small claims track.
- In Tubridy v Sarwar ("Tubridy") a different issue arises. This is whether the fees of counsel for attending the hearing of the Part 21.10(2) application at which the judge was asked to approve the settlement of the damages claim are properly recoverable as a disbursement under CPR 45.10(2)(c). This depends upon whether they were "necessarily incurred by reason of [the claimant] being a child". Permission was given in this case for what is a second appeal because it raises a point of principle or practice on which a number of circuit and district judges have reached different conclusions.
The relevant rules
- CPR 21.10 provides that:
"(1) Where a claim is made—
(a) by or on behalf of a child or protected party; or
(b) against a child or protected party,
no settlement, compromise or payment (including any voluntary interim payment) and no acceptance of money paid into court shall be valid, so far as it relates to the claim by, on behalf of or against the child or protected party, without the approval of the court.
(a) before proceedings in which a claim is made by or on behalf of, or against a child or protected party (whether alone or with any other person) are begun, an agreement is reached for the settlement of the claim; and
(b) the sole purpose of proceedings is to obtain the approval of the court to a settlement or compromise of the claim,
the claim must—
(i) be made using the procedure set out in Part 8 (alternative procedure for claims); and
(ii) include a request to the court for approval of the settlement or compromise."
- The rule is general in its application and therefore applies to the compromise of all actual or potential claims by a child or protected party whether the amount of the claim is large or small. The principal difference between the case where a claim has been commenced and is then compromised and the case (governed by CPR 21.10(2)) where the compromise occurs before the claim is issued is that in the former case the judge will be asked to approve the terms of the settlement in existing proceedings which, depending on the amount at stake and the complexity of the case, is likely to have been already allocated to an appropriate track. In cases where no proceedings have yet been issued, the claim is brought solely for the purpose of obtaining court approval of the settlement. In such cases the Practice Direction to CPR Part 21 (21 PD.5) stipulates that:
"5.1 Where a claim by or on behalf of a child or protected party has been dealt with by agreement before the issue of proceedings and only the approval of the court to the agreement is sought, the claim must, in addition to containing the details of the claim and satisfying the requirements of rule 21.10(2), include the following –
(1) subject to paragraph 5.3, the terms of the settlement or compromise or have attached to it a draft consent order in Practice Form N292;
(2) details of whether and to what extent the defendant admits liability;
(3) the age and occupation (if any) of the child or protected party;
(4) the litigation friend's approval of the proposed settlement or compromise,
(5) a copy of any financial advice relating to the proposed settlement; and
(6) in a personal injury case arising from an accident –
(a) details of the circumstances of the accident,
(b) any medical reports,
(c) where appropriate, a schedule of any past and future expenses and losses claimed and any other relevant information relating to the personal injury as set out in Practice Direction 16 (statements of case), and
(d) where considerations of liability are raised –
(i) any evidence or reports in any criminal proceedings or in an inquest, and
(ii) details of any prosecution brought."
5.2 (1) An opinion on the merits of the settlement or compromise given by counsel or solicitor acting for the child or protected party must, except in very clear cases, be obtained.
(2) A copy of the opinion and, unless the instructions on which it was given are sufficiently set out in it, a copy of the instructions, must be supplied to the court.
5.3 Where in any personal injury case a claim for damages for future pecuniary loss is settled, the provisions in paragraphs 5.4 and 5.5 must in addition be complied with.
5.4 The court must be satisfied that the parties have considered whether the damages should wholly or partly take the form of periodical payments.
5.5 Where the settlement includes provision for periodical payments, the claim must –
(1) set out the terms of the settlement or compromise; or
(2) have attached to it a draft consent order,
which must satisfy the requirements of rules 41.8 and 41.9 as appropriate.
5.6 Applications for the approval of a settlement or compromise will normally be heard by –
(1) a Master or a district judge in proceedings involving a child; and
(2) a Master, designated civil judge or his nominee in proceedings involving a protected party."
- Proceedings of this kind will therefore generate costs which may include the cost of initial legal advice and work carried out in preparation for the damages claim which in the event was never issued. It is common ground on this appeal that those costs (if otherwise recoverable) do fall to be treated as part of the costs of the Part 8 proceedings. The real issue in cases like the present where the damages would have been less than £1,000 is whether the claimant's litigation friend should be entitled to recover the costs of instructing a solicitor to handle the matter (including the claim for approval) or whether those costs should be limited to or by reference to what might be recoverable for a small claim under CPR Part 27. CPR 27.14 limits such costs to the fixed costs of issuing the claim; court fees; and a sum not exceeding £200 for each expert: see 27PD.7.3.
- CPR 27.14 applies in terms only to "claims which have been allocated to the small claim track under Part 26": see CPR 27.1(1)(a). CPR 26.6(1)(a) provides that:
"(1) The small claims track is the normal track for –
(a) any claim for personal injuries where –
(i) the value of the claim is not more than £5,000; and
(ii) the value of any claim for damages for personal injuries is not more than £1,000;
- A Part 8 claim issued under CPR 21.10(2) cannot be a small claim. This is because CPR 8.9(c) provides that:
"Where the Part 8 procedure is followed –
(c) the claim shall be treated as allocated to the multi-track and therefore Part 26 does not apply."
