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The Hadley Smokescreen

On Wednesday 28^th February 2024, the Court of Appeal heard the Claimant’s appeal from the decision of Master McCloud in Hadley v Przybylo [2023] EWHC 1392 (KB) arising from her judgment handed down on 22 June 2023 from a Costs and Case Management Hearing on 29 March 2023. Interest from the profession was high in respect of this leapfrogged appeal. But with the dust having settled and judgment reserved, many commentators are suggesting it was somewhat of a damp squib and/or a disappointing event. To understand why, it is necessary to recap the main facts from the first instance decision:

1. The Claimant had sought a substantial allowance of time in his Precedent H costs budget – comprising 3 hours per week on average for attending on the case manager, other treating professionals and the Court of Protection deputy.
2. During the CCMC, the Claimant’s justification for such costs underwent modification from being involved in rehabilitation and treatment (MDT) meetings to discussing and receiving information to keep the Schedule of Loss up to date.
3. The Defendant argued that the time spent by a ligation solicitor in meetings with medical and other professionals dealing with rehabilitation and treatment were not recoverable in principle between the parties; and time relating to discussion and the receiving of information regarding the Schedule of Loss was not reasonable and proportionate in any event.
4. In her reserved judgment, Master McCloud couched the issue in the following terms:

“This case determines one such specific issue in relation to the principles of costs budgeting under the Civil Procedure Rules. In particular that issue is whether the inclusion of solicitor attendance time in a budget, for attending case management meetings with medical and other professionals in the course of management of the Claimant’s rehabilitation needs, and for meetings with financial and Court of protection deputies said to be part of inputting into a Schedule of Loss are in principle costs which may be included in a budget and whether, if so, it is appropriate to include those in the ‘Issues and Statements of Case’ phase of the budget on Form H.”

5. In arriving at her conclusion, the learned Master held:

• ‘costs’ are legal costs which are incurred in the progression of litigation. Costs which are inherently non-progressive are not costs.
• Nothing in this decision says that in principle some phases in a budget cannot include engagement with case managers or deputies, such as for disclosure or witness statements and occasional letters.

• The (numerous) attendances of the sorts proposed here do not in my judgment progress litigation in this case. Note that I am not here saying that these costs are ‘unreasonable’ or ‘disproportionate’: those would be the tests I would apply if I were accepting that in principle they were ‘costs’ for the purposes of a budget in the first place.

• If they were to be allowable in principle I lean to the view that a separate phase or phases should be added ad hoc by the Judge to incorporate them as a specific identified category in any particular case, assuming the sum can be budgeted judicially and is not too unclear to be determined in advance (in which case one might expressly decline to budget the item and leave it for detailed assessment).

Perhaps the most succinct way to summarise each parties’ position in the appeal is:

• Claimant/Appellant: The learned Master was wrong to hold that time spent by a litigation solicitor in meetings with medical and other professions concerning rehabilitation and treatment was not in principle a recoverable legal cost. The appropriate legal test for recoverability was the three strands of reasoning in Re Gibson’s Settlement Trust [1981] Ch.179 i.e (i) providing of use and service in the action, (ii) relevance to an issue, (iii) attributability to the Defendant’s conduct.
• Defendant/Respondent: The learned Master did not conclude that a litigation solicitor has no role to play concerning rehabilitation and treatment – or that no costs incurred with case managers, treating professionals and deputies were recoverable. Where such costs can be classed as costs of litigation, they must be reasonably necessary (and proportionate) to progress the litigation. In approving a budgeted amount for the Issue/Statement of Case phase, the learned Master had exercised her wide ambit of discretion; had applied the correct legal test; and importantly, had made an additional allowance for some communications/attendances on the case manager, treating professionals and deputy.

The background facts and circumstances giving rise to the appeal is somewhat disjointed and frayed around the edges, evidenced perfectly by the closing remarks of Lord Justice Coulson when he said, “There are a number of issues for us to consider, including whether or not there is an issue for us to consider!”.

That being so, in our view there are a variety of reasons why Hadley appears to be somewhat of a smokescreen for the real dispute that needs to be resolved by decisive authority. Whilst the real issue of principle may have been shadowed in Hadley, regrettably it was not front and centre as the Court and parties may have desired.

