Qualified One-Way Costs Shifting, Section 57 and Set-Off
This book is updated on Kerry on QOCS: Book Update and Links and the links provide the full judgment of all cases, statutes, statutory instruments etc.
PRE – PUBLICATION REVIEWS
I read this compelling book in one sitting .Those who work in this area of law will suffer if they do not devour it as I did. It oozes pragmatic guidance at every turn. As essential for injury lawyers as The White Book itself.
Professor Dominic Regan
Comprehensive, authoritative, highly practical and always straight to the point – this book is everything we have come to expect from the leading expert Kerry Underwood. It will undoubtedly prove an essential resource no PI lawyer will want to be without.
Rachel Rothwell, editor, Litigation Funding magazine
“Fundamental Dishonesty”, “Substantial injustice” and Section57 of the Criminal Justice and Courts Act 2015 are the new kids on the Personal Injuries block. Who better to introduce them to you and consider their vagaries than Kerry Underwood?
His Honour Michael Cook, former Circuit Judge
When one wishes to find a decent curry in say Basingstoke, one Googles “curryhouseBasingstoke”. When one has a legal problem, particularly personal injury or Jackson related, one Googles “KerryUnderwood”. It really is that simple! There is just no need to look elsewhere.
Andrew Twambly, CEO, InjuryLawyers4U
Qualified One-Way Costs Shifting, Section 57 and Set-Off
Partner, Underwoods Solicitors
Law Abroad PLC
Copyright © 2016 Kerry Underwood. All rights reserved
Special thanks to:
British International School of Stavanger, Norway
His Honour Michael Cook
PJ Kirby QC
Mike Penning MP
Professor Dominic Regan
My Blog Subscribers
My followers on Twitter
I am particularly grateful to Professor Dominic Regan for proof reading this book. Any remaining mistakes are mine.
Kerry Underwood is a solicitor and is senior partner of Underwoods Solicitors. He is a lecturer, writer, broadcaster and former Employment Judge.
Kerry writes and edits the Costs and Funding section of Butterworths Personal Injury Litigation Service and is a regular contributor to Litigation Funding, New Law Journal, Claims Magazine and the Law Society’s Civil Justice Section Newsletter.
Kerry pioneered Conditional Fee Agreements, TV advertising by lawyers and off-shoring work to South Africa.
Former Councillor and Parliamentary Candidate.
Kerry travels extensively and home is his beloved adopted town of Hemel Hempstead. Underwoods Solicitors sponsor the town’s football club and rugby league club.
Interests include football, cricket, gardening and reading. Kerry still plays cricket and is Chairman of his village club Bovingdon Cricket Club.
Nelson Mandela, TS Eliot and Elvis are amongst his heroes.
See Kerry’s blog at: kerryunderwood.wordpress.com
Other titles by Kerry Underwood
Small Claims, Fixed Costs and Portals
Wasted Costs and Third Party Costs
Litigants in Person
Court and Tribunal Fees and Remissions
Conditional Fee Agreements, Damages-Based Agreements and Contingency Fees
Selected Legal Writings Volume 1
Selected Legal Writings Volume 2
Non – Law books
My Dad and Other Pieces
“Without lawyers, judges and courts, there is no access to justice and therefore no rule of law, and without the rule of law, society collapses”
Supreme Court President
10 April 2015
HOW TO USE THIS BOOK
Readers will obtain far greater value out of this book by referring to the post on my blog: Kerry on QOCS: Book Update and Links, where every statute, statutory instrument, case, civil procedure rule and practice direction etc. can be accessed in full.
My blog can be seen at:kerryunderwood.wordpress.com.
You can subscribe to my blog by visiting the address above and scrolling down to the bottom of the archive posts list on the right hand side of the page where it says email subscription.
Type your email address and click subscribe, once you receive the email click the link in the email and you have subscribed.
All of the references appear in Part VI of this book, starts at page 217. Simply go to the case or whatever on the blog click on the link and it will open.
Thus the full text of the entire statute law, case law, civil procedure rules, Practice Directions and other publications can be accessed in seconds through the blog.
It also gives links to all my other blog posts. For example the interplay between QOCS and Part 36 is crucial. I deal with that in this book but my blog post – Part 36: The Dry Salvages – goes into far greater detail about all matters relating to Part 36.
I also constantly update this book, chapter by chapter, on the blog.
The blog has at the end a comments section. Please leave comments, ask questions and let me know of any cases etc that you are involved in.
PARTS AND CHAPTERS
Part I – WHAT IS COVERED?
- Section 57
- Structure of CPR 44.12 to 44.17
Part II – EXCEPTIONS
- Fundamental Dishonesty
- Pre – Jackson Funding Agreements
- Part 36
- Discontinuance, Strike – out and Summary Judgment
- Financial Benefit of Another
Part III – STATUTES ETC
- Statutes etc.
