Kerry Underwood

Archive for March 2016

QUALIFIED ONE-WAY COSTS SHIFTING: DISCONTINUANCE

with one comment


This subject is dealt with in my new book on the subject which is available Amazon.

 

The book is fully updated on my blog: Kerry on QOCS: Book Update and Links and this blog has already been incorporated there.

 

I am also doing a series of one day courses on Qualified One-Way Costs Shifting – Click here. 

 

In Rouse v Aviva Insurance Ltd, Unreported, 15 January 2016, Bradford County Court

 

His Honour Judge Gosnell found that where a claimant discontinues and the defendant seeks a finding of fundamental dishonesty under CPR 44.16 so as to dis-apply Qualified One-Way Costs Shifting, the relevant procedure is in the discretion of the court.

 

The claimant Rouse sued for personal injury arising out of an alleged car accident and the defendant insurance company was suspicious and investigated fully and a few days before trial Rouse discontinued and the insurance company sought a finding of fundamental dishonesty under CPR 44.16.

 

The District Judge had held that the claimant did not need to explain the discontinuance and nor was the court obliged to draw an adverse conclusion from the failure to explain discontinuance and that any CPR 44.16 issue had to be determined on the papers irrespective of the timing of discontinuance and in spite of the guidance given by HH Judge Maloney in Gosling v Hailo and Another, Unreported, 29 April 2014, Cambridge County Court.

 

Aviva Insurance appealed. On appeal the judge held that under Practice Direction 44.12.4(c) the court did indeed have a discretion to direct a paper determination or limited enquiry or full trial as per the guidance in Gosling.

 

The judge also said:-

 

  • Where there was a prima facie case of dishonesty on the paperwork, it was only fair to the claimant and to the court to allow the claimant to explain why he had made a claim and then discontinued it. Where the claimant failed to give evidence or failed to explain the discontinuance, then the defendant could invite the court to draw an adverse influence from that conduct.

 

  • A hearing may be proportionate where, for example, the case was virtually ready for trial and evidence had been exchanged. If discontinuance occurred just after service of the defence then that weighed strongly against incurring substantial further costs.

 

On the facts of this matter, where discontinuance took place just before trial, it was right and fair to have either a full trial or a limited enquiry giving the claimant and his witness the opportunity to give evidence.

Written by kerryunderwood

March 16, 2016 at 8:05 am

Posted in Uncategorized

DISABILITY DISCRIMINATION & CHILDREN WITH SPECIAL NEEDS: AN INTERESTING CASE

with 5 comments


In a recent First Tier Tribunal case a child was successful in a claim for disability discrimination under the Equality Act 2010 where that child had assaulted a teacher in a BESD (Behavioural, Emotional and Social Difficulties) School even though normally a tendency to commit violence against another invalidates such a claim.

 

Here the young person was able to convince the First Tier Tribunal that the action of the teacher had caused the young person to react in this way and therefore the action was as a direct result of his disability.

 

The First Tier Tribunal held that the Responsible Body was unaware of, and had failed to understand, its obligations under the Equality Act 2010.

 

Additionally there had been a failure by the Responsible Body in relation to its own Behaviour Management Policy and also failure to provide reasonable adjustments in respect of the young person’s disability.

 

Here the young person had a diagnosis of Pathological Demand Avoidance (PDA) and this together with a diagnosis of Attention Deficit Hyperactivity Disorder (ADHD) and Autism Spectrum Disorder (ASD) meant that he was disabled within the meaning of the Equality Act 2010.

 

The school, as the Responsible Body, was aware of his disability before his placement with them and he was placed in the school as he was unable to access education in a standard educational placement due to his severe behavioural difficulties.

 

The First Tier Tribunal held that in spite of this information the Responsible Body did not have sufficient understanding of his particular needs prior to him being placed in the school.
The teacher asked the young person to remove his coat and to take his books from his bag and he refused and was asked to leave the room and again refused.
These refusals were consistent with a young person suffering from Pathological Demand Avoidance but in spite of this the teacher and teaching assistant persisted in making repeated requests.

 

Responding to this the pupil pulled his hood over his head and put his head on the table in front of him and the teacher and teaching assistant attempted to remove him forcibly from the classroom.

 

The pupil reacted by winding his legs around the legs of the table and he was physically manhandled to the extent that a leg of the table came away from the table and the pupil was carried out of the room and he was kicking and screaming and was then restrained for 20 minutes and all parties sustained injuries.

 

The First Tier Tribunal held that it was a “bad case of disability discrimination” and they would have awarded damages if they had the power to do so as the courts did.

 

The Responsible Body was ordered to make a full written apology to the young person expressing their regret and providing an explanation of the steps would now take to ensure that this type of discrimination never occurred again.

 

The First Tier Tribunal also ordered the Responsible Body to ensure that all Senior Managers, staff and Governors of the school underwent training in relation to the Equality Act’s implications for school management. They were also ordered to review the school’s policies to ensure that they were compatible with their responsibilities under the Equality Act 2010 and this review was to be conducted with external assistance from appropriate educational consultants.

 

The First Tier Tribunal ordered a copy of the decision to be sent to the Chief Officer for Children and Education in the County concerned as well as to the Equality and Human Rights Commission and OFSTED.

 

Comment

 

This is a decision of a First Instance Court and that means that it is not binding on other courts and nor on the First Tier Tribunal itself.

 

Nevertheless it is an important decision as it shows that a tendency to commit physical violence against another person does not act as a complete bar to bringing an Equality Act claim arising out of an incident where the person claiming has committed such physical violence.

 

Each case will depend upon its facts but the type of circumstances which occurred in this case are not that unusual.

 

It shows the importance of BESD schools being fully aware of the law and of their responsibilities as well as being fully aware of the young person’s particular needs.

 

Although this case involved a BESD school, exactly the same principles apply to a child with special education needs and thus applies to all Special Education Needs and Disabilities cases and indeed to any child or adult who is disabled within the meaning of the Equality Act 2010 where someone else knows or ought to know of the disability and the issues involved.

 

Thus it applies to all mainstream education as well, and potentially to service provision outside the educational field.

Written by kerryunderwood

March 15, 2016 at 7:58 am

Posted in Uncategorized

PART 36: DOES A CLAIMANT GET INDEMNITY COSTS ON LATE ACCEPTANCE?

with 49 comments


This blog is updated to 8 November 2016.

 

This subject is dealt with in my new book on Fixed Costs etc. To order one click here .

 

In Sutherland v Khan, Kingston-Upon-Hull County Court, Case number A81YM424

 

District Judge Besford, Regional Costs Judge, held that a late accepting defendant of a claimant’s Part 36 offer was liable to pay indemnity costs from the date of expiry of the time for accepting the offer.

 I deal with Sutherland v Khan in detail below, but it is clear from reports from lawyers contacting me that first instance courts are divided in their attitude to this subject.

In Hart v Pizza Hut, 1 November, Chester County Court the court adopted the reasoning of DJ Besford in the Sutherland case and distinguished the case of Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd, which I deal with below.

In Hart v Pizza Hut the judge considered it relevant that the claimant had been put to work in the 49 days between expiry of the time for accepting the Part 36 offer and ultimate acceptance by the defendant.

