No: HQ04X03752 
Neutral Citation Number: [2005] EWHC 1518 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Royal Courts of Justice
The Strand
London WC2A

Friday, 13 May 2005

B e f o r e:

MRS JUSTICE HALLETT

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SHEPPARD
CLAIMANT

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ESSEX STRATEGIC HEALTH AUTHORITY
DEFENDANT

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MR ALEXANDER HUTTON (Instructed by Messrs Gadsby Wicks, Chelmsford) appeared on behalf of the Claimant/Appellant

MR MICHAEL POOLES QC (Instructed by Messrs Weightman, London) appeared on behalf of the Defendant/Respondent
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JUDGMENT
Friday, 13 May 2005

JUDGMENT

MRS JUSTICE HALLETT:   

1.	This is an appeal from a decision of Master Ungley dated 23 February 2005 by which he ordered that there be a costs cap on the claimants’ costs of the action, with the levels to be determined by a Costs Judge.  The Master himself gave permission for this appeal to proceed.  The parties agree that the test for me to apply on this appeal is whether or not I am satisfied that Master Ungley was wrong to make the cost-capping order that he did under CPR 52.11. 

2.	The claimants, Toby and Louisa Sheppard, are twins who were born on 17 July 1980 at the Essex County Hospital Colchester.  They both suffered from hydrocephalus which was suspected before they were born and diagnosed shortly afterwards.  Toby’s hydrocephalus is worse than Louisa’s.  No complaint is made about the management of their birth.  Shunts were fitted in each child to drain the excess fluid from the brain.  It is the management of those shunts which forms the subject of this action in clinical negligence against three health authorities.  Both children started to suffer fits and it is their case that, despite the recommendation of a Mr Forest, a consultant paediatric surgeon in February 1983, scans and thereafter proper treatment were not instigated at the proper time.

3.	It is Toby’s case that he suffered a subdural effusion, namely a collection of fluid, shortly after February 1984 due to the fact that his shunt was not working properly.  The doctors did not diagnose this between February 1984 and April 1985 when, on the claimant’s case, they carried out a procedure which was outmoded and misconceived.  The procedure that was eventually performed on 11 December 1985, namely a subdural pleural shunt, was the procedure the claimant says should have been performed in October 1984.  It was the delay in carrying out this procedure which allegedly caused him damage over and above that he had already suffered, having been born in any event with hydrocephalus.

4.	In particular it is said he sustained more brain damage than would have been the case had the subdural effusion been treated shortly after February 1984.  It is argued that the additional brain damage is substantial.  His vision has been affected, his pale optic nerves and reduced visual acuity are likely to have resulted from the untreated subdural effusion rather than the underlying hydrocephalus.  Toby suffers a greater number of fits than before and it is said therefore has suffered far greater damage than would have been the case had his hydrocephalus been treated properly.  His intelligence has been adversely affected.  He has some permanent paralysis to his right-hand side and to the right-hand side of his face.  He has also had to undergo orthopaedic surgery to rotate his right leg.  It is said that had he been properly treated, he would have remained a walking child.  As it is, he will remain dependent for the rest of his life.

5.	Louisa’s case, although bad fortunately is not as bad as her twin’s.  Her condition it is said deteriorated between May 1983 and May 1984.  At that time she suffered a stroke resulting in severe left hemiplegia affecting her leg and arm.  She is therefore left with a slow and clumsy walk.  She has a mild inability to speak normally and a visual field defect.  She will have some dependence upon adults for the rest of her life, but not to the extent of her brother.  It is her case that the stroke and its consequences could have been avoided if the defendants had not negligently failed to replace her shunt at the appropriate time.

6.	The three defendant health authorities deny the allegations of negligence in substance.  There is a limited admission on the part of the third defendant into which I do not need to go, suffice it to say that as Mr Hutton on behalf of the claimants has argued, breach of duty, causation and quantum are very much in issue.  The claimants estimate a 15 day trial and the defendants say a 10 to 15 day trial.  The claimants’ estimate of total costs and disbursements worked out on behalf of the present solicitors, Messrs Gadsby Wicks, is just over £515,000.  Gadsby Wicks took over in November 1999.  The previous solicitor’s costs were estimated at about £20,000 and the costs already incurred on behalf of Gadsby Wicks are just under £130,000.  

