Supreme Court Costs Office reviews for 2009
No. 1 of 2009
Forde v Birmingham City Council  EWHC 12 QB
Date 13 January 2009
Christopher Clarke J
(Appeal from  EWHC 90105 (Costs) (30 April 2008) (No.24 of 2008).
Another round of the housing disrepair litigation by tenants of Birmingham City Council represented by McGraths Solicitors under CFAs.
C signed a CFA without a success fee; owing to technical challenges advanced in Crook v Birmingham City Council (No.15 of 2007) and elsewhere, C signed a second CFA with a success fee covering the same housing disrepair claim. The Council challenged the validity of CFA2. On appeal, the Judge held that:
- CFA 2 was supported by adequate consideration;
- No undue influence had been exerted on the client to sign CFA 2;
- CFA 2 could be retrospective, so a retrospective success fee could be claimed even for the period before 1 November 2005 when the CFA Regulations 2000 were revoked;
- If, contrary to that finding, a retrospective success fee was contrary to public policy, that did not vitiate CFA 2 as a whole;
- If CFA 2 was not enforceable, CFA 1 could still be relied on, there having been no breach of Regulation 4;
- CFA 2 was not unfair under the Consumer Contracts Regulations;
- Were CFA 1 to be invalid, the solicitors would not be permitted to receive payment on a quantum meruit basis.
Note: permission to appeal was given by the Court of Appeal in relation to the recoverability of the retrospective success fee but a compromise was reached and the appeal withdrawn.
No. 2 of 2009
Findley v Barrington Jones & Anor (2009) EWHC 90130 (Costs)
13 January 2009
Master Hurst, Senior Costs Judge
Compliance with Regulation 4(2)(d) and (e) – obligation on the legal representative to inform the client about other methods of financing the costs and the reasons for recommending a contract of insurance, and whether the solicitor has an interest in doing so.
The claimant entered into two CFAs, the first dated 20 July 2001 and the second between 1 September 2002 and 4 December 2002. The court held that CFA1 was unenforceable for want of compliance with Regulation 4(2)(d) and (e), so the solicitors recovered nothing except paid disbursements.
After signing CFA2, the client lost capacity and his litigation friend did not enter into a further CFA. The court held that the retainer of the litigation friend was valid, and whilst the second CFA had not complied with the Regulations either, the breaches had not had a materially adverse effect upon the protection afforded to the client, nor on the administration of justice (applying the test in Hollins v Russell) and accordingly was enforceable.
No. 3 of 2009
Burgess v J Breheney Contracts Ltd  EWHC 90131 (Costs)
16 January 2009
Personal injuries claim compromised in the sum of £1,500 damages, financed under a CFA dated 20 March 2007, backed by after the event insurance with a base premium of £2,600. On detailed assessment the court did not reduce the premium, having in mind Rogers v Merthyr Tydfil  1 WLR 808 at paragraph 117 (Brooke LJ):
"If an issue arises about the size of [insurance premiums] District Judges and Costs Judges do not, as Lord Hoffman observed in Callery v Gray (Nos 1 and 2)  1 WLR 2000 paragraph 44 have the expertise to judge the reasonableness of a premium except in very broad brush terms ..."
No. 4 of 2009
Aurangzeb v Walker (2009) EWHC 90134 (Costs)
22 January 2009
The issue for decision was the basis upon which the successful claimant's solicitor's costs should be assessed, the claimant (a minor) having accepted £500 through his litigation friend prior to the issue of proceedings. The court held that the costs should be dealt with as if the claim had been allocated to the small claims track, as the defendant contented, which would thereby limit the costs to £250 under table 1 to CPR 45 and CPR 27 PD 7.3, rather than on the "predictable basis" sought by the claimant which would yield costs of £1,822.19.
No. 5 of 2009
Helvadjian v Ambrose Appelbe (2009) EWHC 90133 (Costs)
30 January 2009
Master Hurst, Senior Costs Judge
Assessment under the Solicitors Act 1974 between the claimant and her former solicitors.
Applying Richard Buxton (Solicitors) v Mills-Owens  EWHC 1831 (QB) MacKay J ( No 32 of 2008) the court held that as the retainer had been an entire contract to deal with various appeals which had not been fulfilled, nothing was payable in respect of the solicitor's profit costs.
No. 6 of 2009
Ibbertson v MFI & Howdens Joinery  EWHC 90132 (Costs)
30 January 2009
Regulation 4 Conditional Fee Agreement Regulations 2000 (as amended) (obligation on the solicitor to inform the client about methods of funding and if a contract of insurance is recommended, the solicitor's reasons for doing so and whether he has an interest).
On the facts, the solicitors had not made a full disclosure to the client sufficient to enable her to make an informed decision as to whether any interest her solicitor might have had in recommending the particular insurance policy in question would affect the firm's liability to act for her without any conflict of interest. Accordingly the CFA was unenforceable, the breach having been material and incapable of being saved under the test in Hollins v Russell.
No. 7 of 2009
Rosserlane Consultants v Herbert Smith (2009) EWHC 90135 (Costs)
12 February 2009
Solicitors Act (1974); detailed assessment of bills submitted by solicitors to their client but payable under Section 71 by "a party chargeable", here the claimant ("C"). Prior to the assessment, C applied to inspect the solicitor's papers on the grounds that implicit within the statutory right to assess under Section 71, was the ability to see the papers upon which the solicitor's claim for costs rested. That submission failed. Section 71 conferred on the party chargeable the right to apply for assessment. It did not entitle that party to inspect privileged documents which reflected the work covered by the bills unless the client waived privilege. In any event, such an order could not be made against the solicitors, since the privilege in the documents was not theirs to waive.
No. 8 of 2009
Richardson Roofing Company Limited v The Colman Partnership Limited  EWCA Civ 839
13 February 2009
Jacob, Aikens & Sullivan LJJ
Does a Judge have jurisdiction to give directions about how a costs order should be considered? If so, should he exercise it?
In proceedings in the Technology & Construction Court ("TCC"), the Claimant ("RR") and the fourth party ("Colman") consented to the following order ("the Order") on 4 November 2003:
"It is hereby ordered that –
1. RR pay to [Colman] the costs incurred and thrown away by the adjournment of the trial
4. Detailed assessment of costs due to [Colman] pursuant to the Order at paragraph 1 above to follow in due course."
The reference to "the trial" was to the trial of preliminary issues which were to have taken place on 23 June 2003 but which the Judge adjourned because the state of the action was "shambolic".
On 16 March 2007 Colman served a bill for £855,000 encompassing the entire costs of the proceedings up to 23 June 2003. RR contended they were not "costs incurred and thrown away by the adjournment". Colman applied to the Judge of the TCC for an order that the costs arising under the Order should include not just Colman's costs thrown away by the adjournment but also the costs of preparation and attendance at the trial because:
"... there is now no prospect of the claimant's claim being revived and no prospect of any of the relevant costs incurred by the fourth party will be used for the purpose of any alternative hearing."
HHJ Toulmin decided he had jurisdiction to hear the application and in paragraphs 84 – 90 of his reserved judgment he gave directions about how the Costs Judge should deal with the detailed assessment. They were reflected in his Order thus:
1. The Costs Judge dealing with the detailed assessment of costs due to the fourth party, pursuant to paragraph 1 of the Order of the Court dated 4 November 2003, that the Claimant pay the fourth party the costs incurred and thrown away by the adjournment of the trial of preliminary issues which took place before His Honour Judge Seymour QC in June and July 2003, be directed that he carry out the assessment using the guidance in paragraph 84-90 of the approved judgment dated 25 July 2008.
2. The costs of this application are to be in the assessment. For avoidance of doubt the Costs Judge should make this assessment on the basis of CPR 47.18(2) disregarding the presumption CPR 47.18(1) ..."
Such an order was, to the mind of Jacob LJ, quite extraordinary and would be set aside on the following grounds:
1. This was a Consent Order drafted by the parties which they themselves had in effect contractually agreed to. There was no "slip" involved which would enable it to be varied under CPR 40.12 ("the slip rule").
2. It was wrong in principle to take the order to a Judge not experienced in costs matters and say "you decide how this order is to be worked out", rather than to a Costs Judge (paragraph 18).
3. To do so was to by-pass the permission to appeal regime (19).
4. If the Judge did have jurisdiction he was wrong to have exercised it (22).
5. The basis of the Judge's order was extremely diffuse and it was doubted that any Costs Judge would follow the directions in the sense of knowing what it was he was supposed to be doing (23). As a matter of practice it was thoroughly undesirable that this kind of order be made (24).
6. The order contained "liberty to apply". It was that liberty which could and was intended to be used on its true construction for post-order events or non-order events such as the non event of the trial (30).