Part IV – EXTENDING QUALIFIED ONE-WAY COSTS SHIFTING
- Extending Qualified One-Way Costs Shifting
Part V – SET – OFF
Part VI – REFERENCES
Part I – WHAT IS COVERED
1. INTRODUCTION 3
a. History 3
b. Modern Times 5
c. Interplay with Section 57 Criminal Justice and Courts Act 2015 6
d. Structure of the Book 8
e. Summary 9
f. Exercise 11
2. SCOPE 14
a. Type of Work 14
b. Issued Proceedings In England & Wales 15
c. Place of Injury 16
d. Date of Injury 16
e. Pre – Action Disclosure 17
f. Hybrid Claims 17
g. Section 57 19
h. Small Claims – Section 57 20
i. QOCS 21
j. Appeals 22
i. Section 57 22
ii. QOCS 23
iii. Liability Appeals 24
iv. Quantum Appeals 25
v. Defendants’ Appeals 25
vi. Multi-Party Claims 26
vii. Legally – Aided Claims 27
k. Motor Insurers Bureau Claims 28
i. Uninsured Drivers 28
ii. Untraced Drivers 28
iii. Qualified One Way Costs Shifting 30
iv. Appeals 31
v. Summary 32
l. Criminal Injuries Compensation Authority (CICA) Claims 33
m. Discrimination Cases 36
i. Actual Injury 36
ii. Employment Tribunals and QOCS 37
iii. Employment Tribunals and Section 57 37
iv. Injury to Feelings 38
v. Shorter Oxford English Dictionary 38
1. Impairment 38
2. Impair 38
3. Impaired 38
4. Impairment 38
5. Impair 38
6. Impaired 39
vi. Roget’s Thesaurus gives the following alternative for “impair” 39
vii. Roget’s Thesaurus gives the following alternatives for “impaired” 39
viii. Roget’s Thesaurus gives the following alternatives for “impairment” 39
n. Summary 45
i. QOCS 45
ii. Section 57 45
iii. Childrens Cases 46
iv. Those Lacking Capacity 46
v. Costs Proceedings 46
o. Simmons v Castle 10% uplift 48
3. SECTION 57 53
a. Commencement 53
b. Effect 54
c. Related Claim 55
d. Substantial injustice 55
e. Costs 55
f. Definitions 56
g. Criminal Proceedings 58
h. Problem areas 59
i. Success Fee and Charge to Client 60
j. After-the-Event Insurance 61
k. Self-insurance 62
l. Client Care Letter Wording 62
m. Substantial Injustice 64
n. Level of Burden of Proof re Substantial Injustice 66
o. What might be covered? 67
p. Children’s cases 68
q. Claimants lacking capacity 69
r. Loss of huge award 69
s. Other matters 69
t. Cost to state 69
u. Fundamental Dishonesty and Costs Proceedings 70
v. Section 57 and Part 36 71
w. Section 57 and Proportionate Costs Orders 72
x. Case Law 73
y. The Irish Experience 74
z. Criminal Liability 82
i. Criminal Justice and Courts Act 2015 83
ii. Civil Liability and Courts Act 2004 84
4. THE STRUCTURE OF CPR 44.12 to 44.17 88
a. Restriction is on enforcement, not the order 88
b. Partial enforcement without leave 89
c. Full enforcement without leave 90
d. Full enforcement with leave 90
e. Ambiguities 90
f. Set-off under CPR 93
g. Interim payments and CRU 94
Part II – EXCEPTIONS
5. FUNDAMENTAL DISHONESTY 97
a. Claimant Wins 99
b. Claimant Loses 99
c. Summers v Fairclough Homes Ltd  UKSC 26 105
d. Other cases 109
e. Alpha Rocks Solicitors v Alade  EWCA Civ 685 111
f. The Defence View 113
g. Procedure under QOCS re Fundamental Dishonesty 113
h. Advice re Fundamental Dishonesty 115
i. Multi-party cases 116
6. PRE – JACKSON FUNDING AGREEMENTS 117
a. Pre-Action Disclosure 118
b. Pre 1 April 2013 Conditional Fee Agreements,
ATE etc 118
c. Nil Success Fee 120
d. Appeals where recoverable additional liability in relation to original hearing 124
e. Joining new parties post 1 April 2013 125
f. Discontinuing and starting again 126
g. Assignment 126
h. CPR 52.9A 126
i. Retrospection 130
i. Retrospective retrospection 131
7. PART 36 135
a. The idea 135
b. The reality 135
c. Exercise 138
d. Case Study 140
8. DISCONTINUANCE, STRIKE-OUT and SUMMARY
a. Strike-Out and Summary Judgment 143
b. Strike out 143
i. No Reasonable Grounds 143
c. No Reasonable grounds 145
i. Oh What Tangled Webs we Weave 145
d. An Abuse of Process 146
i. Delay 146
e. Obstructing Just Disposal 146
i. Failure to attend trial 146
ii. Failure to file Pre-Trial Checklist 147
f. Discontinuance 148
i. Discontinuance- Not as simple as you may think 149
ii. Jumping the gun 151
iii. Court’s discretion to set aside Notice of Discontinuance 152
iv. Discontinuance- CPR 38.6 154
v. Discontinuance and Fundamental Dishonesty 155
9. FINANCIAL BENEFIT OF ANOTHER 159
a. Claims on behalf of the estate of a deceased person 165
10. MISCELLANEOUS 169
a. Provisional Assessment 169
b. Fixed Recoverable Costs 169
