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IN THE SUPREME COURT OF JUDICATURE CCRTI 1999/0130/2

COURT OF APPEAL (CIVIL DIVISION )

(HHS GOLDSTEIN QC AND ASSESSORS )

Royal Courts of Justice

Strand

London WC2

Wednesday 12th May 1999

B e f o r e :

LORD JUSTICE JUDGE

-and-

LORD JUSTICE MAY

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JOHN MICHAEL SULLIVAN

Plaintiff/Respondent

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CO-OPERATIVE INSURANCE SOCIETY LIMITED

Defendant/Appellant

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(Computer Aided Transcript of the Stenograph Notes of

Smith Bernal Reporting Limited

180 Fleet Street, London EC4A 2HD

Telephone No: 0171-421 4040/0171-404 1400

Fax No: 0171-831 8838

Official Shorthand Writers to the Court)

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MR N BACON (instructed by BKJ Lewis, Manchester M60 0AL) appeared on behalf of the Appellant.

MR J MORGAN (instructed by Reid Minty, London W1X 9HZ) appeared on behalf of the Respondent.

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J U D G M E N T

( As Approved by the Court )

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Crown Copyright

Wednesday 12th May 1999

JUDGMENT

LORD JUSTICE JUDGE: Lord Justice May will give the first judgment.

LORD JUSTICE MAY: This is an appeal by permission granted by Sir Anthony McCowan from a decision of his Honour Judge Goldstein QC sitting with assessors made upon a review of taxation of costs on 16th July 1998 in the Central London County Court. The taxation arose in an action in which the plaintiff, John Sullivan, claimed damages against the defendant for injury to his health from exposure to asbestos dust. His claim for damages was settled on 13th January 1997 with a payment being made of £6,000 by way of provisional damages. The agreed order enabled the plaintiff to apply at a future date for further damages if he should in the future develop mesothelioma or lung cancer or suffer significant deterioration of his present asbestosis. The order provided for the defendant to pay the plaintiff's costs on County Court scale 2 on the standard basis.

The plaintiff's costs were taxed on 7th November 1997. Objections were taken to the allowance of hourly rates claimed by the plaintiff and to witness expenses. The main basis of the objection was that the plaintiff, through his union, had instructed solicitors in London, and that the case had proceeded in the Central London County Court when it was so closely connected with Manchester that it ought reasonably to have been conducted by Manchester solicitors in Manchester, in which event the costs incurred would have been less. The objections were heard and considered by a deputy district judge whose main decision was in favour of the plaintiff. The decision which is the subject of the present appeal was a review of the decision of the deputy district judge whereby the application for a review of the taxation of costs in the action was dismissed.

The facts on which the defendants have relied throughout are that the plaintiff lived in Manchester; the defendant was based in Manchester; the cause of action arose in Manchester; the lay witnesses as to liability lived in the Manchester area; and one of the plaintiff's experts practised in the same area; there were many firms of solicitors in the Manchester area well capable of handling the plaintiff's claim; the action had no connection with London; the plaintiff instructed London solicitors because he was supported by his union who habitually instruct these London solicitors; and that charging rates and travelling costs and so forth for Manchester would generally have been rather lower than those for London.

The principles upon which costs were to be taxed on a standard basis were at the time of the review to be found in the former Order 62 rule 12(1) of the Rules of the Supreme Court. This provided:

"On a taxation of costs on the standard basis there shall be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the taxing officer may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party."

By rule 51.18 of the Civil Procedure Rules the general presumption is that no costs for work undertaken before 26th April 1998 will be disallowed if those costs would have been allowed in a costs taxation before 26th April 1999. This means that for this appeal the substantive costs provisions of the Civil Procedure Rules do not apply.

It was, and is, submitted on behalf of the defendant that the judge failed to apply, or wrongly applied, the decision of this Court in Wraith v. Sheffield Forge Masters Limited and Truscott v. Truscott [1998] 1 WLR 132, to which I shall refer.

The judge, in giving judgment, referred to the judgment of Kennedy LJ in Wraith and also to passages from the judgments of Neill LJ and Aldous LJ in L v. L [1996] 1 FLR 873. He said that the first point to consider applying these cases was whether it was reasonable for the plaintiff to instruct London solicitors. The deputy district judge had considered that it was not unreasonable to retain London solicitors since the case was proceeding in the Central London County Court. It was submitted that this was incorrect and that the question was rather whether the case should have been started in the Central London County Court. The judge said that the narrow approach of the deputy district judge might well be incorrect. The court had considered whether it was decisive or relevant that no application had ever been made to transfer the case to Manchester, but they were persuaded that the question of transfer was irrelevent and that correct question was whether it was reasonable to instruct London solicitors in the first place. The court decided unanimously that the answer to that question was "Yes" for reasons which were expressed as follows:

"(a) This was potentially a very serious case, and indeed it still might be though we obviously hope that it is not.