7. Paragraphs 84 to 90 did not give the Costs Judge any assistance in deciding how to construe paragraph 1 of the Order of 4 November 2003. The order should not have been drawn up in the form that it was; it was an improper order. (Aikens LJ (21))
No. 9 of 2009
Schlumberger Holdings Ltd v Electro Magnetic Geo Services  EWHC 773 (Pat)
24 February 2009
What rate of interest is payable on costs between judgment and the date of payment? Section 17 Judgments Act 1838 prescribes 8%, but the defendant argued that in the current market, 8% was unjustifiably high and the Court should exercise its powers under CPR 40.8(1) and CPR 44.3(6)(g) to postpone the date at which 8% would apply until the costs had been quantified. Pro tem the rate should be 1% above base rate. Held – the statute does not permit the Court to vary the rate. The Civil Procedure Rules permit the Court to adjust dates in relation to the applicability of interest, but there is no power to adjust the rate. A fixed and constant judgment debt rate gives certainty and clarity and in some cases is an incentive for paying sooner rather than later. On the facts, it was not appropriate to adjust the dates from which interest was to run.
No. 10 of 2009
Roach v The Home Office  EWHC 312 (QB)
25 February 2009
Davis J (Sitting with Assessors)
Can the costs of attending an inquest be recovered by way of costs in subsequent civil proceedings?
The Home Office contended that the decision in the Bowbelle  2 LL Rep 196 Clarke J that:
"... unless there are particular costs which are not fairly referable to the attendance at the inquest for that purpose, reasonable costs of attending the inquest are in my judgment recoverable."
was per incuriam the Court of Appeal decisions in Wright v Bennett  1 KB 601 and Aiden Shipping Co Ltd v Interbulk Ltd  1 WLR 1222; alternatively the Bowbelle was wrong and should not be followed.
1. No basis existed for restricting the operation of the wide language of Section 51 Supreme Court Act 1981.
2. The approach taken by Clarke J in the Bowbelle was correct; costs of attendance at an inquest are not incapable of being recoverable as costs incidental to subsequent civil proceedings.
3. Costs of an inquest should not be divided equally (before going on to assess the reasonableness of various items) on the basis that the role of lawyers in attending an inquest would fall into two equal parts; assisting the coroner and obtaining evidence necessary to pursue the civil claim. It is essential to have regard to consideration of relevance where the costs of attendance at an inquest are claimed, in whole or in part, as costs incidental to the subsequent civil proceedings.
No. 11 of 2009
Bollito v Arriva London  EWHC 90136 (Costs)
27 February 2009
Reduction of interest on costs of assessment. D contended that no interest should be payable because C initially had the benefit of "before the event" legal expenses insurance, and thereafter the claim had been financed under a conditional fee agreement. These arguments failed; interest awarded from the date of judgment at 8%. (see too Fattal V Walbrook Trustees (No 22 of 2009).
No. 12 of 2009
Truex v Toll  EWHC 396 (Ch)
6 March 2009
This case addressed the sensitive issue of unpaid solicitors pursuing their one time client for professional fees via bankruptcy proceedings.
Here, there were concurrent proceedings by the claimant ("Mrs T" the former client of the claimant solicitors) for assessment of their bills under Solicitor Acts 1974 and by the defendant, in bankruptcy, for a bankruptcy order for non payment of their invoices.
It was common ground that the solicitor's costs had not formed the subject of a judgment, assessment or agreement and accordingly were not a liquidated sum for the purpose of founding a bankruptcy petition. However because in evidence to the Chief Bankruptcy Registrar, Mrs T had "just about" admitted the fees claimed in the invoices, he had held that there was no bona fide dispute that the solicitor was owed at least £750 and accordingly a bankruptcy order would be made.
On appeal against the bankruptcy order, Proudman J ruled that:
(1) a claim for solicitor's fees not as yet judicially assessed or determined is not a claim for a liquidated sum which can be the subject of a bankruptcy petition under Section 267 of the Insolvency Act 1986;
(2) it is indisputable that the sum claimed becomes a liquidated sum once the fees have been assessed by a Costs Judge or determined in an action.
Accordingly, the issue on appeal was what (if anything) could convert the solicitor's un-assessed bill into a debt capable of founding a bankruptcy petition. The Judge said thi:-
"It seems to me that there is logic in [counsel's] submission that an agreement converting an unliquidated debt into a liquidated one must be a binding agreement. That would mean an agreement for consideration, that is to say an agreement as to a fixed amount, or an agreement as to hourly rates and time spent in consideration of future services, or a compromise agreement, or conduct giving rise to an estoppel according to established principles ... [paragraph 30]
In my judgment whether a sum is liquidated and whether there is a defence to the claim are separate issues and the first must be determined before the second is addressed. Accordingly any admission, acknowledgment or agreement converting the amount claimed from an unliquidated to a liquidated sum must be one from which the client has bound himself not to resile. A mere acknowledgment would be insufficient to bind him to forego judicial assessment or determination ..." [paragraph 36]
On the facts, the bill as a whole had been capable of challenge as to quantum and thus had been for an unliquidated sum which did not fulfil the requirements of Section 267. If that be wrong, on the facts the Judge was not satisfied that Mrs T had made a clear and unequivocal admission that the sums claimed were due. Appeal allowed.
[Note; this decision might be seen as a caution to those solicitors who seek to recover unpaid fees through bankruptcy proceedings without first having obtained judgment in an action on the bill or a final costs certificate following an assessment under the Solicitors Act].
No. 13 of 2009
Hosking v Smallshaw (2009) EWHC 90137 (Costs)
25 March 2009
Fixed success fees in Road Traffic Accident Claims under CPR 45.15. Conditional fee agreements between the client and the solicitors and between the solicitors and counsel provided for a success fee of 100% if the case proceeded to trial. If not, the success fee would be 12.5% for the solicitors and 75% for counsel.
The trial listed to start on 28 January 2008; a consent order was agreed prior to the hearing quantifying the amount of damages; on 15 May 2008 there was a hearing of an application for the court to determine the frequency of periodical payments.
The court held that the latter could not be a "trial" within the definition under CPR 45.15(6)(b). The parties had agreed the amount of the periodical payments as part of the settlement reached on 28 January 2008, the only outstanding issue being whether they were to be paid annually or monthly. As the claim had concluded prior to the hearing on 28 January 2008, the success fees would be 12.5% and 75% for solicitors and counsel respectively and not 100%.
No. 14 of 2009
MasterCigars v Withers  EWHC 651 (Ch)
30 March 2009
Morgan J (Sitting with Assesors)
The next round in the litigation between MasterCigars (M) and their former solicitors Withers (W) about estimates (see No.18 of 2007 and No.30 of 2008). Below, the Master held, having heard evidence, that M had relied on W's estimate, a finding upheld on appeal. However on the "all important question [emphasis added] of the effect of such reliance on the amount of costs it was reasonable to expect M to pay" [Morgan J's judgment paragraph 52], the Master had reflected M's reliance on the estimate by adding a margin of 20% as being the sum, in all the circumstances, it was reasonable for the client to pay (following Reynolds v Stone Rowe Brewer (A Firm) (No.14 of 2008)). Morgan J accepted that a Costs Judge having made specific findings on reliance, was not precluded from "deciding that the fairest way to reflect those findings was by reference to a margin above the estimate" . However the figure of 20% had "all the appearance of being arbitrary rather than calculated" . Accordingly the decision could not stand and the Judge himself would decide upon the correct way of reflecting the Master's findings of fact as to reliance in the detailed assessment [87 and 90]. That would be done once his assessor had prepared a report "on the appropriate questions"  settled by the Judge, having heard further argument from the parties.
No. 15 of 2009
Liverpool Freeport Electronics Limited v Habib Bank (2009) EWHC 861 (QB)
30 April 2009
Jack J sitting with Assesors
Section 11 Access to Justice Act 1999. Application by the bank for costs against the Legal Services Commission made outside the 3 month time limit (the funding certificate was issued prior to 3 December 2001 and the courts discretion to extend time introduced by subsequent amendment was unavailable).
Jack J rejected the bank's submission that an order of the Court of Appeal dated 29 July 2004 had directed any assessment under section 11 to be dealt with by a High Court Judge rather than by a Costs Judge thereby giving the bank the option of applying to the former so that the 3 month period would only begin to run when he had made an assessment of what was recoverable from the assisted party.
No 16 of 2009
Sidhu v Sandhu (QB) unreported
Burton J (Sitting with Assessors)
5 May 2009
This appeal concerned Regulation 3(1) Conditional Fee Agreements Regulations (2000) which provides:-
"A CFA which provides for a success fee –
(a) must briefly specify the reasons for setting the percentage increase at the level stated in the agreement, and
(b) must specify how much of the percentage increase, if any, relates to the cost to the legal representative of the postponement of the payment of his fees and expenses."
The second defendant's costs of action were ordered to be paid by the claimant. From 26 October 2005, they had been funded via a CFA.
The relevant parts of the CFA said this:
"3. ...To the extent that there is a shortfall between the success fee and the amount of the success fee you recover from your opponent, we will not ask you for that shortfall...
6. Success fee
This is 14.5% of our basic charges
The reasons for calculating the success fee at this level are set out in Schedule 1 to this Agreement.
You cannot recover from your opponent any part of the success fee that relates to the cost to us of postponing receipt of our charges and disbursements. This part of the success fee remains payable by you......
"The Success Fee
The success fee is set at 14.5% of basic charges and cannot be more than 100 % of the basic charges.