c. Does QOCS Apply To A Claim By a Defendant Against a Third Party? 169
d. Is QOCS Legal, That Is Is It Intra Vires? 171
e. Does The Existence Of Defence Junior Counsel’s Pre-1 April 2013 Conditional Fee Agreement Mean That QOCS Did Not Apply To It? 171
PART III – STATUTES ETC
11. STATUTES ETC 174
a. Criminal Justice and Courts Act 2015 174
b. CPR 44.13 – 44.17 176
i. 44.13 176
ii. 44.14 176
iii. 44.15 177
iv. 44.16 177
v. 44.17 178
c. Practice Direction 44 179
PART IV – EXTENDING QUALIFIED ONE WAY COSTS SHIFTING
12. EXTENDING QUALIFIED ONE WAY COSTS SHIFTING 183
a. Scope 185
b. Procedure 186
c. Retrospection 187
d. Agreement 187
e. Statement of Assets 187
f. Severe financial hardship 187
g. Means 188
i. Modest means – full costs protection – nil net liability (Draft CPR 44.22) 188
ii. Mid group of some means – partial costs protection – capped liability (Draft CPR 44.23) 188
iii. Reasonable Amount 189
iv. Substantial means – no costs protection 190
h. Confidentiality (Draft CPR 44.26(3)) 190
i. Variation or loss of costs protection (Draft CPR 44.21, 44.24 and 44.25) 190
j. Retrospective Orders (Draft CPR 44.27) 191
k. Enforcement 191
l. Costs of Applications 192
m. Extending the scheme 192
n. The Draft Civil Procedure Rules 192
o. Further extension 197
PART V SET OFF
13. SET OFF 200
a. Case Law 202
b. Reid v Cupper 211
PART VI REFERENCES
14. REFERENCES 217
a. Statutes 217
b. Statutory Instruments 218
c. Civil Procedure Rules 219
d. Practice Directions 220
e. Case Law 220
f. Other 224
Adverse costs: The other side’s costs that is adverse to the person paying them.
Aiel: A writ which lies where a man’s grandfather being seised of lands and tenements in fee simple the day that he died, and a stranger abated or entered the same day and dispossessed the heir of his inheritance.
Assessment: Procedure whereby the court decides what costs should be awarded. Assessment can be a summary, provisional or detailed.
Basic Costs/Base Costs: The amount the client is contractually obliged to pay to his or her solicitor, a part of which is recovered from an unsuccessful opponent in the event of a win. These costs are also known as Solicitor and Own Client Costs. The element recovered is known as “inter-partes” costs, “between the party” costs.
Cap: An agreed maximum to be charged to the client. In personal injury work this is now normally by reference to damages. In relation to the success fee element this is a statutory maximum of 25% but in relation to all costs it is a matter of contract between solicitor and client.
Civil Procedure Rules: Set of rules, constantly updated, which govern all civil proceedings in England and Wales.
Conditional Fee Agreement (CFA): A creature of statute. A form of contingency fee that is subject to additional conditions laid down by Parliament. In return for agreeing to charge no fee, or a lower fee, in the event of losing, the lawyer is entitled to charge an additional fee over and above her or his normal fee, in the event of a win. The distinguishing feature of Conditional Fee Agreements, as compared with straight forward Contingency Fee Agreements, is that the lawyer’s success fee is calculated by reference to the ordinary fee, rather than just damages. However the imposition of a cap on that additional fee effectively transforms conditional fees into contingency fees.
Contingency fee: An arrangement whereby the lawyer’s fee is expressed as a percentage of damages and is thus governed by the amount recovered and not directly by the amount of work done. Common in the United States.
Cosinage: Fraud, deceit.
Novel disseisin: Recent dispossession. This was an action to recover lands of which the plaintiff had been disseised, or dispossessed. The action became very popular due to its speed. Rather than dealing with the issue of lawful possession, it simply asked whether a dispossession had taken place and if it had the property was restored to the plaintiff immediately with the question of true ownership being dealt with later. It was dealt with at the assize of novel disseisin, which was one of three petty assizes established by the assize of Clarendeon by Henry II in 1166 along with the assize of Northampton 1176 and these three petty assizes lasted until 1833. The other two were the assize of mort d’ancestor and the assize of darrein presentment.
