Hadley v Przybylo: All Change or No Change?
Hadley v Przybylo has received significant comment, some of which has not been entirely correct. The judgment of the Court of Appeal is not the only thing worthy of comment, though, as the case raises a number of issues about costs budgeting, rehabilitation and costs conduct generally.
By way of background, the Claimant was badly injured in June 2020, sustaining a serious traumatic brain injury. The claim has in fact been settled subject to approval, the Court of Appeal recording the settlement figures in its judgment. They are not repeated here but claim is/was substantial.
To Budget or Not to Budget?
The Claimant initially sought to exclude costs budgeting on the grounds that the claim was valued excess of £10m. The Defendant was required to apply.
CPR 3.12(1)(a) disapplies costs budgeting to all claims over £10m unless the Court orders otherwise. It’s not hard to see the basis for the rule: proportionality is less likely to have a significant force, for example, in very weighty commercial actions.
Does that apply in the same way to PI and clinical negligence claims? Often the difference between an £8m and a £12m claim is nothing more than the age of the Claimant; the two claims might otherwise be identical, with identical medical evidence and issues of identical complexity. All very substantial injury claims are complex to a degree but they are almost always heavily expert-led in that the experts will often define a number of the issues – even if there is some complexity to the resolution of such issues. That also applies to many claims much lower in value than £10m.
Thus, the proportionality arguments don’t apply in the same way and indeed experience suggests that costs budgeting is a strong advantage in such cases, for both parties.
The CPR recognises these points in CPR 3 PDD para 2 which provides that costs management may be “particularly appropriate” in PI and clinical negligence claims where the value is £10m or more. That choice of words is telling.
There are plainly some PI and clinical negligence cases which may not benefit from costs management. Obvious examples include very short life expectancy cases and cases involving child claimants. Both are already dealt with by the rules (CPR 3 PDD para 1 and CPR 3.12(c) respectively). There will be occasions where there will be strong arguments for costs budgeting in such cases but they are less likely to be the norm, particularly where the Claimant is young and there will be a substantial period before the prognosis can be determined.
In all other high value PI and clinical negligence claims, there is far more of an argument to be had regarding costs budgeting being imposed and there ought not to be, in my view, an assumption that it should simply be dispensed with on grounds of value alone.
The Master took the same view in Hadley and re-applied costs budgeting.
Costs ADR
Having ordered costs budgeting, the Master ordered the parties to undergo ADR of their budgets. It required no more than the costs lawyers on both sides to have formal discussions to resolve issues where possible. It was spectacularly successful, although ironically led to one of the issues in the Court of Appeal: all phases other than Issues / Statements of Case were resolved.
It is to be encouraged in all cases. Who knows whether it was an operative factor in this case but the potential threat of the Court looking at the conduct of such negotiations might be a useful ‘carrot’ to aid in narrowing the issues.
The Claimant’s Budget
The Claimant’s budget totalled £1.083m after the ADR. Incurred costs were £550k, of which nearly £185k had been spent on the Issues / Statements of Case phase.
There was already a detailed Schedule of Loss but, even so, the costs were high – a view reflected by both the Master and the Court of Appeal. To put the figures in context, the costs were spread between 2 rates: £300/hr and £150/hr. The accident was in June 2020 and the budget was dated January 2023. In that time, the Claimant had incurred 544.3 hours of work on this phase: 14.5 full working weeks on the Issues / Statements of Case phase alone.
Moving forward, the Claimant sought a further £72,400 for the phase. The assumptions did not assist much in those figures, recording “Preparing an updated Schedule of Loss, reviewing and advising upon a Counter Schedule in conference. Working with the Case Manager and Deputies throughout”. The £72,400 broke down to £4,000 for counsel (which was agreed), leaving £68,400 for the remaining work in the phase, or nearly 7 complete working weeks (34.4 full working days).
No further breakdown or assistance was given as to how that might be made up. One might comment, although perhaps with the benefit of hindsight, that it would be sensible (if only as a matter of advocacy) to set out in some detail in advance of the budgeting hearing what the costs sought actually comprised. I mention that CPR 3 PDD para 10(a) deprecates documents providing additional assumptions. That said, where ADR has been ordered and failed, it might be said that further detail being provided was a relatively obvious step.
The Defendant put in a brief submissions document in advance. It made two main points on this issue. The first was that only modest work was required to finalise the Schedule and to deal with the other core issues in the phase.
The second was critical as it has been regularly wrongly stated: the Defendant accepted that “some general additional work will be required in order to liaise with counsel, the case manager and deputy” but that the time claimed by the Claimant was “significantly beyond what would be reasonable and proportionate”.
To the suggestion that the Defendant was raising a point of principle, it is clear that that is wrong and always had been wrong. The cornerstone was always what was reasonable and proportionate. The Court of Appeal agreed with that submission.
The Defendant offered £19,750 for the phase. With counsel’s fees being agreed, that left £15,750 for time costs.
The Claimant offered various explanations for the £68,400 in the hearing. £12,900 was said to be for drafting the Schedule, considering the Counterschedule etc. That left £55,500 for the liaison. That was, in effect, explained in two ways: attendance at all MDT meetings or 3 hours per week for regular liaison with the case manager and deputies.