The District Judge considered that the overriding objective was in play and that it was obviously inequitable for a late accepting claimant to have to pay Part 36 consequences but a late accepting defendant to not have to pay them.

That would mean that the parties were not on an equal footing as required by the overriding objective when it interprets any rule – see CPR 1.2(b). Consequently indemnity costs for the relevant period were awarded.

Permission for leave to appeal has been granted. 

However the defendant has chosen not to appeal, in spite of permission having been given.

I am grateful to David Pilling of counsel for bringing this case to my attention.

However in, for example, Whiting v Carillionamey (Housing Prime) Ltd – claim number B80YM364, Winchester County Court, the judge overturned the decision of a Deputy District Judge who had awarded indemnity costs following late acceptance of claimant’s Part 36 offer.

Guidance from the Court of Appeal would be welcome.

This was a fixed costs case. Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016) establishes that a successful Part 36 claimant, that is one who matches or beats her or his own offer, is entitled to indemnity costs on an open basis, that is that those indemnity costs are not limited to a sum equal to fixed costs.

 

I deal with the Broadhurst case in my blog post – Claimant’s Part 36 Offer Overrides Fixed Costs.

 

The issue remained, and as this is a first instance decision, albeit by a highly respected Regional Costs Judge, remains, whether in the absence of judgment being entered a late accepting defendant is liable to pay indemnity costs in the way that a late accepting claimant has to pay costs from the date of expiry of time for acceptance.

 

Here the judge said, correctly:-

 

“Unfortunately, part 36, whilst dealing with situations where the claimant accepts out of time a defendant’s offer, would appear to be silent as to a defendant accepting a claimant’s offers out of time or prior to trial. The nearest analogy is part 36.17, but it is accepted that part 36.17 can only apply where a judgment has been entered. That situation is not applicable here.”

 

The judge declined to follow the High Court decision in Fitzpatrick Contractors Ltd v Tyco Fire v Integrated Solutions (UK) Ltd [2010] 2 Costs LR 115 on the ground that it is “perhaps a statement of the law as it was in 2009, but not necessarily the way the law in respect of Part 36 is being interpreted in 2016.”

 

In Fitzpatrick the court was referred to Petrotrade Inc v Texaco Ltd [2000] All ER (D) 724.

 

In the key section of the judgment DJ Besford said:-

 

“18. In addition, in the course of submissions I was referred to Petrotrade Inc v Texaco Ltd [2000] All ER (D) 724, which is mentioned by Coulson J in Fitzpatrick. Coulson J dealt with these cases at paragraph 22: “I accept Mr Thomas’s submissions that the other cases relied upon by Fitzpatrick, namely Petrotrade, Hook and Read, do not offer very much assistance to the central question here, which is whether a rebuttable presumption in favour of the indemnity costs, taken from a rule dealing with a situation following a trial, where the offer has not been accepted, should be inferred into a rule dealing with the position prior to trial, where the offer has been accepted. I do not accept that the present situation is analogous to those cases. In all three of them, the courts were endeavouring to apply the words of the old CPR 36.21, in a commonsense way, to achieve a just and sensible result and to prevent injustice; they all arose after a trial on the merits, (either on a summary or a full basis). In contrast, I conclude that the replacement of old CPR 36.21 – the new CPR 36.14 – does not apply to the present case, because there has been a settlement, and it has occurred before the trial. The claimant has therefore been spared the cost, disruption and stress of the trial.”

 

“19. The interpretation of these cases put forward by Coulson J is not, with respect how I read the more recent cases coming forth from higher courts. My understanding is, as I have alluded to, that there has been a tightening up as to the ‘carrot and stick effect’ of part 36 offers. To my mind, notwithstanding the comments of Coulson J, if there was no incentive or penalty there would be little point in a defendant accepting offers early doors, as opposed to waiting immediately prior to trial. It also seems to me unsatisfactory that there should be penalties flowing if you do not beat an offer at trial, whereas if you settle before trial there are none. This position does not sit comfortably with the overriding objective of saving expense. In my view, I think that Fitzpatrick is perhaps a statement of the law as it was in 2009, but not necessarily the way the law in respect of part 36 is being interpreted in 2016.”

 

“20. In conclusion, I do not find that the court has to find that the defendant has, in some way been guilty of inappropriate behaviour or conduct capable of censor before I can consider making an order for costs on an indemnity basis.”

 

The judge then set out the relevant provisions of Part 36 and said:-

 

“27. It follows that for the court to deny the consequences that flow from accepting a part 36 out of time the court has to make pretty exceptional findings and there has to be some very good reason as to why it is unjust not to make the usual order. The very fact that the claimant obtains a ‘windfall’, most certainly does not constitute unjustness, under part 36.17.”

 

Comment

 

Unsurprisingly I always agree with decisions that follow my blog posts. Having said that this is a sensible, pragmatic and bold decision giving effect to the will of Parliament.

 

It is a shame that the Rules Committee cannot rise above nursery class English.

 

I am very grateful to John McQuater for his help in relation to this piece and for bringing it to my attention and, most of all, for being the solicitor who pushed this issue and won. 

 

I am satisfied beyond doubt that a claimant who makes a Part 36 offer which is then accepted by the defendant after the expiry of 21 days is able to get indemnity costs from the defendant for the time after the date when the offer should have been accepted. It is not automatic, but of course will become so if a superior court gives appropriate guidance.

 

CPR 36.13(4) appears to put the matter beyond doubt:-

“(4) Where—

(a) a Part 36 offer which was made less than 21 days before the start of a trial is accepted; or

(b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; or

(c) subject to paragraph (2), a Part 36 offer which does not relate to the whole of the claim is accepted at any time,

the liability for costs must be determined by the court unless the parties have agreed the costs.”

 

This is crystal clear. Unless the parties have agreed the costs where there has been late acceptance then the court must determine those costs. Thus in the three circumstances set out in (a) (b) and (c) the automatic Part 36 consequences do not follow.

 

36.13(4)(a) is self-explanatory, as is (b). The scenario in (c) would cover, for example, an acceptance of an offer of liability, but which does not deal with quantum.

 

It will be noted that CPR 36.13(4)(c) is subject to paragraph (2) but (2) relates exclusively to defendant’s Part 36 offers and thus has no application in relation to a claimant’s Part 36 offer.

 

CPR 36.13(5) then goes on to consider what the court should do when paragraph (4) (b) applies, that is the situation that we are talking about where a Part 36 offer relating to the whole of the claim is accepted late.

 

CPR 36.13(5) reads:-

“(5) Where paragraph (4)(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—

(a) the claimant be awarded costs up to the date on which the relevant period expired; and

(b) the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.”

 

The wording is significant. It would have been very easy for (b) to read:-

 

“the claimant do pay the defendant’s costs for the period from date of expiry of the relevant period to the date of acceptance.”

 

It very deliberately does not so say. Clearly whether it is a claimant’s offer that is accepted or a defendant’s offer that is accepted the claimant gets costs up to the date on which the relevant period expired and CPR 36.13(5)(a) deals with that.

 

The wording in (b) very clearly and obviously leaves it open to cover either a situation in which the defendant has made the offer or the claimant has made the offer, hence the use of “offeree” and “offeror” rather than claimant and defendant. In a given case either, or indeed both, the claimant and defendant may be the offeror or the offeree.