Costs following the event: See cost-shifting
Cost-Shifting: Rule whereby the losing party in litigation pays the winning party’s costs, or more generally, a percentage of them. Also known as “loser pays” or “costs following the event” or “two-way rule” or “winner takes all”.
Darrein presentment: An action brought to enquire who was the last patron to present a benefice to a church then vacant of which the plaintiff complained that he had been unlawfully deprived by the defendant. The action was related to the aristocratic privilege of the right to appoint a parson to a particular parish.
Demandant: Old name for a claimant.
Indemnity costs: The full amount of the costs incurred by a party. Normally a party recovers costs against the other side on the standard basis, rather than the indemnity basis. Standard costs are subject to the concept of proportionality whereas indemnity costs are not. Standard costs are for all intents and purposes subject to guideline hourly rates followed by the court whereas indemnity costs are not . The award of indemnity costs has traditionally marked disapproval by the court of the paying party’s conduct. However, and confusingly, indemnity costs should now be awarded where a claimant matches or beats its own Part 36 offer and that does not involve any criticism of the defendant. Because of the traditional association of indemnity costs with misconduct judges seem reluctant to award claimants indemnity costs where they match or beat their own Part 36 offer.
Indemnity principle: Extremely complicated principle which expressed simply means that the losing party is only liable for legal costs which the winning party has agreed to pay their lawyers. This has traditionally been interpreted as making Conditional Fee Agreements or Contingency Fee Agreements unenforceable as the law does not distinguish between a win and a loss. Thus in the event of a loss the client had agreed to pay his or her lawyer nothing, so under the indemnity principle, even if the client wins and had agreed to pay his lawyers in the event of a win, he can recover nothing from the other side. This has always encouraged solicitors to increase fees to justify recovery from the other side.
Inter-partes costs: Costs recovered by a winning party from a losing party. Now correctly known as “between the party costs”.
Legal aid: A form of financial assistance by the state for those of moderate means. Now abolished in civil matters with very limited exceptions.
Loser pays: Rule whereby the losing party in litigation pays the winning party’s costs, or more generally a percentage of them. Also known as “costs-shifting”, “costs following the event” or “two-way rule” or “winner takes all”.
Mort d’ancestor: An action brought by a plaintiff who claimed that the defendant had entered upon a freehold property belonging to the plaintiff following the death of one of his relatives.
Multi-party actions: Defined as cases where there are 10 or more people bringing a claim.
No-way rule: Rule whereby the court generally makes no order for costs, that is each party pays their own costs, win or lose. In contingency fee cases this means the losing party has no liability for costs, either to his own lawyers or to the winner’s lawyers. This system is in operation in the United States.
Obiter: A statement in a Judgment not necessary to decide the result of that case. Consequently an obiter statement is not binding on other courts but is persuasive.
One-way rule: Rule whereby one party only is potentially liable for the other side’s costs and one party is immune. This is the basis of one-way costs shifting.
Part 36: Technically Civil Procedure Rule no 36, but always known as Part 36. A rule of extreme complexity. Putting it very simply indeed where a defendant makes a Part 36 offer, and such offers are subject to considerable formalities, and the claimant fails to get more at trial than the offer then the claimant has to pay all of the defendant’s costs from 21 days after the offer was made. This applies even in Qualified One-Way Costs Shifting cases and many commentators take the view that it wrecks QOCS. If a claimant matches or beats its own Part 36 offer at trial then the claimant gets indemnity costs, rather than standard costs, from 21 days after the offer was made and also a 10% increase in damages.
Plaintiff: Old name for a claimant.
Practice Direction: Guidance, which is not legally binding, in relation to the Civil Procedure Rules.
Qualified One-Way Costs Shifting: A system of one-way costs shifting, subject to qualifications.
SCCO: Senior Courts Costs Office. A specialist court consisting of specialist costs judges whose technical status is that of a District Judge. Nevertheless in view of their expertise their decisions carry more weight than those of other first instance judges.
Small claims: A more informal procedure in the County Court in which costs do not follow the event, that is that each party is liable for their own lawyer’s fees and cannot recover them from the other side. The general small claims limit is £10,000.00 but in personal injury cases it is currently £1,000.00 and on 25 November 2015 government announced that it would be increased to £5,000.00. This will probably be from April 2017.
Solicitor and Own Client Costs: See Basic/Base Costs.
Standard costs: See indemnity costs.
Success fee: The additional fee, over and above ordinary fees, charged by a successful lawyer in a conditional fee case to reflect the risk of getting no fee, or a lower fee, in the event of defeat. Also known as uplift.