7.	The defendants’ estimate as far as costs are concerned is as follows, just under £46,000 to date and future costs just under £118,000, making a total of about £162,000.

8.	Master Ungley was invited to consider estimates provided by a Mr Hurlihy instructed by the defendants, and a Mr Filtness on behalf of the claimants, both extremely experienced costs draftsmen.  Mr Hurlihy on behalf of the defendants estimated the claimants’ costs should be in total in the region of £240,000.  There was, therefore, a substantial difference between the figures quoted on behalf of the claimants and those on behalf of the defendants as far as the claimants’ costs were concerned.

9.	Mr Hutton argues that the Master appears to have placed too great a reliance upon those differences.  He submits there is very good reason why the figures are so different, and essentially that is because the defendants have grossly under-estimated the costs of preparing this case for trial, particularly as far as the claimants are concerned.  He also appeared to argue they have underestimated their own potential costs.

10.	Mr Hutton submits that the Master failed to take sufficient account of the extent to which this is likely to be a hard fought case and a hard fought case to and including trial.  Costs estimates, he reminded me, must be prepared on a worst-case scenario, not on the basis that they may settle or that certain issues may be resolved before trial, and he referred me to the decision of the Court of Appeal in Leigh v Michelin Tyres [2004] 1 WLR 847 at paragraph 37 to that effect.  The claimants must prepare their costs estimates, therefore, in accordance with the CPR on the basis that all issues remain in contention up to and including trial.

11.	The claimants have adopted the appropriate worst case scenario, but Mr Hutton argues the defendants have not.  For example, they have, in various places, used a ten day trial estimate and in others a 12 day trial estimate and not the worst case scenario of a 15 day trial estimate.

12.	Further, Mr Hutton reminded me this is essentially two actions in one.  There are two claimants making different allegations of negligence over different periods of time against different doctors.  The claimants have suffered different damage.  The position therefore on causation and quantum, Mr Hutton argues, is very complex.  The question of what difference the alleged negligence has made to each child, is inevitably going to be difficult to discern precisely.  The potential value of the claim, Mr Hutton submits, is very substantial, and he argues it would be wrong to attempt to pre-judge the level of damages likely to be recovered, as he suggested the defendants’ arguments were tending to do.  He submitted that it was necessary for the claimants’ solicitors to instruct a large number of experts to provide reports so that a proper schedule could be set out of the valuation of the claim.  

13.	As far as Toby’s claim in relation to his extra disability is concerned, the claim comes to a total of over £2.3 million; Louisa’s claim comes to a total of nearly £2.8 million.  This makes a total of over £5 million; as Mr Hutton says, a very substantial claim.

14.	On behalf of the defendants Mr Pooles QC argues that a large number of the claims appear to be implausible and that on investigation the level of the claim may in fact be quite modest, if not negligible.  In his written submissions, I was taken through certain aspects of the detail of the claims, for example, the costs of care and accommodation, in an attempt to justify that argument.  Mr Hutton responds by arguing, firstly, that the court should look at the value of the claim as the claimants reasonably expect it to be, and in any event, a total costs estimate of one-tenth of the claim in a case such as this is not disproportionate.

15.	He reminded me that Master Ungley allowed the parties to rely on a number of experts, both on liability and quantum, eleven doctors in all, four would be dealing with liability and ten will be dealing with quantum.  This is a case that began in the pre-CPR era.  I was astonished to learn that it took 18 years from the issue of the first legal aid certificate to the issue of the claim and a further seven years from what was described as a promise to serve the proceedings “in the near future” to the claim form actually being served.  I should emphasise that the matter was in the hands of other solicitors acting for the claimants for much, if not all, of that time.

16.	Whatever the cause of the instruction of so many experts, Mr Pooles reminds me that the Master must have been concerned at the large number of experts already instructed because he gave the defendants permission to apply for the revocation of permission to call certain experts on quantum, should investigation prove their services are unnecessary.  Mr Pooles argues that where, as here, as he puts it, experts have been unilaterally instructed, where the claim may be far more modest than the claimants suggest, and substantial costs have already been incurred, then this is a classic case for the intervention of the court and robust exercise of its case management powers.

