There has now been time to reflect on the Court of Appeal’s proportionality guidance given in the case of West v Stockport NHS Foundation Trust  EWCA Civ 1220. And what a sorry mess that guidance was.
The first part of the guidance related to the reasonableness and proportionality of the ATE premium. The Court was concerned with two ATE premiums, each costing £5,088, as against two separate clinical negligence claims that settled for £10,000 and £4,500 respectively.
The Court reheated the pre-Jackson decision of Rogers v Merthyr Tydfil County Borough Council  EWCA Civ 1134 and decided, so far as relevant, that it basically remained good law when assessing ATE premiums. (The key finding in Rogers being: “if the court concludes that it was necessary to incur the staged premium, then as this court’s judgment in Lownds shows, it should be adjudged a proportionate expense”.) This is surprising given Lownds was clearly overturned by the Jackson reforms, as expressly recognised by the Court here:
“we make clear that Lownds must no longer be regarded as good law”
Nevertheless, the Court decided that the dead body of Lownds was to be resurrected in the context of assessing ATE premiums:
“Specifically, therefore, if the ATE premium is assessed as reasonable, it will not fall to be reduced by any further assessment of proportionality.”
It is the reasoning behind this conclusion that is particularly troubling:
“This last point raises the wider issue as to whether, when considering proportionality, the judge needs to have regard to every item of cost, or whether there are some costs which ought to be removed from that part of the assessment. We consider that, when the judge comes to consider proportionality, there are some elements of costs which should be left out of account.
The exceptions are those items of cost which are fixed and unavoidable, or which have an irreducible minimum, without which the litigation could not have been progressed. Court fees are perhaps the best example.”
The Court elaborated:
“We recognise that this means that, when undertaking the proportionality exercise, it is those elements of cost which are not inevitable or which are not subject to an irreducible minimum which will be vulnerable to reduction on proportionality grounds in order that the final figure is proportionate. Such costs are, however, likely to be costs which have been incurred as a result of the exercise of judgement by the solicitor or counsel. Those are precisely the sorts of costs which the new rules as to proportionality were designed to control.
As should be apparent, leaving particular items out of account when considering proportionality because they are both reasonable and an unavoidable expenditure does not re-introduce the Lownds test, by which necessity always trumped proportionality. Most costs will still be subject to the proportionality requirement.”
With respect to the Court of Appeal, the suggestion that this does not re-introduce the Lownds test is complete twaddle.
It unarguably re-introduces the Lownds test in respect of ATE premiums. There is no difference whatsoever between “unavoidable expenditure” (under West) or “necessarily incurred” (under Lownds).
This problem might be overlooked if it were limited to the small category of cases where ATE remains recoverable. Unfortunately, the Court did not stop there. The Court noted, with apparent approval, the approach that had been adopted by some other judges on detailed assessment of excluding from the proportionality test elements such as court fees, VAT and the costs of drafting the Bill of Costs itself. Happily disregarding the law of unintended consequences, the Court concluded:
“any reductions for proportionality should exclude those elements of costs which are properly regarded as unavoidable, such as court fees, the reasonable element of the ATE premium in clinical negligence cases, and the like”
The words “and the like” will return to haunt the Court of Appeal and will lead to years of argument in the corridors of the Senior Courts Costs Office and county courts across the country.
If a court fee is an “unavoidable” cost where proceedings are issued, what type of cost is the cost of a psychological expert’s fee where a claimant is believed to have incurred psychological injuries? Is this not “unavoidable…without which the litigation could not have been progressed”? In what sense is this a cost incurred simply “as a result of the exercise of judgment by the solicitor”? Why should a court fee be elevated to a higher category than a necessary medical report? The solicitor is unlikely to have any more control over the amount a psychologist will charge for a report then they do over the amounts ATE providers charge for insurance. At best, in each case, they can look for an alternative provider that may, or may not, be slightly cheaper. If it is unavoidable to instruct a psychologist, is it not also an unavoidable cost to have to write the letter of instruction? Is it not an unavoidable cost to have to read and consider the report that is subsequently produced? Is it not an unavoidable cost to have to advise the client on the contents of the report and seek instructions? Perhaps there is an element of “exercise of judgement” when deciding what level of fee earner should undertake discrete items of work, but there remains an “irreducible minimum” in respect of the work that any matter will require. Once this “irreducible minimum” is reached, the Court of Appeal appears to be saying that no further reduction should be applied to reflect proportionality. But this takes us straight back to Lownds.
The wording of the post-Jackson CPR was expressly drafted to kill off Lownds:
“Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred” [emphasis added]
The Court of Appeal (ie just three judges), have now decided, at least partially, to disregard the clear wording of the CPR by introducing a new concept of “unavoidable” costs that is, linguistically and logically, indistinguishable from the concept of “necessarily incurred”. The Jackson reinterpretation of proportionality was open to a number of legitimate criticisms (and everyone was aware of these when the new rules were drafted). However, surely it cannot be appropriate for a tiny number of judges to drive a coach-and-horses through the rules whilst pretending to uphold the integrity of those reforms.
The West judgment does not just open a crack in the door that leads straight back to Lownds, it takes the door off the hinges and jumps up and down on it until there is nothing but a few splinters left.
If anything, the judgment then gets worse. But I will leave that for another day.