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
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