17.	Mr Hutton argues, however, that the Master has plainly, by giving permission for these experts to be used, accepted that they are necessary for the preparation of this trial.  He reminded me the defendants had opposed the instruction of some of them.  He also submitted that they give some indication of the complexity of the case.  This is a case, he submitted, of considerable importance to the claimants.  They are both patients and the time and money spent in advancing their action, he argued, is entirely justified.  The estimates, he submitted, are proportionate and reasonable and the main test should be the question of proportionality.  He repeatedly emphasised, and made no apologies for so doing, that this was a highly unusual case.  He suggests it is very different from the type of case that sadly confronts the courts on a relatively regular basis, that of a child who is brain damaged at birth, and it is clear that the damage has occurred at birth, and the main issue apart from future care is whether the defendants were negligent in the management of the birth.

18.	He submitted that, given this litigation is in the hands of an experienced solicitor and an experienced firm of solicitors, there is not the risk of the costs of this litigation spiralling out of control, the kind of situation envisaged in the cases to date where cost capping orders have been made.  I was referred to two, one of them my own and one of them a decision of Gage J (as he then was).  I shall return to those cases later.  I was not referred to a previous example of the kind of order made by Master Ungley here, where the court sets a cap in principle and then refers the level and detail of that cap to the Supreme Court Costs Office.  It was not submitted such an order was wrong in principle.

19.	Both sides took me through the differences in their skeleton arguments in the costs estimates put before Master Ungley.  The differences, the detail of which I am not going to rehearse, can be summarised as follows.  It comes to differences in hourly rates, time to be spent on documents, the number of telephone calls and letters, the number of counsel to be instructed, the level of counsel’s fees, the trial estimate, and the number of days that lawyers and experts will be required to attend court.  Mr Hutton invited me to note that the defendants’ costs estimate dates back only to April 2001 when the present solicitors took over.  He also showed me the estimate, which has no breakdown of past costs, and he argued a very limited breakdown of future costs.  On the other hand, Mr Filtness has produced a very detailed schedule, which he submits will have to be even more detailed if this matter has to go to a Costs Judge under a costs capping order.  

20.	Mr Hutton submits, therefore, that when one looks at a case of this kind, which is essentially a clinical negligence action, albeit with two claimants, it is indeed suitable for a detailed assessment post-trial.  A detailed assessment can more fairly decide the hourly rate, the number of letters required, the days on which experts should have attended and the like.  

21.	As far as Master Ungley’s judgment itself is concerned, Mr Hutton criticised it for its brevity, and it is right to say it is extremely short.  Mr Hutton draws my attention to the fact that the Master made no reference to the issues in the case, or the case’s complexity.  Pausing there, I have no doubt that Master Ungley was well aware, given his experience of this field of litigation, of the level of complexity of this case, and the fact that he did not set it out in terms I do not find particularly persuasive.  

22.	Mr Hutton reminds me that in paragraph 2 in the note of Master Ungley’s judgment, he refers specifically to the costs estimated by the claimants’ solicitors and the defendants’ solicitor’s estimate of the defence costs.  He submits this seems to indicate that the Master has relied heavily on the fact that the claimants’ estimate was substantially larger than the defendants without providing proper analysis.

23.	The Master did refer to the case of Smart v East Cheshire NHS Trust [2003] EWHC 2806 (QB), [2004] 2 Costs LR 124 in which Gage J was invited to make a costs capping order.  In refusing to make a costs capping order in that particular case, Gage J said this:

“… where the applicant shows by evidence that there is a real and substantial risk that without such an order costs will be disproportionately or unreasonably incurred; and that this risk may not be managed by conventional case management and a detailed assessment of costs after a trial; and it is just to make such an order.  It seems to me that it is unnecessary to ascribe to such a test the general heading of exceptional circumstances.  I would expect that in the run of ordinary actions it will be rare for this test to be satisfied but it is impossible to predict all the circumstances in which it may be said to arise.  In these circumstances it seems to me very unlikely that it would be appropriate to adopt a practice of capping costs in the majority of clinical negligence claims.”

24.	Mr Hutton derives, therefrom, three limbs to the test to be applied.  Firstly the real and substantial risk that costs would be disproportionate or unreasonable.  He emphasises the word “disproportionate”.  Secondly, the risk is one which cannot be managed by conventional case management and detailed assessment post trial.  Thirdly, it is just to make the order.  He also argues that, following the reasoning of Gage J, a costs capping order should be a rare event.