Preferred Forum

First and foremost, as alluded to by Lord Justices Birss and Coulson during the hearing, decisions made in the context of costs budgeting are case management decisions. Judges engaged in such are afforded a wide ambit of discretion and a wide margin of appreciation by appellant Courts. Case management decisions are typically made by applying established principles and authority rather than creating new ones. Furthermore, there will inevitably be insufficient Court time to delve into the intentions of parliament and the evolution of jurisprudence in a 60-90 minute hearing. Where there is a point of principle arising with potentially far-reaching ramifications (as suggested by the Claimant in Hadley), it would have been preferable for that issue to have found its way to the Court of Appeal following a detailed assessment hearing before a specialist tribunal. This would have given the parties and the Court opportunity to work through the relevant law and authorities and apply them to the facts of the case on a more nuanced basis. Neither the parties nor the learned Master had that opportunity when trying to air and resolve the issues in a summary fashion as part of a Costs and Case Management Hearing.

The Real Issue

Having considered the judgment of Master McCloud and watched the live stream in the Court of Appeal, we are drawn to the conclusion that Hadley is a smokescreen for the real question that needs answering: where do advocacy and litigation services begin and end in high value injury claims? And having ruminated on that question, the best answer we could come up with is, “It depends.”

Section 51(13) of the Senior Courts Act 1981 states, “legal or other representative, in relation to a party to proceedings, means any person exercising a right of audience or right to conduct litigation on his behalf”.

CPR 2.3 helpfully defines “legal representative”, and Section 119 of the Courts and Legal Services Act 1990 explains what “litigation services”, “advocacy services” and “right of audience” mean. But no attempt is made – perhaps understandably – to explain what constitutes “litigation services”.

The Legal Services Act 2007 deals with “reserved legal activity” and “the conduct of litigation”. But the term “litigation services” in the phrase “advocacy or litigation services” appearing in Section 58(2) of the Courts and Legal Services Act 1990 is not decisively set out in statute. And with many, if not most, personal injury claims being funded by conditional fee agreements to which Section 58(2) applies, this is a fundamental question that needs to be properly explored and resolved in both: (i) the context of the indemnity principle under Section 58(2); and (ii) as a matter of overarching principle in Section 119 of the Courts and Legal Services Act 1990.

• Surely the crux of the issue is whether the costs being 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?
• And if that is a half-decent formulation [accepting that others may suggest it is lacking in potency and finesse], is the next question not: “Reasonable to what standard; an objective or subjective one?”.

Isn’t this what the parties were really arguing about in Hadley – rather than the inclusion of solicitor’s attendance time in a budget for attending case management meetings with medical and other professionals (i.e. Multi-Disciplinary Team Meetings)?

Adopting the thrust of what Master Brown said in BCX v DTA [2021] EWHC B27 (Costs), the Defendant in Hadley was in practise arguing that MDT meetings do not involve the provision of advocacy or litigation services. Instead, they relate to rehabilitation and are for the medics and treating professionals. Only where questions arise concerning the funding or recoverability of treatment as part of the damages claim would solicitor input be required – which would then naturally constitute the provision of litigation services; but with such costs as may be recoverable having to satisfy the tests of being reasonable in amount and proportionate.

In contrast, the Claimant was in practise arguing there is no ‘one size fits all’ to what [objectively or subjectively] constitutes the provision of litigation services in high value injury claims. In deciding what might, the Court must adopt a nuanced approach on an item-by-item basis because recoverability depends (amongst other things) on the injuries sustained by the negligence; the individual circumstances of the client; the task at hand; the added value brought by the legal representative’s involvement; and the application of the three strands of reasoning in Re Gibson’s in conjunction with the factors at CPR 44.3 and 44.4.

Discussion

CPR 44.3 and 44.4 expressly state that, as part of the assessment process, the Court will take into consideration any wider factors involved in the proceedings, and any additional work undertaken, or expense incurred, due to the vulnerability of a party or any witness. Arguably the latter can be interpreted to encapsulate 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. But those specific services and the reasonableness and extent of such is inevitably going to vary from case to case, and even from Defendant to Defendant within the same proceedings.

