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Cost capping hammer blow

11 July 2007

Synopsis

On 12 March 2007, his Honour Judge McDuff made a cost capping order limiting Irwin Mitchells costs to just 30 of their £726,000 estimate. In a judgement that pulled no punches, sympathy was expressed for the defendants view that the case "was less about gaining compensation for the claimants and more about making profits for Irwin Mitchell".

Background

The claimants are represented by Irwin Mitchell, acting under a Group Litigation Order and the defendant is First Choice Holidays and Flight Limited. The allegations relate to the provision of holidays in 2001 and 2002 at the Soviva Hotel in Tunisia. It is claimed that as a result of inadequate hygiene at the hotel the claimants became ill. Liability is denied.

At the Allocation Questionnaire stage, Irwin Mitchell produced an estimate showing costs to date of £650,000, with an estimated total expenditure of £940,000. Both figures were exclusive of the success fee uplift and were described by the defendant as "breathtaking". His Honour Judge McDuff agreed with that sentiment.

In order to support a cost capping application the defendant sought a full breakdown of these estimates. That was not forthcoming, but further estimates (in fact also wrong!) revised the costs spent as £1.2 million, with a further £900,000 anticipated. Unsurprisingly the defendant proceeded with their application.

Judgement

His Honour Judge McDuff refused to retrospectively limit the claimants costs. He did however say that the defendants suggested cap of £166,000 for past costs represented a figure with which he would have agreed had he been so empowered.

As to the application for a prospective cap, the judgement was scathing as to the claimants inability to provide an accurate breakdown and the discrepancies in their evidence as to why this had not been possible. Short shrift was given to the suggestion that the claims are worth £1.15 million and, so limited are the anticipated damages in the individual cases, it was suggested to be unlikely that they would have been pursued in the absence of a Conditional Fee Agreement.

His Honour Judge McDuff commented that increasing legal costs are a real impediment to the affordability of civil justice, meaning many can no longer afford to litigate. Little wonder that Irwin Mitchell received little judicial sympathy for their suggestion that a costs cap would result itself in limited access to justice.

The claimant has permission to appeal.

Conclusion

  • As his Honour Judge McDuff said "I do not see why, in the appropriate case, costs capping should not be a regular and normal order". In our view this is now something to be considered in every case
  • The orders are prospective, so applications should be made a soon as possible, and that will usually be after Allocation Questionnaires are filed. If the case is moving slowly, why not ask for a pre-action estimate of costs. After all, what reasonable litigant would deny a defendant this information?
  • Caps will undoubtedly focus attention on the key issues and limit any tendency to plead and pursue claims too widely based. In this case the judge observed that the cap would at least "…act as a check against the constant thirst for opening the file and recording a unit or two"
  • Defendants solicitors must be prepared to file detailed proposals as to how caps should be calculated, with robust evidence to support those proposals
  • Finally, we have just heard that the Civil Procedure Rule Committee has costs capping is on the agenda for the next meeting on Friday 20 July 2007

A more detailed article by the author on this subject is due to be published by the Law Society Gazette shortly.

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