 

Thus with a claimant’s Part 36 offer the offeree – that is the defendant – pays the offeror – that is the claimant – costs for the period from the date of expiry of the relevant period to the date of acceptance.

 

True it is that it does not there say that those costs should be on the indemnity basis, but neither does it say that they shall be on the standard basis.

 

CPR 36.13(6) states:-

 

“(6) In considering whether it would be unjust to make the orders specified in paragraph (5), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5).”

 

CPR 36.17(5) reads:-

 

“(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—

(a) the terms of any Part 36 offer;

(b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

(c) the information available to the parties at the time when the Part 36 offer was made;

(d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

(e) whether the offer was a genuine attempt to settle the proceedings.”

 

The reference back there to paragraph (3) and (4) is to those paragraphs within CPR 36.17 and not CPR 36.13.

 

Paragraph (3) relates only to a defendant’s Part 36 offer.

 

Paragraph (4) relates only to a claimant’s offer and reads:-

 

“(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs…”

 

There is then the table setting out additional damages which I will not go into here.

 

Thus the structure of what is admittedly a very complicated rule is that CPR 36.13(5)(b) states that the court must award the claimant costs from expiry to acceptance unless it will be unjust to do so and the factors that the court must take into account are all the circumstances of the case including, but not limited, to the matters listed in CPR 36.17(5) and as we have seen that rule gives an example of the circumstances that must be taken into account, but by specific reference, in the context of a claimant, to the claimant matching or beating its own offer and getting, amongst other things, indemnity costs from the period of expiry of the Part 36 offer.

 

It is true that the opening words of CPR 36.17 are:-

 

“(1) Subject to rule 36.21, this rule applies where upon judgment being entered…”

 

And yet we know the rule has a wider application because reference is made to its provisions applying to CPR 36.13. Furthermore 36.17(3) deals with the defendant’s entitlement to costs on late acceptance.

 

It will be noted that CPR 36.17 is subject to CPR 36.21 but in fact what CPR 36.21 says is that CPR 36.17 applies with certain modifications which are set out in that rule. Essentially they relate to claims that no longer continue under the Road Traffic Accident Portal or Employer’s Liability/Public Liability Portal. It deals only with the circumstances of a defendant’s Part 36 offer not a claimant’s Part 36 offer.

 

I accept that the drafting of CPR Part 36 would test Einstein, but it is clear that unless it is unjust to do so a defendant, on late acceptance of a claimant’s Part 36 offer, must pay the claimant’s costs to the date of acceptance. Nowhere are those costs restricted to standard costs and we now know, following Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016) that the post-expiry costs even in a fixed costs case, are on the indemnity basis.

 

Thus there is no doubt at all that on judgment being entered the claimant gets indemnity costs from the date of expiry of the Part 36 offer until the judgment is entered, whether or not the matter is a fixed costs case or an open costs case. The Broadhurst ruling is a particular importance given the proposal to increase fixed costs to all claims of all kinds whether damages are £250,000.00 or less.

 

I refer there to judgment being entered. That is the standard defence line, that a claimant can only get the bonus if judgment is entered.

 

I disagree. The somewhat tortuous wording that I have set out above shows that it is mandatory for a court to consider and determine costs on late acceptance of a claimant’s Part 36 offer unless the parties have agreed costs.

 

Thus the scenario is that there is late acceptance and the claimant seeks indemnity costs for the period from the expiry to acceptance and the defendant refuses. Very clearly the claimant has the right to go to court and have those costs determined. It is a somewhat circular argument but of course the very fact that the claimant goes to court will mean that judgment will be entered and therefore, even on the standard defence line, that triggers the condition that means that indemnity costs should be ordered!

 

In my blog Claimant’s Part 36 Offer Overrides Fixed Costs – dealing with the Broadhurst case I made the following statement:-

 

“Firstly it is a recognition that a claimant gets indemnity costs even if the matter does not go to trial. Otherwise there would be no need to refer to “the last staging point” as it would only apply if the matter had gone to trial and no consideration of the different stages within the preparation for trial matrix would be necessary.”

 

I appreciate that that is also a somewhat circular argument in that it was predicated on the basis that the court was allowing both fixed costs and indemnity costs. That remains my view. However if I am wrong on that then there could be another explanation for the “last staging point” which is that even if the matter has gone to trial one needs to look at the last point before the expiry of the relevant period so as to determine the level of fixed costs and then run indemnity costs on.

 

In Jockey Club Racecourse Ltd v Willmott Dixon Construction Ltd [2016] EWHC 167 (TCC)

 

the Technology and Construction Court of the High Court held that where a claimant had made an offer to settle the matter on the basis of 95% liability and then succeeded on a full liability basis by way of settlement the claimant was entitled to indemnity costs in the usual way.

 

This is on all-fours with a defendant’s late acceptance of a claimant’s quantum offer. The fact that it was on liability is irrelevant – the issue here was whether a 95%/5% offer in cases where the court would have made an all or nothing order on trial was a genuine offer to settle and was genuinely offering some concession.

 

I deal with this case in my blog Part 36 – Important Recent Cases. This point was actually decided by the court at a Case Management Conference as the quantum hearing still had to proceed. Now it may be that judgment may have been entered at that hearing on the liability point but the decision on liability was not made at that hearing – it had been conceded and therefore this was a late acceptance case, albeit that there then was a completely separate hearing – the CMC. Two points arise. Firstly it would be absurd that the mere chance of there being another type of hearing – here a CMC – would give a claimant entitlement to indemnity costs but in the absence of that hearing there will be no such entitlement. It would also mean that defendants would be better off, where quantum remains in dispute, to never to submit to judgment when the claimant has made a Part 36 offer as submitting to judgment would trigger indemnity costs but doing a deal outside court would not.

 

In any event as I have pointed out above by the claimant refusing to agree costs unless paid on the indemnity basis the matter must go to court whereupon judgment can be entered. Once such a matter is at court the Jockey Club rule must apply and that is a binding decision of the High Court.

 

In the Jockey Club case the matter appears to have been dealt with by a consent order:

 

“A pre-trial review was fixed for 17 December 2015, by which the Defendant had conceded liability and the preliminary issues were resolved by consent in the Claimant’s favour.” (Paragraph 11).

 

“Accordingly the only issue that is left is the question of the basis on which the Claimant should be awarded its costs of the litigation in relation to liability. Miss Laney [counsel for the paying party] has, quite rightly in the circumstances, not taken a point as to whether or not the order by which the preliminary issues were resolved is a judgment for the purposes of Part 36. I therefore proceed on the basis that it is.” (Paragraph 22).

 

The decision in Jolly v Harsco Infrastructure Services Ltd [2012] EWHC 3086 (QB)

 

has been misunderstood and misrepresented by those arguing that a claimant cannot get indemnity costs in such circumstances.

 

What happened in that case was that the claimant made a 99% liability offer which the defendant accepted late. The claimant prepared a draft order which stated:-

 

“Judgment on the issue of liability be entered 99 percent in favour of the claimant.”

 

The defendant refused to sign it and said:-

 

“CPR 36.14 doesn’t bite – your client has not received judgment so the provisions you have put in do not apply.”

