The Hadley Smokescreen (Part 2): “Judgment Day”
On 15 March 2024, the Court of Appeal handed down their eagerly awaited judgment in the case of Hadley v Przybylo [2024] EWCA Civ 250, which was a leapfrogged appeal from the case management decision of Master McCloud [2023] EWHC 1392 (KB) in the context of costs management. The essence of the appeal was whether or not budgeted costs could/should include the solicitor’s attendance at all rehabilitation case management meetings and regular meetings with Court of Protection deputies.
Most practitioners will be familiar with the background to the appeal due to its coverage in the legal press and from Part 1 of this article posted on our website on Monday 11 March 2024. The thrust of the article was our contention that the more fundamental question requiring examination was: Where do advocacy and litigation services begin and end in high value injury cases? With our conclusion being, “It depends – so let the Costs Judge decide at detailed assessment, because each case turns on its own facts.” In respect of disposal of the appeal, we identified the 3 most likely outcomes. So what did the Court of Appeal decide?
The Issues Determined
| No | Issue | Outcome
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| 1 | Permission to rely on additional witness statements | Granted – but only to the extent they inform consideration of the Master’s possible statement of principle.
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| 2 | Where to include such costs in a Precedent H Costs Budget | Issue/Statement of Case phase was the most apposite phase.
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| 3 | Assumptions in PD.3D | Should not be read as if they had statutory force.
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| 4 | Did the Master decide a point of principle? | Yes
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| 5 | “costs of and incidental to the proceedings” in s51(1) of the Senior Courts Act 1981
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The words “incidental to” widen rather than reduce the ambit of the provision |
| 6 | Applicable Principles | 1) Recoverability of costs will depend on the application of Utility, Relevance and Attributability as per In re Gibson’s Settlement Trusts [1981] Ch 179.
2) Reasonable & proportionate costs of rehabilitation which meet these criteria will generally be recoverable.
3) Precise amount of recoverable time in respect of rehabilitation will always depend on the facts.
4) It would be unusual to rule any generic category of cost irrecoverable or assume it automatically recovery. In every case it will depend on the facts.
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| 7 | Recoverable costs must materially progress the case | An incorrect and potentially unhelpful test, as costs can still be recoverable as “incidental to” the litigation even if they do not materially progress the litigation.
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| 8 | Are costs of attendance at rehabilitation case management meetings (and attendance on deputies) recoverable in principle? | Yes – it would be wrong to automatically decide such costs are always irrecoverable. Equally, it would be wrong to assume routine attendance at such meetings will always be recoverable. It will always depend on the facts.
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| 9 | Are such costs open to challenge? | Yes – what may or may not be recoverable on assessment is a matter for the costs judge.
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| 10 | Should the budgeted sum for the Issue/Statement of Case phase be revisited | No – in all the circumstances the Master’s overall cost budget figures were fair and reasonable.
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Discussion
In Part 1 of this article, potential outcome number 2 for the appeal was stated as:
To deal with the issue of principle as framed by the Master/Claimant and provide guidance on its future application because it will assist the lower Courts when determining budgeted costs on high value injury claims; and thereafter to revisit the budgeted sum and determine whether the approved amount requires adjustment in view of the application of the foregoing.
This is the outcome adopted by the Court of Appeal. Furthermore, we are pleased they chose to deal with the (so called) issue of principle, as they have provided very useful guidance for the wider profession, whilst leaving the parties to the appeal in the awkward situation of arguing about who is the real winner and loser. The Claimant just about got home on both grounds of appeal, albeit with a heavily caveated success on ground number 2. But ultimately success had no impact on the individual budgeted sums which remain as per the learned Master’s assessment at first instance.
So does the judgment make any real difference to how claimant and defendant lawyers will approach high value injury claims? Probably not in our view for the reason stated on more than one occasion in the judgment, which we also highlighted in Part 1 of this article, namely: What is recoverable in principle and/or is reasonable & proportionate always depends on the facts of any one case and should be left to the costs judge on assessment.
To this extent, the judgment of the Court of Appeal does not make any new law, nor does it develop existing law. It helpfully clarifies and draws together in one convenient place the relevant principles to be applied to items or traches of costs being assessed; but beyond that, if no appeal had been brough to the first instance non-binding decision of Master McCloud, it didn’t follow that claimant lawyers would not be entitled to payment for attending rehabilitation case management meetings and the like, or equally they automatically would. It would always depend on the facts of the case.
