Hobbs v Guy’s and St.Thomas NHS Foundation Trust – Proportionality beats necessity
In this article PIC Advocate Alex Taylor examines one recent example of the Court’s application of the new proportionality test, in the SCCO case of Hobbs v Guy’s and St.Thomas NHS Foundation Trust.
In this rather concerning judgement for Claimants, Master O’Hare made the disturbing finding that whilst it was reasonable for a Claimant to incur costs to successfully bring a case to conclusion, it was unreasonable to expect a Defendant to pay them.
Briefly, Hobbs was a low value clinical negligence matter which settled for £3,500.00. The Claimant submitted a bill of £32,329.12 which was subject to provisional assessment. The assessing officer reduced the bill by two thirds on grounds of reasonableness and made a further reduction on the grounds of proportionality. The final assessment figure was £9,879.34. Understandably, the Claimant sought an oral review.
Master O’Hare confirmed his initial finding was correct. Despite this, the judgement is full of contradictions and rather worryingly so.
The Master applied the two tests of proportionality in this case. To the pre-April 2013 costs (parts 1 and 2 of the bill) the Lownds test was applied which does not concern proportionality. To the Post-April 2013 costs (Parts 3 and 4) the Master applied the new Proportionality test, which is set out at CPR 44.3(5):
Costs incurred are proportionate if they bear a reasonable relationship to –
(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance.
…And CPR 44.3(2):
Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
The Master acknowledged that there was little guidance available to judges as to how the proportionality test should be applied, however referring to Rupert Jackson’s commentary on the subject noted that ‘Proportionality should prevail over reasonableness and the proportionality test should be applied on a global basis’.
Master O’Hare further noted at paragraph 31 that ‘it would be wrong to disallow any costs in Parts 1 and 2 on the basis of the Jackson test of proportionality.’ The Master then effectively went on to use the costs he was unable to reduce on proportionality grounds to make further reductions in relation to Parts 3 and 4 of the bill.
In order to justify his decision, Master O’Hare emphasised that he had made reductions to three specific aspects of the costs claimed, namely costs in relation to instructing a consultant anesthetist, costs in relation to the making of a Part 36 offer and the difference between the Grade B rate allowed and the relevant Grade C rate. This was in contrast with the alternative approach, which would require, in the Master’s words, ‘chopping off a slice of all the costs I had just found to be reasonable’.
It should also be noted that the Master distinguished a leading judgement on the application of the proportionality rule, Kazakhstan Kagazy PLC v Zhunus. The Master stated that the test laid down in that case would not apply where the costs of a case would exceed the damages and therefore ruled that although the costs were reasonable, they were still not proportionate.
It seems the Master has taken a circuitous route to applying the proportionality test to pre April 2013 costs. He has also managed to justify his decision to commute Grade A rates to Grade B, bizarrely by applying Grade C rates!
The Master also took the audacious step of stating that the decades old rule that hindsight should not be used in the assessment of costs is now trumped by proportionality.
Interestingly, the Master appears to have made a distinction between varying degrees of necessity. The example he gives at paragraph 31 concerns the costs in relation to obtaining medical records and instructing experts stating these are vital to the successful bringing of a clinical negligence case, thus are immune from proportionality.
Perhaps most concerning is the finding that costs which are reasonable and necessary to incur may still fall foul of proportionality, rendering them unreasonable for a Defendant to pay for them.
Finally whilst it is clear from recent case law that the amount a Defendant can be expected to pay must not exceed the lowest reasonable spend required to proficiently and successfully present the case. Clearly therefore proportionality must take precedence over necessity.
Claimants are therefore advised to protect themselves from the outset. A highly effective strategy used by PIC is to address proportionality at the earliest stage possible in the assumptions to the costs budget.
Should you have any queries or require advice in relation to this concerning case, you can contact Alex Taylor directly at firstname.lastname@example.org or on 03458 72 76 78.