25.	As far as the Master’s declaring himself satisfied of the first two limbs of the test, again Mr Hutton criticises him for the brevity of his reasoning.  He also makes no mention of the third limb, the question of justice.  Where the Master does refer to the case of Musa King v Telegraph Group Limited [2004] EWCA (Civ) 613, by suggesting that the system of assessment after the event may not be appropriate, the Master, he said, does not deal with the fact that the Musa King case was very much limited to its facts, namely a defamation action in which damages may well be totally disproportionate to the costs, and that the action started on a conditional fee agreement with no after the event insurance.

26.	As far as the first two limbs of the test were concerned, Mr Hutton argues that had the Master gone through the facts of this litigation as he should have done, he would have appreciated to a far greater extent the issues involved and paid greater attention to the potential value of the claim.  The test that Mr Hutton submitted the Master should have applied and I should apply, is to look to CPR 44.5(3) and the decision in Lownds v Home Office [2002] 1 WLR 2450 at paragraph 31.  Here he referred me to what used to be called the seven pillars of wisdom (now eight) namely that in resolving the question of costs, the court must have regard to the conduct of the parties, before and during the proceedings, efforts made to resolve the proceedings, the amount of the claim, the importance of the matter to the parties, the complexity of the case, the skill and specialised knowledge and expertise required, the time that had to be spent on the preparation of the case, and the place where and the circumstances in which work was done.  

27.	As far as the value of the claim is concerned, he referred me to paragraph 39 of Lownds where it is said:

“Whether the costs incurred were proportionate should be decided having regard to what it was reasonable for the party in question to believe might be recovered.  Thus (i) the proportionality of the costs incurred by the claimant should be determined having regard to the sum that it was reasonable for him to believe that he might recover at the time he made his claim…”

Therefore, Mr Hutton says, he is fully entitled, as are the claimants’ solicitors, to put forward their costs estimate, bearing in mind that this may well be a claim worth over £5 million.

28.	At the risk of repeating myself or Mr Hutton’s submissions, he submitted that the Master should very much have borne in mind the extent to which the issues are disputed, the skill and effort and specialised knowledge and responsibility required on all those involved, the importance of the litigation, the value of the claims and the fact that this is a case that will involve substantial time being spent.

29.	He reminded me that very often in clinical negligence cases it is argued that the defendants, in preparing for trial, have to spend far less time than the claimants do.  Indeed, Gage J (who is very experienced in this work) said in Smart:

“In my judgment this is not a case where a costs cap order should be made.  I accept that there is a wide discrepancy between the defendant’s estimate of its costs and that of the claimant and that on a worst case basis the claimant’s estimates of costs is very high.  However, it seems to me that solicitors acting for claimants in such cases will inevitably have more work to do in preparing and presenting the case than defendants’ solicitors.”

Mr Hutton submits that the Master appears to ignore this factor and he also reminded me of the experience of those who are conducting this case on behalf of the claimants.

30.	He also reminded me of my own comments in Ledward Claimants v Kent & Medway Health Authority [2003] EWHC 2551 (QB).  In that case I sat with the Senior Costs Judge, Master Hurst, on a costs capping application and I made the order.  At one stage in the course of the judgment at paragraph 37 I said as follows:

“The Defendants go on to suggest that the best guide available to the market is the rate paid by NHSLA “who are the largest purchases of legal services in this field”.  I do not accept that submission.  The individual Claimants are one off purchasers who are unlikely to provide repeat business.  There is no guarantee of a flow of work to a claimant solicitor.”

Accordingly, Mr Hutton said there is a good basis for saying here that there may be a very real difference in the hourly rates charged by the defence lawyers as opposed to the claimants’ lawyers.

31.	He accepted that plainly this is not a mathematical exercise, and it is one that depends upon the facts of each case.  He did, however, take me through some of the detail of the claimants’ costs.  As I have said, I do not intend to rehearse that detail, suffice it to say that if one takes just four aspects of the figures, there is a difference on those four aspects alone of £136,000 odd.  Pausing there, I saw force in his submissions that the defendants’ estimate may have been somewhat mean in certain respects, and unrealistic in others.  For example, they have not allowed for the instruction of leading counsel in this litigation, nor have they allowed for anything more than one conference of three hours.  I do find that somewhat surprising, given the nature of the claim and the amounts involved.  I did not embarrass Mr Pooles by asking for his specific submissions on the subject, but I doubt that he would have seriously argued to the contrary.  Plainly this is a case that merits leading counsel if any case did.