Practical Application
For those engaged in preparation of costs budgets, it will be reassuring to know that if costs relating to rehabilitation meetings and the like have been included in the Issue/Statement of Case phase, there is no need to frantically recall budgets already served & filed for urgent amendments. That being so, local practice in the county court and some district registries had long ago recognised that rehabilitation costs do not naturally fit within the pre-defined phases of Precedent H. Parties were therefore permitted to place such costs in a bespoke phase at the end of the budget for transparency purposes. Notwithstanding the Court of Appeal’s scepticism in Hadley about including such costs as a contingency, it is hoped any such local practice will be allowed to continue – as it appears to be welcomed by claimants, defendants and case managing judges. There is much force in having such costs isolated and dealt with on their own merits rather than trying to filter and separate them out from across multiple phases if they are to be challenged and/or disallowed.
Because the gatekeeper of recoverability and reasonableness/proportionality (quite properly) remains with the costs judge on assessment, it is more important than ever for claimant lawyers to keep detailed file notes of what was discussed and determined at rehabilitation case management meetings and the like. This will go a long way towards crossing the thresholds of Utility, Relevance and Attributability – whilst demonstrating the added value of having the legal representative present. It is worth bearing in mind the clear warning from the Court of Appeal that claimant lawyers should not assume attendance at all rehabilitation case management meetings will automatically be recoverable, hence the need for a sensible discussion with the client, case manager and even the treating professionals ahead of time to ensure there will be added value by the legal representative attending. As highlighted in Part 1 of this article, where there are mixed questions of medicine, fact and law, it would not be unexpected or unusual to have legal representatives present to help resolve those matters. In contrast, now that the Court of Appeal have reaffirmed the applicable principles governing recoverability, should the lay client simple suggest they would feel ‘more at ease’ with their legal team being present, this is unlikely to satisfy recovery of all attendance costs between the parties. If the injured party expresses such a view, it should be clearly explained and documented that these costs may not always be recoverable between the parties and therefore could fall to be paid personally by the client at conclusion. Equally important is documenting in the file note whether the defendant’s legal team is present together with any discussion or agreements arising from the meeting (e.g. further funding agreed/disputed, additional sources of disclosure identified & required, arranging future way-forward meetings, varying the directions/timetable etc.).
Final Thought
The Court of Appeal have confirmed that being overly prescriptive as to what can be claimed as an item or tranche of costs under s51 of the Senior Courts Act 1981 is to be avoided. Providing a party can pass through the gateways of Utility, Relevance and Attributability, the focus moves from determining a qualitative question to undertaking a quantitative assessment. During the live-stream of Hadley, the bench asked whether Utility, Relevance and Attributability were conjunctive or disjunctive. Learned Counsel for the Claimant considered them conjunctive – and although not specifically mentioned in the judgment – that appears to be accepted as correct. Consequently, an item or tranche of costs must therefore satisfy all three strands to be recoverable in principle; but once it does, the court will move from the qualitative question to a quantitative assessment.
This deserves some further consideration, because it may potentially reopen for examination, items or tranches of costs that have traditionally been considered irrecoverable in an inter partes bill under the guise they were ‘non-progressive’ as between the parties to the litigation. How far the qualitative question under s51 can be pushed to set new parameters for what may be recoverable as an item of costs will no doubt play out in case law over the coming years. In this vein, it is noteworthy the Court of Appeal were keen to delineate between damages and costs, remarking:
“…there is a suggestion in the defendant’s submissions, reflected at [13] of the Master’s Judgment, that these costs may be recoverable, not as costs, but instead as a head of special damages. We offer no view about that, beyond expressing our general reluctance to encourage the claiming of particular items of costs as damages in the same proceedings. That is primarily because the judges who decide these cases, and the damages to be awarded to a claimant, are skilled in those tasks, but not necessarily so experienced in the assessment of costs.
It is pleasing that the Court of Appeal tackled the (so called) issue of principle in Hadley, even if it was only to reaffirm the appropriate test for recoverability of items of costs in a bill and to convey the commonsense view that the application of costs law to complex questions of fact, evidence and procedure are best left to the costs judge at assessment to be determined on the facts. This avoids potentially unjust outcomes for those engaged in high value injury claims by ensuring these types of complex and nuanced issues are not unfairly pre-determined with the kind of broadbrush rough justice only suitable for more routine lower value claims.
However, as canvassed in Part 1 of this article, it remains open for further debate as to where exactly advocacy and litigation services begin and end in high value claims, and whether the costs claimed or challenged relate (de facto and de jure) to the legal representative providing a[ny] service to the client which it would be reasonable to provide in the context of the claim against the opposing party. This could be a similar gateway to the three strands of Utility, Relevance and Attributability – but it could be an opening much higher and wider, especially in the context of vulnerable parties and new PD1A. Time will tell…
Ben Petrecz
Costs Lawyer, Advocate and Senior Costs Consultant
19 March 2024