In AB v Royal Devon and Exeter NHS Foundation Trust [2016] EWHC 1024 (QB), Mr Justice Irwin excluded from the award of damages, any costs associated with the Claimant’s lack of capacity before the trial date and beyond a period of 12 months post-trial. His reasoning was that aside from that narrow 12 month period, any costs arising from capacity issues were unrelated to the negligence of the Defendant and instead were contingent upon the Claimant’s pre-accident history. This was a decision reached on the facts but based on a nuanced approach having regard to all the circumstances of the case.

In Fullick and others v The Commissioner of Police For The Metropolis [2019] EWHC 1941 (QB), The Honourable Mrs Justice Slade DBE concluded that the costs incurred by the Claimants in connection with the Inquest must be relevant to the issues in the civil claim, which required identification of those outstanding issues in respect of which the Claimants’ case would be advanced by participation in the Inquest. Thereafter the assessment also required identification of what it was in that participation that would assist the civil claim, with the value of that assistance to be weighed against the cost of pursuing that particular point in the Inquest. Mrs Justice Slade went on to add,

“Performing the exercise of identifying and evaluating the relevance and utility to the civil claim of participating in the Inquest may be onerous but in my judgment it is necessary. It may be necessary and would be prudent to stand back to consider whether the total costs of participation in the Inquest are proportionate to its utility and relevance to outstanding issues in the civil claim.”

The outcome of this exercise would again be a decision reached on the facts, but based on a nuanced approach with regards to all the circumstances of the case.

In the modern era of litigation, and with a finite amount of judicial resource, there is a tendency to favour rough justice by adopting a broadbrush approach wherever possible. Those involved in civil litigation are well-versed in adapting to continuous reform, streamlined procedures, on-line portals and fixed costs extensions. And whilst these are to be encouraged against the backdrop of proportionality and the overriding objective, there are still many situations and circumstances in law and practice where a broadbrush or regimented approach is not appropriate or just in all the circumstances. We have the overwhelming feeling Hadley is indeed one of those situations where the Court must guard against attempting to find a simple answer to what is a complex and delicate question.

It is understandable that Defendants and paying parties in injury claims do not want to face otherwise avoidable costs arising from unnecessary or ancillary matters not directly attributable to their conduct (or the conduct of those they indemnify). But equally so, where there are mixed questions of medicine, fact and law, we ask the question:

• Does the provision of advocacy and litigation services not naturally and equitably extend to a 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, with the gatekeeper of reasonableness and proportionality of any added expense being the costs judge at detailed assessment, who will be able to take into consideration all the circumstances of the case with the benefit of a retrospective understanding of all material issues?

Back to Hadley…

So far as we can see, the three competing outcomes most likely to be adopted by the Court of Appeal are:

• To limit the scope of the appeal to that of a case management decision concerned with the amount of budgeted costs approved by the Court for the assumed work in a particular phase; and thereafter to dismiss the appeal on grounds there is nothing to demonstrate that the amount of the budgeted costs approved by the learned Master – irrespective of how she got there – were outside the range of reasonable and proportionate or the wide margin of appreciated afforded to her;

or

• 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;

or

• Agree with the learned Master that such costs [other than those liaising with the case manager, treating professionals and deputy concerning disclosure, evidence and outlay for inclusion in the Schedule of Loss] do not ordinarily belong in a costs budget and therefore are to be excluded henceforth from the Costs Management process; but with such costs to be included as un-phased non-budgeted costs in the detailed bill so that the costs judge at detailed assessment can determine recoverability and reasonableness/proportionality in line with established authority (e.g. Re Gibson’s, Fullick et al).

Whatever decision is reached, we are of the view that the real issue still remains at large; namely where do advocacy and litigation services begin and end in the context of high value injury claims? The answer to that question is, “It depends – so let the Costs Judge decide at detailed assessment, because each case turns on its own facts.”

 

5 March 2024

Ben Petrecz

Costs Lawyer, Advocate and Senior Costs Consultant