- In relation to the recovery of costs, the choice of appropriate regime therefore lies between CPR 45 Part II and the general provisions of CPR Part 44.5. The fixed costs regime under CPR 45 Part II applies only in costs-only proceedings under CPR 44.12A or in proceedings for the approval of a compromise under CPR 21.10(2) which fall within the provisions of CPR 45.7(1). Where Part II does apply then CPR 45.8 states that:
"Subject to rule 45.12, the only costs which are to be allowed are –
(a) fixed recoverable costs calculated in accordance with rule 45.9;
(b) disbursements allowed in accordance with rule 45.10; and
(c) a success fee allowed in accordance with rule 45.11."
- In relation to fixed recoverable costs, CPR 45.9 provides that:
"(1) Subject to paragraphs (2) and (3), the amount of fixed recoverable costs is the total of –
(b) 20% of the damages agreed up to £5,000; and
(c) 15% of the damages agreed between £5,000 and £10,000.
(2) Where the claimant –
(a) lives or works in an area set out in the Costs Practice Direction; and
(b) instructs a solicitor or firm of solicitors who practise in that area,
the fixed recoverable costs shall include, in addition to the costs specified in paragraph (1), an amount equal to 12.5% of the costs allowable under that paragraph.
(3) Where appropriate, value added tax (VAT) may be recovered in addition to the amount of fixed recoverable costs and any reference in this Section to fixed recoverable costs is a reference to those costs net of any such VAT."
- A claim for a sum in excess of these amounts will only be entertained in exceptional circumstances: see CPR 45.12.
- In relation to disbursements and success fees, CPR 45.10 and 45.11 provide that:
"45.10—(1) The court –
(a) may allow a claim for a disbursement of a type mentioned in paragraph (2); but
(b) must not allow a claim for any other type of disbursement.
(2) The disbursements referred to in paragraph (1) are –
(a) the cost of obtaining –
(i) medical records;
(ii) a medical report;
(iii) a police report;
(iv) an engineer's report; or
(v) a search of the records of the Driver Vehicle Licensing Authority;
(b) the amount of an insurance premium; or, where a membership organisation undertakes to meet liabilities incurred to pay the costs of other parties to proceedings, a sum not exceeding such additional amount of costs as would be allowed under section 30 in respect of provision made against the risk of having to meet such liabilities;
('membership organisation' is defined in rule 43.2(1)(n).)
(c) where they are necessarily incurred by reason of one or more of the claimants being a child or protected party as defined in Part 21 –
(i) fees payable for instructing counsel; or
(ii) court fees payable on an application to the court;
(d) any other disbursement that has arisen due to a particular feature of the dispute.
('insurance premium' is defined in rule 43.2.)
45.11—(1) A claimant may recover a success fee if he has entered into a funding arrangement of a type specified in rule 43.2(k)(i).
(2) The amount of the success fee shall be 12.5% of the fixed recoverable costs calculated in accordance with rule 45.9(1), disregarding any additional amount which may be included in the fixed recoverable costs by virtue of rule 45.9(2)."
- These provisions are the product of negotiations which took place between solicitors and legal expenses insurers representing the interests of claimants and liability insurers who were concerned to protect the position of defendants. They constitute what Simon J in Nizami v Butt  EWHC 159 accepted is a self-contained system of recovery applicable to relatively small claims which does not involve the application of the indemnity principle but produces a pre-determined figure based on a simple application of the rules. As a consequence, solicitors know in advance what fees will be recoverable for the work they will carry out and may undertake the work on the basis that costs in that sum will be allowed. For this reason costs under CPR 45 Part II are sometimes referred to as predictive costs.
The application of CPR 45 Part II
- The fixed costs provisions do not apply to all cases brought under either CPR 44.12A or CPR 21.10(2). CPR 45.7(2) provides that:
"This Section applies where –
(a) the dispute arises from a road traffic accident;
(b) the agreed damages include damages in respect of personal injury, damage to property, or both;
(c) the total value of the agreed damages does not exceed £10,000; and
(d) if a claim had been issued for the amount of the agreed damages, the small claims track would not have been the normal track for that claim."
- The first issue to be decided in Dockerill and Macefield is whether the claims in those cases are excluded from the fixed costs regime by CPR 45.7(2)(d). This turns on what is meant by "claim" when it appears in that sub-rule. In Dockerill the Deputy District Judge took the view that the claim being referred to was the claim issued under CPR 21.10(2) for the approval of the compromise. Because this is a Part 8 claim it is not one in respect of which the normal track would have been the small claims track. He therefore awarded predictive costs.
- His decision on this point was reversed on appeal by HH Judge Oliver-Jones QC. He held that the claim which is referred to in CPR 45.7(2)(d) is (as it says) the claim that but for the compromise would have been issued for the amount of the agreed damages. It is not the Part 21.10(2) claim. Since the damages claimed would have been less than £1,000, the normal track for that claim would have been the small claims track: see CPR 26.6.
- A similar conclusion was reached by HHJ Robert Owen QC in Macefield.