The percentage takes into account:
(a) the risks inherent in litigation;
(b) the risks in your particular case;
(c) that we have given you a significant discount on our standard hourly rates;
(d) that we have agreed to accept that we may not recover the success fee;
(e) the additional risk factors we have identified].
The matters set out in paragraphs (a) and (b) above together make up 60% of the increase on the basic charges. The matters at paragraphs (c), [and (d)] make up 40% of the increase on the basic charges. So the total success fee is 14.5% as stated above.]"
The Law Society's Conditions referable to CFAs also applied to the agreement. Schedule 2 said this:
"3. Explanation of words used.
(m) Success fee
The percentage of basic charges that we add to your bill if you win and that we will seek to recover from your opponent....
4. What happens if you win?
You will not be entitled to recover from your opponent the part of the success fee that relates to the cost to us of postponing receipt of our charges and our disbursements. This remains payable by you."
On detailed assessment, the paying party (D) contended that the CFA was unenforceable for failure to comply with Regulation 3(1)(b) having omitted to specify how much of the percentage increase (if any) related to the cost to the legal representative of the postponement of the payment of his fees and expenses. Below, the Master had held that the words "if any" related to the words "how much" and if, as was the case, that figure was nil, it should have been stated within the body of the CFA. Accordingly the CFA was unenforceable.
Burton J held that if the postponement element was nil, there was no need for this to be specified unless doubt existed as to the construction of the agreement, in which case it would be necessary for the court to consider the full construction of the CFA. On the facts before him, the Judge was satisfied that there was doubt as to the construction of the CFA and, in these circumstances, it was necessary for him to decide whether the CFA had contained a sufficiently explicit statement that there was to be no charge to the client for postponement.
Burton J was satisfied that Schedule 1 excluded any allowance for the deferment of fees by expressly providing that the matters mentioned under paragraphs (a) to (d) amounted to 100% of the success fee. He expressed himself to be much influenced by the decision of the Court of Appeal in Tichband v Hurdman (see Hollins v Russell  1 WLR 2487 at paragraphs 131 – 134). On the facts, he was also satisfied that the position about postponement had been made sufficiently clear and that clause 3 of the CFA, schedule 1 and paragraph 3(m) of schedule 2 prevailed over all the countervailing clauses. CFA enforceable. Appeal allowed.
[Note: Burton J also found that Utting v McBain  EWHC 3293 (QB) and Spencer v Wood  EWCA Civ 352 were factually different. In those cases postponement had been a factor which had been reflected in the success fee but which had not then been quantified. In Sidhu, schedule 1 had not advanced postponement as a matter that was reflected in the level of the success fee.]
No. 17 of 2009
Mullan v Chief Constable of Thames Valley Police (2009) EWHC 90140 (Costs)
6 May 2009
This decision considers the extent to which, if at all, work done in one claim can be recoverable as costs in another.
In successful proceedings brought against the Chief Constable for wrongful arrest, assault and false imprisonment, the claimant on the assessment of his bill claimed the costs of pursuing a written complaint to the Independent Police Complaints Commission and thereafter an appeal from that decision. He contended that such costs were incidental to his civil claim and involved an evidence gathering exercise akin to attending an inquest for that purpose (permitted in Roach v Home Office (2009) EWHC 312 (QB) No. 10 of 2009). Here, in contrast to Roach, there was no live evidence which might be crucial to the civil proceedings and accordingly the costs of the complaint and appeal were not incidental to the claim against the Chief Constable and fell outside the ambit of the costs order. Application for those costs refused.
No.18 of 2009
Brewer v Secretary of State for Justice  EWHC 9876 (QB)
8 May 2009
Holroyde J (Sitting with Assessors)
The issue on this appeal pursuant to Regulation 11 Costs in Criminal Cases (General) Regulations 1986 as amended was whether a defendant's costs order for payment of "out of pocket expenses after the grant of legal aid" could cover an additional £311,471.41 in addition to the sum of £258,542 paid to the defendant's solicitors for both pre and post certificate work. Holroyde J held that Regulation 22 Criminal Defence Service (General) (No.2) Regulations 2001 does not apply to legally aided litigants "topping up" their private funding with private resources, or that an order for payment out of Central Funds for "out of pocket" expenses is limited to expenditure such as fares or subsistence but can include a further claim by an applicant in respect of "expenses properly incurred" (R v Bedlington Magistrates Court ex p. Wilkinson  164 JP 156 QBD applied). However:
"It seems to me that the applicant's claim is all the more likely to fail when the subject matter of it is expenses incurred by him or her during the currency of the representation order in respect of legal professional services ... Where however the solicitors were instructed under the representation order at the relevant time, but played no part in engaging or instructing the person in respect of whose fees the claim is made, it will often, it seems to me, be very much harder in practice for the applicant to bring himself within the statute and regulations." (Holroyde J paragraph 48)
In determining the particular claim in accordance with the statute and regulations, the Determining Officer should take account of all relevant circumstances which might include:
- the profession and professional services of the person who provided the relevant services;
- the exact nature and purpose of the professional services provided;
- the reason why it was necessary and reasonable to engage that person to provide those services;
- the reason why such services could not be provided by the legal team instructed under the representation order;
- the reason why the claim did not form part of the solicitor's fees and disbursements under the representation order;
- the basis on which and the rate at which the provider of the services charged the applicant;
- the extent to which there was duplication of work done under the representation order
- what was said on the claimant's behalf when the application for the defendant's costs order was made for a defendant's costs order in the criminal proceedings;
- why (if it be the case) the applicant's application for reimbursement of the expenses was not made at the same time as the claim of his lawyers for costs under the representation order.
No. 19 of 2009
Oliver v Whipps Cross University Hospital NHS Trust  EWHC 1104 (QB)
21 May 2009
Jack J (sitting with Assessors)
The correct success fee to allow in a Conditional Fee Agreement (CFA) when the assessment of risk was that the client might have a better or worse than even chance of success was 100%. That will be so where the solicitor enters into a CFA at an early stage (as he is entitled to do – see Callery v Gray  1 WLR 2112, paragraph 91) without having had access to the medical records and expert advice.
No. 20 of 2009
Mohammadi v Shell Point Trustees  EWHC 10908 (Ch)
22 May 2009
The principal issue on appeal by the claimant (Mrs M) was the extent to which she had been "a legally assisted person" within the meanings of sections 2(11) and 17(1) of the Legal Aid Act 1988 between September 1990 and 24 July 2002, thereby benefiting from the costs protection afforded by Section 17 from liability to pay her opponent's costs. Mrs M contended that during periods when she had been without legal representation in 1996 and 2001, she had taken no active steps herself and that where legal aid certificates had been reinstated following discharge, they were deemed never to have been discharged.
- During any period when she was in fact acting in person, Mrs M was not a legally assisted person even though she was actively seeking to reinstate for her benefit the provision of her legal advice, assistance and representation under the Legal Aid Act (paragraph 24).
- Mrs M was not a legally assisted person for the purposes of Section 17 during any period after the firm of solicitors which had ceased to act for her had communicated that fact to the respondent's solicitors, even if a period of time had elapsed before she took any active steps as a litigant in person.(25)
- The reinstatement of a legal aid certificate for the purposes of enabling new solicitors to act after the discharge of that certificate when the previous solicitor ceased to act, did not have the effect retrospectively, that the litigant is deemed to have been a legally assisted person for the purposes of Section 17 during the period between the discharge and the reinstatement of the certificates or, during any period between the termination of the old firm's retainer and the commencement of the new firm's retainer (26).
No. 21 of 2009
Bailey v UK Coalmining Limited (2009) EWHC 90139 (Costs)
28 May 2009
Master Hurst (sitting as a Recorder)
Regulation 4(2)(d) Conditional Fee Agreements Regulations (2000); (requirement on the legal representative to inform the client before signing a CFA whether other methods of financing the costs are available and if so how they apply to the proceedings in question).
The court granted the Defendant permission to appeal against the decision of the District Judge upholding the validity of the CFA, but the appeal failed. The Judge below had not applied the wrong legal test in arriving at his conclusions; the topic of trade union funding had been clearly raised with the client and the appeal appeared to be another technical challenge of the type the Court of Appeal had tried hard to discourage in Hollins v Russell.
No. 22 of 2009
Fattal v Walbrook Trustees (Jersey) Ltd (2009) EWHC 1674 (Ch)
5 June 2009
Christopher Clarke J (Sitting with Assessors)
This appeal concerned the following issues in which both sides had costs orders in their favour and against them.
- Should interest be awarded on the costs that the claimants had been ordered to pay to the defendants, when the litigation had been financed by a loan that was given interest free?
- Did the Costs Judge have jurisdiction to make an order that interest should not accrue on the defendant's costs or was this a matter which the trial Judge alone was empowered to deal with (as contended for by the defendants)?
- In the absence of misconduct (not advanced), was it unfair, wrong in principle and/or wrong in the result that the Costs Judge should have made no order as to the costs of the detailed assessment (thereby varying rule 47.18) when assessing the claimants' costs payable by the defendants?