32.	Mr Hutton rejected the Master’s finding on the second limb, that the risk could not be managed by conventional case management.  He submitted the Master did not explain why he said that.  He argued that, even if Mr Pooles is correct and the claimants will not justify on post-trial assessment every item of their estimates, that does not mean it is the wrong way to manage this case.  The very purpose of detailed assessment is to disallow unreasonable or disproportionate costs.  Given Master Ungley’s experience in this field, he suggested it was odd that the Master had concluded that the court was incapable of managing this case without a cost capping order.  

33.	Mr Hutton also took me through the details of the other actions in which cost capping orders have been proposed or imposed.  In Griffiths v Solutia UK Limited [2001] EWCA (Civ) 732, 2 Costs LR 247, he submitted that proportionality was very much uppermost in the court’s mind and there the total costs far exceeded the total amount of damages added together.  In AB & others v Leeds Teaching Hospitals Trust [2003] EWHC 1034 where Gage J made a costs capping order, the costs were estimated at £2.45 million but the claimants were only likely to get £7,000 damages per claimant.  In Ledward (supra) I found the case was “driven by the lawyer for the claimants” who, as a member of a small Cornish firm was “at the very least over-generous with her time”.  

34.	He submitted that we do not have here the risk inherent in group litigation, or indeed in defamation actions where costs may spiral disproportionately out of control in relation to relatively small awards of damages.  He submitted in a single clinical negligence action, albeit with two claimants, there is what he described as a roadmap in which the Master approves the instruction of experts, and they then meet.  At each stage it is clear what has to happen.  It is then an issue, he says, simply of assessing the amount of time that the experts, solicitors and counsel spend at each stage, and whether or not it was proportionate.

35.	Further Mr Hutton referred me to what he described as the dangers of delay and distraction of dealing with applications of this kind and, should the order stand, of any subsequent hearings before the Costs Judge.  He suggested there would have to be witness statements, possibly further cost estimates, estimates from counsel.  This could involve increased expenditure and delay, and indeed difficulties for those who should be focusing on preparation of this case for trial.  If the Costs Judge does not go into detail, Mr Hutton submits there is a danger of a broad brush approach being taken, which could be to the prejudice of the claimants.  He submitted that this is a case, being highly unusual and unpredictable, where either the expenditure of time and effort and money on detailed pre-trial analysis, or indeed the broad brush approach, would not produce a fair result whereas a detailed assessment would.

36.	He asked me to consider what would be the position if, for example, the trial went longer than expected.  Should the parties apply immediately to Master Hurst (or whoever is dealing with the case in the Supreme Court Cost Office) for a variation of the cap.  

37.	He submitted there would not be a level playing field in any event between the defendants and the claimants because the defendants are not bound by any cap.  Nobody has invited me to make a cap on the defence costs in this case, as I was invited to do in the Ledward litigation.  He submitted there is nothing to stop the defendants, firstly under-estimating their costs and then spending whatever money they wished to upon the litigation.  He also argued in his written submissions that there would be difficulties with apportionment.  I confess that, like Mr Pooles, I find that somewhat difficult to follow, but Mr Hutton did not dwell on that in his oral submissions.  

38.	In Mr Hutton’s written submissions, he had also argued that there was a real danger of any difference between the cap on costs and what is found to be costs reasonably incurred, having to come from the claimants’ damages.  In the light of a letter from the Legal Services Commission, he accepted that the position was not clear.  Without abandoning the point, he did not ask me to decide it.

39.	Mr Pooles reminded me first of all, quite properly, that both of the parties are publicly funded and this application concerns the proper limit upon the public’s expenditure on legal costs.  He argued that the independent costs draftsman, Mr Hurlihy, had concluded in a number of respects that the costs estimated by the claimants’ solicitors were excessive.  He had referred to, for example, hourly rates, work on documents to date, attendances, experts fees, estimated work on documents, estimated counsel’s fees.  There has also been a very real concern expressed as to the amount of money already spent on this case since it has been in the hands of lawyers and experts.  He submitted that that in itself was a particular feature of the case, which went some way to justifying the Master’s approach.  Similarly he submitted the fact that the claimants are patients is also a feature that should be very much borne in mind when the court is exercising its court management powers. 

