COSTS—ASSESSMENT—GENERIC COSTS

Court of Appeal, Civil Division
Buxton, Smith and Wilson LJJ
31 January 2007

There is no requirement for any additional or collateral agreement relating to generic costs (of a group action) in a conditional fee agreement (CFA) for a successful claimant to recover such costs in an action where no group litigation order has been made.

Simon Jonathan Brown (instructed by Burroughs Day) for the claimants.
Justin Fenwick QC and Leigh-Ann Mulcahy (instructed by Halliwells LLP) for the defendant.

In the mid-1990s, a large number of claims were brought by miners and former miners against British Coal alleging that they had developed vibration white finger during the course of their employment. The claimants were successful, and the state decided to finance ‘handling arrangements’ to reflect the litigation findings. The claimants in this case were part of a large group of miners who had instructed the defendant solicitors to initiate claims against British Coal. In each case, the claim was settled before the result of the group litigation was known, for sums substantially less than the claimants would have received under the handling arrangement.
 

The claimants consulted different solicitors, Burroughs Day, to claim for the alleged professional negligence of the defendant in settling their claims at undervalue. Each of Burroughs Day’s clients entered into a CFA with the firm. The agreements were in standard form, as approved by the Law Society. Burroughs Day intended to conduct the claims as group litigation, and it expended time and money investigating the state of development of the handling arrangement to enable it to assess what its clients would have received under that scheme. It was also its intention to seek a group litigation order. However, there was a failure to reach agreement on several costs issues. Burroughs Day, in reliance on CPR 44.12A, commenced Pt 8 proceedings in the county court.

The district judge ordered the defendant to pay the claimants’ costs to be determined by detailed assessment. He also ordered Burroughs Day to prepare and serve supplemental bills of costs relating to its generic costs, which had not been included in the bills already served. The Supreme Court Costs Office held that Burroughs Day was not entitled to any sums at all in respect of generic costs. The senior costs judge reversed that decision and the defendant appealed.

LADY JUSTICE SMITH:

The only issue before the Court of Appeal was whether the CFAs, standing alone, provided a sufficient basis on which to rest a valid claim to recover from the paying party a share of the costs incurred by Burroughs Day on behalf of a large group of clients. It was common ground that the wording of the CFA was wide enough to encompass a share of generic costs. It was also accepted that the CFAs were binding between the solicitor and the clients because the Conditional Fee Agreements Regulations 2000 (SI 2000/692) had been satisfied. The only question was whether the individual client had to demonstrate that there was an agreement between him and his solicitor (collateral to the CFA) specifically relating to generic costs. That would only be necessary if generic costs were in some way different from costs incurred solely for the individual client.

Her Ladyship was satisfied that there was no requirement for any such additional or collateral agreement relating to generic costs. The client’s entitlement was to recover the costs for which he would have been liable to his solicitor. He would be liable for all costs properly incurred whether they were incurred solely on his behalf or whether they were incurred for the benefit of a large group and he had only to pay an appropriate proportion. There was nothing fundamentally different or special about generic costs; they were simply costs that had been shared for the sensible purpose of keeping the costs of each claim down.

The defendant’s protection against an inflated claim was to be found in CPR 44.5(1)(a), where it was provided that, when assessing costs on a standard basis, the court had to consider whether, in the circumstances, the costs were proportionately and reasonably incurred and were proportionate and reasonable in amount. That was an objective test. Further, any doubt about the reasonableness or proportionality of any item on the bill had to be resolved in favour of the paying party: CPR 44.4(2)(b).

The protection provided by detailed assessment under CPR 44.5(1) would not in any way be enhanced by the existence of a letter, sent at the time of the retainer, wherein the solicitor told the client that some of the costs would be expended for the benefit of other claimants besides himself but that he would only be asked to pay a share of those costs. In the real world, that would be a statement of the obvious. In practice, it was highly likely that the claimant would be aware that there were others making similar claims, through the same solicitors. Why would the solicitor do anything other than share those costs which were capable of being shared and thereby save some money?

It would be good practice for a solicitor to mention in a client care letter that some of the work to be done would be for the benefit of a group of clients and individuals would be liable only for their share. It would be sensible for a firm to keep records of the number of clients for whom it was acting at any time. Such records would help to demonstrate, if need be, that the proportion claimed for any individual client was justified. Where solicitors intended to claim a share of costs incurred by other solicitors, it would be wise for them to ensure that the terms of the agreement between the solicitors were clearly defined, to demonstrate more easily that the bill under scrutiny was reasonable and proportionate. In short, such records were desirable because they would be an aid to proof of the reasonableness of a bill; they were not required as a pre-requisite to the recovery of a share of generic costs.

The appeal would therefore be dismissed.
Lords Justices Buxton and Wilson agreed.