Christopher Clarke J held that:
- The circumstances did not need to be "exceptional" before the court could depart from Section 17 Judgments Act 1838 under which interest on costs runs from the date of judgment. However:
"Since the payment of solicitors' costs involves the payment of money which could otherwise have been profitably employed the overwhelming likelihood is that justice requires that some recompense be made in the form of interest. If the receiving party has financed the costs from his own money, or from money that he has borrowed at interest, the case for his receiving interest on his costs at least from some date is likely to be overwhelming. The position might be different if the finance had been advanced entirely voluntarily, interest free, from a sympathetic relative or institution.... or (conceivably) from a lender which mistakenly failed to call for interest." (paragraph 30)
- "The court" specified in CPR 40.8(1)(b) did not mean "the court" which had given the judgment for costs and upon which, in the absence of some special order made by the Judge, interest would be due from that date (42). On the contrary, CPR 2.4 when interpreted in accordance with the overriding objective of dealing with cases justly, expeditiously and fairly permits the court (including the Costs Judge) to deal with interest, that conclusion being consistent with the powers exercisable under CPR 44.3(6) (the power of the court to make an order that interest on costs runs from or until a certain date, including a date before judgment).
- The claimants had failed to recover over 70% of what they had sought, the reduction in large measure being due to the failure of the solicitors to keep attendance notes. The amount disallowed indicated that it had been unreasonable for the claimants to have claimed as much as they had. Appeal dismissed.
No. 23 of 2009
Hanley v Smith & The Motor Insurers Bureau  EWHC 90144 (Costs)
17 June 2009
Deputy Master WilliamsThis judgment addressed (1) whether the claimant should be entitled to interest on costs from the date of an approval settlement, and (2) the success fee payable to counsel and his instructing solicitors under conditional fee agreements (CFAs).
Interest; could the Court disallow interest which would otherwise be payable on costs under Section 17 Judgments Act (1838) to reflect the fact that the receiving party had never been out of pocket because his solicitors had acted under a conditional fee agreement and he had never paid any money on account of costs? The Court declined to disallow Judgment Act interest at 8% from the date of the final approval settlement, notwithstanding that they had not been paid any costs by their client.
Success fee; the case had not been "won" before the solicitors (and counsel) had entered into the CFAs because by then, judgment had been obtained against an uninsured driver (the paying party's contention). "Win" meant succeeding against the Motor Insurers Bureau who would be paying the damages on the driver's behalf and that had not happened by the dates on which the CFAS had been signed. On the facts, the success fee would be allowed at 82% for the solicitors and at 50% for junior counsel, the stage at which 100% would be triggered under the staged success fee arrangement not having been triggered not having been reached. For leading counsel, the success fee was reduced from 82% to 54%, since, by the date of his CFA, the MIB had agreed to pay 70% of the claim.
No. 24 of 2009
Nasfif v Augusta Off-Shore SPA (2009) EWHC 90143 (Costs)
17 June 2009
Deputy Master Williams
Interpretation of a consent order for costs made after settlement of the claim.
C sued DI, DII and DIII following an accident. Later C discontinued against DII and later still against DIII with the claimant to pay their costs under CPR 38. Subsequently C settled with D1 on terms that:
"The First Defendants do pay the Claimant's costs of the claim on the standard basis such costs to be subject to detailed assessment if not agreed."
Did this mean that C could recover from DI the cost of the claim(s) he brought against DII and DIII prior to the discontinuance?
C contended that DII and DIII had only been joined because of uncertainly as to the identity of the correct tortfeasor in respect of the sole cause of action. In the consent order, DI had not sought to exclude the costs of the claims against DII or DIII or otherwise to qualify the order. Accordingly, the order should be construed as covering all C's costs, including the costs against DII and DIII until discontinuance.
That argument failed. The costs of DII and DIII were governed by the deemed costs orders in Rule 38.6(1) and the parties had not contracted out of the rule by agreeing that certain costs would be paid by one party (here DI) which would not otherwise be payable. Accordingly, indivisible items (eg, a medical report) would be recoverable in full on assessment from D1 (subject to quantum) but divisible items would be allowed only to the extent that they related to the claim against DI. The parts attributable to DI and DII would be disallowed.
No. 25 of 2009Tranter v Hansons (Wordsley) Limited (2009) EWHC 90145 (Costs) 18 June 2009 Master Wright
Regulation 4(2) (c) CFA Regulations 2000; (requirement on the Legal Representative to consider whether the client's risk of incurring a liability for costs is insured under an existing contract of insurance). Here the solicitors committed a material breach of the regulations then in force because the firm had denied the client (a passenger on the Defendant's bus) the opportunity of deciding, with the benefit of the solicitor's advice, whether or not to rely on an insurance policy that the Defendant might have had. Accordingly the CFA was unenforceable and no profit costs were recoverable from the Defendant.
No. 26 of 2009
Hughes v George Major Skip Hire Limited (2009) EWHC 90147 (Costs)
3 July 2009
Regulation 3(1)(b) Conditional Fee Agreement Regulations (2000); (requirement on the legal representative to specify in a CFA which provides for a success fee the reasons for setting the percentage increase at the stated level and how much, if any, relates to the cost of the postponement of the payment of fees and expenses).
The CFA provided for a success fee-"this is 50% of our basic charges". Schedule 1 stated that the percentage reflected five factors under (a) to (e) including the fact that if the case was successful the solicitors would not be paid their basic charges until the end of the claim. The CFA then said this:-
"The matter set out at paragraphs (a) and (b) above together make up 50% of the increase on basic charges. The matters at paragraphs (c) and (d) [and (e)] make up 50% of the increase on basic charges. So the total success fee is 50% as stated above".
The defendant's contention that the CFA failed to comply with regulation 3(1)(b) was upheld on the basis that the agreement had failed to specify, with sufficient clarity, how much of the percentage increase, if any, related to the cost of postponement. However, the CFA was not unenforceable (contrast Utting v McBain (2007) EWHC 3293 (QB) and Spencer v Wood (2004) EWCA Civ 352) because the breach had not had a materially adverse effect on the protection afforded to the client nor upon the proper administration of justice (applying the materiality test in Hollins v Russell (2003) 1 WLR 2487 at paragraph 107).
No 27 of 2009
Pacey v Ministry of Defence (MOD)
28 July 2009 (QB) (unreported)
Mrs Justice Sharpe (Sitting with Assessors)
This appeal concerned the recovery of costs under a consent order in which one part of the claim was successful but the other failed. Whilst the outcome turned upon the facts, Sharpe J gave a firm direction about the difficulties that can arise when parties reach a compromise which embodies an issue based order for costs.
The claimant was an executor. The deceased's widow, who was not a beneficiary or executrix under his will, instructed solicitors to bring a claim for statutory bereavement damages under the Fatal Accidents Act 1976 ("the 1976 Act claim") on the grounds that the deceased had been exposed to asbestos in the course of his employment by the MOD. On 26 August 2005, the widow signed a Conditional Fee Agreement with those solicitors ("the first CFA"). Before proceedings were issued, the executor entered into a CFA with the same solicitors which he signed on 17 September 2007 to be effective from 21 June 2007 ("the second CFA") to cover proceedings for the benefit of the beneficiaries of the deceased's estate under the Law Reform (Miscellaneous Provisions) Act 1934 ("the 1934 claim"). On 25 June 2007 proceedings were issued (seeking damages for the estate under the 1934 Act and damages for the dependent under the 1976 Act) in the name of the executor alone, this being a procedural requirement under s.2 of the 1976 Act in relation to any one death.
On 25 April 2008, the claim was settled by consent on the following terms as to costs:-
"3. The defendant do pay the claimant's costs in relation to the claim under the Law Reform (Miscellaneous Provisions) Act 1934 on the standard basis to be subject to a detailed assessment if not agreed.
4. The claimant to withdraw his claim under the Fatal Accidents Act 1976 with no order as to costs..."
Before the Master, it was common ground that the effect of the order was that the claimant could only recover those costs which were of or incidental to the claim under the 1934 Act. However the Master was asked to decide as a preliminary issue (1) the extent to which, if at all, overlapping work which was relevant to both claims was recoverable under the costs order for work undertaken before 21 June 2007 and (2) whether work undertaken under the second CFA should be apportioned (in the ratio 50/50), as the MOD contended or divided (such as that some items might be payable 80/20 and others 40/60 and so on ), as the claimant contended.
The Master held that all costs claimed before 21 June 2007 were irrecoverable and that costs incurred on or after 21 June 2007 should be apportioned (in a ratio to be decided when he had seen the papers) between the claimant (recoverable) and the widow (irrecoverable).
The claimant appealed on the grounds that the Master ought to have found that (1) costs claimed before 21 June 2007 had been incurred on behalf of the claimant and were in principle recoverable where not costs of the unsuccessful claim under the 1976 Act claim and (2) costs incurred after 21 June 2007 should not have been apportioned but ought to have been divided and recovered in full where not costs of the 1976 Act claim.
On the first issue, the claimant advanced his case in relation to pre 21 June 2007 work on the basis that the widow had been his agent and had acted with his knowledge and authority on behalf of the estate and that the claimant had agreed to indemnify her for costs. On the facts, Sharpe J found that there was no such an indemnity still less had the widow been acting as the executor/claimant's agent. The Master's decision was correct.
