Steven Davies reports on a new frontier in the ‘costs war’ & the threat of increased satellite litigation
Costs-related arguments have always had a habit for creating satellite litigation and a recent flurry of cases indicates that the newest outbreak of the ‘costs war’ comes from solicitor-client costs disputes over deductions made from the claimant damages to pay their solicitor’s costs in personal injury cases.
The 2013 reforms essentially authorised the deduction of costs to a maximum of 25% of the damages recovered, which has caused an increased focus from clients on their legal bills.
Three recent cases were decided in the Senior Courts Costs Office. Green & Ors v SGI Legal LLP [2017] EWHC B27 (Costs) was heard by Master Leonard. The four former clients of Liverpool firm SGI Legal had wanted copies of the documents to challenge a costs bill, and applied for disclosure of copies of funding documents, copies of all correspondence sent to them and copies of all invoices prepared during the life of the claim.
Master Leonard noted when reaching a decision in this matter “The purpose of creating documents for the client’s benefit is fulfilled when those documents are given to the client. Supplying extra copies is another matter.”
The claimant’s case was “fatally undermined” by what he considered a proper and correct concession during the hearing that the client was not entitled to copies of the defendant’s entire file in order to obtain advice on applying for detailed assessment.
The judge concluded: “Finally, bearing in mind that the application has been narrowed down to incorporate only copies of documents which in the normal course of dealings will already have been supplied to the claimants, I do have concerns about the fact that I have seen no evidence that any consideration has been given as to the extent to which those documents are already in the claimants’ possession.”
Then came Hanley v JC & A Solicitors Ltd [2017] EWHC B28 (Costs), in which Master James refused disclosure and confirmed that she did not feel bound by any prior authority on the point.
“There is currently no [binding] decided case in which solicitors have been ordered to hand over papers over which they (rather than the clients) have proprietorial rights. [The court] in Re Thomson [(1855) 20 Beav 545] did order production of copies upon payment of a fee but, crucially, solicitors had already offered that and the case had gone before the Master of the Rolls solely for a decision upon whether the client ought to pay for the privilege.”
The master said she was also concerned by the “floodgates” that would likely be opened by a ruling that solicitors could be ordered to hand over their complete file in circumstances such as these. This would “foreseeably” lead to considerable satellite litigation “and I am not persuaded that this would be a positive step”.
The third decision sits at odds with the other two. In Swain v JC & A Ltd [2018] EWHC B3 (Costs), the claimants sought production of a letter to the after-the-event provider and disclosure of four schedules to the conditional fee agreement which dealt with matters such as fees and rates.
Master Brown determined that the court has the discretion to order the provision of copies of the documents sought whether or not a proprietary right in the relevant documents has been established. In this case, he said, it would be appropriate to exercise that discretion in the claimant’s favour.
He explained: “There are substantial and legitimate concerns about the proportionality of costs incurred in applications of this sort, and as to the prospect that allowing the production of copies of documents might encourage ‘satellite’ litigation. In this case the costs that would be at stake on an application for assessment are potentially significant in proportion to the damages received such that the matter is likely to be of importance to the claimant, particularly given the recent demand for payment by the defendant.
“Indeed I do not think that these two concerns should weigh against making an order which I otherwise consider to be correct; if the sums involved are modest in proportion to the costs that would be incurred in pursuing a section 70 assessment that might be said to be a factor which weighs in favour of giving the disclosure sought now, not against.
“Further, if the exercise of providing copies or inspection of documents is at the claimant’s expense this should deter frivolous requests; the costs involved in this application will reflect the issues arising, including issues as to proprietary interests, and thus may be higher than might otherwise be the case.”
Master Brown add that the ‘one-fifth’ rule offered statutory protection against frivolous or unsubstantiated applications for assessment. Moreover, in the spirit of CPR 31.16, “there is, it seems to me, at least a reasonable basis for thinking that transparency will improve the prospect that any dispute as to the defendant’s costs can be resolved without the need for the court’s further intervention”.
All three of these rulings have notable regard to potential satellite litigation when reaching a decision, though ultimately reach differing conclusions when it came to the right for disclosure of solicitors papers in principle. The difficulty is ensuring that the claimant’s interests are protected at the same time as discouraging frivolous applications. What seems certain, however, is that we will not see any let up to the satellite litigation any time soon.
Steven Davies is a Council member of the Association of Costs Lawyers and is Head of Costs at the Medical Protection Society.
This article was first published in the New Law Journal on 2 March 2018.