Taxation: Same as assessment. Assessment was the original term, used at least as early as the 16th century and to which we have now returned.
Uplift: See success fee.
Chief Master Marsh sitting in the Chancery Division of the High Court was dealing with the case management of a matter where the claimant was bringing an action against its former Chief Executive Officer in relation to entitlement to shares and his conduct, as well as other matters, and the defendants brought actions against other parties seeking declaratory relief and financial remedies relating to the second defendant’s departure from her job.
The first Case Management Conference was not reached until a year after proceedings had been issued and at that Case Management Conference there were two major issues, that is whether the matter should be subject to costs budgeting and whether there should be a split trial.
The Master refused to order a split trial stating that:-
- there was unlikely to be any significant saving in time spent at trial;
- there was unlikely to be any significant costs saving compared with the likely increase in costs if both trials went ahead;
- there would be a major increase in stress on the witnesses in attending two trials;
- it was likely that a first trial would lead to a situation where the court needed additional evidence which would only be available in the second trial anyway.
Although the value of the action was now £13 million the claim form had limited it to £10 million and thus the starting point was that the matter was within the costs budgeting regime, £10 million being the maximum that the scheme automatically applies to at present.
The Master ordered that the matter remain within the costs budgeting scheme stating:-
- it was desirable that costs budgeting take place given the nature of the claim and the matter in which it was being conducted;
- combined costs of £4.14 million meant that issues of proportionality had to be considered in any event and that factor made costs budgeting desirable;
- it was not possible to conclude that the litigation could be conducted justly and with proportionality in the absence of costs management;
- although costs budgeting was taking place at a relatively late stage there were significant future costs to be incurred;
- the court should take into account the size in absolute terms of the costs and £4.14 million is an expensive piece of litigation;
- the potential inequality of arms between the parties, although here the Master found that there was no evidence of any such inequality of arms;
- the difference between the budgets, which here was £700,000.00
It should be noted that even in a case where costs budgeting does not apply, proportionality does apply, although obviously then it would only be dealt with at the end of the case as there would be no budgeting stage.
the defendant was ordered to pay all of the claimant’s costs where the claimant discontinued shortly before trial following disclosure by the defendant of documents which it should have disclosed during the portal process.
The matter was an Occupiers’ Liability slipping case. The defendant denied liability and stated that it had no documents to disclose.
Proceedings were issued. The defendant then disclosed documents showing that it had a reasonable cleaning and inspection system.
The claimant discontinued.
The claimant was awarded fixed costs up to the post-listing, pre-trial stage less the fixed recoverable costs sum applicable had the matter settled pre-issue.
The court described the defendant’s conduct as “entirely unacceptable” and was critical of the National Health Service Litigation Authority.
The Pre-Action Protocol for Personal Injury Claims provides that:-
“The Defendant should also enclose with the response, documents in their possession which are material to the issues between the parties, and which would be likely to be ordered to be disclosed by the court, either on an application for pre-action disclosure, or on disclosure during proceedings.”
CPR 44.2(1) provides:-
“(1) The court has a discretion as to –
- whether costs are payable by one party to another;
- the amount of those costs; and
- when they are to be paid.”
CPR 44.2(4) states:-
“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –
- the conduct of all the parties;”
CPR 44.2(5) says:-
“(5) The conduct of the parties includes –
- conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;
- whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
- the manner in which a party has pursued or defended its case or a particular allegation or issue; and
- whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
The court awarded costs on the basis of the stage costs of £3,790.00 without the added 20% of damages as no damages were recovered.
It then set-off the stage costs of £950.00 which the claimant would have incurred anyway, representing the point where the matter would have been stopped had the NHSLA disclosed its evidence when it should have done so.
Consequently the defendant was ordered to pay the claimant £2,840.00 plus VAT and disbursements.
Of course in a Conditional Fee Agreement case, as this was, a claimant would normally be prevented from recovering costs due to the indemnity principle. However that principle does not apply in fixed costs cases – see Nizami v Butt  EWHC 159 (QB).
The court also recognized the extra danger involved of defendants behaving badly in fixed costs cases:-
“15. The Defendant’s behaviour in the conduct of this litigation was entirely unacceptable. It’s exactly the type of conduct which Part 44.2 is designed to address. Under the modern costs provisions, of course, the costs sanctions become increasingly important. The Claimant’s solicitors are pursuing these matters, PI claims, and at the end of the claim are recovering costs which are fixed and which are not by any stretch of the imagination, generous. There is a danger of — I am not saying it has happened in this case — this is a pure inadequacy of approach by the Litigation Authority and the Trust, but there is a danger that defendants and their representatives will cause difficulties in the course of litigation, so as to run up the work which claimant’s solicitors are having to do in the knowledge that those solicitors cannot recover costs reflecting that work. And of course, it always has to be borne in mind the provisions of CPR 1.3, that the parties to litigation have an obligation to assist the Court to further the overriding objective. The overriding objective firstly being to try and avoid costs and the issue of proceedings if at all possible, which is the whole purpose of the pre-action protocol, of course and secondly, when such claims are brought that they be dealt with in an efficient manner, in a proper manner so as to avoid excessive costs, involving public resources, delay and so on.”