On the second issue, the MOD challenged the grounds of appeal on the footing that generic costs had been incurred with two separate clients, under two separate retainers set out in two separate CFAs and that the Master had been right to order that they should be apportioned. Where, as here, costs in relation to one claim were irrecoverable, generic costs could not be loaded onto the other claim to enable recovery to take place.
Sharpe J rejected these arguments. She held on the facts that the first CFA had been superseded by the second CFA and that there had been one action embodying two claims. Accordingly the appeal would be allowed on that point and the costs would need to be divided (applying Cinema Press Ltd v Pictures and Pleasures Ltd (1945) 1 All ER 440) Dyson Technology v Strutt (2007) EWHC 1756 (CH)), that is to say looked at item by item so that the costs relating solely to the 1976 claim could be separated out and disallowed.
Sharpe J said that although the outcome of the appeal depended upon the facts, the guidance given in CPR 44.3 (7) (not to make issue based costs orders) was of equal importance to the profession and in particular to solicitors, as it was to the court. The reason for this was that it was plain that where an issue based costs order was made following a compromise, this would lead to extra costs and difficulties on detailed assessment and therefore in the Judge's view such costs orders should be avoided for those very reasons.
No. 28 of 2009
Bilkus v Stockler Brunton (A Firm)  EWHC 1957 (Ch)
30 July 2009
Detailed assessment under Solicitors Act 1974 confined to a single item in the bill; was the sum of £50,000 and described as "uplift on all bills since April 2001" payable by the client?
The work undertaken by the solicitors concerned the valuation of the client's share in a company. That involved the presentation of a petition under Section 459 Companies Act (1985) on grounds that the business of the company had been conducted in a way prejudicial to the client, since work in connection with the valuation was done "in or for the purposes of proceedings begun before a court" (see Section 87(1) Solicitors Act), the business conducted was contentious not non-contentious. Accordingly there was no lawful basis upon which the uplift could be charged.
Prior to the assessment hearing, the solicitors applied to amend the bill so that the narrative for the charge of £50,000 read: "uplift to reflect the factors set out in the Solicitors (Non-Contentious Business) Remuneration Order 1994". This was refused. Henderson J considered the case provided:
"A suitable opportunity to remind the profession of the guidance given by the Court of Appeal in Polak v Marchioness of Winchester  1 WLR 810 to the effect that permission to amend the bill (or, which comes to the same thing, allow a bill to be withdrawn and substituted with a corrected bill) should be granted only in exceptional circumstances". (paragraph 45)
In the present case, the purported uplift of £50,000 had been objectionable for at least three reasons: (46)
"First, it was charged in breach of the terms of Mr Bilkus' retainer over the firm. Secondly, it purported to charge an uplift in respect of a series of earlier bills, all of which were final as delivered and not merely in respect of the bill of 3 September 2004. Thirdly, it purported to charge an uplift in respect of contentious business."
No. 29 of 2009
Business Environment Bow Lane Limited v Deanwater Estates Limited  EWHC 2014 (Ch)
31 July 2009
Where a Claimant has picked up one or more costs orders in his favour on the way to a trial, but fails very badly at the trial (for example due to exaggeration), can the Costs Judge assess those costs at nil on the footing that they were not, as it turned out, reasonably incurred because they had been incurred in an action that sought an exaggerated sum which should never have been claimed?
The Defendant ("D"), a landlord, served a schedule of dilapidations on the Claimant ("B"), its former tenant, claiming £416,000. As a preliminary issue, D contended for a complete defence based upon a previous collateral contract and/or a promissory estoppel. That contention succeeded before Briggs J, but failed before the Court of Appeal, with B to pay D's costs in that Court and below. Thereafter the action proceeded in the TCC. D's Scott Schedule disputed every item of claim except two, worth £1,073.50, which B accepted. Having exaggerated its claim, B was ordered to pay the costs of the action, other than those subject to the order of the Court of Appeal on the indemnity basis.
On detailed assessment, D contended that had B not exaggerated its claim, the parties would have been able to resolve the dispute for a modest sum without the trial of the preliminary issue before Briggs J and the Court of Appeal and quite possibly without any proceedings at all. Accordingly, the justice of the situation lay in the Court disallowing the entirety of B's bill for the preliminary issue and appeal.
On appeal to Mann J, that submission failed.
(1) It is the duty of the assessing tribunal to carry out the assessment which the previous court has directed it to carry out (Cope v United Dairies (1963) 2 QB 33) (paragraph 29).
(2) If the Court wishes to make an order which is affected by the fate of the action, or by what subsequently transpires, then it has the weapons available to it in the form of orders for costs in the case or costs reserved (32(2)).
(3) D took the preliminary issue point, fought it and lost it. That attracted costs consequences; "it happens all the time that a party who is successful in the action and who ends up getting his costs, has to pay some interim costs orders picked up along the way. If he says that they would not have happened if the unsuccessful action had not been brought, or if the unsuccessful defence had not been run, the answer is that they would not have happened if the interim application had not been fought (and defended), as the case may be either, so it is right that the costs liability, in a real sense, should remain" (32).
(4) If the Court makes an order that costs be borne by one party or the other irrespective of the outcome of the case, that may well be because it has formed a positive view that, come what may, costs ought to be paid and "come what may" in this example includes the possibility that the other side wins at the trial and wins handsomely (33). If there really is a harsh case that needs addressing, there is a potential mechanism through which it can be done – see CPR 3.1(7) the power of the court to make an order includes a power to vary or revoke the order (38).
(5) The costs of the preliminary issue should be determined by looking at the reasonableness of their being incurred and the conduct of the parties under CPR 40.5(a) in relation to that issue and not by reference to what happened in the action at the end of the day.
No.30 of 2009
Roundhouse Nurseries Limited v Stephenson Holdings Limited  EWHC 1431 (TCC)
10 June 2009
Costs of setting aside a default judgment entered under CPR 12.3.
The defendant was entitled to the costs notwithstanding that the judgment was regular because there was a “good reason” for doing so under CPR 13.3(1)(b), namely it had been obtained in an improper manner and was the result of unreasonable conduct. The parties had consented to a stay of proceedings to enable the requirements of the pre-action protocol to be completed. On expiry, the claimant knew a further stay was required and had not suggested to the contrary; silence was taken to amount to acquiescence and a party who entered judgment knowing that the defendant had a real prospect of successfully defending the claim must face the costs consequences of that decision. To say that a party was entitled to ignore “without prejudice” material in assessing whether or not there was a real prospect of defending the claim was contrary to the whole basis of the CPR which requires co-operation and commonsense, not tactical games-playing.
Costs thrown away as a result of D’s late withdrawal from a mediation.
Was the mediation part of the pre-action protocol agreed by the parties or a separate ADR process? If the former, in principle the costs would be recoverable as costs incurred during the pre-action protocol process (see McGlinn v Waltham (No.1)  3 All ER 1126). If the latter, the costs would not usually be recoverable where the mediation took place before the issue of proceedings (see Lobster Group Ltd v Heidelberg Graphic Equipment Limited  EWHC 413 TCC). Here the mediation was being treated as an integral part of the parties’ attempt to comply with the pre-action protocol process. Absent an agreement that each party would bear their own costs of the mediation, or that those costs would not subsequently be sought as part of the pre-action protocol process, such costs were incidental to the litigation and recoverable in principle.
(Applying McGlinn)On the facts, D should not have cancelled the mediation the day before it was due to start, and would bear the costs thrown away.
No. 31 of 2009
Onay v Brown  EWCA Civ 775
10 June 2009
Carnwath, Toulson and Goldring LJJ
The perils of making badly worded offers and counter-offers.
In an RTA, the defendant (D) submitted to judgment on liability "with damages and the issue of contributory negligence, if any, to be assessed". Offers and counter-offers followed "pursuant to Part 36", but without expressly mentioning costs with D ultimately saying this:
"Our client offers to settle the issue of contributory negligence on the basis of a 25% deduction. ... This offer is made pursuant to part 36 of the Civil Procedure Rules and is intended to have the consequences of that rule. The relevant acceptance period is 21 days from the date of receipt of this letter ..."
Agreement was reached that judgment be entered for the claimant (C) for 75% of the damages that were to be assessed. D then contended that "there remains to be determined the issue of costs of the issue of contributory negligence pursuant to CPR 36.11(3)(b) [which says unless the parties have agreed costs, liability shall be decided by the court] ...."
Below, the Judge found that D was the claimant in the single issue of contributory negligence and as D's offer had not contained an implied offer to pay those costs, C would pay the costs of and occasioned by that issue.
On appeal by C, Goldring LJ found that "the reference to the relevant acceptance period of 21 days pointed to CPR 36.2 ... Any reasonable solicitor reading the letter would, in my judgment, conclude that the writer's intention was that Part 36.2(c) was to apply, in other words that if within 21 days the offer was accepted "the defendant will be liable for the claimant's costs in accordance with rule 36.10"" (paragraph 27).
Carnwath LJ continued at paragraph 32:
"The moral of this story is that someone who writes a letter headed "part 36 offer", and which is stated as "intended to have the consequence of that rule", should make sure that he knows what those consequences are. I agree with my Lord that those consequences in a case such as this are clearly set out in 36.2(2) and 36.10(1). If the party writing the letter does not want those consequences to apply, he should put his offer in some other way, as is expressly permitted by rule 36.2."