- In my view these decisions are clearly right. The words of CPR 45.7(2)(d) refer in terms to the claim which (but for the compromise) would have been issued for damages in the amount at which they were eventually agreed. That is the only claim for which the small claims track might have been the "normal track" which is an obvious reference to CPR 26.6. If the District Judge was right then CPR 45.7(2)(d) could never apply because a CPR 21.10(2) claim is always a Part 8 claim. Because the agreed damages in Dockerill and Macefield did not exceed £1,000 for each claimant, the condition set out in CPR 45.7(2)(d) is not satisfied and the costs therefore fall for detailed assessment under CPR 44.5.
- The second and the substantive issue is how a detailed assessment of the costs under CPR 44.5 should be carried out in a case where the underlying damages claim would (if litigated) have been a small track claim. There may, of course, be cases where, although the claim is limited financially, it is thought appropriate to allocate it to the fast track or even conceivably the multi-track. But such cases are likely to be rare and, as I explain later in this judgment, I can see no reason in principle why a small damages claim by an infant should be taken out of the small claims track merely because of the age of the claimant. It is also clear that the premise on which CPR 45.7 operates is that the normal track for small claims for damages by infants will be the small claims track.
- The issue which then arises is whether the removal from CPR 45 Part II of approval applications in respect of claims for less than £1,000 should be reflected in the way in which the costs of such applications are assessed under CPR 44.5. The defendants in these cases submit that it cannot have been the intention of the Rules Committee to withdraw such cases from the predictive costs regime in order to have provided a more generous basis for the recovery of costs. Otherwise one would be left in the situation in which the costs of approvals for settlements of under £1,000 fall to be dealt with on the same basis as extremely complicated structured settlements in respect of multi-million pound claims. They contend that the rationale for excluding from the predictive costs regime approval applications relating to small claims was to allow them to be treated less rather than more generously than CPR 21.10(2) applications for sums in excess of £1,000 and beyond.
- In Dockerill HHJ Oliver-Jones QC addressed that issue in these terms:
"16. However, when it comes to the approval of a settlement on behalf of a child, the Court, through the rules, is in fact giving a good deal of responsibility to the solicitor who represents and advises a litigation friend, and through the litigation friend, of course, the child. It is an important matter that solicitors should take that responsibility seriously, and that the court should approve the steps they have taken. Amongst the steps that are required to be taken, except in the plainest case, is the obtaining of counsel's opinion on the merits of the proposed settlement. Often small cases are not 'plain', and in a very small claim it would be an unwise solicitor who chose not to seek counsel's advice. Somebody has to pay for that responsibility and that advice. That would not be recoverable under the Small Claim Track because the fixed costs allowed for the solicitor's so-called "profit costs" is only £70, and, whilst the cost of medical reports may be recoverable, counsel's fees for advice supporting the settlement would not be recoverable and nor would any time taken by the solicitor to accomplish the same end.
17. Therefore, it seems to me that the correct approach is for costs to be assessed under and in accordance with CPR 44.5. All of the factors that the court must take into account in assessing the amount of costs for a multi-track case, are there set out and well-known. It would be open to the defendant in such cases to argue that in reality small claims track case costs represent what is reasonable, but that would not be something that the district judge would necessarily have to accept because the district judge would be exercising a discretion as to what the costs should be. The usual arguments would be advanced by each side supported in the usual way by schedules. One would hope that in the majority of cases these matters would be dealt with summarily bearing in mind that the damages are so small and the costs of a detailed assessment should, in all but the most exceptional case, be avoided."
- As a consequence, the matter was remitted to a District Judge for the assessment of the costs under CPR 44.5 in accordance with the judge's order. The detailed assessment hearing took place before Deputy District Judge Fowler on 1st October 2010 who was met with the argument by the defendant's representative that the assessment should proceed by reference to what would have been recoverable under CPR 27 subject to any necessary additions. The Deputy District Judge rejected this for the following reasons:
" The important thing about 44.5 is that it gives the court, quite deliberately, a very wide discretion. I am not going to (inaudible) 44.5 (inaudible) the court first of all has to look at proportionality and reasonableness, and then it will have regard to all the factors of 44.5(3)(a) to (g) in looking at all the circumstances. It seems to me that, in this case and in similar cases, it gives the court ample discretion to look at the reality of the matter to bear in mind, for example, factors such as those which Mr Cooper has drawn my attention to: the fact that there was a claim by the mother of these infants that was resolved; that liability perhaps was not in reality anything of an issue, certainly as far as breach of duty was concerned as opposed to causation; and of course the modest sums for which these claims actually settled. However, it is quite another step to go from that to say that in these particular circumstances, these particular costs should be assessed as if the cases have been on the small claims track."
- The financial consequences of this approach were that the solicitors' base costs for the approval of the claims of both children amounting to £750 each were assessed at £3,474.80; the disbursements (medical reports and counsel's fees) at £1,367.50; and a success fee of 12.5% (£370.48) plus an ATE premium of £399 was also allowed in each case. With VAT the total costs allowed amounted to £6,931.59 but the Deputy District Judge in error assessed the costs at £6,885.59. He also ordered the defendants to pay the costs of the assessment which were summarily assessed at £6,400.83.