 

It is true that the judge refused to enter judgment, saying that he had no power so to do but the judge stayed the issue of liability and ordered that the question of the costs relating to that issue, including the basis of the assessment of those costs, should be postponed to be dealt with under CPR 36.10(4) and (5) or under the general discretion under CPR 44.3.

 

CPR 36.10(5) has now been renumbered CPR 36.13(5) and CPR 36.10(4) has been reworded and has become CPR 36.13(4) and I deal with these provisions above.

 

The High Court most certainly did not state that a claimant in such circumstances could not get indemnity costs and the final paragraph is worth setting out in full:-

 

“14. In principle CPR Part 36.10(5) would appear to apply in this case but the claimant is entitled to argue for a different order and the court may agree. CPR 36.11 provides that a stay operates. As we have seen under CPR 36.11(5) (b) the stay does not affect the power of the court to order costs. Nothing in the self-contained code which is Part 36 provides for judgment to be entered in this situation. Mr Steinberg could point to no specific power in the CPR. To my mind the change in terminology from the 1998 version of Part 36 does not fill the gap. What has happened in this case is that the issue of liability has been compromised by the late acceptance of a Part 36 offer. The defendant has not consented to judgment being entered. There is no power for me to enter judgment under Part 36. In my judgment the appropriate order should follow CPR 36.10 and 36.11, and CPR 36.14 is not applicable. The issue of liability should be stayed upon the terms of the claimant’s offer and the question of the costs relating to that issue (including the basis of the assessment of those costs) should be postponed to be dealt with under CPR 36.10(4) and (5) or under the general discretion under CPR 44.3.”

 

A Different View

 

It is true that in Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions (UK) Ltd [2009] EWHC 274 (TCC)

 

the High Court took a very different view and rejected the notion that a late accepting defendant would ever have to pay indemnity costs.

 

I accept that this is a decision of the High Court but it is a very poorly reasoned decision and has been disagreed with by many other High Court judges since, as is obvious from the above cases. The public policy statements by the judge have effectively been overturned by Parliament. In my view it cannot any longer be regarded as good law.

 

In particular the judge proceeded on the basis that if a defendant was liable for indemnity costs on late acceptance then that would deter them from accepting and they would go to trial instead:-

 

“It would not be appropriate to construe the CPR in such a way, because that would, in my view, actively discourage late settlements and instead give rise to another reason for the offeree to push on to a trial.” (Paragraph 25).

 

However the judge completely fails to explain how exactly the same consideration does not apply in relation to the rule that a late accepting claimant, who of course has won the case, has to pay the defendant’s costs from the date of expiry to acceptance. Exactly the same logic applies – if the judge is right then claimants would be deterred from accepting late and will “push on to a trial”.

 

It is settled law that a matter that does go to trial and where a claimant matches or beats its offer does result in indemnity costs and so in that sense a defendant does have an incentive to settle to avoid those indemnity costs, but as stated above why does that logic not apply to late acceptance by a claimant?

 

The judge also proceeded on the basis that indemnity costs implied misconduct – see for example paragraph 28:

 

“Furthermore, it is not as if the claimant is deprived of the remedy of indemnity costs altogether. The parties have rightly agreed that, in this case, the claimant is entitled to seek indemnity costs in the conventional way, by reference to conduct, and matters of that sort, pursuant to CPR 44.3. That is a further reason of policy why I would conclude that an indemnity costs presumption should not be imported into CPR 36.10: there is already a right to claim recovery of indemnity costs; what there is not, in my view, is a rebuttable presumption that such costs will be recovered.”

 

Again the judge fails to deal with the fact that if a claimant matches or beats its own offer at trial, and in the absence of any misconduct whatsoever by the defendant, the claimant nevertheless gets indemnity costs.

 

Furthermore in the Legal Aid, Sentencing and Punishment of Offenders Act 2012, Parliament has given a claimant who matches or beats its own Part 36 very substantial other advantages, including a 10% windfall uplift on damages.

 

Fitzpatrick v Tyco is, in my view, wrongly decided and does not have to be followed.

 

In any event the supposed public policy considerations set out in the judgment have clearly been swept away by Parliament in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and in the United Kingdom, Parliament, and not the courts, is the arbiter of public policy.

 

Costs Orders

 

A silent order means no costs and therefore it is vital in any case to obtain a costs order.

 

“Costs” in an order means standard basis only and if you want indemnity costs then it is necessary to ensure that the order describes them as being such.

 

The word “costs” on its own in the Civil Procedure Rules gives the court discretion to order either ordinary standard costs or indemnity costs and indemnity costs will most usually be in relation to a claimant’s successful Part 36 offer and also to disapprove of the behaviour of either party – see for example Gulati v MGN, upheld on appeal.

 

 

In ABC v Barts Health NHS Trust [2016] EWHC 500 (QB) (11 March 2016)

 

the Queen’s Bench Division of the High Court ordered a late accepting claimant to pay the trust’s costs from the date of the offers expiry until the date of its acceptance on the indemnity basis. Here the trust successfully argued that it would be unjust, given the particular circumstances of the case which I will deal with in a separate blog, simply to order the costs to be paid on the standard basis.

 

This is a most important case and a most important point. The general rule on late acceptance by a claimant, or indeed failure to beat a defendant’s offer at trial, is that costs are switched from the date of expiry of the relevant periods. Thus although the claimant has won he or she has to pay the defendant’s costs from that point on and that is the penalty, that is that a winning claimant nevertheless pays costs for that period. Here the court ordered them on the indemnity basis.

 

It cannot possibly be the case that a court has the power to impose that further penalty, that is not only costs switching but those costs to be on the indemnity basis in relation to late acceptance of a defendant’s Part 36 offer but not a claimant’s Part 36 offer.

 

If all that a claimant got was costs on the ordinary basis then there is no penalty whatsoever on a late accepting defendant; they would have to pay the costs anyway on the standard basis whether or not any offer had been made.

 

Public policy considerations only go one way here – a court giving purposive construction to the will of Parliament and applying public policy considerations is bound to award a claimant costs on the indemnity basis for the period from expiry of the relevant period to late acceptance by a defendant, unless it is unjust to do so.


It seems to me now to be beyond doubt and claimants should never now agree to accept costs on the standard basis where a defendant accepts late.

Written by kerryunderwood

March 14, 2016 at 2:26 pm

Posted in Uncategorized

DOES A CLIENT WITH A PRE-JACKSON CONDITIONAL FEE AGREEMENT WITH A NIL SUCCESS FEE GET THE 10% UPLIFT

leave a comment »


In the initial decision in the case of Simmons v Castle [2012] EWCA Civ 1039

the court held that with effect from 1 April 2013, general damages in tort cases would be increased by 10% from current levels as stated in paragraph 20 of that judgment:-

and this was clarified in the judgment in

Simmons v Castle & Ors [2012] EWCA Civ 1288:-

“Accordingly, we take this opportunity to declare that, with effect from 1 April 2013, the proper level of general damages in all civil claims for (i) pain and suffering, (ii) loss of amenity, (iii) physical inconvenience and discomfort, (iv) social discredit, or (v) mental distress, will be 10% higher than previously, unless the claimant falls within section 44(6) of LASPO. It therefore follows that, if the action now under appeal had been the subject of a judgment after 1 April 2013, then (unless the claimant had entered into a CFA before that date) the proper award of general damages would be 10% higher than that agreed in this case, namely £22,000 rather than £20,000”