No. 32 of 2009
Layass v DWFM Beckman (A Firm) (2009) EWHC 90150 (Costs)
24 August 2009
Interim statute bills delivered and paid under Part III Solicitors Act 1974 by the defendant solicitors (D) to the claimant (C), their former client. C's contention that three invoices submitted more than 12 months before the application for assessment was made, failed. D's client care letter did not preclude the firm from sending such bills to C and those delivered had all had the features of interim statute bills (eg, self contained, for precise amounts rather than lump sums and not a "running account"). The application for assessment was too late.
C also failed to establish that "special circumstances" applied in relation to four further bills paid less than one year before the date of the application for assessment was made under Section 70(3)(a) of the 1974 Act.
No. 33 of 2009
Stillwell v Clancy Docwra PLC  EWHC 90148 (Costs)
1 September 2009
Settlement of claim for £750 pre-issue. In her bill, C claimed costs of £6,727.68.
As a preliminary issue prior to the detailed assessment , D contended that had the claim been issued, it would have been allocated to the small claims track under CPR 26.6(1) and only fixed costs under CPR 27.14 (2) would have been payable. Accordingly, the bill should be assessed by reference to that track, albeit that under the terms of the consent order, the court was not compelled to allow small claims costs and nothing else. C contended that the costs should not be fixed but should be allowed in whatever sum was found to be reasonable and proportionate.
Held; the Court should hear the arguments on the assessment; if, having done so, it concluded that the reasonably incurred and proportionate costs that it was just for D to pay were those that would be payable under the small claims regime, nothing in the order prevented the costs from being limited to that figure. The matter would need to be restored for a detailed assessment. When that had been carried out, the court could decide whether the costs to be allowed would be those akin to the small claims regime or such larger sums as were reasonable, having regard to the level of the work reasonably and proportionately undertaken.
No 34 of 2009
M&M Savant ltd v Raja and others  EWHC 90149 (Costs)
3 September 2009
Innocuous looking costs order made at conclusion of trial that required detailed assessment as an "issue based" costs order.
At trial, the Judge had resolved an appeal from the Leasehold Valuation Tribunal ("the LVT appeal") and a claim "for dispensation" under the Landlord and Tenant Act (1985) ("the County Court claim"). The order said this:-
"The claimant ("C") is to pay the costs of all three defendants ("D") in relation to the County Court proceedings,..the quantum...shall be subject to detailed assessment."
The parties agreed that this meant C would pay all the Ds' of the County Court claim (subject to assessment) and each party would bear their own costs of the LVT appeal. How would overlapping costs be dealt with viz costs for work done which was of material benefit to both claims and/or were common to each claim?
Ds contended: any costs inextricably linked to or of material use and benefit in both claims were recoverable eg a witness statement used to defeat the County Court claim would have been the same even if there had been no LVT appeal. Only costs that did not have a "dual purpose" were irrecoverable. C contended: the costs of the County Court claim were small and what the Ds were attempting to do was to recover the costs they had incurred in defeating the LVT appeal which the costs order did not cover. Only those costs by which the County Court claim had increased the overall costs were recoverable from C.
Held: the contention that the work to which the Ds were put in the LVT appeal that was of use in the County Court claim and therefore recoverable, was incorrect. Where costs were common to both claims, on assessment, such costs needed to be divided up so that the costs attributable to the LVT appeal were separated out, leaving only the County Court costs. Such "common costs" were either "specific" or "non-specific".
Those that were "specific" because they related to work done on more than one issue (eg attendances on the client, brief fee on trial) needed to be divided (and not apportioned). Accordingly, if 60% of the trial related to the LVT Appeal, C would pay only the 40% of the brief fee attributable to the County Court claim.
Those that were "non-specific" because they would have been incurred whether or not there had been an LVT Appeal, were indivisible and recoverable in full (eg the court fee on issue or travelling to court for the trial). They were composite fees and would have been the same whether C had sued one two or three defendants: "Medway Oil Principle" (1929) AC 88, Cinema Press Ltd v Pictures and Pleasures Ltd(1945) KB 356, Lavery v Ewing and Peterborough Health Authority (QB)11 May 1995 (Keene J) and Dyson Technology v Strutt (2007) EWHC 1756 (Ch) Patten J applied.
No. 35 of 2009
Harvey v East Kent Hospital NHS Trust (unreported)
21 September 2009
Success fee in clinical negligence proceedings funded under a conditional fee agreement ("CFA") with a single stage success fee of 100% reduced to 80% on detailed assessment. The reasons for the reduction were:-
"To my mind it is not reasonable for solicitors to stipulate for a single stage success fee 100% on the basis that he has not undertaken any proper assessment of the risks of that case. To do so would enable him to investigate the risks and prospects at the defendant's expense and, if the claim later succeeded, would entitle him to that high success fee, even where the investigations prove that it was too high.. .. [paragraph 35]...
I turn now to explain why I think my allowance of a success fee of 80% is appropriate in this case, even though it appears to be inconsistent with the decision made by Jack J in the Oliver case [see Oliver v Whipps Cross Hospital University NHS Trust  EWHC 1104 (QB)]... [paragraph 38]
In the case before me I have decided that it was unreasonable for the solicitors to enter into an agreement for a maximum success fee without attempting properly to assess where in the spectrum of riskiness this case was likely to fall.... [paragraph 40]
In my judgment had a proper assessment of risk been made before the CFA was entered into, the claimant's solicitors would not have been able to justify a single stage success fee exceeding 80%. Although the solicitors were entitled to enter into a CFA early, the relevant circumstances which were, or which should have been know to them before entering into that CFA do not justify a 100% success fee. [paragraph 41]
Note: An appeal by the claimant was withdrawn upon the parties agreeing terms, not disclosed to the Court.
No. 36 of 2009
Barr & Ors v Biffa Waste Services Ltd
Westmill Landfill Group Litigation (No.2)  EWHC 2444 (TCC)
2 October 2009
No costs capping order ("CCO") made under CPR 48.18 in proceedings subject to a Group Litigation Order ("GLO"), but it was appropriate instead to make an order under CPR 44.3, under which the claimants' estimate of future costs (£1.5 million approx) was to be taken as "a reasonable estimate that such costs and therefore their likely maximum recovery at the end of trial".
Coulson J found:-
(1) The "blackmailing effect" referred to in Musa King v Daily Telegraph  1 WLR 2282 and Campbell v MGM (No.2)  1 WLR 3394 was present in this case, namely that although the maximum likely recovery by the 163 claimants was £1 million damages in total, the defendant could face a bill of £4 million because the claims were funded by a conditional fee agreement ("CFA") with a 100% success fee.
(2) If the claims failed, the claimants' ATE policy was limited to £1 million, so the defendant would be out of pocket by £1 - 2.3 million on its own costs, depending upon what was allowed on assessment.
Nonetheless, the criteria in CPR 48.18 were not met. In deciding whether there was a substantial risk that without a CCO costs would be disproportionately incurred, the success fee must be ignored. All the defendant could complain about was base costs, which when measured against its own costs, were not disproportionate. Any such risk could, in any event, be adequately controlled by case management directions, or a detailed assessment by application of CPR 44.18(5)(c)(i) and (ii).
Application for CCO refused
No. 37 of 2009
Earles v Barclays Bank Plc (2009) EWHC 2500 (Mercantile)
8 October 2009
HH Judge Simon Brown QC (Sitting as a Deputy Judge of the High Court)
Costs of the Action.The claimant lost and Bank won the three issues tried.Nonetheless the Judge awarded the Bank only 25% of its costs to reflect conduct under CPR 44.3(5) relating to:
- The Bank's failure to give disclosure of documents referred to in its own witness statement.
- The Bank's conduct in failing to procure and retain an ex employee's email account and telephone records.
- The Bank's litigation lawyers' failure to discuss with the claimant prior to the CMC electronic disclosure as expressly provided for by CPR 31 PD.2A2.
- That accounted for 50% but because the Bank used "the very best of City of London firms" and counsel from leading commercial chambers in a London case tried in the Birmingham Mercantile Court by choice of the claimant and agreed upon by the Bank, another 25% would be deducted. Accordingly, the Bank's claim for £154,071.25 costs would be summarily assessed at 25% of that sum, namely £38,517.81.
- Note: This judgment at paragraphs 18-20 also contains a comprehensive resume of the law where a Judge is faced with resolving conflicts of evidence, as frequently occurs when Costs Judges hear oral evidence, for example, in proceedings under Part III Solicitors Act 1974.
No. 38 of 2009
Eweida v British Airways Plc  EWCA Civ 1025
15 October 2009
Maurice Kay, Lloyd and Moses LJJ
Protective costs orders (PCO) which protect a party against liability for the other party's costs, and costs-capping orders (CCO) which impose a cap on the amount which one party can recover from the other in respect of future costs.
The appellant (A) worked for BA on its check-in desk. Her claim for unlawful discrimination on the grounds of her religious belief failed in the employment tribunal. Her appeal to the Employment Appeal Tribunal in respect of indirect discrimination also failed, but she obtained permission to appeal to the Court of Appeal.
