Cash flow and catastrophic personal injury litigation

Taking up again the role of a modern day Jeremiah, or conversely, John the Baptist, depending on your point of view, about the vexed topic of the ease of  funding of personal injury claims post 2020 (you can read my earlier article on the subject here: ) I have read with interest the recent case of RXK v Hampshire Hospitals NHS Foundation Trust [2019] EWHC 2751 (QB) which concerned an application for a payment on account of costs, in a catastrophic personal injury claim which still had some way to run before its conclusion.

The case concerned a decision of Master Cook, who described the application before him in these terms:

3. Following the publicity given to the decision of His Honour Judge Robinson in the County Court case of X v Hull & East Yorkshire Hospitals NHS Trust and the subsequent refusal of permission to appeal by Irwin LJ this sort of application has become common in high value clinical negligence and personal injury claims where there is likely to be substantial delay before quantum can be determined by the court. I am aware that there is no decision of the High Court on the principle of whether such applications are well founded and have an adequate juridical basis in the rules and/or authorities. I therefore indicated to the parties I would give a short written judgement in the hope that such applications would be better prepared in future.

The context of the application was the sort of case all too sadly familiar, in the corridors of the Queens Bench Division:

4. The Claimant suffered neurological injury as a result of a profound asphyxial insult at the time of her birth on 9 November 2013 as a result of negligent delay in her delivery. A neonatal MRI performed five days after birth showed evidence of ischaemic changes in the basal ganglia and thalami. It is the opinion of the Claimant’s consultant paediatrician that she suffers from dyskinetic cerebral palsy GMFCS II, she is cognitively spared (although there is uncertainty about the extent of any learning difficulties), she has bilateral metaphyseal hip dysplasia, frequent difficult behaviour, disturbed sleep and associated dependency.

5. Proceedings were issued on 2 November 2016. Judgment was entered for damages to be assessed by way of order dated 25 July 2017, which also awarded the Claimant her liability costs to be subject of a detailed assessment if not agreed. This order also provided for interim payments on account of damages in the sum of £100,000 and of costs in the sum of £50,000.

6. The first CMC in the assessment of damages took place before me on 29 March 2019. I made orders for disclosure and for the parties to obtain reports from experts in paediatric neurology, neuropsychology and care. The primary purpose of these reports was to enable the parties and court to form a view about when it would be possible to assess damages on the basis of a settled prognosis. It is the court’s experience that in the majority of such cases the Claimant will be between the ages of 12 and 22 before a final prognosis can be given.

As is well known there has been at least one case recently on the court’s power to award costs by way of payment on account, even though the case has not been finally disposed of:

11. At paragraphs 30 and 31 of his judgment in X v Hull & East Yorkshire Hospitals NHS Trust HHJ Robinson said;

“30. In my judgment, rules 44.2(1) and 44.2(2) are wide enough to allow the Court to make an order for costs of the
kind sought by the Claimant:
(1) The discretion conferred by rule 44.2(1) relates to the questions whether costs are payable, the amount and when
the costs are to be paid.

(2) Rule 44.2(2) sets out the general rule that the unsuccessful party pays the costs of the successful party.

31. Rule 44.6(c) gives the court power to order payment of costs “from or until a certain date only”.

The Court of Appeal refused permission to appeal from the decision of HHJ Robinson and Master Cook had no difficulty aligning himself with the reasoning in the earlier case:

12. I agree with these observations. The discretion conferred by section 51 of Senior Courts Act 1981 and expressed in CPR 44 (2) is a very wide one. As Irwin LJ commented when refusing permission to appeal the meaning of “successful party” or “unsuccessful party” cannot be confined to a binary outcome of the whole case. But it in my view it is important to realise that what HHJ Robinson actually did when allowing the appeal from DJ Batchelor was to make a costs order down to the date of the hearing of the application for an interim payment on account before the District Judge, see paragraphs 23 and 43 of his judgment. This must be right as the wording of CPR 44.2 (8) provides that the court will make an interim payment on account of costs only where it has made a costs order which could be subject to detailed assessment. This is sometimes described as a “prospective” or “anticipatory” costs order, because it has been made before the conclusion of the proceedings, see the
commentary in the White Book at 44.2.11

13. The application which should be made in these circumstances is for a costs order down to a specific date and an interim payment on account of those costs.