(b) There could well be other cases arising from the same source in the very near future.

(c) It was vital to get the best legal advice. It was not the case that any solicitor will do. It has to be one with the necessary skill and experience.

(d) In the event of there being other actions it was vital [that there should be] a coordination and consistency of approach.

(e) The union was entitled to use the solicitors whom they clearly used for their important work ("clearly" might be a mistranscription of "already").

(f) The medical experts paramount in this field are generally to be found in London."

The court then considered whether the fees allowed by the deputy district judge were reasonable. They decided that they were. They were based on an average of hourly rates charged by the solicitors who regularly litigate at Central London County Court, thereby avoiding the criticism that the plaintiff could choose the most expensive solicitor in London and expect to recover on taxation his costs in full. The court then said:

"It may well be that even the figure arrived at by the District Judge was above the rates generally allowed in Manchester, but the Local Practice Note issued by the Joint District Judges of the Manchester District Registry make it plain (and I quote):

'These figures are for the expense rates of solicitors or senior managing clerks in conducting an average High Court case. It is emphasised that these figures are guides and the Joint District Judges will feel able to depart from them as circumstances dictate.'

We have no hesitation in stating that this case could well be construed by a Manchester District Judge as 'above average' and higher rates allowed."

There was thus a decision that a taxation using Manchester rates might not have been less than this taxation. On the other hand, the underlying contention that Manchester rates should have been applied was rejected. In my judgment this latter point is one of some importance for the Court to consider.

Mr Bacon, for the appellant, submits in essence that this was a Manchester case with no obvious connection with London and which did not require expertise to be found only in London. Mr Morgan, for the respondent, relies on the decision below and its reasons. He submits that this is an appeal essentially on a matter of quantum, with which this Court should be very slow to interfere. Those who considered the matter originally and on review are all judges well experienced in assessing costs and they have all reached the same conclusion.

Mr Morgan submits that the question of reasonableness has to be judged at the time when the decision was made to instruct London solicitors. It was, for the plaintiff, an extremely serious case. There may have been some other cases waiting in the wings. It must be reasonable for the union to advise the plaintiff that this was a really important case which justified instructing a firm of known competence in London. Mr Morgan relies on the facts of Truscott, to which I shall refer in a moment, as concentrating consideration on the reasonable interests of the plaintiff. He relies on the passage from the judgment of Potter J (as he then was) in Wraith which Kennedy LJ said was right and to which I will refer in a moment. He submits that it is relevant that the defendant did not apply to transfer from London to Manchester.

Mr Morgan submits that the challenge to witness expenses is a separate point which the judge was correct to reject on the basis that there would have been substantial travelling expenses for other witnesses had the action proceeded in Manchester. In my view this is a valid point which Mr Bacon for practical purposes accepts.

The law relevant to the main ground of appeal is to be found in Wraith and Truscott where Kennedy LJ gave full consideration to previous authority. There are two limbs to Order 62 rule 12(1) - whether the costs are reasonably incurred and whether they are reasonable in amount with doubts to be resolved in favour of the paying party. The question whether it is reasonable to instruct particular lawyers when this might be regarded as out of the way or a luxury is part of the question whether the costs were reasonably incurred. The question is whether objectively the plaintiff, if it be the plaintiff, acted reasonably in engaging the lawyers in question. In Wraith, at page 139A, Kennedy LJ quoted from the judgment of Auld LJ in KPMG Peat Marwick McLintock v. HLT Group Limited [1995] 2 All ER, 180 where Auld LJ (as he then was) said, at page 186:

"If, as I find, it was reasonable for the plaintiff to have instructed Travers Smith Braithwaite in the litigation, then the firm's costs on taxation should be taxed by reference to the broad average direct costs for such a firm in that area. The fact that the plaintiffs could have obtained the same services at a much lower price than that average elsewhere is irrelevant..."

Mr Truscott had a costs order in his favour. He had instructed a London solicitor for a Sussex case concerning matrimonial property. He was dissatisfied with his previous Sussex solicitors. Kennedy LJ set out the considerations relevant to Mr Truscott's case at page 141C as follows:

"The following are matters which, as it seems to me, the judge should have regarded as relevant when considering the reasonableness of Mr Truscott's decision to instruct ATC. (1) The importance of the matter to him. It was obviously of great importance. It threatened his home. (2) The legal and factual complexities, in so far as he might reasonably be expected to understand them. Due to the incompetence of MFC the matter had taken on an appearance of some complexity. (3) The location of his home, his place of work and the location of the court in which the relevant proceedings had been commenced.

