A district judge was wrong not to order an interim payment on account of costs in a baby brain injury case where the solicitors faced not receiving payment for 10 years or more, a circuit judge has ruled.
His Honour Judge Robinson in Sheffield said that “failure to ensure adequate cash flow during the period of inevitable delay may lead to the perverse and undesirable consequence that solicitors are unwilling to take on cases such as this at an early stage”.
He continued: “It is in everyone’s interests to determine liability as early as possible. But, if the consequence is that solicitors must then fund the quantum investigation for 10 years or more, they may not be anxious to take the case on early.”
The claimant in I v Hull and East Yorkshire Hospitals NHS Trust was born with catastrophic injuries in October 2007. In December 2012, a High Court judge approved a liability settlement giving judgment for 90% of the value of the claim. He also made an order for costs. An interim payment on account of costs of £100,000 was made.
At that time, it was expected that quantum could be assessed in late 2016 or early 2017, but that date has now been moved to 2022.
Since 2012, there has been a further voluntary costs payment of £115,000, making a total of £215,000. Of that sum, £165,000 was paid to Irwin Mitchell – where the fee-earner was working at the time – and £50,000 to Switalskis, where she has worked since March 2013.
Switalskis’ profit costs down to 21 August 2017 were said to be just short of £400,000, plus £77,000 in disbursements (both figures excluding VAT).
There was a telephone hearing with District Judge Batchelor to determine applications by the claimant for an interim payment on account of damages of £200,000 and an interim payment on account of costs of £150,000.
The former was agreed, but the judge said she was troubled that there had not been a detailed assessment of the costs incurred on liability. If it then transpired that the claimant was “dreadfully out of pocket”, then that would be the time to consider an interim payment.
In overturning the district judge, HHJ Robinson stressed that it was one of several issues she had to deal with, and on a summary basis, and that she did not have the benefit of the more detailed argument that he had.
The claimant’s argument was that the claimant was virtually certain to recover costs to date and that an additional £150,000, on top of the £50,000 already paid, was only a “very modest” payment on account of costs.
HHJ Robinson decided that CPR allowed the court to make an order for costs of the kind sought by the claimant. “The discretion conferred by rule 44.2(1) relates to the questions of whether costs are payable, the amount and when the costs are to be paid. Rule 44.2(2) sets out the general rule that the unsuccessful party pays the costs of the successful party. Rule 44.6(c) gives the court power to order payment of costs ‘from or until a certain date only’.”
The claimant had already received £1.2m in payments on account of damages, and the judge said the final award was “very likely to be in the region of a lump sum in excess of £3m with a PPO of in excess of £150,000 per annum at present day values”.
He continued that since there was yet to be any part 36 offer from the defendant, it was “a virtual certainty” that the claimant will be entitled to his costs to date. Orders for interim payments of damages were a “triggering” event, giving rise to a right to receive a tranche of costs too.
HHJ Robinson said the district judge gave “insufficient or any weight” to the fact that Switalskis would obtain no benefit at all from the December 2012 costs order, as all of its costs have been incurred since then.
“She was also plainly wrong to rule that a total of £200,000 by way of an interim payment on account of costs to date might exceed a reasonable proportion of the costs to which the claimant’s solicitors would be entitled.”
The judge’s view around delay and cash flow answered the defendant’s argument that Switalskis must have willingly undertaken the delay in payment until quantum and quantum costs were determined. “There is some force in that point on the basis that quantum was expected to be determined in 2017, a delay of five years. But, in 2012, no-one anticipated a delay of double that, namely 10 years.”
There was no risk of overpaying the claimant’s solicitors and, even if it did happen, it could be deducted from the claimant’s damages.
Michael Mylonas QC (instructed by Switalskis) for the claimant, Dan Stacey (instructed by DAC Beachcroft) for the defendant.