The court rejected any suggestion that CPR 44.2 did not apply to fixed costs cases:-
“18. I am satisfied that the provisions of Rule 44.2 can be applied. It would be a nonsensical situation if the rules which are provided by Rule 44.2 to give the Court the power to impose sanctions to penalise those who abuse the system, and clearly there has been abuse here by the Trust and possibly by the Litigation Authority initially representing them. I am certainly not suggesting that Weightmans have been dealing with it improperly, they are obviously having to deal with what information they are supplied. But it would be a nonsensical situation if the rules, in an appropriate case where the fixed costs regime did apply, precluded the Court from imposing the sanctions provided under Rule 44.2 and 44.2, of course, gives the Court an unqualified discretion. I do not accept that I am bound by the Part 45 scales, but I clearly have to bear them in mind. It would be nonsensical if the Claimant’s solicitors could achieve a windfall and recover more costs than they would have done had the matter gone to trial or settled in favour of the Claimant at the stage that it was discontinued. That would be absolutely nonsensical.”
Although this is a first instance decision it is of considerable importance as this type of scenario is not uncommon. The whole issue will become of much greater importance as and when fixed costs spread to much higher value claims and also to non-personal injury claims.
I am grateful to Emma Ireland of Scott Rees and Co both for bringing this matter to my attention and supplying me with the judgment and for pursuing the matter on behalf of the claimant in the first place.
the High Court held that the reference, to legal services in CPR 46.5(3)(b) (which sets out a litigant in person’s right to recover costs), does not allow recovery in respect of services provided by a lawyer qualified in a different jurisdiction.
Here the claimant, a litigant in person, instructed lawyers in a Jersey law firm (who were acting for him in related litigation in Jersey but were not practising as English solicitors) to assist in the English proceedings.
The court referred to Agassi v Robinson (HM Inspector of Taxes) (No 2)  EWCA Civ 1507 (a case decided under the forerunner of CPR 46.5(3)), where the applicant was assisted by specialist tax advisers.
There the court held that the costs of those advisers could not be recovered as disbursements, and also approved Tuckey LJ’s interpretation of “legal services” (in United Building and Plumbing Contractors v Kajla  EWCA Civ 628) as “those provided by or under the supervision of a legal representative”.
It was not just a question of the nature of the services, but also the identity of the provider.
In reaching his decision, the judge noted that:
- There was no material difference between the position of a lawyer qualified in a different jurisdiction and the specialist tax advisers considered in Agassi. Although the providers of the services, in each case, no doubt had valuable knowledge and expertise, they were not authorised to conduct litigation, and nor were they subject to the wasted costs jurisdiction of the court.
- In the English proceedings, the Jersey lawyers were in the position of lay advisers so (as with a McKenzie Friend) their fees would not ordinarily be recoverable from the opposing party.
- The use of lawyers qualified in a different jurisdiction to provide “legal services” in respect of English proceedings seemed far from the “unbundling of legal services” that Lord Woolf had in mind in his Access to Justice report.
District Judge Brett held that where a claim is properly brought in the fast track and the defendant then admits part of the claim, causing the amount still in dispute to bring the claim within the small claims track limit, the court may award fast track costs up to the date of entry of judgment on the admission.
Practice Direction 46.7.1(3) reads:-
“(3) Where a claim, issued for a sum in excess of the normal financial scope of the small claims track, is allocated to that track only because an admission of part of the claim by the defendant reduces the amount in dispute to a sum within the normal scope of that track; on entering judgment for the admitted part before allocation of the balance of the claim the court may allow costs in respect of the proceedings down to that date.”
The defendant argued that the claimant should only be allowed fast track costs up to the date of the admission and not the date of judgment.
That submission was rejected.
Here the claim was for just over £10,000.00 and included credit hire and vehicle damage. In the defence the defendant admitted £4,787.47, meaning that the balance in dispute would be allocated to the small claims track.
Thus a defendant who pays off or admits part of the sum claimed and thus reduces the balance to a small claim is still potentially liable for costs up to the date that judgment is entered.
How the courts exercise what is clearly a discretion under this Practice Direction may become of considerable significance as and when the personal injury small claims limit is raised from £1,000.00 to £5,000.00.
the Chancery Division of the High Court stated that figures for additional liabilities in cases where they are still recoverable should not appear in cost budgets.