The Master then explained in his view that the criteria which governed the exercise of the jurisdiction needed to be addressed in the evidence supporting an application for a payment on account of costs:

14. Putting the matter this way makes it clear that the court will wish to take into account the factors listed in CPR 44.2 (4) and (5) and will normally expect to be presented with sufficient information to enable it to carry out that exercise. I do not consider there is a basis for asserting any kind of exceptionality test. The court will consider such applications on the basis of established principles.

The evidence which was put forward in support of the application was described as follows:

7. The application for a further interim payment on account of costs was supported by one paragraph in the witness statement of Ms Bean, the Claimant’s solicitor;

“59. The Claimant also seeks an interim payment on account of her costs in the sum of £150,000 pursuant to the Court’s discretion in CPR rule 44.2. A schedule of costs is exhibited to
this statement as exhibit “AB-13 and totals £410,136.88. Interim payments of £100,000 have previously been received (£50,000 in January 2017 and £50,000 in August 2017), and therefore this payment would mean that the total interim payments on account of costs would be £250,000 (just over 60% of the total costs in the costs schedule). I submit that it is
likely there will be significant delay before quantum is resolved in this matter (at least 3-4 years, but possibly much longer in uncertain future), by which time costs are likely to be
significantly higher, and therefore I respectfully request that an interim payment on account of costs is made at this stage pursuant to the judge’s discretion.”

8. The schedule of costs exhibited to Ms Bean’s witness statement was a short summary of all profit costs incurred down to the 17 June 2019. No attempt had been made to apportion the figures between liability and quantum costs.

9. It also became apparent, in answer to a question asked by me, the Claimant had the benefit of a public funding certificate and that some payments on account had been made by the Legal Services Commission.

The Master then went on to evaluate this evidence and decided that it was inadequate:

15. A relevant consideration will be to preserve security for a Defendant and to ensure that there is a limited risk of such costs having to be repaid although I accept, as did
HHJ Robinson, that a defendant who has overpaid costs to a claimant’s solicitor may seek to set off such costs against damages. Without being prescriptive relevant considerations may include:

i) the type of funding agreement and details of any payments made under that agreement,

ii) whether any Part 36 or other admissible offer has been made, and if so, full details of the offer,

iii) details of any payments on account of damages made to date,

iv) a realistic valuation of the likely damages to be awarded at trial,

v) a realistic estimate of the quantum costs incurred to the date of the application,

vi) any other factor relevant to the final incidence of costs, such as the possibility of an issue-based costs order, arguments over rates or relevant conduct.

vii) the likely date of trial or trial window.

16. It is clear that Ms Bean’s witness statement failed to adequately address any of the above issues and amounted to no more than a cri de coeur for more money. The need for solicitors engaged in heavy and protracted litigation to expect adequate cash flow is now well understood and enshrined in the rules, see the note at 44.2.12 of the White Book. The parties may serve one further witness statement each and apply to re-list the application for hearing before me. I hope that those who make such applications in future will ensure that all relevant material is put before the court in support of the application.

So the application was adjourned, with leave to put in further evidence. Through this decision it cannot be said that the Master has addumbrated new principles of law, or done other than follow the prevailing orthodoxy that costs orders can be made down to a certain date, and then payments on account made in respect of the costs caught by such orders. The significance of such an order is clear: the party at fault can be made to fund the further tranche of litigation brought against it, through a pre-emptive order even though a quantum trial might be years away. Moreover as the Master noted, his is a decision of the High Court, and so has binding force upon inferior courts: though I am not sure that many Circuit Judges necessarily believe that to be the case.

One can anticipate further refinements of principle, in particular where a defendant with judgment on liability against them, will seek to make a robust and early part 36 offer. In such circumstances I anticipate that the same approach as adopted in Eeles may be pressed into service, suitably tweaked, requiring the court to make some sweeping assessments.

However this is a familiar problem: how to grant timely relief to an injured person, whilst avoiding complications of over compensation, clawback or set off, some way further down the line.

The jurisdiction grounded in part 44 CPR is not confined to catastrophic personal injury cases. It follows that in other contexts where there is going to be a gap between the resolution of liability and quantum that such applications can be made. When one considers how lengthy can be the delays in big ticket commercial litigation as massive trials are worked on, the question may well be whether delay of more than one year is a pre-requisite for making such an order or some greater period of time.

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