The judgment goes on to state that:-

“27.        In our view, it is clear from these observations that both Sir Rupert and the MoJ envisaged and intended the primary purpose of the 10% increase in damages would be to compensate successful claimants, as a class, for being deprived of the right which they had enjoyed since 2000 to recover success fees from defendants, in cases where a claimant was funding the legal costs of pursuing his or her claim by a CFA. The reason, or at least the principal reason, Sir Rupert made the point that the level of general damages was generally on the low side was to meet the argument that the 10% increase in damages could be said to represent something of a windfall for successful conventional claimants. Similarly, it appears clear that the MoJ regarded the proposed 10% increase in damages as being a quid pro quo for depriving successful CFA claimants of the ability to recover success fees from the defendant.”

and

“40.        … Rather than excluding from the 10% increase those claimants who enter into CFAs before 1 April 2013, we would prefer to exclude those claimants who fall within the ambit of section 44(6) of LASPO. First, this would mean that there will be a guaranteed identity between those successful claimants who are statutorily entitled to recover their success fees from defendants and those successful claimants who are disentitled from enjoying the 10% increase in general damages. Secondly, in so far as there is any risk of satellite litigation, as Mr Aldous suggests, it will be limited to one formulation, namely that set out in section 44(6).

  1. … In principle, as reflected in our earlier judgment, general damages should be increased by 10% in all cases where judgment is given after 1 April 2013, subject to the exception, explained above, where the claimant entered into a CFA before 1 April 2013. That exception is based on the fact that CFA claimants are better off under such a CFA than they will be under a CFA (or a damages based agreement) entered into after that date.”

The judgment does not deal with the different types of Conditional Fee Agreements and does not deal with those Conditional Fee Agreements with a nil success fee.

Section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 sates:-

“(6) The amendment made by subsection (4) does not prevent a costs order including provision in relation to a success fee payable by a person (“P”) under a conditional fee agreement entered into before the day on which that subsection comes into force (“the commencement day”) if—

  • the agreement was entered into specifically for the purposes of the provision to P of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or
  • advocacy or litigation services were provided to P under the agreement in connection with that matter before the commencement day.”

Thus in simple terms those Agreements that fall within the ambit of section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 are pre-1 April 2013 Conditional Fee Agreements for the provision of advocacy or litigation services where there is a success fee payable.

As I have set out previously a Conditional Fee Agreement with a nil success fee does indeed have a success fee, albeit that that success fee is nil and no success fee payable, because it is nil.

The Oxford English Dictionary defines “payable” as:-

  1. that is to be paid; due, owing; falling due 
  2. that can be paid; capable of being paid

Pay is defined as:-

“The action of paying, as a verb it is defined as:-

  1. to give
  2. (personal) what is due in discharge of a debt, or as a return for services done, or goods received, or in compensation for injury done; to remunerate, recompense.
  3. to give a recompense for, to recompense, reward, requite (a service, work, or action of any kind)
  4. to give, deliver, or hand over (money, or some other thing) in return for goods or services, or in discharge of an obligation; to render (a sum or amount owed).
  5. to give or hand over the amount of, give money in discharge of (a debt, dues, tribute, tithes, ransom, fees, hire, wages, etc.)
  6. to give money or other equivalent in return for something or in discharge for an obligation;”

In my view there cannot be payment of zero and therefore there can be nothing payable and therefore a nil success fee cannot be “payable” and those Agreements with a nil success fee would therefore not fall within the meaning of section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

On balance, it is my view that a pre-1 April 2013 Conditional Fee Agreement with a nil success fee cannot be included within the ambit of section 44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and thus will attract the 10% uplift stated in Simmons v Castle & Ors [2012] EWCA Civ 1288.

In Summers v Bundy [2016] EWCA Civ 126

the Court of Appeal held that the 10% uplift applies to all claimants except those covered by Section 44 (6).

Written by kerryunderwood

March 11, 2016 at 2:43 pm

Posted in Uncategorized

10% UPLIFT IN ALL CASES EXCEPT WHERE THERE IS A RECOVERABLE SUCCESS FEE

with 3 comments


Two recent cases, one in the Court of Appeal and one in the Employment Appeal Tribunal, hold that the 10% Simmons v Castle uplift to general damages etc. applies in all cases except where there is a recoverable success fee.

 

Here it was held in the Court of Appeal to apply to legally-aided clients, who would not suffer the loss of recoverability as they never had it, and in the employment tribunals to recipients of damages for personal injury and/or injury to feelings, who likewise could never have recovered a success fee.

 

In Summers v Bundy [2016] EWCA Civ 126

 

the Court of Appeal held that the 10% uplift on general damages as set out by the Court of Appeal in

 

Simmons v Castle [2012] EWCA Civ 1039[2012] EWCA Civ 1288

 

is compulsory and not a matter for judicial discretion.

 

Here the claimant had at all times been legally-aided in a clinical negligence case and the trial judge took the view that he should not receive the 10% uplift as he would not suffer the loss of recoverability of the success fee which the uplift was meant to compensate.

 

In the two Simmons v Castle cases the Court of Appeal had originally said that the 10% uplift would apply to all cases settled, or where the judgment was given, on or after 1 April 2013, which was the implementation date for most of the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, itself implementing many of the Jackson Reforms, of which this is one.

 

This original decision was challenged by The Association of British Insurers who pointed out that an across the board increase would mean that claimants with a pre-Jackson Conditional Fee Agreement would get up to a 100% success fee from the paying party and still get the uplift and that that would be an unfair windfall.

 

The Court of Appeal accepted this contention and thus excluded those claimants who stood to recover a success fee from the paying party.
All other claimants were to get the 10% increase.

 

Here the judge had considered that a further exception was available to him in relation to a legally-aided client. The Court of Appeal held that he was wrong and that that reasoning was not open to him.
The Court of Appeal pointed out that if there was a discretion some legally-aided clients may get the uplift and some may not and this would lead potentially to “complete uncertainty and inconsistency in awards of the courts throughout England and Wales. There also potentially would be difficulties in calculating and determining the form and amount of Part 36 offers or without prejudice proposals of settlement.” (Paragraph 21).

 

The Court of Appeal made it clear in forceful terms that the only exception related to claimants with a recoverable success fee and there was no discretion on any court to refuse the 10% uplift in any other type of case.

 

In paragraph 20 of the original Court of Appeal’s decision in Simmons v Castle it said this:-

 

“ 20. Accordingly, we take this opportunity to declare that, with effect from 1 April 2013, the proper level of general damages for (i) pain, suffering and loss of amenity in respect of personal injury, (ii) nuisance, (iii) defamation and (iv) all other torts which cause suffering, inconvenience or distress to individuals, will be 10% higher than previously.”

 

That general principle was unchanged by the Court of Appeal’s second decision which simply excluded claimants with a recoverable success fee.

 

Discrimination Claims and Injury to Feelings

 

The Court of Appeal decision in Summers v Bundy appears to end the controversy as to whether general damages awards in the Employment Tribunal, generally for injury to feelings, attract the 10% uplift.