- The defendants appealed against the assessment on the ground that the judge failed to have any or any adequate regard to the limited amount of costs which would have been recoverable had the damages claim itself been tried and then compromised. The costs of the approval application should have been recoverable only to the extent permitted for a small claim subject to any reasonable additions in respect (for instance) of the solicitors' or counsel's report on the merits of the compromise required under the terms of the Practice Direction to CPR Part 21 (see para 4 above). What this comes down to in practice is that the solicitors' costs of conducting the litigation should be disallowed. Mr Mallalieu referred to this method of assessment as what he called "Small Claims Plus". The assessment should not be at large. Rather it should use the Part 27 regime as a template but allow such additional expenses to be recovered as the judge considers to be reasonable and necessary having regard to the circumstances of the particular case.
- HH Judge McKenna accepted this argument and allowed the defendant's appeal. Having referred to the guidance contained in the judgment of HH Judge Oliver-Jones QC he said this:
"10. There is nothing to exclude cases involving children from the small claims track. Therefore if a claim brought by a child were not to be compromised prior to issue and proceedings were issued and went all the way to a judgment, the child would only be able to recover the fixed costs provided for under Part 27. It would be unusual indeed if the effect of a claimant being a child, and the parties were able to negotiate settlement prior to issue, was that in that case, notwithstanding the policy considerations to which I have referred in the case of an adult claimant, or indeed a child claimant whose claim went to trial, that simply because the claim settled prior to issue and proceedings only had to be issued in order to obtain court approval, that that meant that the claimant could instruct solicitors to deal with all matters and that those costs would be recoverable. To my mind that is not the appropriate approach.
11. What the Deputy District Judge should have done (which to my mind is in line with the approach identified by Waller LJ at paragraph 19 of the judgment of the Court of Appeal in O'Beirne v Hudson  1 WLR 1717, 1724) is to look at each item of costs, decide whether that item was necessary, but in the light of the fact that had the claim been brought by an adult the small claims track costs regime would have applied. Manifestly that is not the approach that was adopted by the Deputy District judge in this case. He seems to have approached the case on the basis that because the claimant was a child (and therefore court approval was necessary), it was reasonable or necessary to instruct a solicitor throughout and then tested each of the elements of the bill as to whether it was reasonable or necessary, as appropriate, on the basis that it was reasonable or necessary to have the solicitor as appropriate, and therefore he was just testing the amount of time or the hourly rate and the like, instead of, which seems to me he should have done, to ask himself whether each of the steps taken by the solicitor was necessary to be taken by a solicitor in a case which would otherwise be covered by the small claims track.
12. I conclude therefore that the Deputy District Judge erred in the test which he applied and/or as to his exercise of discretion by failing to give any or any adequate weight to the highly material consideration that, but for the fact that the claimant was a child, the claim would have been allocated to the small claims track with the costs consequences that would thereby apply."
- In Macefield the claimant was a 2 year old child whose claim for damages was also settled in the sum of £750. The District Judge proceeded to order the payment of predictive costs under CPR 45 Part II but, as mentioned earlier, HH Judge Owen QC held on appeal that there should be a detailed assessment under CPR 44.5. He went on, however, to take a different view about the basis on which the assessment should be conducted and rejected the Small Claims Plus approach accepted by Judge McKenna in Dockerill:
"20. I am satisfied that Mr Williams' submissions are correct. I do not consider that any form of direction or 'guidance' to the costs judge, could or should be made to the effect that the yardstick by which any item should be tested or allowed at the detailed assessed should be that of the small-claims track costs regime.
21. That is not to say that a district judge would not have regard (as he would be bound to do), as a potentially material circumstance of the case, to the value of the claim, which without more, would fall within a small-claims track regime. Conversely, no doubt, the costs judge would have in mind as a material circumstance the nature of the claim, namely, a claim concerning an infant and the fact that the rules expressly require the claim, however, modest, to be handled by a qualified practitioner subject to well known professional responsibilities which require various steps to be taken to demonstrate that all proper care of the claim has been taken. The court would be loath to criticise a solicitor in such circumstances for taking such steps (for example, see the observations of HHJ Oliver-Jones QC at paragraph 16 in Dockerill & Healey v Tullett (No 1) ). Although it is a matter for the costs judge he might reasonably be expected, in all probability, to pay particular regard to the fact that the court consistent with the material rules expects and requires such a vulnerable claimant to be protected in the form of proper legal representation with all appropriate steps having been taken prior to seeking approval. It would be a likely misdirection on any such assessment for the costs judge's focus simply to be placed on the value of the claim and to then adopt, in result if not expressly in name, a small claims costs regime or approach.
22. There would be no distinction in such circumstances, if the defendant's position as presented in this case is correct between this kind of case (where the rules require the allocation to the multi-track and established good practice recognise minimum steps to be taken in the interests of the infant in civil litigation) and a claim which is free from such constraints and concerns, say, litigants outwith the provisions of CPR 21, for example, as in O'Beirne v Hudson."