Additional liabilities remain recoverable in defamation and privacy proceedings, mesothelioma proceedings and, to a limited extent, in clinical negligence proceedings.
Here the defendant had submitted that the court should consider the extent of additional liabilities when looking at proportionality during the costs management exercise.
However the judge agreed with the claimants that Precedent H, the form for the costs budget, stated clearly that it related only to base costs and the summary page contained wording stating that the budget excluded success fees and After-the-Event insurance premiums.
This form is compulsory by virtue of Practice Direction 3E and therefore the form itself had the force of a Practice Direction.
Furthermore the claimants were under no obligation to disclose the terms of the Conditional Fee Agreement or After-the-Event insurance before the end of the trial and that itself meant that it could not be proper for that information to be given during the costs budgeting stage.
It has always been the case that details of the level of success fee do not have to be disclosed until the end of the case as that would indicate the solicitor’s assessment of risk and would prejudice the party being represented under that Conditional Fee Agreement.
This did mean that there might be some inconsistency between the budgeting process and the assessment process.
In BNM v MGN Ltd  EWHC B13 (Costs)
the Senior Costs Judge had said that the court need not consider the amount of any additional liability separately from the base costs when looking at the whole test of proportionality, that is the new test post-1 April 2013.
Here the judge commented that on actual assessment the judge would know what the additional liabilities were and would be dealing with actual figures and the inconsistency was an inevitable effect of the different things required of the parties at different stages of litigation.
There is an inherent logical problem here. Suppose a court sets a budget taking into account proportionality and limits the total to say £100,000.00 base costs and disbursements as the maximum proportionate figure.
If that is then applied on assessment it is obvious that nothing further can be allowed for the success fee or ATE premium as any additional costs would tip the bill over into disproportionality.
To not allow any such additional liabilities defeats the will of Parliament in retaining recoverability in these limited fields and indeed in relation to mesothelioma the Administrative Court quashed Government attempts to remove recoverability.
Under the pre-1 April 2013 law proportionality did not come into play in relation to additional liabilities.
In my view the new Civil Procedure Rules, insofar as they allow proportionality to be considered in relation to additional liabilities, are ultra vires, or to put it more bluntly, illegal.
Solicitor and own client bills are very heavily regulated in a way unparalleled in any other profession, business or trade.
One little known provision is that in County Court matters a solicitor cannot charge her or his own client anything beyond that recovered from the other side in the event of a win, or, in the event of a defeat, a sum which could have been allowed on a party and party basis, unless there is a written agreement to the contrary.
Section 74(3) of the Solicitors Act 1974 reads:-
“(3) The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in a county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”
The rules of court do provide otherwise, but only to a limited extent. CPR 46.9(2) and (3) read:-
“(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
(3) Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –
- to have been reasonably incurred if they were incurred with the express or implied approval of the client;
- to be reasonable in amount if their amount was expressly or impliedly approved by the client;
- to have been unreasonably incurred if –
- they are of an unusual nature or amount; and
- the solicitor did not tell the client that as a result the costs might not be recovered from the other party.”
Thus unless there is a written agreement to the contrary a solicitor in a County Court matter cannot charge the client any more than could have been recovered from the other side and must tell the client that the costs may not be recovered.
The requirement to tell the client that any particular item of costs may not be recovered only applies if the costs are of an unusual nature or amount, but applies to all matters, not just County Court matters.
The written agreement provision applies to County Court matters only.
The requirement to tell the client applies to any individual item, not just the overall bill. Thus if, say, £10,000.00 could have been recovered and the total bill is £9,000.00, the solicitor still cannot charge for, say, an unrecovered medical report fee unless these provisions are satisfied.
This can become a circular argument which applies to between the parties’ assessments.
Thus a phase in the costs budget is exceeded. Arguably the excess is something of “an unusual nature or amount” relieving the client from any obligation to pay it unless told in advance.
Under the Indemnity Principle if there is no liability on the client to pay, then there can be no recoverability from the other side.
Note that the mere fact that the costs might not be recovered from the other party does not bring the requirement to inform the client in to play. The costs need to be of an unusual nature or amount as well, as the link between CPR 46.9(3)(c) (i) and (ii) is and, not or.
Conditional Fee Agreements
There is an obvious issue here. Success fees and After-the-Event insurance premiums, with very limited exceptions, are no longer recoverable from the other side, so in County Court proceedings cannot be charged to the client without written agreement.
As a Conditional Fee Agreement must be in writing that should not be a problem but it is most important that details of any After-the-Event insurance premium, as well as the success fee, are dealt with in writing and that the client’s written agreement is obtained to charging such premium.
If any costs are “of an unusual nature or amount” then additionally the solicitor must tell the client that as a result the costs might not be recovered from the other side.