 

Following the rationale of Summers v Bundy such cases must now indeed attract the 10% uplift.
There had been different lines of authority with the Employment Appeal Tribunal in

 

Chawla v Hewlett Packard Ltd [2015] IRLR 356 EAT

 

holding that there could be no such uplift as Employment Tribunal claims were not included in the list of specific types of litigation dealt with in the Jackson Report and nor did the issue of loss of recoverability of the success fee apply as there are no recoverable costs in Employment Tribunal cases generally.

 

Now that the Court of Appeal has said that it is irrelevant that some claimants without Conditional Fee Agreements, such as legally-aided clients, will get a windfall , that must apply to claimants in Employment Tribunal proceedings as well, as the Court of Appeal has said that the only exclusion is in relation to those with recoverable success fees.

 

Furthermore the precise types of litigation in the Jackson Report are irrelevant – the law is as set out by the Court of Appeal in Simmons v Castle and as clarified in Summers v Bundy.

 

Other divisions of the Employment Appeal Tribunal had followed this line and said that the 10% uplift was applicable – see

 

Ozog v Cadogan Hotel Partners Ltd [2014] EqLR 691 EAT and

 

The Sash Window Workshop Ltd v King [2015] IRLR 348 EAT

 

The Court of Appeal is just about to hear the appeal in The Sash Window case but it will now be bound by its own decision in Summers v Bundy. Consequently the appeal should be dismissed.

 

An appeal on the same point in the case of

 

Pereira de Souza v Vinci Construction UK Ltd [2015] IRLR 536 EAT

 

is due to be heard in December 2016, but again it appears that that is now academic.

 

On 27 November 2015 the Employment Appeal Tribunal in

 

Beckford v London Borough of Southwark [2016] IRLR 178

 

followed the Ozog and Sash Window line of cases and rejected the reasoning in Chawla and thus correctly anticipated the decision of the Court of Appeal in Summers v Bundy.

 

The Employment Appeal Tribunal arrived at that conclusion by two routes.

 

Firstly it gave the precise reasoning subsequently used by the Court of Appeal in Summers v Bundy, even referring to the example of a legally-aided client who never stood to gain the recoverability of the success fee and therefore could not lose it, but who would nevertheless get the 10% uplift.
The Employment Appeal Tribunal also relied on the fact that Section 124 (6) of the Equality Act 2010 provides, in similar terms to its predecessors, that

 

“(6) The amount of compensation which may be awarded under subsection (2)(b) [that is the subsection which permits a Tribunal to order the Respondent to pay compensation to the Complainant] corresponds to the amount which could be awarded by the County Court or the Sheriff under section 119.”

 

Section 119 (4) provides that:-

 

“(4) An award of damages may include compensation for injured feelings (whether or not it includes compensation on any other basis).”

 

Therefore the Equality Act 2010 requires awards to be comparable in the tribunals to those given in the County Court and although that comparability may be broad, it does not allow for one set of awards to be consistently 10% above the other as that would not be “broadly comparable” but “generally 10% different”.

 

Furthermore the Equality Act 2010 reflects an important aspect of judicial policy, which is that awards made in the tribunals should broadly be coherent with those made in the civil courts. It would not reflect well on a system of justice that the same injury, as it may seem to a member of the public, should be compensated in one regime at a lower level than it would be in another, particularly given that in discrimination cases there is a general principle of effectiveness deriving from European authority which requires the award to be broadly the same.

 

Comment

 

It is now beyond doubt that all claimants except those who had a recoverable success fee, receive the 10% uplift in all cases where compensation is awarded for general damages etc. as set out by me above.

 

It is also beyond doubt that the 10% uplift applies to all injury and injury to feelings awards in the Employment Tribunal.

 

However the Employment Appeal Tribunal’s point about comparability and the need for consistency between awards in the courts and Employment Tribunals is not well made. There is a huge difference. At present costs remain recoverable in the courts whereas in the Employment Tribunals they do not and typically a represented claimant will suffer a 35% deduction from those damages as a contingency fee, permitted by statutory instrument, to their lawyers.

 

 

 

 

Written by kerryunderwood

March 8, 2016 at 8:12 am

Posted in Uncategorized

RUNNING SMALL CLAIMS TRACK PERSONAL INJURY CLAIMS

with 11 comments


I deal with this in my new book on the subject. To order one click here.

 

Only very limited costs are recoverable in small claims. For example in a normal small claim, where the small claims limit is already £10,000.00, a claim for £5,000.00 would attract just £90.00 fixed costs. Court fees and disbursements are also recoverable.

 

It may be that the figure will be slightly higher for personal injury work, but for all intents and purposes in a small claim one must look to one’s own client, and only one’s own client, for profit costs.

 

As we all know clients in personal injury matters are generally not prepared to pay win or lose and therefore the only realistic funding mechanism in the market is a No Win No Fee Agreement.

 

Even if costs are not recoverable the basic position remains the same, and that is that a Contingency Fee Agreement under the Solicitors Act 1974 can be used for pre-issue work but not for post-issue work.

 

Furthermore once a matter is issued the pre-issue work retrospectively becomes contentious and thus the Contingency Fee Agreement cannot be relied upon as a Solicitors Act 1974 Contingency Fee Agreement can only be used for non-contentious work.

 

The answer, as it is indeed now for cost bearing work, is to have a Contingency Fee Agreement and the Conditional Fee Agreement both in place from day one with the Conditional Fee Agreement coming into place if the matter becomes issued and the Contingency Fee Agreement then simply falls away.

 

This is achieved by a Bridging Agreement.
The principle of having an agreement that will only come into place if the other agreement is for any reason not valid has a long history in Conditional Fee Agreement matters going back to Forde v Birmingham City Council [2009] 1 WLR 2732 and recently confirmed in Budana v Leeds Teaching Hospital NHS Trust – 4 February 2016.

 

That deals with the mechanics of running a personal injury claim that is in the small claims track. It does not deal with the issue of how much to charge the client and whether it is possible to run such work profitably.

 

I believe it is possible to run such work profitably and indeed my firm has always been prepared to take on cases in the small claims track.
Currently in personal injury work virtually all firms charge the client 25% of damages. In Employment Tribunal cases, where no costs have ever been recoverable from the other side, the statutory maximum under the Damages-Based Agreements Regulations is 35% of damages if any form of Contingency Fee Agreement/Conditional Fee Agreement/Damages-Based Agreement is being used. That has become both a maximum and a minimum and thus is now the standard charge and clients happily enter into such agreements and happily allow the deductions.

 

Prior to this maximum many firms, including my firm, charged 40% including VAT.

 

40% is not unusual in the United States of America where contingency fees operate in personal injury work and where no costs are recoverable from the other side.

 

Thus my advice is that firms doing personal injury work in the small claims track should charge 40% of damages to clients. I will return to the issue of whether this is lawful.

 

One of the unanswered questions is whether clients will simply seek to deal with matters themselves if they have to pay lawyers considerable percentage of damages. I do not believe that this will happen. In the Republic of Ireland there is generally no costs recovery in personal injury work and that has been the case since 2004 and yet 90% of injured people still retain lawyers.

 

There is no evidence of any reduction in the percentage in injured people instructing lawyers following the sharp cut in portal fees in April 2013 which led to virtually all firms charging the client 25% of damages rather than nothing. Prior to the introduction of recoverability in April 2000 it was standard to charge clients 25% of damages and there was no client resistance.