- Central to the reasoning in both these judgments is the decision of this court in O'Beirne v Hudson  EWCA Civ 52. In that case the claim was for general damages exceeding £1,000 but the claim was settled before being allocated to any track. Under the consent order the defendant agreed to pay general damages of £400; special damages of £719; and the claimant's reasonable costs to be assessed on the standard basis. The terms of the order for costs precluded an assessment under CPR 27 but the court held that on an assessment under CPR 44.5 the costs judge was entitled to take into account the fact that had the claim not been settled it would have been allocated to the small claims track and the costs recoverable would have been limited.
- Waller LJ at paragraphs 16-17 said that:
"16. In my view, despite the attractive argument of Mr Williams, the answer to this case is straightforward. This was a consent order providing for costs to be assessed on the standard basis; the addition of the words reasonable to my mind adds nothing to the order that costs were to be assessed on that basis. It certainly follows from that that the costs judge was not free to rule that the costs would be assessed on the small claims track basis and if and in so far as Judge Stewart might be understood to be saying that he was in my view wrong. But, and this is the critical point, in making an assessment the Costs Judge is entitled to take account of all circumstances (see CPR 44.5(1)), including the fact that the case would almost certainly have been allocated to a small claims track if it had been allocated. In so doing she would have regard to what could or could not be recovered if the case had been so allocated.
17. At that stage the Costs Judge must question whether, if it could have been fought on the small track, it is reasonable that the paying party should pay the costs of a lawyer. The Costs Judge would not be bound (as I think Mr Morgan's formulation would suggest) only to allow the costs as per a case on the small claims track but it would be a highly material circumstance in considering what by way of assessment should be payable."
- He then referred to what Lord Woolf CJ said in Lownds v The Home Office (Practice Note)  1 WLR 2450 about assessing costs on the standard basis and to the judgment of this court in Voice and Script International Ltd v Alghafar  EWCA Civ 736. He went on:
" I have quoted the passage from Judge LJ's judgment in Voice and Script above. I accept that what was under consideration in that case was what order a trial judge should make when making an order for costs. Thus in many cases the problem that occurred in this case will not arise because the trial judge can actually make an order that costs be assessed on a small claims track basis. I also accept that as Judge Stewart noted, a costs judge has no power to alter the order for costs made by the a judge, and thus make a direction from the outset where costs have been awarded on the standard basis that costs will be assessed on a small track basis. But what lay behind what Judge LJ said reflects what Lord Woolf was saying in Lownds and provided the Costs Judge does not purport to vary the original order or tie himself to assessing by reference to the small claims track it is quite legitimate to give effect as far as possible to the philosophy which lies behind the above statements. There is a real distinction between directing at the outset that nothing but small claims costs will be awarded and giving items on a bill very anxious scrutiny to see whether costs were necessarily or reasonably incurred, and thus whether it is reasonable for the paying party to pay more than would have been recoverable in a case that should have been allocated to the small claims track. Was it for example necessary to have had lawyers and is it reasonable for the paying party to have to pay for lawyers are questions that should arise where a claim should have been allocated to the small claims track."
- In Macefield HH Judge Owen QC distinguished O'Beirne v Hudson on the basis that the Part 8 approval claim was not one which should have been or was allocated to the small claims track. He said that:
"23. In my judgment there is a material distinction between the circumstances ordinarily found in cases of the kind subject to CPR 21 and those which are not. In any event, there is an obvious distinction between the present case and O'Beirne v Hudson which was a case which should have been allocated to the small-claims track but it was not and it was perfectly proper and understandable, and just, that the approach to the assessment of those costs should be as indicated by Waller LJ (and explained also by Hooper LJ). The case before me is not a case which should have been allocated to the small-claims track and its costs regime which would then apply. This is a case which should and indeed had to be allocated to a different track with a different costs regime (that is the multi-track).
24. In the circumstances I am satisfied that the costs of this Part 8 infant approval claim must be subject to a detailed assessment in default of agreement in accordance with CPR 48.5 and subject to CPR 44.5. I reject the approach advocated by the defendant to the effect that that assessment should be subject to a fetter identified by the small claims costs regime. The proper conduct of a detailed assessment which allows for the court to have regard, as a material circumstance, to the value of the claim and (lack of) complexity should in my judgment afford the necessary protection for the defendants and their insurers. The approach advocated by the defendants or their insurers lacks balance and fairness, is too rigid and is not supported by the existing provisions governing costs assessments."
- This reasoning is supported by Mr Bacon QC in respect of both appeals. He says (rightly) that O'Beirne was not concerned with a claim brought by a protected party but was a case where the size and nature of the claim all but guaranteed that it would have been allocated to the small claims track but for the terms of the consent order. By contrast in these cases the court is required to approve the compromise of a claim for the benefit of children who cannot manage the litigation themselves or make an assessment of whether they should settle on the terms which are offered. The court's intervention on their behalf has to be an informed process which cannot be achieved without the instruction of a lawyer if only in order to assess the value of the claim and to advise whether the sum on offer is reasonable. He says that it is also in the public interest to ensure that court approval of infant settlements is arrived at with the benefit of legal advice and assistance. If the costs are liable to be assessed on a small claims basis the reality will be that solicitors will be unable and therefore unwilling to undertake the work because they will have no assurance that they will be able to recover their profit costs. The protected party assisted by their litigation friend will become effectively unrepresented in the formulation of the claim and the negotiation of the settlement whereas the defendants, through their insurers, will have the advantage of professional representation and advice throughout.
