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Tribe v Southdown Gliding Club Ltd & Ors, Supreme Court Costs Office, 4 June 2007

23 August 2007
The issues

Costs – Allocation Questionnaire – what effect should the estimate in the Allocation Questionnaire have on the claim for costs – proportionality – solicitorís hourly rates.

The facts

In July 2000 Mr Tribe was piloting a glider which, after a winch launch, nosedived to the ground causing him severe multiple injuries. He consulted a firm of solicitors, Patterson & Brewer, in Central London. On 11th July 2003 proceedings were issued in the High Court for damages for negligence against the First Defendant who had hired the glider, the Second Defendant, the owner of the glider, and the Third Defendant who had been responsible for inspecting the glider and had helped maintain it. The Claimant had entered, in May 2003, into a Conditional Fee Agreement with Patterson & Brewer. He purchased an after the event insurance policy under the Accident Line Protect Scheme to cover him against the cost of his own disbursements and against liability for the Defendants costs in the event that he lost the action. Cover was limited to £100,000.00. A Defence was served on behalf of the First and Third Defendants denying liability and on behalf of the Second Defendant denying liability and alleging contributory negligence. In November 2003 Allocation Questionnaires were filed. The Claimantís Allocation Questionnaire was ‘remarkably unhelpfulî, giving no details of experts or other witnesses or any estimate of the length of Trial or any estimate of the costs incurred to date or the overall costs. The Allocation Questionnaire filed on behalf of the First and Third Defendants was more forthcoming, identifying four possible witnesses and two liability experts. The time estimate was 7 days. The costs incurred by the Defendants to date were put at £7,500.00 and the overall costs at £50,000.00. On behalf of the Second Defendant a costs estimate at £1,250.00 was filed, with an overall costs estimate of £15,000.00. In September 2005 the solicitors on behalf of the First and Third Defendants served a Listing Questionnaire with a breakdown of costs, estimating Trial length at 5 days. The breakdown showed costs at £234,379.00 and the future costs for the Trial of £79,984.00. Three days later the Claimant served a Notice of Discontinuance. Bills of Costs were served on behalf of the Defendants. That served on behalf of the Second Defendant was settled by the Claimant in the sum of £17,800.00. The Bill served on behalf of the First and Third Defendants was in the total sum of £244,509.72. That figure was broadly in line with the breakdown provided with the Listing Questionnaire but 5 times the amount estimated in the Allocation Questionnaire. The matter was listed by the SCCO for the Hearing of 4 preliminary issues, namely:-

1. Whether the costs claimed by the First and Third Defendants should be limited to the sums estimated in the Allocation Questionnaire;
2. What effect, if any, should the estimate have on the claim for costs;
3. Whether the costs claimed were disproportionate;
4. The amounts that should be allowed for the solicitors hourly rates.

Shortly before the Hearing the Claimantís solicitors came off the record and the Claimant therefore attended in person.

The decision

The first and second issues.

Section 6 of the Practice Direction to Part 43 of the Civil Procedure Rules 1998 provided that where there was a difference of 20% or more between the base costs claimed by receiving party and the costs shown in an estimate of costs filed by that party and no satisfactory explanation had been provided, or the paying party had reasonably relied on the estimate of costs, then the Court could regard the difference between the costs claimed as evidence that they were unreasonable or disproportionate.

In Leigh v Michelin Tyre Plc the Court of Appeal had given guidance as to the way in which estimates were to be taken into account in determining the reasonableness of costs claimed. In that case the Court of Appeal had said that the estimates provided should be a useful yard stick by which the reasonableness of the costs claimed could be measured; that the Court could take account of the estimated costs if the other party showed that it relied on the estimate in a particular way, for example, not making an offer of settlement in reliance on a low estimate of costs given by the other side; thirdly the Court should take the estimates into account where it would have given different case management directions if a realistic estimate had been given; but, it was not appropriate to hold a party to its estimate simply to penalise him for providing an inadequate one because to do so would be, in effect, to treat a costs estimate as a costs cap.

The Claimant had said that his solicitor had relied on the estimate in limiting the cover under the policy to £100,000.00. Given the estimate the solicitor had taken the view that there was no need to seek a ‘top upî. The Court had no doubt that had the Claimant been aware at the outset of the true nature of the claim for costs against him he would have purchased additional insurance cover. There was no doubt therefore that the Claimant had relied on the estimate of costs given by the First and Third Defendants in their Allocation Questionnaire. Whilst the estimate was low, it was not so low that it was unreasonable for the Claimant and his solicitors to rely on. It was contained in a document signed by a solicitor in a respected firm. He would have been aware that the Claimant had purchased ATE insurance from the earlier Notice of Funding and should have been aware of the importance of the estimate. On behalf of the First and Third Defendants an explanation had been put forward. It had been said that they had not anticipated the complexity and volume of the engineering evidence or the need for metallurgical evidence, or the delays on behalf of the Claimantís solicitors, or the death of one expert and of the Second Defendant. Whilst some of these factors would have been unanticipated, others were commonplace in this sort of litigation. Collectively the factors could not explain the difference between the estimate and the sum now claimed. The chasm was not bridged.

Had the true nature of the costs had been known it was doubtful that the case would have been differently case managed. It was probably not a case where a direction for joint experts would have been appropriate.

Whilst the Court of Appeal had stressed in Leigh that an estimate was not a ‘capî, this was an appropriate case to reduce the costs that could be recovered from the receiving party to take account of the paying partyís reliance on the estimate. The starting point should be the costs which one would expect to see incurred in this case by the parties. The First and Third Defendants reasonable costs would have been expected to have been in the sum of £100,000.00 to £150,000.00. Allowance then had to be made for three competing factors:-

1. The low estimate that was given. This would suggest a starting point at the bottom of the bracket of £100,000.00 to £150,000.00.
2. A deduction of the costs of Trial and of dealing with the assessment of damages. On the Defendantís own figures the costs of Trial would have been about £80,000.00. The reasonable figure for Trial and the assessment of damages would have been just over one half of that figure.
3. The additional costs of the factors identified by the Defendantís solicitor.

Taking these matters into account the reasonable figure for defending the action to discontinuance and including the additional costs reasonably incurred because of the deaths of an expert and one of the Defendants and the need for metallurgical evidence would have been £70,000.00. That should be the most that the First and Third Defendants should be able to recover in respect of their costs.

The third issue – whether the costs were disproportionate.

This was a potentially high value claim but not the highest by a long way. Potentially the damages may have approached £500,000.00. There were no complex legal issues. The case would succeed or fall on the expert evidence. Even if the amount now claimed for costs included the costs of Trial and of dealing with damages, the figure was so out of kilter with the Bills seen in incomparable cases, that it had to be concluded that the costs were disproportionate.

The fourth issue – hourly rates.

It was reasonable for the First and Third Defendants to instruct specialist aviation solicitors. The Claimant had instructed a Central London firm and the action was in the High Court in London. This however was not a ‘cityî case. This was not ‘cityî work. The Defendants should be able to recover Central London rates but anything more would be unreasonable. The Partnerís initial rate of £280.00 was reasonable. The step up in January 2004 to £320.00 was not explained and a reasonable rate for 2004 should be £300.00 and for 2005 £320.00 rather than the £340.00 claimed. The grade C rates claimed of £150.00 in 2003 and £170.00 from 2005 were reasonable. The costs draftsmanís fee had been claimed at £165.00. This was high. It could have been done by many independent costs draftsmen at an hourly rate of up to £120.00. The costs draftsmanís rate should be limited to £120.00.

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