Taxing Master erred in law in taxation for medical negligence case

About this case:

• Judgment:
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The proceedings concerned a case brought by Isabelle Sheehan (suing through her mother and next friend, Catherine Sheehan), with regards to negligence on the part of her mother’s doctor, which led to her suffering birth injuries and being left with cerebral palsy.

This resulted in an interim settlement of €1.9m, which resulted in a court order in 2011 which also included an order for the appellant’s costs to be taxed in default of agreement.

The hearing on taxation lasted two days and resulted in a Taxation Ruling on 7 November 2012. Ultimately the Taxing Master allowed a sum of €276,000.00.

This was followed by Objection hearings, and a review by the High Court, which was dismissed and was now the subject of appeal.

The Court first outlined the Rules of the Superior Courts governing the Bill of Costs as being contained within Order 99, rule 29(5).

It was noted that the Rules required that bills include the date on which the professional service was given, the particulars of the professional service and the charges for such a service.

However, it appeared that solicitors and legal costs accountants have lost sight of these Rules, and had failed to set out proper particulars of the professional services charged for and the professional fee for each individual service.

It was found to be clear that bills should include the amount of time undertaken in respect of each activity, the seniority of the solicitor carrying out such an activity and the professional charge for such an activity.

Turning to the Bill of Costs in this case, the Court found that it did not comply with the Rules.

The dates for some services were given; some particulars of the professional services were given but not all; and the professional charge in respect of each item of professional services was not given at all.

The Bill did not set out the amount of hours spent on any item or by whom the work was done.

It omitted reference to the hours spent on the case in the last few months, was of inordinate length (107 pages), contained irrelevant information, was unnecessarily repetitious and contained some illogical costings, for example 85 cents for a Letter Prior to Action.

The instructions fee was described as appearing out of the blue, and of not being based on the work done.

The Court observed that “It is difficult to see on what basis legal costs accountants set out a Bill of Costs in this way. Whereas it should be transparent, it is opaque; whereas it should be simple, it is prolix; whereas it should be easy to read as a chronological narrative of events, services and charges, it is impenetrable.”

Turning then to the legal principles applicable to taxation, as contained in the Courts and Court Officers Act, 1995, the Rules of the Superior Courts and related case law (C(D) v. Minister for Health IEHC 299; Cafolla v Kilkenny & Ors IEHC 24; Minister for Finance v. Goodman (2) 3 I.R. 333; Superquinn v. Bray UDC (No. 2) 1 I.R. 459; and Cafolla v. Kilkenny & Ors. IEHC 24).

It was found that the Taxing Master had made errors in his methodology. He should have realized that the Bill of Costs did not have the information he required and should have requested a fresh Bill.

Further, when the solicitors offered to reconstruct the time spent on the file and submit a memorandum, he should have accepted this offer.

Finally, rather than assessing the work done and then considering the complexity etc. of the case, the Taxing Master considered the complexity of the case first.

The Court then considered the standard of review to be applied by the High Court, finding that when reviewing a decision of the Taxing master, the standard should be:

(i) whether the Taxing Master has erred as to the amount of the allowance or disallowance; and

(ii) if so, whether that error is of such an amount or of such a nature that the decision of the Taxing Master is unjust.

Turning to the specific grounds of appeal, the Court agreed with the solicitors that the Taxing Master and the High Court had failed to give sufficient regard to the amount of time involved. This was an error of principle and of law which resulted in an injustice.

While the Court dismissed the argument that the Taxing Master and High Court had failed to consider the novelty and complexity of the case, it observed that the assessment had been against the backdrop of the fact that they had both assumed the Taxing Master’s assessment of time had been correct.

Thus, this would have to be reassessed in light of the errors in approach to time.

Similarly, the Taxing Master had erred in law in relation to the assessment of skills, knowledge and responsibility. He ought to have first considered the time and labour expended by the solicitors and in so doing to have assessed the number of hours spent, the seniority of the solicitor involved, the hourly rate for each solicitor and the appropriate professional charge for each element of a professional service.

On the issue of ‘super profits’, while it did not appeal that this consideration had been taken into account, the Court stated for the avoidance of doubt that the issue of super profits was irrelevant and should not be considered in taxation.

The Court also found that the Taxing Master had erred in not including the costs of two senior solicitors. The Court observed that the case was a difficult, complex and hard-fought case, which required two senior solicitors.

It was therefore found that the error amounted to an injustice.

In relation to the solicitors’ argument that the Taxing Master should have used comparator cases, the Court observed that comparators should rarely be used, unless in exceptional circumstances, as they involve the Taxing Master not only in an analysis of the time and labour expended in the case under review but also of the time and labour in comparator cases. This will inevitably result in the taxation process becoming even more lengthy and costly.

The solicitors submitted that the Taxing Master - and the High Court - both relied heavily upon the economic downturn as a basis for rejecting comparators and for upholding the instructions fee in this case. They submitted that there was no real evidence before the Taxing Master or the High Court on these issues and that appropriate evidence on this issue is required before it could be taken into account.

The Court found that insofar as the Taxing Master assessed an overall instruction fee and then reduced it because of the economic downturn, he made an error of principle. Such an approach fails to apply the correct methodology for the reasons set out above. The Taxing Master is of course entitled to take economic circumstances into account. But he should take it into account at all levels of his assessment of the fee i.e. in assessing an hourly rate, the charge for a specific professional service and his final assessment of the instruction fee as a whole.

The Court therefore concluded that it had no option but to remit the matter back to the Taxing Master for a renewed assessment of the appropriate instruction fee. This should commence with a proper Bill of Costs being drawn up by the appellant’s solicitor’s cost accountants which sets out as fully as possible the time and labour expended by the solicitor in this case. Thereafter the Taxing Master should assess it in accordance with the methodology set out above.