- He submits that the correct starting point is the one identified by Judge Owen QC: namely that these are Part 8 multi-track proceedings which are therefore designed to be cost bearing at every stage. Whilst it will always be open to the paying party to challenge the reasonableness of any particular item on the bill by reference to the complexity and size of the claim, there is nothing in CPR 44.5 which justifies the small track regime as the starting point or measure against which the bill should be scrutinised. To do so would be to convert an order for costs to be the subject of detailed assessment under CPR 44.5 into an order for their assessment under CPR 27.
- Mr Mallalieu's response to this is that an assessment of the costs of an infant approval claim under CPR 21.10(2) should take account of the fact that had the damages claim been commenced it is likely to have been allocated to the small claims track. Consistently with this, he accepts that if the damages claim has particular aspects to it which would have led to it being allocated to a different track then this approach will not be appropriate. But his basic premise is that small claims by infants are not ipso facto assigned to a different track and that had those proceedings been issued they would have been governed as to costs by CPR 27. He points to the fact that under CPR 26.8 which lists the factors relevant to allocation, there is no mention of infancy or any other lack of competence nor is there any express exclusion of cases involving such claims from the CPR 27 regime.
- He makes the point that a child can only litigate with the assistance of an adult litigation friend and that they are therefore in no better or any worse position than any other litigant.
- He also rejects the suggestion (evident in Judge Owen's judgment in Macefield) that approval claims involving infants raise additional issues which necessarily require the involvement of solicitors. He says that simple cases are often dealt with on paper on the basis of a solicitor's written advice about the merits of the compromise and will rarely involve complex facts or disputes about liability or quantum.
- Mr Mallalieu accepts that a CPR 21.10(2) claim is a multi-track claim and that its costs are to be assessed under CPR 44.5 but this is not, he submits, an obstacle to the application of a small claims approach to assessment because on a detailed assessment under that rule the costs judge may consider as part of his assessment of the reasonableness and proportionality of the costs claimed whether it was reasonable to employ a solicitor to do the work at all: see O'Beirne. He emphasises that the defendant does not suggest that the court should at the outset of the assessment limit the claimant's costs to what is recoverable under CPR 27. But it should, to use Waller LJ's words, give very anxious scrutiny to claims for costs above that level so as to ensure that only reasonable costs proportionate to the size and complexity of the claim are recoverable.
- The correct starting point must be the orders for costs which were made. In Dockerill the order made on the hearing of the Part 21.10(2) application (as amended by Judge Oliver-Jones QC on appeal) was for the detailed assessment of the costs on the standard basis under CPR 44.5. In Macefield (again following an appeal) a similar order was made. In these circumstances, the court's obligation was to apply CPR 44.5 and to decide whether the costs claimed were proportionately and reasonably incurred or were proportionate and reasonable in amount: see CPR 44.5(1)(a). This is a fundamentally different exercise from that under CPR Part 27 where the court is not permitted to order the payment of any costs except those specified under CPR 27.14. The provisions of CPR 45.7(2) exclude certain types of case (including claims for sums below £1,000) from the predictive costs regime but do not otherwise dictate how those costs are to be dealt with. But the combined effect of CPR 8.9(c) and CPR 21.10(2)(b)(i) is to make these multi-track claims to which Part 27 can have no application.
- The resolution of the apparent anomaly involved in extracting such cases from the Part 45 regime but not making them small track claims is, I think, that the costs judge is entitled to take into account the size and complexity of the claim under CPR 44.5(3). But he will not do so (as in O'Beirne) because the costs bearing claim (i.e. the CPR 21.10(2) claim) should itself have been a small claim. For the reason just explained, that is not a possible hypothesis. What he is required to do is to look realistically at the underlying claim for damages which has been settled and consider whether the costs claimed in the Part 21.10(2) proceedings are proportionate to the issues involved. In practice the issues raised in the approval proceedings are unlikely to be any more or less complex than those which would have existed had the damages claim been issued and tried. Although the claimants are children, I accept Mr Mallalieu's submission that in a simple and straightforward case (which these are) not involving serious injuries and with no real issues about liability or quantum the court is likely to have allocated the claim to its normal track and to have been able to deal with the case on that basis. This will obviously be highly material to a consideration of whether it was proportionate for the claimant to have employed solicitors to handle the approval proceedings beyond providing a written advice on the merits of the settlement in accordance with the Practice Direction.
- The fact that this will be an assessment under CPR 44.5 means that the court will only allow costs which are proportionate to the matters in issue and will resolve any doubts in favour of the paying party: see CPR 44.4(2). But it also means that these matters will be approached through the lens of CPR Part 44 under which reasonable and proportionate costs are in principle recoverable. I therefore reject the argument (if this is what it comes to) that the starting point should be CPR Part 27 and that each item of costs claimed should be measured against what would be reasonable under that regime. And Mr Mallalieu does not now put his case in that way. But I accept that as part of the CPR 44.5(3) exercise the paying party will be entitled to challenge not merely the amount and reasonableness of any particular item but also whether it was proportionate and reasonable to have instructed solicitors to act generally in the approval proceedings.