Below, E had not been at risk of having to pay BA's costs, her legal representatives having acted for her gratuitously. In the Court of Appeal, those representatives acted under a conditional fee agreement, but she faced a real risk of liability for BA's costs, in the event that the appeal failed. Sedley LJ refused her application for a PCO on paper, but acceded to a revised application for an order capping BA's costs at £25,000 including disbursements and VAT. BA exercised its right to have the application considered at an oral hearing.
Held: Since this was not public law litigation, but a private claim by a single employee against her employer, a PCO could not be made-(see R (Cornerhouse Research) v Secretary of State for Trade & Industry  EWCA Civ 192. Even if the Court could make a PCO, notwithstanding that it was not public law litigation, it would not do so.
The CCO would also be discharged. No particular element in BA's draft bill of costs was unreasonable or disproportionate in itself. If the level of hours devoted for the case were more than called for, or the hourly expense rates too high, the Costs Judge provided the protection to which E was entitled. Accordingly, making a CCO would be inconsistent with the requirements of rule 44.18(5).CCO discharged.
No.39 of 2009
Kris Motor Spares Ltd v Fox Williams LLP  EWHC 2813 (QB)
13 November 2009
Validity of termination by the defendant solicitors ("FW") of their conditional fee agreement ("CFA") with the claimant ("C") before the end of the case and "special circumstances" under Section 70(1)(3)(c) part iii Solicitors Act 1974.
FW acted as C's solicitors in substantial litigation under a CFA which provided for payment of their fees:
(i) at full hourly rates plus an uplift of 30% if successful;
(ii) limited to 70% of full hourly rates if unsuccessful, and
(iii) 100% at full hourly rates if FW terminated the CFA before the end of the action.
Against advice, C rejected an offer of £4.2 million in settlement of the action. Subsequent disclosure proving potentially ruinous to C's prospects of success, FW terminated the CFA under Condition 8.5(a), which permitted the firm to do so if the client breached its responsibility to FW under Condition 2 (not deliberately or negligently [to mislead]). Two hours after termination, C settled the litigation on a "drop hands" basis and FW submitted a final bill for the firm's work at full hourly rates. Since the bill exceeded £1m, at least £300,000 turned on whether C was obliged to the full rather than the discounted rate.
Holroyde J upheld the Master's finding that FW validly terminated the CFA because C was in breach of Condition 2. Accordingly, FW could charge 100% of their fees because the CFA had been terminated (albeit only 2 hours) before the litigation had been settled unsuccessfully. It did not matter that no notice had been given, because the retainer to conduct the litigation continued (FW went on acting for C but not under the CFA), so C's "entire contract" argument failed (that a solicitor can only terminate the retainer on good cause - see Underwood v Piper v Lewis  QB 306).
"Special circumstances"; there were none. C paid a series of bills without demur: objection to the final bill was in the vaguest of terms: the dispute in reality merely related to the 30% difference between the discounted fees and the full fees, hourly expense rates having been agreed: the solicitors had not put the client under pressure to pay, but had been obliged to point out to C that he would need to discharge outstanding bills before FW could continue to act or pass papers to another firm. Order for assessment under s.70 refused.
No.40 of 2009
McCarthy v Essex Rivers H.A. NHS Trust
13 November 2009 (unreported)
Mackay J (Sitting with Assessors)
Success fees under a Solicitor's Conditional Fee Agreement in clinical negligence proceedings.
Was the Master correct, having decided the case had 50/50 prospects when the CFA was signed, that Clause 97 was a relevant consideration to take into account when fixing the success fee? [Clause 97 permitted the solicitors to terminate the CFA if subsequent investigations revealed poor prospects of winning.]
Yes - Clause 97 allows a solicitor to pick out and discard from the basket of CFA cases he is handling, those claims which, as time goes by, are viewed as cases with less than 50/50 prospects of success.
That leaves the solicitor with an enriched or improved basket. The Master was correct to reduce the success fee from 100% to 80% to reflect the effect of Clause 97 "in which the solicitor, as I understand it, is saying to the client, in effect, if I later form a different and less favourable view of the case I can cut you free and limit my losses" (see paragraph 30).
It will also be harder for the solicitor to justify a higher success fee and if he has not, in an appropriate case entered into a staged success fee (paragraph 26).
No.41 of 2009
AHMED V AVENTA PHARMA LTD  EWHC 90152 (Costs)
19 November 2009
Group litigation. Sixty Claimants discontinued their claims with their costs to be paid by the Legal Services Commission. An outside bureau had sorted and summarised their medical records and charged £841.75 per Claimant. In their billed lodged for provisional legal aid assessment, the solicitors claimed this work as profit costs at £75 per hour plus a 50% uplift at a charge per Claimant of £2565, being a profit of £1723.25 above the figure billed by the bureau. In principle, the solicitors were entitled to be paid for the work as a profit cost not as a disbursement (Crane v Cannons Leisure  EWCA Civ 1352) applied, but no uplift was justified for "sorting" which would be reduced to 25%.
No.42 of 2009
Austin v Metropolitan Police and the LSC  EWHC 90151 (Costs)
19 November 2009
S.11 Community Legal Service (Costs Protection) Regulations 2000. The Respondent (R) was awarded his costs against the publicly funded Appellant (A) in the Court of Appeal but failed to apply for determination of the costs payable by the Legal Services Commission within three months thereafter under the CLS (Costs Protection) (Amendment No. 2) Order 2001 (SI 2001/312). On the facts was there a "good reason" for the delay which would enable the application to proceed?
Held: R's application was 13 weeks out of time. The CLS Regulations 2000 were applicable. Under Reg 5(3)(b) the 3 month period was mandatory and could not be extended (see R v Sec of State for the Home Office ex parte Gunn (2001) EWCA 891 Phillips MR at 31). In the alternative, if this regulation had been amended by the 2001 (amendment) regulations, which had inserted "unless there is good reason" for the delay, awaiting notification of A's intention to appeal to the House of Lords was not a "good reason". Application dismissed.
No.43 of 2009
Widlake v BAA Ltd  EWCA Civ 1256
23 November 2009
Ward, Smith and Wilson LJJ
Exaggeration and concealment:
The Claimant (C) suffered injury in the course of her employment and recovered £5,522.38 damages. A surveillance video suggested to the Judge that C had acted completely normally as if she had no pain or disability when it had been taken. At one point C's schedule of special damages sought £148,878 for loss of earnings. This was later modified to £23,906.40. The Defendant (D) paid £4,500 into Court. Although that sum was not beaten after a three day trial, the Judge found that C had deliberately withheld from her own medical experts, material information as to her previous medical history in an attempt to manipulate the civil justice system. He ordered C to pay D's costs.
On appeal by C:
Q1: Who was the successful party?
A: The person who had to pay the money - here D.
Q2: Was it reasonable for C to pursue her allegation that she had suffered pain such that it (a) justified her case that her pre-existing condition was accelerated by 5 years and (b) that it was of the severity she had described?
A: If it was unreasonable, then it was conduct the court had to take into account, in which case to what extent did C's lies and gross exaggeration cause the incurring or wasting of costs?
Q3: Was the misconduct so egregious that a penalty should be imposed on C by way of a punitive sanction?
A: The fact that a defendant has the ability to win outright by making an offer which C fails to beat where the facts are well known, counts against that defendant; likewise the failure by a claimant to make a counter-offer would count against that claimant.
Accordingly, on "the balance sheet" per Ward LJ at paragraph 44:
- the starting point was that C should have her costs because she beat the payment in; but
- pursuing the claim in an exaggerated way led to heavily contested litigation which otherwise might have settled, putting D to unnecessary expense, but;
- D failed to alleviate its predicament by making a proper Part 36 offer; and
- C had failed to negotiate a claim that was clearly capable of settlement.
- The fair order was "no order as to costs". Appeal allowed
No.44 of 2009
Lord Chancellor v Michael J Reed Ltd  EWHC 2981 (QB)
23 November 2009
Penry -Davey J
Fees for "special preparation" under paragraph 15(1) of Part 3 to Schedule 2 of the Criminal Defence Service Funding (Amendment) Order 2007 ("the graduated fee scheme" - "GFS"). Under the GFS, fees are based on the complexity of the case rather than the number of hours worked. The graduated fees are calculated with reference to proxies (eg, length of trial) for case complexity and contain uplifts (eg, multiple defendants) that approximately reflect and remunerate differences in both costs and complexity. The trial fee including proxies and uplifts also contains an increment calculated by reference to the number of pages of prosecution evidence ("PPE") under paragraph 1(2) of Schedule 2 as follows:
"(2) For the purposes of this Schedule, the number of pages of prosecution evidence served on the court includes all -
(a) witness statements;
(b) documentary and pictorial exhibits;
(c) records of interviews with the assisted person; and
(d) records of interviews with other defendants which form part of the committal or served prosecution documents or which are included in any notice of additional evidence, but does not include any document provided on CD-ROM or by other means of electronic communication."