40.	He submitted that the defendants perfectly properly sought a costs cap or a costs budget (as it is sometimes called) in respect of the claimants’ costs on the basis that costs would be unreasonably and disproportionately incurred on behalf of the claimants.  He submitted that the essence of Mr Hutton’s argument is that cost capping orders are, in principle, unfair and that even if Master Hurst or the Costs Judge dealing with this matter imposes a cap at the claimants’ own level, it would still be wrong in principle and unfair.  Mr Pooles argued that a cost capping order can only become unfair if they are set at too low a level.  This has not yet arisen and should not arise.  Should it do so, any level set can be varied or it can be appealed.  Mr Pooles submitted that there is nothing unfair about making a cost capping order in principle.

41.	He reminded me that Mr Filtness, the draftsman responsible for the preparation of the claimants’ estimate (not, he noted, the solicitor with charge of the case) has suggested in respect of certain items of the costs, that the figure could become significantly higher than the costs already quoted.  

42.	He submitted that this possibility should ring alarm bells with the court and rightly so.  As I have indicated, the parties agree that for the claimant to succeed, the claimant will have to show the Master was wrong to make the order that he did.  Mr Pooles reminded me that in matters of discretion, the claimant would have to demonstrate “that the judge at first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which reasonable disagreement is possible”: see Brooke LJ citing G v G  in Tanfern v McDonald [2000] 1 WLR 1331.  He argues that it is plainly significant here because, not only did this matter involve discretion, but it occurred in the context of a case management issue of a clinical negligence claim in which the Master has considerable experience and authority.  

43.	He reminded me of the effect of the Practice Direction as to the filing of costs estimates which now have to accompany the allocation questionnaire, which in fact in this case prompted the application for the cost capping order.  He invited me to bear very much in mind that these days a solicitor is required to provide his or her client with cost estimates in keeping with the Law Society’s guide, and indeed the court itself can at any time demand an up-to-date cost estimate from a party.

44.	He referred me to Griffiths v Solutia [2002] PIQR 176 in which the Court of Appeal held that the general case management powers of the court set out in CPR 3.1 should be employed to set cost budgets whenever appropriate.  Mance LJ at paragraph 33 said this:

“The present litigation was conducted under the old rules preceding the Woolf reforms.  It is to be hoped that subsequent to the Woolf reforms judges conducting cases will make full use of their powers under the Practice Direction about costs, section 6, which appears in the Civil Procedure White Book 43/PD006, to obtain estimates of costs and to exercise their powers in respect of costs and case management to keep costs within the bounds of the proportionate in accordance with the overriding objective.”

45.	He referred me to observations of Dyson LJ in Leigh v Michelin (supra) as to the control of costs being “one of the principal objects of the Woolf Reforms”.  He referred me to the emphasis on the need for prospective cost budgeting given in Jefferson v National Freight Carriers [2001] 2 Costs LR 313, and indeed in Lownds (supra).  In Jefferson Lord Woolf CJ cited with approval the following observation:

“In modern litigation, with the emphasis on proportionality, there is a requirement for parties to make an assessment of costs at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which would be necessary and appropriate to spend on the various stages in bringing the action on to trial, and the likely overall cost.”

46.	Mr Pooles submitted it is a necessary corollary of such an approach that the court may itself impose a costs cap or budget as Gage J did in Leeds Teaching Hospitals and as I did in Ledward.  He submitted that such steps are even more pressing than they were in 1999 because the advent of the CPR has not had the desired effect and the costs of litigation continue to grow, particularly in the field of experts causing the High Court and the Court of Appeal considerable concern.

47.	In Leigh he said the court was specifically concerned with the effect of costs estimates on the assessment of costs.  Estimates can, of course, be taken into account on later assessment.  But he reminded me it gave guidance as to the use that may be made of costs estimates and budgeting:

“There is, however, much to be said for costs budgeting and the capping of costs.  Some judges have made prospective costs cap orders exercising the general power conferred by section 51(1) of the Supreme Court Act 1981: see, for example, Gage J in AB v Leeds Teaching Hospitals NHS Trust …  This is not the place to review these decisions.  Suffice it to say that, whatever the scope of the jurisdiction to make such orders, it is quite different from the jurisdiction that is exercised retrospectively at the stage of costs assessment, and when the court is required to decide the amount of reasonable and proportionate costs.  Costs estimates can also alert the judge responsible for case management to the need to take appropriate action to prevent disproportionate costs from being incurred.”