(4) Mr Truscott's possibly well-founded dissatisfaction with the solicitors he had originally instructed, which may well have resulted in a natural desire to instruct solicitors further afield, who would not be inhibited in representing his interests. (5) The fact that he had sought advice as to whom to consult, and had been recommended to consult ATC. (6) The location of the ATC, including their accessibility to him, and their readiness to attend at the relevant court. (7) What, if anything, he might reasonably be expected to know of the fees likely to be charged by ATC as compared with the fees of other solicitors whom he might reasonably be expected to have considered."

These considerations led to a conclusion that Mr Truscott was acting reasonably in instructing the London firm and seeking to charge rates appropriate to a firm in that area which were allowed on the taxation.

Mr Wraith brought proceedings with the help of his union who instructed London solicitors. It was a Sheffield case transferred by consent to Sheffield. He obtained a costs order, but the question was whether the taxation should allow costs appropriate to the London solicitors. Potter J had said in the judgment appealed against, which is quoted by Kennedy LJ at page 141H, as follows:

"In relation to the first question, "Were the costs reasonably incurred?" it is in principle open to the paying party, on a taxation of costs on the standard basis, to contend that the successful party's costs have not been "reasonably incurred" to the extent that they have been augmented by employment of a solicitor who, by reason of his calibre, normal area of practice, status or location, amounts to an unsuitable or "luxury" choice, made on grounds other than grounds which would be taken into account by an ordinary reasonable litigant concerned to obtain skilful competent and efficient representation in the type of litigation concerned... However, in deciding whether such an objection is sustainable in practice, the focus is primarily upon the reasonable interests of the plaintiff in the litigation so that, in relation to the broad categories of costs, such as those generated by the decision of a plaintiff to employ a particular status or type of solicitor or counsel, or one located in a particular area, one looks to see whether, having regard to the extent and importance of the litigation to a reasonably minded plaintiff, a reasonable choice or decision has been made. If satisfied that the choice or decision was reasonable, it is the second question "what is a reasonable amount to be allowed?" which imports consideration of the appropriate rate or fee for a solicitor or counsel of the status and type retained. If not satisfied that the choice or decision was reasonable, then the question of "reasonable amount" will fall to be assessed on the notional basis of the costs reasonably to be allowed in respect of a solicitor or counsel of the status or type which should have been retained. In either case, solicitors' hourly rates will be assessed, not on the basis of the solicitor's actual charging rates, but (in a case where the decision to retain was reasonable) on the basis of the broad costs of litigation in the area of the solicitor retained or (in a case where the choice made was not reasonable) of the type or class of solicitor who ought to have been retained."

Having quoted that passage from the judgment of Potter J, Kennedy LJ continued a page 142E in these terms:

"That in my judgment is right. I do however take issue with the way in which the principle was applied to the facts of the case. I accept that it was reasonable for Mr Wraith to consult his trade union, but the trade union knew or ought to have known what sort of legal fees it would have to expend to obtain competent services for Mr Wraith, who lived in Sheffield and had sustained a serious accident there. Once Mr Wraith consulted his union that knowledge must be imputed to him. As Potter J accepted, at page 625,'no doubt there were firms of solicitor in Sheffield or Leeds well qualified to do the work' and in reality the only reason why the work went to London solicitors was that the union had adopted the practice of sending all their work to those solicitors. That connection seems to me to be of limited relevance on taxation in an individual case. It means of course that, like competent solicitors in Sheffield or Leeds, the solicitors actually instructed were well qualified to do the work, and that the union, as advisors to Mr Wraith, knew the solicitors to be competent and trusted them to exercise the necessary expertise, but that is all.

None of what I have just said is intended to put pressure on trade unions or insurers to change their policy and parcel out work so that different solicitors act for them in different areas. Some insurers and some unions already operate in that way. Others use one solicitor who has local branches, as is now the case with RJW, but whatever approach is adopted it seems to me that it is the duty of unions and insurers in each individual case to keep down the costs of litigation, and that may well mean that if they go to London solicitors who charge London rates for a case which has no obvious connection with London, and which does not require expertise only to be found there, they will, even if successful, recover less than the solicitors have charged."

