The Complexity of Group Actions

by Jonathan Houghton  & Paul Durkin as appeared in the ACAL Newsletter of 2003

The issue of Group Action Costs have never come under closer scrutiny following the decision of Mr Justice Gage in A.B. & Others v Leeds Teaching Hospitals NHS Trust and in the matter of a Nationwide Organ Group Litigation [2003] EWHC 1034 (QB).

The co-ordinating solicitors, Messrs Alexander Harris agreed with the defendants that there should be a costs cap on all future costs until the conclusion of the trial. The only issue in dispute between the parties was the level of costs. Mr Justice Gage in a very clear Judgment confirmed not only the power of the Court to make such an Order but effectively that even if the parties do not request such an Order the Judge has an obligation to consider this. In this case the Judge made an Order that the future costs of the claimants solicitors be capped to almost half of the rate of those that they were seeking.

The decision clearly has widespread implications for Child Abuse Multi-Party Actions. In future greater consideration than ever will have to be given to the issue of budgeting which coincides with the increasing budgetary requirements of the Legal Services Commission in the form of detailed case plans.

Although described as "novel" by Mr Justice Gage, who took advice from the Senior Costs Judge, Peter Hurst, it is quite apparent that the case very much represents a new era for funding. It will be likely that the defendants in child abuse group action cases and indeed other multi-party cases will seek to obtain a costs cap from the Courts. Although there will be provision in such Order for leave to apply to the Court should there need to be reconsideration of the costs budget, the reality is that the Court are likely to set tight financial guidelines all the way through until trial. It is both interesting and worrying to note that not only were the number of hours are capped but also the hourly rate at £155. This rate did however apply to all fee earners and therefore there is the likelihood that firms in cases that are likely to be cost capped will have an increased ratio of paralegals to ensure maximum profitability for firms.

The reality is more so than ever that costs will be scrutinised. The importance of budgeting, costs restraints, streamlining and improved efficiency and budgetary control by the lead solicitor has never been greater. Ultimately providing that this power is not abused by the defendants then the prospects for victims of child abuse having improved access to justice is greatly enhanced and the resultant absence of detailed assessment will lead to claimants receiving their damages earlier than they would otherwise, enabling them to move on and start to rebuild their lives.

Jonathan Houghton

All solicitors are familiar with the situation where the client asks: "You've settled my claim. When will I get my money?". Increasingly the answer is not straightforward in any personal injury action and the position is even more complicated in Group Actions. This short article will illustrate briefly just some of the many problems of costs in Group Actions and also help solicitors explain to their clients why, in Group Actions, their client's money is not forthcoming more quickly.

The decision of Mr Justice Gage in A B & Others v Leeds Teaching Hospitals NHS Trust may go some way to simplifying the complex world of Group Litigation Costs. However, it remains to be seen whether it leads to even further complexities and problems. 

It has been acknowledged that the question of costs in multi party litigation is a major problem. In Lord Woolf's review, Access of Justice (July 1996), he said "The problem of costs……. are magnified in the context of Group Actions. Cases take on a life of their own…… There is a great risk that actions involving a large number of claimants will become management or organisation driven because of the sheer scale of the numbers involved. Decisions which, in a single case, might have a negative impact, when multiplied by many hundreds or even thousands of times, can produce waste of effort and resources on a large scale". The suggestion by Lord Woolf is that the Courts should manage multi party action costs from an early stage. This seems to be becoming a reality following the decision in A B & Others v Leeds Teaching Hospitals NHS Trust.

To illustrate the complexity of costs in multi party actions, one can look at the North West Child Abuse Cases. In that litigation, allegations were made against 5 separate homes, which were defended by 3 Defendants. They proceeded together under the umbrella of the North West Child Abuse Cases until April 2000 when one home broke away and proceeded to settle the claims of the 35 claimants. By in or around July 2001, all those claimants had their claims settled. In the meantime, in May 2001, the Group was further broken down into two further Groups. The two further Groups had common defendants.

Accordingly, in that Group Action, there are the individual costs of each claimant, home generic costs relating to each specific home, and common generic costs relating to the generic North West Child Abuse Action. The position with regard to the individual costs and home generic costs is simple, as one defendant is responsible for those costs. However, with regard to the common generic costs the position is more complex. Here there are 3 defendants responsible for the common generic costs. Only one of the defendants has settled their action. The other two still litigate strongly and, of course, have no obligation in respect of the common generic costs as no Costs Order has been made against them and they only have an obligation in the event that a Costs Order is made against them.