48.	At paragraph 31 the court dealt specifically with the possibility that prospective cost budgeting may be more effective than detailed assessment after the event and said:

“We recognise that the use of paragraph 6.6 of the Costs Practice Direction to control costs by taking costs estimates into account at the assessment stage is not the most effective way of controlling the cost of litigation.  It seems to [me] that the prospective fixing of costs budgets is likely to achieve that objective far more effectively…”

49.	In relation to Gage J’s observations in Smart, Mr Pooles submitted that Gage J did not have the benefit of the decision in Leigh and the observations as to the advantage of prospective cost budgeting.  He submitted that this is a developing area and there may well come a time when lawyers become familiar with the prospect of costs budgeting as a normal feature of modern litigation.  He reminded me, again with no apology, that we are now in the year 2005 and things have moved on considerably since pre-CPR.

50.	He also reminded me that the relevant passage in Leigh to which I was referred had been cited in and endorsed by the Court of Appeal in Musa King.

51.	He did not suggest this was a totally straightforward case, but he did not accept that it gave rise to the legal or factual difficulties said to be so wholly exceptional.  He argued that the thrust of the claimants’ case was there were a large number of experts, therefore the case was unpredictable and therefore costs could not be budgeted.  (a) He did not accept that was the position, and (b) he submitted that, to the extent that it does have an effect it is because the claimants’ solicitors have occasioned the unilateral (as he put it) instruction of experts and reduced the ability of the court to control costs by effective case management.  He argued that the number of expert reports rather than reducing the concern that costs may be excessive, has in fact heightened it.

52.	He argued there was ample evidence before the Master from which he was entitled to conclude there was a real risk that costs might be unreasonably incurred.  He did not place as much emphasis on the word “disproportionate”, because, of course, that does involve a rather detailed analysis of the value of the claim.  

53.	He referred me to the contents of Mr Hurlihy’s statement.  He referred me to the high level of costs already incurred.  He made mention, for example, of the 43 expert days allowed by the claimants on a 10 to 15 day trial, whereas the defendants have allowed but 16 expert days in attending trial.  He has suggested that the large amounts of time proposed on documents, given the time already spent, and the fact that some reports are already available and the claim already formulated was excessive.  

54.	He referred me to the huge disparity (as he put it) between the costs estimated by the defendants and those by the claimants.  He did not argue that this was, in essence, a trump card.  What he submitted is that it is plainly a feature that the Master was entitled to take into account.  He also referred me to the detail of the work that the defendants’ lawyers themselves will have to carry out acting, as they do, on behalf of three separate defendants and representing, in some way, the interests of several practitioners who have been accused of negligence.

55.	In short, therefore, Mr Pooles argued Master Ungley was entitled to reach the conclusion that he did, that there was a real risk in this case that the costs could be excessive.  He said there was nothing in this case the court can now do by way of case management to control the time spent in preparation, and the court was entitled to take the view that unless action was taken, further excessive costs would be incurred.  He said the fact that the Master made no mention of whether or not it was just to make such an order, was irrelevant.  The Master had plainly formed the view that it was just and that, unless something was done, the costs might spiral out of control.

56.	He argued that you do not need to have a convoluted system which involves unnecessary delay or cost if the matter does go to the Costs Judge just for the level of the cap to be set.  He accepted that the court must be alive to the dangers of satellite litigation of which Mr Hutton suggests this is a prime example, but he submits there are many ways in which the court can ensure that one does not have such litigation.  He also submitted that, as far as costs are concerned, there can always be protection by way of Part 36 offers in the usual way.  He said there is no reason why the time spent and the costs spent in determining cost budgets should be substantial.  All parties should have become used to the idea of costs budgeting, particularly in high level claims.  The matter should therefore be straightforward.  Should the cap require amendment, he could see no real or practical difficulties in making it.

57.	He submitted that it was a flawed argument to suggest the defendants could spend as much money as they want.  They too are publicly funded, albeit through the NHS LA rather than the LSC and they do not have a free hand to instruct whomever they like and to spend as much money on their own fees, or the experts’ fees.

58.	He argued, in essence, therefore, that because of the material before Master Ungley, not only could I not say that Master Ungley was wrong, but I myself should be satisfied that this was a perfectly proper order to make.  