Thus in determining whether it is objectively reasonable to instruct lawyers who may be said to be out of the way or a luxury, the court takes account of and balances a wide range of relevant circumstances. The fact that a union or other organisation, no doubt for understandable reasons, habitually uses a particular firm of solicitors is a relevant factor but of limited relevance on taxation in an individual case. Litigants are entitled to engage any lawyer they choose, and from a subjective point of view the choice may be entirely reasonable, but the question is to be judged objectively. The fact that a case has no obvious connection with London is a relevant factor, the more so if the case does not require expertise only to be found there.

In the present case his Honour Judge Goldstein and his assessors, in my view, asked the right question and they gave a series of explicit and relevant reasons for reaching the conclusion that it was reasonable to instruct London solicitors in this case. I have considered whether in these circumstances this Court should dismiss the appeal on the basis that the judge applied correct legal principles and made a largely discretionary judgment on sustainable ground. On reflection, however, I think that the decision was wrong because the reasons given were, in the light of Kennedy LJ's judgment, overstated and other relevant factors proper to the consideration were not given proper weight.

Firstly, although the judge undoubtedly had well in mind that this was a Manchester case with no obvious connection with London, this does not feature in the balance of the stated reasons. In the light of Kennedy LJ's judgment in Wraith, this is an important consideration. Secondly, I consider that the judge's reasons substantially overstate the scope and difficultly of this case. This is not to diminish in any way the importance of the case to the plaintiff himself. All cases are of the greatest importance indeed to those involved in them. In particular this case concerned Mr Sullivan's health and the future prognosis of a serious condition. However, in objective terms this was an asbestosis case without extraordinary legal complication and similar with the regrettably large number of similar cases with which the legal profession and the courts are unfortunately all too familiar. It had no special feature or unusual complication. Thirdly, I consider that the judge's reasons substantially understate, by clear inference, the availability of fully competent legal practitioners in the Manchester area. There is no doubt whatever that there are in the Manchester area plenty of legal practitioners fully able and qualified to conduct litigation of this kind with full competence. There are in Manchester, and in many other centres outside London, many such practitioners who conduct cases of this kind and cases of substantially greater weight and complexity every day of their working lives. The shadowy possibility that this might be regarded a something of a test case would not seem to me to diminish the availability of Manchester lawyers to deal with it. In addition, it seems that it was, in so far as it may have been a test case, a test case for the Manchester area. It is of some, but, in my view, of limited significance that medical experts may generally be found in London. That would not, however, give the case a connection with London.

The possibility that a taxation having regard to Manchester rates might have produced a result as great as one having regard to London rates is, in my view, no more than speculative. It does not overcome the problem that in principle, as I consider, the taxation should proceed on the basis of charges which would have been reasonable had the plaintiff instructed solicitors in the Manchester area. The speculation was based on what I think was an erroneous view of the objective seriousness of the case in relation to others of the same kind. This was, in the terms of Local Practice Note to which the judge referred, an average county court case.

In the end, it seems to me that was preeminently a Manchester case with no obvious connection with London, and it did not require expertise only to be found in London. There were other factors to be considered, among them that the union wanted to instruct a particular firm of solicitors. However, there were in, in my view, in this case no weighty factors within Kennedy LJ's main criteria in Wraith suggesting that in the context of taxation of costs it was objectively reasonable for the plaintiff to instruct London solicitors.

For these reasons I would allow the appeal in relation to charging rates but not in relation to witness expenses.

LORD JUSTICE JUDGE: I agree with May LJ and the reasons he has given for allowing the appeal. As, unusually, we are interfering with the decision of the judge and assessors on a review of taxation, I shall add a few words by way, not of elaboration, but emphasis.

In reality this was a Manchester case. The cause of action arose from the plaintiff's employment by the defendants in Manchester and his consequent fault exposure to asbestos which caused him serious personal injury. Even as the case developed through the identification of witnesses and the selection of experts and discovery, the case remained a Manchester case with no, or no relevant, connection at all with London.

Manchester is one of the major legal centres in this country. Substantial numbers of competent solicitors and barristers, well qualified to act on behalf of parties, whether for the plaintiff or for the defendant, in any area of personal injury or similar litigation, however complex or substantial, can readily be found there.

Nothing in the papers before us suggests that legal expertise, and that is the only question for consideration in the present appeal, properly to look after this plaintiff's interests was not readily available in Manchester, and, if I may say so, it would be extremely surprising if it did.

ORDER: Appeal allowed with costs, assessed in the sum of £4,500. No order for costs on the taxation. Respondent to pay the appellant/defendant's costs below.

ORDER NOT PART OF APPROVED JUDGMENT