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Various Claimants v Scott Fowler Solicitors (a firm) & Ors
Factual and Procedural Background
This judgment follows a hearing on 30 May 2018 concerning costs management in four related claims case managed together pursuant to an order dated 19 July 2017. The claims involve multiple claimants represented by different law firms pursuing professional negligence claims against two defendant solicitor firms. The claimants had invested in long-leasehold interests in hotel and student accommodation developments which were not constructed due to the insolvency of the developers. Deposit Protection Bonds, intended to protect the claimants' deposits, failed due to the insolvency of the insurer. The claimants allege breaches of duty by the defendant solicitors who acted for them in the transactions.
The four claims are not subject to a Group Litigation Order but have been case managed similarly, with liability for costs being several rather than joint. Directions have been given for trial of generic issues and lead claims, with a provisional 30-day trial estimate and listing category A. Costs management orders were made, requiring the parties to submit budgets for approval by the court, with specified conditions such as no provision for expert evidence and prospective costs limited to lead cases except for settlement, mediation, and generic disclosure.
The claims are divided among three groups of claimants, each represented by different solicitors, and two defendant solicitors. The number of lead claims totals 22, divided between the claimant groups and defendants. The court notes complexities in managing the trial due to the number of claims, claimants residing abroad, and the need for careful trial choreography.
Legal Issues Presented
- Whether the costs budgets submitted for the various phases of litigation are reasonable and proportionate under CPR Part 3 and Practice Direction 3E.
- How to apply the tests of reasonableness and proportionality to the costs budgets, particularly in multi-claim, complex professional negligence litigation.
- The extent to which the court should consider constituent elements of budget phases versus total figures.
- The appropriateness of counsel’s fees and solicitors’ rates within the costs budgets.
- Whether the large estimated costs, particularly for trial phases and counsel’s fees, can be justified.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Group Seven Ltd and others v Nasir and others [2016] 2 Costs LO 303 | Guidance on proportionality and reasonableness of costs budgets; no fixed arithmetic relationship between costs and sums in issue; guidelines on exceeding 50% of claim value. | The court agreed with the multi-factorial, objective approach to proportionality and reasonableness, rejecting a strict arithmetic threshold and emphasizing assessment per budget phase. |
| Marks and Spencer plc v Asda Stores Ltd [2016] 5 Costs LR 837 | Commentary on Group Seven v Nasir regarding the starting point for assessing proportionality of costs budgets. | The court rejected the suggestion that exceeding half the claim value creates a rebuttable presumption of disproportionality, emphasizing the need to apply Practice Direction 3E strictly. |
Court's Reasoning and Analysis
The court emphasized that costs management under CPR and Practice Direction 3E requires assessing whether total figures for each budget phase fall within a range of reasonable and proportionate costs, rather than undertaking detailed assessments or focusing on constituent elements. Reasonableness involves some consideration of calculations, while proportionality is a broader, graduated test considering the relationship between costs and factors such as sums in issue and litigation complexity.
The court noted that the claims are relatively straightforward professional negligence claims but complexity arises from the number of lead claims and the trial length and organization. The court rejected the use of rigid arithmetic relationships between costs and claim value, favoring a multi-factorial approach consistent with established precedents.
The court scrutinized the costs budgets, finding many estimates, particularly for trial phases and counsel’s fees, to be excessive and not justified. For example, the claimant group represented by Pennington Manches had disproportionately high estimates for disclosure, witness statements, trial preparation, and alternative dispute resolution phases. The Wilsons Defendants’ trial phase estimate was almost twice that of any other party and lacked justification for high counsel fees. Conversely, the Scott Fowler Defendants’ trial phase estimate was more reasonable but included an unjustified high brief fee.
The court stressed the importance of clear explanations for counsel’s fees and assumptions in budgets to enable proper costs management. It declined to comment on incurred costs before claim issuance due to insufficient information, leaving detailed assessment to a Costs Judge.
Holding and Implications
The court issued directions for costs management, including a table annexed to the costs management order reflecting approved budget phases. The court found many budget estimates to be unreasonable and disproportionate, particularly in trial phases and counsel fees, and required appropriate revisions.
The court’s decision is to approve costs budgets only to the extent they fall within a reasonable and proportionate range and to reject or require amendment of inflated or unjustified estimates.
The direct effect is that the parties must adjust their costs budgets to comply with the court’s findings, ensuring costs management aligns with CPR and Practice Direction requirements. No new legal precedent was established; the judgment applies existing principles to the complex context of multiple related professional negligence claims managed collectively.
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