The Court had to decide whether or not the common generic costs would be apportioned per capita, per home or per defendant. In the event, the Court decided that the approach should be for the common generic costs to be apportioned per capita. This increased the burden of costs considerably on two of the defendants who appealed the decision. They argued that the apportionment of the common generic costs should be per home. The matter was dealt with by Mr Justice Holland in May 2003 who reserved his judgement.

One of the most contentious and difficult parts of group litigation costs are the generic costs of those claimants who discontinued, were struck out or lost.

There are broadly 2 approaches to the problem. One is that only the successful claimants recover their common costs and that the shortfall in respect of the common costs be shared amongst the successful claimants. This would leave them paying the costs of the unsuccessful claimants either by way of the Legal Aid Statutory Charge or out of their damages. This would, of course, be of great disadvantage to the claimants. The preferable approach for the claimants is the common issues approach. This is the approach which was adopted in the British Coal Respiratory Disease Litigation. The common issues approach is that the claimants should recover all their generic costs in full, notwithstanding that some of the individuals lost their claims, were struck out or discontinued. The outcome of individual claims are disregarded in relation to generic costs. The usual costs rule applies in respect of individual costs.

There is, of course, a general presumption from CPR 44.3 and CPR 38.6 that the unsuccessful claimants should pay the defendants' costs. CPR 38.6 provides "Unless the Court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom he discontinues incurred on or before the date on which Notice of Discontinuance was served on him."

Case law shows that no presumption exists in relation to Group Litigation and that there is a general discretion on generic costs (Sayers v Merick Smith Kline Beecham & Others 2002 IWLR 2274). There are clearly considerable different considerations in Group Litigation as opposed to individual claims, which is the justification for the departure from the normal rule. In that case, the Judge said the question as to the liability for claimants who discontinue should be left until the end of the action. The Court said that in a Group Action, whilst there is a prima facie rule that the discontinuing claimant has an inability to recover common costs, that was too blunt an instrument and unnecessarily favourable to the defendant. This was because it was yet unknown whether or not the claimants as a whole were to be successful in the common issues which were to be tried. The Court said it was more sensible, and also consonant with justice that the recoverability of common cost and the liability of discontinuing claims for costs should be determined at the same time as orders for common costs which are made in respect of those common issues. It is only at that point that the Court will have a full picture and be able to make whatever Order was just in all circumstances.

That case seems to extend the recoverability of discontinuers' and losers' generic costs against the Defendants in certain circumstances.

The situation is even more complex in cases in which the Group Action has settled before trial and the issues have not been tried. Accordingly, it is impossible to say which issues have been won or lost. This issue is to be dealt with in the Danesford Litigation in which 35 claimants out of 42 settle. There is now an issue as to whether or not the 7 cases that discontinued or were struck out are entitled to have their proportionate share of generic costs paid.

There are, of course, policy issues involved in that the Woolf Reforms encourage settlement. If there is uncertainty as to the recoverability of costs in settled Group Actions, this will be a disincentive to Groups settling.

The Legal Services Commission are also concerned to have certainty and clarity with regard to liability for discontinuers in the context of Group Actions that settle. The Legal Services Commission are generally the funders of the Group Actions and under the Access to Justice Act (1999) the Commission must weigh priorities for public funding and to obtain the best possible value for money. Accordingly, they are particularly interested in the question of recoverability of common costs. The Commission must be able to ascertain the risks to the fund and the extent of their liability in respect of discontinuers. Inevitably, multi party actions and group litigation incur extremely high costs and the Legal Services Commission increasingly scrutinise and risk-assess the funding of multi party actions.

Accordingly, the issue of discontinuers and the recoverability of common costs from the Defendant could affect the Legal Services Commission's commitment to multi party actions which, of course, would have a serious impact upon the access to justice.

This is especially true in child abuse work where CFAs are inappropriate in the light of the lack of an insurance product. Clearly the law relating to costs in Group Actions needs to have greater clarity and certainty. The present situation creates enormous uncertainty for the claimants, the claimants' solicitors and the Legal Services Commission.

Paul Durkin

Jonathan Houghton & Paul Durkin
AGM
12th June 2003