- This is, I think, the real battleground in these cases. Mr Bacon accepts that on an CPR 44.5 assessment individual items which are charged for may be disputed as excessive or unreasonable but strongly resists the right of the paying party to query the necessity of employing solicitors at all.
- CPR 44.4 and 44.5 do not refer in terms to any criterion of necessity. But the concept of proportionality was explained by Lord Woolf CJ in Lownds v The Home Office in these terms:
"29. In assessing costs judges should have no difficulty in deciding whether, in order to conduct the litigation successfully, it was necessary to incur each item of costs. When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed. Any item that was not necessary should be disallowed.
30. In his advice the senior costs judge drew attention to the problems that can arise from 'double jeopardy'; in other words from making a deduction when considering the bill item by item and then looking again at the situation as a whole and making a further global deduction. This danger will be avoided if a party receives at least a reasonable sum for the items of costs which were necessarily incurred.
31. In other words what is required is a two-stage approach. There has to be a global approach and an item-by-item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which CPR 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This is turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner.
32. The fact that the litigation has been conducted in an insufficiently rigorous manner to meet the requirement of proportionality does not mean that no costs are recoverable. It means that only those costs which would have been recoverable if the litigation had been appropriately conducted will be recovered. No greater sum can be recovered than that which would have been recoverable item by item if the litigation had been conducted proportionately."
- It is important to note that this is general guidance about the detailed assessment of costs on a standard basis and does not depend on issues about allocation. But in Voice and Script the Court of Appeal confirmed that a failure to allocate what became a small damages claim to the small claims track did not preclude the costs judge on a detailed assessment from considering whether the claimant should be entitled to recover more than he would have been entitled to under CPR 27. Judge LJ said that:
"20. With that lengthy and slightly involved background I can turn briefly to the principle, which seems to me to be perfectly clear. By treating the absence of allocation to track as conclusive, in my judgment District Judge Jenkins misdirected himself. The omission may have meant that the small claims costs regime did not follow as a virtually automatic starting point, but it did not preclude the court even from considering whether it would be reasonable to make an assessment consistent with the small costs regime or, for that matter, to apply the regime to a claim which should never have exceeded and never was anything more than a small claim. If that approach is not expressly stated in the Civil Procedure Rules, it follows from two essential principles, first, the discretionary nature of costs orders, and second, the overriding requirement of proportionality in civil litigation generally, and also as an essential ingredient for consideration when any question of costs arises: see Home Office v Lownds EWCH 365.
21. In my view in the absence of any specific factors suggesting otherwise, in a case like this where, if sought, an allocation would have been made to small claims track the normal rule should be that small claims costs regime for costs should apply. While respecting Judge Oppenheimer's hesitation about interfering with a decision which he personally would not have reached, in my judgment he should have done so on the basis of the misdirection which I have identified. I should therefore allow the appeal."
- These cases (which were followed and applied in O'Beirne) are therefore authority that the question whether it was necessary to have employed solicitors to do the work is a matter for legitimate consideration as part of the assessment process. Obviously it will be easier to reach the conclusion that the small claims regime is the appropriate model in a damages claim which ought itself to have been allocated to the small claims track. Our cases are one removed from that. But even where (as here) no such allocation was ever possible, it must be permissible for that question to be considered.
- In my view, Deputy District Judge Fowler was therefore wrong in Dockerill to rule that it was not open to him to consider whether the costs should be assessed by reference to the small claims track. I agree with Judge McKenna that what he ought to have done was to ask whether the damages claim and therefore its compromise was sufficiently complex as to have justified the engagement of solicitors beyond the production of a report on the merits of the settlement or in respect of any other step in the proceedings and to have scrutinised the bill on that basis. This is the approach outlined by Judge Oliver-Jones QC in paragraph 17 of his judgment which, in my view, the District Judge failed to give proper effect to. I would therefore dismiss the claimant's appeal in Dockerill.
- In Macefield, the claimant appeals against the rejection by Judge Owen QC of CPR 45 Part II as the appropriate costs regime and I would dismiss that appeal for the reasons given in paragraphs 15-17 of this judgment. There is, of course, no appeal by the defendant against the judge's order that costs should be assessed under CPR 44.5 and it has not therefore been necessary for us to consider his comments on the correct approach to be taken to such an assessment of the costs of a Part 21.10(2) application. I agree with the judge that the size of the sum involved is not a conclusive factor and that the case has to be looked at more widely. I also agree (for the reasons given above) that Part 27 is not the starting point and Mr Mallalieu has resiled from that position on this appeal. But I respectfully differ from him insofar as he suggests that the vulnerability of the claimant always requires a special approach in the context of a Part 21.10(2) claim to the assessment of costs.
- I am very conscious that the practical consequence of this ruling may be to discourage solicitors from taking on CPR 21.10(2) proceedings involving small claims because they are unlikely in many such cases to be able to recover their costs. But to apply a normal multi-track assessment of costs in all such cases seems to me to run contrary to the purpose of CPR 45.7(2)(d) which must, in my view, have been intended to allow the court to apply a less generous regime to approval applications based on small claims. The predictive costs regime could have been applied to all cases involving claims of less than £10,000 but it was not. If this produces a difficulty in practice then it will be for the Rules Committee to think again.
