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Willis v Nicolson, Court of Appeal, 13 March 2007

22 March 2007
The issues

Costs capping – whether appropriate to give a comprehensive set of to be applied in personal injury cases – principles to be applied generally – expectations as to annual income of professionals conducting litigation.

The facts

The Claimant suffered a road traffic accident with catastrophic consequences. Damages recoverable on fill liability were likely to be in the area of £5million. The Defendant was concerned about the level of costs likely to be presented to them by the Claimant’s solicitors and sought a Costs Capping Order. At allocation stage the Claimant estimated that their costs of the whole action would be £200,000.00 to £250,000.00. At the time of the Pre-Trial Checklist that figure had risen to £564,189.00. A third estimate was given in connection with the Defendant’s Application, one year on from the estimate given in the Pre-Trial Checklist, and that figure had risen to £959,342.00. In September, the Defendant’s Application for an Order that the Claimant’s solicitors costs be capped was made on the basis that there was “a real and substantial risk that without such an Order costs will be disproportionately or unreasonably incurred”. The Judge refused to impose a cap, being unable to find that there was a real risk that future costs would be unreasonable and disproportionate, but he did feel that the Defendant merited some protection and ordered that the costs incurred from the date of the last estimate should not exceed the figure of £459,496.00, being the figure the Claimant had put in the estimate for future costs. The Defendant appealed.

The decision

Costs Capping Orders were essentially case management decisions depending heavily on a Judge’s perception of the needs of the case and general statements about when and in what circumstances a Costs Capping Order would be made could only be general statements. There was a judicial difference of opinion on the subject. In Smart v East Cheshire NHS Trust Gage J had said that the Court should only consider making such an Order in cases where the Applicant showed by evidence that there was a real and substantial risk that without such an Order costs would be disproportionately or unreasonably incurred and that that risk could not be managed by conventional case management and Detailed Assessment. There were by contrast statements made by the Court of Appeal encouraging the use of costs capping in, for example, Solutia UK Ltd v Griffiths; Leigh v Mitchellin Tyre Plc and King v Telegraph Group Ltd. This difference of opinion needed resolution but the Court would not provide it in this case. For reasons peculiar to this case there was no reason why the Court should interfere with the Judge’s decision. The Appeal therefore would be dismissed.

The Court had however been encouraged to give general guidance on costs capping.

The high cost of civil litigation was a matter of concern. An element in that cost was undoubtedly the expectations as to the annual incomes of the professionals conducting it. The costs system, as it operated, could not do anything about that because it assessed a proper charge on the basis of market rates rather than attempting to place an objective value on the work. When the CPR replaced the Rules of the Supreme Court there was hope that that practice might change, particularly after the Judgment in Lownds v Home Office but in the event nothing had changed. Proportionality is achieved by determining whether it is necessary to incur a particular item of costs. When an item of costs is necessarily incurred a reasonable amount should be allowed. The reasonable amount continued to be determined by the market. Thus it was in a case of this sort that failure routine Trial preparation work was charged at an average, over the range of grades of lawyer involved, of £250.00 per hour. If proportionality was to mean anything, at least the Courts should ensure that no more of those expensive hours were spent than the case justified. To limit the way in which professionals intend to conduct a case is a delicate matter. The Court must be careful before imposing a restriction, particularly when those restricted are acting for a Claimant who has suffered catastrophic injuries. The Court would need reliable information about and understanding of the nature of the particular case and the general demands of that type of litigation. For reasons of fairness and practicality a cap should not be imposed retrospectively so the enquiry should take place at a sufficiently early stage to have a real effect on expenditure.

With those matters in mind the Court had drafted a comprehensive set of principles to apply in personal injury cases which could be considered for application to other types of cases. However, further discussion with members of the Court, including the Master of the Rolles and the Deputy Head of Civil Justice, had demonstrated that, despite the terms in which permission to appeal was granted in this case, there remained serious doubts as to whether further guidance on costs capping should be given by the Court as opposed to being formulated by the Civil Procedure Rules Committee after extensive consultation. The Court did not therefore intend to pursue the question further and it would be left for the Rules Committee to decide whether, and with what degree of urgency, the issues identified by the Court should be taken up.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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