The Master allowed £20,000 for the phase, which allowed £3,100 for the controversial liaison elements.
The keen-eyed will have spotted that the issue in the Court of Appeal therefore revolved around £250 in practical terms. That is one of the reasons the Claimant only recovered 50% of his costs of the appeal.
The Court of Appeal considered that the Master expressed her decision as a point of principle. They were reinforced in that by the fact that she had allowed a leapfrog, incidentally against the Defendant’s position on that issue.
The Defendant always doubted whether the Master did find as a point of principle. As the Court of Appeal discusses in its judgment, there are points going either way. If there was a point of principle preventing such liaison in this phase, it was odd to have allowed a sum for it.
The Court of Appeal – and where do we go from here?
It was quite unique to hear the Court of Appeal comment as they rose at the end of the hearing that they needed to work out what they needed to decide, if anything.
How did this arise? The Claimant said there was a point of principle being decided. The Defendant did not – and accepted, as it always accepted – that some costs of liaison would be allowable where appropriate, reasonable and proportionate.
In that sense, there was no issue for the Court of Appeal to decide – other than perhaps whether the Master had decided a point of principle – deciding ultimately that she had, even though she had allowed a sum for such liaison.
Whatever the decision of the Court of Appeal, it was always the case that the Claimant’s costs will need to go through the detailed assessment process (including any agreements, of course). The Claimant will now do so with the Court of Appeal’s words ringing in his ears, that the estimated costs “seem very high” and that the “the Master’s overall cost budget figures were fair and reasonable”.
So, what does Hadley tell us?
It does not tell us that solicitors can never attend MDTs. It does not tell us that there can be no liaison between solicitors and case managers / deputies. None of that is new.
Hadley reminds us that costs are those “of and incidental to the proceedings”, the “incidental to” widening the “of”. It is the “incidental to” which allows the recovery of the costs of an inquest in certain circumstances, to give an example.
Three criteria had been flagged in re Gibson’s Settlement Trusts: (1) use and service in the action, (2) relevance to an issue and (3) attributability to the Defendant’s conduct. It was far from clear from the authorities whether they were alternatives or cumulative. The Court of Appeal clarified that the three, which they conveniently summarised as “utility, relevance and attributability”, “provide the applicable general test as to the recoverability of any given item of cost”. That is the test going forward. The Court declined to provide any further detail as to recoverability, not least because such matters are so fact-sensitive.
Much was made by the Claimant of the need for proper rehabilitation. That much was never in doubt and neither was it in issue. As the Court of Appeal noted, what the Defendant was complaining about was “the large sums that had either already been incurred, or were included in the future costs, by reference to rehabilitation and, in particular, the attendance at every routine rehabilitation case management meeting”. In essence, the Court of Appeal reflected that view: that rehabilitation is highly beneficial and that recoverability of attendance at MDTs will always depend on the facts.
Hadley was a curious set of facts as all other phases had been agreed. The Claimant thus had to ‘shoehorn’ costs into the remaining phase on the basis of those costs being relevant to ‘Issues / Statements of Case’. The Court of Appeal commented that the budgeting phases don’t fit well for such costs but equally steered well clear of changes being made to budgets / the process.
There are no doubt costs which are directly referable to the pleadings and related matters. The Claimant’s solicitors need to know the figures which have been spent and that will require liaison and/or consideration of the disclosure. The reasonable extent of that liaison will be fact-sensitive.
Likewise, Claimant’s solicitors will need to be kept sufficiently abreast of the finances to be able to manage them in sense of knowing when to seek interim funding from insurers. Again, it will be a matter of fact as to how that should occur and what is reasonable / proportionate. It likely does not require attendance at every MDT.
Likewise, there is of course a role for the solicitors in the rehabilitation. That much is clear from the Rehab Code and the Serious Injury Guide. But this is where care is required: solicitors must keep in mind the tripartite test for the recoverability of costs set out by the Court of Appeal. In doing so, they must bear in mind that it is the roles of the clinical / therapeutic / case management members of the MDT to manage the Claimant’s rehabilitation. That is the role they are qualified for – it is not the role of the Claimant’s solicitor.
In that sense, the evidence the Claimant put before the Court of Appeal is interesting. It flagged the beneficial nature of rehabilitation – but that much was not in doubt. It also sought to set up (amongst other points) an argument that members of the MDT occasionally had legal questions which it was convenient to ask the solicitors. That, in the Defendant’s view, was a matter to be approached with some care: MDTs (which of course also exist outside the litigation context) do not generally have access to legal opinion; also, such occasional questions being necessary does not of itself mandate the solicitor’s attendance at every MDT. Again, the solicitors will need to have in mind the test for recoverability of costs.
The Court of Appeal found the further evidence of limited assistance to them and that it would have been of little use to the Master. There was no order as to the costs of such evidence.
Where does this leave us?
In the same place as we were before Hadley, albeit with clarification of recoverable costs. The Court of Appeal declined to give guidance on some of the controversial elements being claimed as damages, rightly in my view. There is no complete ‘ban’ on the recoverability of costs of solicitors attending MDT meetings – not least as that was never sought – but Claimants’ solicitors need to be mindful of what is likely to be recoverable on budgeting and on detailed assessment.