 

Consequently I believe that clients will pay 40%.

 

I question whether clients have any interest in whether solicitors recover any costs from the other side, and how much those costs are, unless it affects the client herself or himself. What the client wants to know is what it will cost them.

 

If I am right on that then why not start charging clients 40% in all cases, irrespective of whether they are costs bearing or not? That is a market issue but we now charge clients 30% of damages if we take the risk of adverse costs, which by and large in personal injury cases now is the post Part 36 risk given the existence of Qualified One-Way Costs Shifting.

 

I now return to the issue of whether it is lawful to charge the client more than 25% of damages. The short answer is yes.

 

If a client is being represented under a Damages-Based Agreement then it is indeed illegal to charge the client more than 25% of damages and credit must be given to the client for any costs recovered from the other side, although this second point would not be relevant in a small claim.
For this and other reasons no one is using Damages-Based Agreements in personal injury work.

 

True it is that the Conditional Fee Success Fee is limited to 25% of damages and indeed that is of a restricted pool of damages and not the whole sum.

 

However ordinary solicitor and own client costs are not subject to any such restriction and therefore the balance of unrecovered solicitor and own client costs can be charged to the client without any limit whatsoever, save for the general rule that one must not exploit one’s client and must not behave in a way which diminishes public respect in the profession.

 

Thus in order to be able to charge the client additional costs the answer is to have a high hourly rate so that there is always a significant unrecovered element of solicitor and own client costs. The protection to the client is then given by capping the total charge to the client. As indicated this is currently at 25% but I believe the market will bear 40%.

 

This approach was criticised by District Judge Lumb in A & M (by their litigation friend) v Royal Mail Group (2) [2015] MISC B30 (CC). His remarks were obiter and had nothing at all to do with the issue he was trying, which was a totally separate matter of deductions from a child’s damages.

 

In Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016)

 

the Court of Appeal, in a central part of its Judgment, recognised, neither with approval nor criticism, the existence of this method, that is of a solicitor and own client hourly rate with the overall charge to the client being capped at a percentage of damages. It amounts to a wholesale rejection of District Judge Lumb’s remarks.

 

This method is known as the Underwoods Method and the Master of the Rolls said at paragraph 32:-

 

“He says that the way in which lawyers are typically engaged in this part of the market is heavily reliant on CFAs and legal expenses insurance. Both forms of funding typically provide for lawyers to charge on a conventional hourly basis, but may cap their right to enforce payment with reference to the amount recovered. He adds that it is still very common for costs beyond fixed costs to be deducted from claimants’ damages. There is no evidence before us to support this statement either, although I have no reason to doubt it.”

 

Clearly firms will have to adjust and the days of costs being double damages or whatever in personal injury cases are over.
That was always a doomed business model as Slater and Gordon’s reliance on entirely unrealistic fees in Noise Induced Hearing Loss claims have shown.

 

Well organised firms who think things through will be able to make a profit with personal injury small claims and should be able to make a much greater profit, by charging the clients 40%, in claims exceeding the small claims limit.

 

Early and well-pitched Part 36 offers in costs bearing cases now mean that the claimant’s lawyers get fixed costs AND indemnity costs – see Broadhurst.

 

People will still be injured and they will still want lawyers. Good firms can make the new system work.
Factory firms are and will continue to go out of business and that will release far more work for the rest of us.

 

Written by kerryunderwood

March 7, 2016 at 8:03 am

Posted in Uncategorized

QUALIFIED ONE-WAY SHIFTING: UNIFIED

with 2 comments


This subject is dealt with in my new book on the subject which is available on Amazon.

The book is fully updated on my blog: Kerry on QOCS: Book Update and Links.

New developments will be posted by me on my blog in the usual way but for a detailed examination of every aspect of Qualified One-Way Costs Shifting please buy the book.

If you require the text urgently this can be sent by PDF electronically the moment payment is received

 

Written by kerryunderwood

March 4, 2016 at 3:12 pm

Posted in Uncategorized

CONDITIONAL FEE AGREEMENT UPDATE

with 3 comments


There has been a surprising number of recent decisions concerning conditional fee agreements, and covering assignment, human rights and recoverability and the interplay with legal aid and the ability to sever part of an agreement to make it lawful.

 

Conditional Fee Agreements and Assignment

 

Please note that the Budana case reported below has now been leapfrogged to the Court of Appeal but no date has yet been set for the hearing.

 

In Budana v Leeds Teaching Hospitals NHS Trust (4 February 2016)

 

DJ Besford sitting in Kingston-upon-Hull County Court had to rule on the position where a pre-Jackson Conditional Fee Agreement was transferred from one firm to another when the original firm told its client that it was no longer conducting personal injury work.

 

Here the original firm sent a letter to its client on 22 March 2013, just before the change in the law on 1 April 2013 whereby any new CFAs could not provide for a recoverable success fee, saying “we have decided to stop handling personal injury litigation”.

 

The letter explained that a process had been put in place to transfer the case to another firm of solicitors which would continue to act on the same Conditional Fee Agreement.

 

The court held that the wording of the letter was unambiguous and it had terminated the retainer between the solicitor and client and there was nothing to suggest that they would continue to act pending the client’s instructions.

 

Consequently there was nothing to transfer or to be assigned.

 

A second Conditional Fee Agreement, entered into with the new firm of solicitors on the basis that it would only apply if there was a problem with assignment of the first Conditional Fee Agreement, was found to be valid and thus the claimant was entitled to recover the base fees disbursements and VAT in relation to the new solicitor’s costs but not those of the original solicitor.

 

The judge gave permission for an appeal and a cross-appeal and it is understood that the paying party may ask for the matter to be leapfrogged to the Court of Appeal.

 

The judge then went on to consider whether it was possible to assign the Conditional Fee Agreement if the retainer had not been terminated by the first set of solicitors.

 

The judge held that he was bound by the decision of the High Court in

 

Jenkins v Young Bros Transport (2006) 1 WLR 3189

 

although he commented that there was there was much force in the arguments of the defendant that Jenkins had been wrongly decided.

 

The judge noted that “the facts in Jenkins are far removed from the commercial wholesale disposal of clients as in this case” but noted that the higher authority “clearly permits the transfer of a CFA between firms” and must be followed.

 

Comment

 

Spot-on on all points

 

Other than for exceptional reasons a firm of solicitors cannot simply decide to stop doing a particular area of work and leave all of its clients in the lurch.

 

Why could the firm not have instructed appropriately qualified counsel to assist in the run-off of its personal injury cases? Why did the firm not, for example, give three months’ notice to clients and thus give them a chance to look around for other solicitors?

 

The suspicion here is that the first firm of solicitors simply made a commercial decision to sell its personal injury workload and it is unsurprising that in those circumstances the court has not allowed it to recover any fees.

 

The judge is also right, both in following Jenkins, but suggesting that it may be wrongly decided and thus giving leave both for an appeal and a cross-appeal.

 

This decision has been subject to criticism, virtually all of it ill-informed the decision is correct.

 

The problem is easily avoided by entering into an agency arrangement – see my blog Assignment of Conditional Fee Agreements: Unified.