- In this case the claimant was a 15 year old child who was injured in a road traffic accident. Liability was admitted and the damages were agreed at £2,100. An application was made under CPR 21.10(2) for approval of the settlement by the court and the hearing of the application took place before Deputy District Judge Frankish in the Bow County Court on 29th October 2009. The claimant was represented by Mr Edwards of counsel and the claimant's solicitors did not attend.
- At the end of the hearing the judge summarily assessed the costs under CPR 45 Part II and allowed an item of £201.25 (including VAT) in respect of counsel's fee for attending the hearing on behalf of the claimant.
- As mentioned earlier, a disbursement such as counsel's fees is recoverable under CPR 45 Part II provided that the fees are "necessarily incurred by reason of one or more of the claimants being a child or protected party": see CPR 45.10(2)(c).
- This item was disputed by the defendant's representatives who submitted to the District Judge that the claimant's solicitors could have instructed a local agent to attend. But the judge rejected that on the basis that it would have been no cheaper. He said that a court hearing was a stressful occasion for the parties and that counsel was needed to re-assure his client. Mr Edwards had also assisted the court in sorting out the papers so as to provide the correct documents for the approval hearing to go ahead. He therefore allowed the disbursement.
- On appeal the defendant did not contend that the claimant should not be legally represented. He appealed against the assessment on the ground that the costs of legal representation at the hearing should have been met by the claimant's solicitors as part of the fixed recoverable costs payable under CPR 45.9 and that the fees of counsel were not therefore necessarily incurred.
- HH Judge Hornby dismissed the appeal. He accepted the argument that counsel's fees for providing an advice on the merits of the settlement which is required under the Practice Direction would ordinarily be recoverable as a disbursement under CPR 45.10 along with any necessary expert's report and that the costs of attendance at the hearing should be treated no differently. Often they would be covered by the same fee. The judge also drew attention to the fact that it was not always possible to say in advance of a hearing whether some complication might arise which justified counsel being instructed. The court should therefore approach the question of necessity not (as some judges have suggested) by looking with the benefit of hindsight at how complex or not the hearing had proved to be but by adopting the approach (and these are my words) that it is better to be safe rather than sorry. He concluded by saying:
" as a matter of principle I consider that the rules are clear and are that, where a claimant is a child or a protected party, the fees payable for instructing counsel are necessarily incurred because of the simple fact that the court is concerned enough with claimants who are children or protected parties to have, if I may say so, the Rolls-Royce skills of experienced counsel as opposed to those of a person who might not be thought to have the same degree of experience and skills to represent a child. In every case I consider that it is essential that a child has the best skills available to ensure that the least amount of mistakes are made."
- Mr Mallalieu submits that this is an evident misdirection because it treats counsel's attendance as a necessity in every case regardless of the particular circumstances. In this case counsel had charged separately for his advice on the settlement (which was accepted as a proper disbursement) and the fee in dispute relates solely to his attendance of the hearing. The requirement to demonstrate necessity in CPR 45.10(2)(c) creates an additional condition which has to be satisfied over and above the representation secured through the use of solicitors and the opening words of CPR 45.10 ("the Court may allow a claim for a disbursement") confirm that there has to be some specific justification for counsel to be instructed.
- It seems to me that the wording of CPR 45.10 contemplates that the fees of counsel will only be recoverable if they had to be incurred because of the special status of the claimant. "Necessarily" imports a causal link of this kind which is not established merely by general considerations such as that counsel may be more competent or better equipped to deal with a hearing than a local agent appointed on an ad hoc basis. The rule is looking to identify some factor attributable to the claimant being a child or protected person as defined in CPR 21 which requires counsel to be instructed and which by process of elimination would not exist in a case where the claimant was a competent adult.
- The costs of instructing counsel to provide the opinion required under 21 PD 5.2 and 6.4 will ordinarily satisfy this test because they are a specific requirement of Part 21.10 proceedings. But for counsel's fees for attending a hearing to be recoverable there must, I think, be some complexity in the case which justified their being instructed to appear on the approval hearing. It is not enough to say that counsel would help to remove the stress of the occasion. That is a problem in every case. It is not unique to claimants under CPR 21.10.
- Judge Hornby thought that children and protected parties merited the services of counsel in all cases but that, I think, puts the matter too widely. If the use of counsel in all Part 21.10 cases had been considered appropriate by the Rules Committee then one would have expected to see that reflected in CPR 45.10(2)(c) or in the provisions of the Practice Direction to CPR 21. As it is, a much stricter test has to be satisfied.
- Many of these cases (and this one seems to be no exception) do not involve difficult issues and can be dealt with shortly on the basis of the written advice on the merits. In such cases the convenience of having counsel attend the hearing has, I think, to be borne by the solicitors as part of their costs just as they would have had to meet the costs of instructing a local agent.
- For these reasons I would dismiss the appeals in Dockerill and Macefield and I would allow the appeal in Tubridy.
Lord Justice Carnwath :
- I agree.
Lady Justice Arden :
- I also agree.
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