Additional fees are payable under paragraph 15 of Schedule 2 where prosecuting evidence is served in electronic form only, as follows:
"15(1) This paragraph applies where, in any case on indictment in the Crown Court in respect of which a fee is payable under Part 2, any or all of the prosecution evidence, as defined in paragraph 1(2), is served in electronic form only, and the appropriate officer considers it reasonable to make a payment in excess of the fee payable under Part 2.
(2) Where this paragraph applies a special preparation fee may be paid in addition to the fee payable under Part 2."
- The Master had allowed a special preparation fee under paragraph 15(1) of £25.44 to remunerate counsel for his time spent viewing video footage of the road on which it was alleged the Defendant driver had caused death by dangerous driving. Penry-Davey J allowed the Lord Chancellor's appeal giving his reasons:
- paragraph 15 incorporating the definition in paragraph 1(2) does not and cannot include DVD footage
- the consultation process which preceded the 2007 Order expressly considered whether electronic material should be included or excluded and a decision taken to exclude it
- the clear effect of paragraph 1(2) is to exclude from the calculation of PPE, any DVD, CD-ROM, audio or video tape or other electronically served material
- if and only if material served in electronic form consists of "any document" can it qualify for a special preparation fee (eg, a still image); moving footage or video tape not intended for conversion to still images or which cannot be so converted are thus excluded.
Comment: this appeal resolves an oft argued point in criminal appeals under the GFS whether DVDs or videos are PPE and eligible for a special preparation fee.
No.45 of 2009
Thomas v Butler (trading as Worthingtons Solicitors) (2009) EWHC 90153 (Costs)
30 November 2009
Proceedings by the claimant (C) against his former solicitors (D) for assessment of bills of £20,651.29 under Part III Solicitors Act 1974 incurred in failed proceedings for damages for personal injury.
C had Legal Expenses Insurance (LEI) cover up to £50,000 under which his previous solicitors had acted for him in the personal injury proceedings. In breach of paragraph 4(j) of the Solicitors Costs Information Client Care Code 1999 (in force until 30 June 2007) the court held that the solicitor had not discussed C's funding options adequately in having failed to investigate the availability of LEI for his own costs and for those of his opponent in the litigation, which had amounted to £24,000. Under CPR 44.4, on an assessment on the indemnity basis, costs unreasonably incurred would not be allowed. Here D's costs would be disallowed and the bill assessed at nil for want of adequate investigation of the LEI position, since D had followed C's instructions, the LEI policy would have met those costs. Order for repayment of the £20,651.29 with interest.
The court had no power under the Solicitors Act to make any order in relation to the £24,000 costs paid to the successful defendant in the personal injuries claim, which in all likelihood, the LEI would also have covered.
No.46 of 2009
MasterCigars Direct Ltd v Withers  EWCA Civ 1526
7 December 2009
Lord Neuberger MR, Maurice Kay and Stanley Brunton LJJ
Oral applications to a three Judge Court for permission to appeal against decisions of Morgan J given in the assessment of solicitor and client costs under Part III Solicitors Act 1974 (see MasterCigars v Withers  EWHC 2733 (Ch), (No.1),  EWHC 651 (Ch) (No.2) and  EWHC (Ch) 99 (No.3).
Refusing permission, at paragraph 33 Neuberger MR said this:
"In my opinion, however, while at least some of these points [of law of potentially wider significance] can be said to be of sufficient importance to cross the second appeal threshold, there is no real prospect of this court holding Morgan J's conclusions to be wrong. ... First, there is Morgan J's summary in paragraph 54 of his second judgment, accurately reflecting what he said more fully in his first judgment as to the effect of an estimate on the assessment of costs. It seems to me that what the judge said in those passages was correct and, despite submissions to the contrary on the part of MasterCigars, quite consistent with principle and with the previous authority."
[In that paragraph, 54, in MasterCigars No 2, Morgan J had said this:-
"In my judgment, the legal process involved in a case where a client contends that its reliance on an estimate should be taken into account in determining the figure which it is reasonable for the client to pay is as follows. The court should determine whether the client did rely on the estimate. The court should determine how the client relied on the estimate. The court should try to determine the above without conducting an elaborate and detailed investigation. The court should decide whether the costs claimed should be reduced by reason of its findings as to reliance and, if so, in what way and by how much. ... It is not the proper function of the court to punish the solicitor for providing a wrong estimate or for failing to keep it up to date as events unfolded...The ultimate question is as to the sum which it is reasonable for the client to pay, having regard to the estimate and any other relevant matter."]
Neuberger MR continued:
"36. Secondly, there is Morgan J's rejection of the argument, that there is to be implied into a retainer that solicitors will comply with the Solicitor's Costs and Information and Client Care Code, as discussed in paragraphs 107 to 111 of the first judgment. The rejection of that argument seems also to me to be unassailable. ...
37. Thirdly, there is the question of whether the judge was right about what he said in relation to the margin approach in paragraph 56 and 57 of his [second] judgment, and his rejection of ... the 20% margin ... In my opinion, that was a view the judge was entitled to form ..."
As to the question of whether Morgan J had power to order in his second judgment and to confirm in his third judgment, that the outstanding questions relating to costs should be dealt with by him following a report by the Senior Costs Judge in further submissions from the parties: "In my view he plainly did" (Neuberger MR paragraph 40).
Applications for permission to appeal refused.
No.47 of 2009
Lord Chancellor v Purnell  EWHC 3158 (QB)
7 December 2009
Sir Christopher Holland
Payment of counsel's fees under the Graduated Fee Scheme ("GFS"). Should counsel be paid a fee for a "cracked" trial as defined in paragraph 9 of Part 3 to Schedule 2 Criminal Defence Service (Funding) Order 2001 for a second trial that did not proceed or a lesser fee because at the conclusion of the first trial (at which the jury was unable to reach verdicts), the Crown had yet to decide whether there should be a re-trial?
The Determining Officer allowed the lesser fee. The Costs Judge awarded a cracked trial fee. The Lord Chancellor appealed.
Appeal dismissed: Counsel had every reason to expect and prepare for a re-trial, even though this was not proceeded with. The GFS Guidance published by or on behalf of the Appellant is not a source of law, but is no more and no less than "Guidance". However, the appearance in the 2008 Guidance of paragraph B 20(2)(4) [the 2005 Guidance was relevant at the date of the Determination] provides that where there is a change of plea at or before the start of the second trial (or the prosecution does not proceed with a re-trial) and such change of plea occurs within one calendar month of the conclusion of the first trial, the advocate is paid a cracked trial for the second trial, but reduced by 40% subject to Guidance paragraph F10A which reads:
"Where a trial is aborted, or a jury is unable to reach a verdict, with the prosecution later offering no evidence - a cracked trial fee should not be paid for the second or subsequent intended trial unless the case was again considered ready for trial by being given a fixture listing or placed in a warned list. Adjourning the proceedings to allow the prosecution time to decide whether or not to proceed further - with the case subsequently being listed for mention at which the prosecution offer no evidence - would not qualify for a cracked trial fee."
No.48 of 2009
National Westminster Bank v Kotonou  EWHC 3309 (Ch)
11 December 2009
Funding related costs: the general principle (judgment paragraph 26) is that the costs of a claim do not include costs incurred by a party in seeking funding, either for the prosecution or defence of that claim. Was the Master correct to find that there was an exception to the general principle where (as here) the negotiations in question had taken place with the other party (the bank), so such costs were recoverable?
Appeal by the bank dismissed. There was an obvious and close nexus between the issues raised by the funding negotiations and the issues raised by Mr Kotonou's claim for declarations as to the true construction of his mortgage with the bank. Costs incurred in pursuit of negotiations designed to provide an interim solution to issues forming the subject matter of pending (or contemplated) litigation, while leaving the issues to be determined at a later date, can form part of those proceedings. The need to negotiate interim solutions to difficulties thrown up by contemplated or pending claims is a feature of litigation (eg, security for costs, questions as to the liberty of the defendant to use his assets in funding the litigation, interim custody of and dealings with property which is the subject matter of the claim, etc) (see paragraph 36). Negotiations as to the resolution of interim issues should be encouraged, and the costs regime should accommodate the costs of such negotiations as part of the costs of litigation (paragraph 37).
No.49 of 2009
Eversheds LLP v Cuddy  EWHC 90154 (Costs)
17 December 2009
Assessment of bills delivered by Eversheds LLP (E) to the Defendant and their former client (C) under Part III Solicitors act 1974.
E's final invoice amounted to £443,077. On assessment, C contended that E had given an estimate that the costs of the litigation in which E were instructed would not exceed £150,000 plus a further £50,000 for work that fell outside the estimate. That submission failed. E had told C that it was not possible to give an estimate before the summary judgment stage of the litigation had been concluded. However, E's terms and conditions and paragraph 6 of the Solicitors Code of Practice then in force had obliged E to give C "best information" and reports about costs which he did not receive. It followed that although the costs had been assessed in the sum of £376,000, that was not a reasonable sum for C to pay, applying MasterCigars v Withers  EWHC 651 (Ch) Morgan J at paragraphs 54 and 101 and Reynolds v Stone Rowe Brewer  EWHC (QB) Tugendhat J at paragraphs 57 and 71. The bill would therefore be reduced to £325,00 and E would pay the costs of the reference under the "one fifth" rule (s. 70(9) of the Act).