59.	In reply, the main matter upon which Mr Hutton relied was the concession made by Mr Pooles that he was not relying so much on whether or not there was a risk of the costs becoming disproportionate so much as there being a risk of their becoming unreasonable.  As I have indicated, he took me through the authorities, again highlighting how it is really the proportionality of the question of costs that the court must have at the forefront of its mind.

60.	Having reviewed the authorities put before me so helpfully by counsel for both sides, authorities on case management and cost control post the introduction of the CPR, it is plain to me that, whether or not the CPR themselves made provision for cost-capping, there is a clear trend, as Mr Pooles suggested, to active case management on the question of costs.  The courts are moving, at whatever pace, toward a system of pre-emptive strikes in order to avoid the costs of litigation spiralling out of control, and becoming unreasonable or disproportionate. 

61.	In my judgment, it is far better for the court to attempt control and budget for costs where appropriate, than to allow costs to be incurred and then have them submitted to detailed assessment after the event; an assessment, of course, that is meant to take place with the benefit of hindsight.  It seems to me that such an approach is entirely in accordance with the spirit and the letter of the CPR.  It is true to say, as Mr Hutton argued, that the facts of Ledward and the facts of Leeds Teaching Hospitals, are very different from the present case.  In the Teaching Hospital case, the damages likely to be awarded were very low compared to the very high level of costs.  In Ledward I made a number of very adverse findings against the claimants’ solicitors.  I wish to emphasise at this stage that I make absolutely no adverse findings against the claimants’ solicitors in this case and certainly not their draftsman Mr Filtness.  

62.	The idea of a cost capping order is to exercise some kind of control, even over the most experienced and respected firm of solicitors.  Any solicitor must obviously act with the best interests of their client at heart.  With the best of intentions; there must be a risk that in certain cases without some kind of control by the court, there may be an unreasonable or disproportionate expenditure of limited resources.  It is significant, in my view, that in this case both sides are publicly funded.  Public funds are scarce and it is the duty of the court to play its part in ensuring they are expended properly and effectively.

63.	In this case the Master had before him and I have before me evidence from two experienced costs draftsmen.  One is described as independent.  His evidence was to the effect that whatever the experience of the claimants’ solicitors, and I do not doubt that for one second, this is a case where there is a risk (and I emphasise the word “risk” not certainty) that costs are rising disproportionately or unreasonably.  As I have indicated during the course of this judgment, there may well be instances where Mr Hurlihy has been somewhat less than generous in some of the figures that he has quoted but the fact remains that this is a case where a very substantial amount of money has already been spent.  The estimate for the claimants’ costs is substantial for an action in clinical negligence, even one with two claimants.  It may rise further.  A large number of experts have already been instructed.  Alarm bells should be ringing.    

64.	This is not an ordinary run of the mill case of the kind referred to by Gage J in Smart.  Given its history it is a case where, in my judgment, some kind of control has become necessary.  I have borne very much in mind the work that has been done and the costs incurred and the work that remains to be done and the costs thereof. 

65.	Not only am I unpersuaded that Master Ungley was wrong or outwith his legitimate discretion in making the order, but I agree with him, that on the facts of this case it was appropriate to do so.  I am satisfied that there is a risk that, without control, the already substantial costs will become disproportionate or unreasonable.  It seems to me the most effective way of exercising that control is by having a budget, a budget imposed by an extremely experienced Costs Judge.  

66.	The Costs Judge can then perform his task at a time that will enable the claimants’ solicitors to represent their clients to best effect but within a reasonable and proportionate budget, which I am sure is the claimants’ solicitors’ aim.  I am confident that the Supreme Court Costs Office and Master Hurst in particular, should he accept this case himself, (which I hope he will) will produce a sensible regime whereby this order can be implemented and varied (if appropriate) fairly and effectively without the unnecessary cost or delay that Mr Hutton fears.

67.	It may well be that on analysis the Costs Judge, be it Master Hurst or anyone else, will find that the claimants’ estimate is entirely reasonable and proportionate.  It may well be that the Costs Judge will find that an increase in any cap imposed is also justified.  I know not what will happen, but I am satisfied that it is the Costs Judge, with all his experience, who can exercise the necessary control over the costs of this litigation, at a far more appropriate stage than post-trial.

68.	Accordingly, despite the excellent arguments of Mr Hutton advanced with great eloquence and persuasiveness (indeed I am grateful to both counsel) this appeal must be dismissed.