As a success fee and ATE generally cannot be recovered from the other party it is best to always include the appropriate wording, whether or not the expenditure may be considered of an unusual nature or amount.
I suggest the following wording for all retainers, whether or not they are County Court or otherwise and whether or not they are Conditional Fee Agreements or otherwise:-
Section 74 Solicitors Act 1974 agreement
“This agreement expressly permits the solicitors to charge an amount of costs greater than that which you will recover or could have recovered from the other party to the proceedings and expressly permits payment of such sum.
This part of this agreement is made under section 74(3) of the Solicitors Act 1974 and Civil Procedure Rules 46.9 (2) and (3).
In so far as any costs or disbursements are of an unusual nature or amount these costs might not be recovered from the other party.”
the Senior Courts Costs Office was considering a Part 8 application by the claimants seeking an order under Section 68 of the Solicitors Act 1974 that the defendant firm of solicitors deliver a final statute bill or bills in relation to proceedings brought against the claimants by Ottercroft Ltd.
Section 68 reads:-
“(1) The jurisdiction of the High Court to make orders for the delivery by a solicitor of a bill of costs, and for the delivery up of, or otherwise in relation to, any documents in his possession, custody or power, is hereby declared to extend to cases in which no business has been done by him in the High Court.”
The defendant solicitors gave a costs estimate of “between £15,000 and £25,000 plus VAT and disbursements” and stated that an application by their opponent for an interim injunction might add “costs of between £5,000.00 and £10,000.00 plus VAT”.
Between September 2011 and July 2014, 22 invoices totalling £76,153.14 were delivered. All except the last were termed Interim Accounts; the last was described as a Final Account.
Only the last three bills contained any narrative explaining the work done.
For reasons relating to late service any application for a Solicitors Act assessment was out of time, and therefore the claimants had to show that the invoices delivered were not “bills” for the purposes of the Act in order to get fresh bills which they would then be in time to have assessed.
A solicitor’s retainer is an entire contract and solicitors are not entitled to be paid other than for disbursements until the case is finished unless there is a natural break in protracted litigation or the parties have agreed that the solicitor may submit interim and statute bills.
Neither occurred here. The solicitors contended that the invoices were chapters culminating in a final bill as in the Court of Appeal decision in Chamberlain v Boodle & King  1 WLR 1443 and Bari v Rosen  5 Costs LR 851.
The court here rejected that submission as the bills did not contain sufficient information about the work done so as to comply with the Act.
However in Ralph Hume Garry v Gwillim  1WLR 510
the Court of Appeal approved the principle set out in
Cook v Gillard 1 E & B 26 , 36–37
that a person cannot object to a bill on the ground of lack of information if it appears that that person is already in possession of that information, even if it does not appear on the bill.
In Cook the court said:-
“64. Thus I would accept the proper principle to be that there must be something in the written bill to indicate the ambit of the work but that inadequacies of description of the work done may be redressed by accompanying documents (as in Eversheds v Osman where it was doubtful whether the bill on the face of it would have been sufficient) or by other information already in the possession of the client. That, it seems to me, would serve the purpose of the Act to give the client the knowledge he reasonably needs in order to decide whether to insist on taxation. If the solicitor satisfies that then the bill is one bone fide complying with the Act.
- This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) of the Solicitors Act 1974 to establish that a bill for a gross sum in contentious business will not be a bill “bona fide complying with this Act” is satisfied if the client shows: (i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and (ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed. The sufficiency of the narrative and the sufficiency of his knowledge will vary from case to case, and the more he knows, the less the bill may need to spell it out for him. The interests of justice require that the balance be struck between protection of the client’s right to seek taxation and of the solicitor’s right to recover not being defeated by opportunistic resort to technicality.”
Here the court held that the claimants did not have sufficient information at the time that they received the final invoice.
It is irrelevant that the claimants subsequently gained that knowledge when they received the files from the solicitors and the court said that that development cannot “convert the final invoice into something that it was not as at the date that it was received by the Claimants.”
Accordingly the court found that the defendants had not yet rendered a final bill to the claimants and therefore the application succeeded to the extent that the claimants were entitled to an order that the defendants now render a final bill.
May a judge re-allocate a case to the small claims track after having given judgment?
That is precisely what happened in Newport County Court recently.
There were two claimants in a fixed costs personal injury case and they won at trial.
The trial judge accepted that each was entitled to fixed recoverable costs, that is in principle there would be two sets of preparation costs and two sets of advocacy fees, even though only one advocate appeared at trial.
I deal with this general issue in my blog – Advocacy Fees in Fixed Costs Cases.
However one of the claimants was awarded just £200.00.
The judge, apparently accepting that there would have to be two sets of fees if the matter remained in the fixed costs regime, reallocated the matter to the small claims track after having given judgment.
He then awarded fixed costs of £80.00 being the appropriate…
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