 

Unenforceable CFA Does Not Render Underlying Retainer Unenforceable

 

In Garnat Trading and Shipping (Singapore) PTE Ltd v Thomas Cooper (a Firm) [2016] EWHC 18 (Ch) (20 January 2016)

 

the Chancery Division of the High Court considered a somewhat complicated set of affairs but had to decide the question as to whether an unenforceable Conditional Fee Agreement rendered the underlying retainer unenforceable.

 

Here the client and the firm of solicitors had entered into a litigation retainer which provided that the solicitor’s fees would be calculated on the basis of an hourly rate and the claimant won and the other side appealed.

 

The claimant and the solicitors then entered into a further agreement which provided that in return for working on the appeal the solicitors will be entitled to all costs recovered from the other side in the appeal and the proceedings below, if the case was won.

 

This was known as the 2011 agreement and it was accepted that it was a Conditional Fee Agreement with a success fee but that it failed to comply with Section 58(4) (b) of the Courts and Legal Services Act 1990 in that it did not specify the amount of the percentage increase.

 

The judge held that the 2011 agreement was concerned only with work relating to the appeal and was not intended to replace the original retainer and nor was it a collateral contract but rather it was intended to vary the retainer.

 

It was possible to run a “blue pencil” through the 2011 agreement and thus sever part of it without modifying the remaining retainer in relation to the non-appeal work.

 

The judge held that the illegality in the form of the Conditional Fee Agreement was neither criminal nor immoral and therefore there was no public policy objection to severing it.

 

The judge therefore held that the solicitors were not entitled to charge the appeal work carried out after entering into the 2011 agreement but could charge for the non-appeal related work which fell within the scope of the original retainer, even if that non-appeal work was done after the 2011 agreement had been entered into.

 

Recoverability of additional liabilities and human rights

 

In BNM v Mirror Group Newspapers Limited [2016] EWHC B1 (Costs)

 

the Senior Courts Costs Office rejected submissions by a publisher that the recoverability of additional liabilities in privacy proceedings was unlawful and placed the United Kingdom in breach of its obligations under the European Convention on Human Rights and the court in breach of its obligations under the Human Rights Act 1998.

 

Mirror Group Newspapers contended that a costs order in favour of the receiving party could not include a provision requiring it to pay the After-the-Event insurance premium and a success fee as any such order would unlawfully interfere with its Article 10 right to free expression.

Mirror Group Newspapers relied on

 

MGN v UK [2011] ECHR 66

 

where the European Court of Human Rights held that recoverability was incompatible with Article 10 and also Section 6 of the Human Rights Act which requires courts not to act in a way that is incompatible with the Convention.

 

The court held that it did not have jurisdiction to make a declaration of incompatibility but did have a discretion to allow or refuse recoverability of the additional liabilities.

 

It held that it was bound by Campbell v MGN [2004] UKHL 22 to conclude that recoverability would not be a violation as submitted.

 

The court noted that the After-the-Event insurance point did not arise for consideration in Campbell v MGN but did arise in

 

Coventry v Lawrence [2015] UKSC 50 in the context of Article 6.

 

There the Supreme Court held that the recoverability of premiums under Section 29 of the Access to Justice Act 1999 was part of the same regime as the recoverability of success fees and therefore did not infringe Article 10 rights.

 

The court here followed that decision.

 

The decision confirms the rule of law that precedent law in England and Wales is not, save in exceptional circumstances, dis-applied where there is an inconsistent decision of the European Court of Human Rights – see

 

Kay v Lambeth London Borough Council [2006] 2 AC 465

 

Legal Aid and Switching to CFA

 

In Ramos v Oxford University NHS Trust [2016] EWHC B4 (Costs)

 

the Senior Courts Costs Office held that the claimant’s decision, effectively that of their solicitors, to abandon legal aid in favour of a Conditional Fee Agreement backed by After-the-Event insurance was not made on the basis of adequate advice and was not made on a fully informed basis and was more to the claimant’s disadvantage than to her advantage and it had not been a reasonable decision.

Consequently the success fee and the ATE premium were not recoverable under CPR 44.4 from the losing defendant.

 

Here the legal aid certificate which had been in place since 3 March 2010 was discharged on 25 February 2013 and on the same date a Conditional Fee Agreement was entered into.

 

That Conditional Fee Agreement was backed by an After-the-Event insurance policy which is dated 5 April 2013 although the insurer had agreed to provide cover on 26 March 2013. On that point the SCCO held that the insurance policy had been taken out prior to the Jackson deadline of 1 April 2013 and therefore was, in principle, recoverable.

 

Like all such cases this one depends upon its facts but there are some important points of principle that emerged.

 

The claimant, effectively the claimant’s solicitors, argued that the Legal Services Commission would not allow experts to charge more than £180.00 per hour to be instructed and would not allow the claimant’s solicitors to top up those fees. They formed the view that they required experts who charged significantly more than that and they could not find suitable experts who would work for those rates.

 

The court found that that was factually incorrect and that the solicitors, Slater and Gordon, had themselves been paying experts on this case higher than those rates and furthermore that it was not the invariable rule that experts charging more than £180.00 per hour could not be instructed and Slater and Gordon had not sought the Legal Services Commission’s permission on this particular case.

 

Thus that ground for switching from legal aid to a CFA was rejected.

 

The solicitors also argued that the client would be at risk of paying the solicitor’s solicitor and own client costs that were not recoverable from the other side and these would be deducted by way of the legal aid statutory charge, whereas the CFA Lite that they had entered into meant that the client would not have to pay any legal costs out of damages.

 

Here the court pointed out that the solicitors were free to waive their additional costs under the statutory charge and indeed had done just that in this case. Therefore switching to a CFA Lite did not achieve anything in relation to deduction of costs from damages that could not have been achieved under the legal aid certificate and indeed was so achieved in this case. Thus that ground was also rejected.

 

The claimant’s solicitors also relied on the protection that After-the-event insurance gave against the costs incurred in failing to beat a Part 36 offer, which protection was not available under a legal aid certificate. The court accepted that point but found that the solicitors had not advised the claimant in relation to this difference in relation to Part 36 and in the particular circumstances of this case that risk was low and had not been a factor in the decision of the solicitors to advise that switching to a CFA/ATE was the right thing to do.

 

Consequently the court rejected this ground as well.

 

The court also held that the solicitors had not adequately advised the claimant as to the risk that part or all of the ATE premium may be disallowed and that she would be then liable for paying that premium or part thereof out of the damages if the case was successful.

 

Of particular relevance was the fact that the solicitors had failed to advise the claimant as to the benefits of a pre-Jackson Conditional Fee Agreement and a post-Jackson Conditional Fee Agreement.

 

In a post-Jackson CFA, where there is no success fee recoverable from the other side, the client gets a 10% uplift on damages under the principles set out in Simmons v Castle [2012] EWCA Civ 1039. The claimant’s solicitors put this between £10,000.00 and £12,000.00 and the defendant put it at £15,000.00.

 

The failure to explain this to the client also formed inadequate advice and meant that the claimant’s decision was not made on a fully informed basis.

 

Both sides and the court appear to have failed to appreciate that had legal aid remained in place, as compared with a pre-Jackson CFA, then the claimant would have had the benefit of Qualified One-Way Costs Shifting. The client would also have enjoyed that benefit with a post-Jackson CFA.

 

Comment

 

It is clear that the solicitors advising the claimant in this matter failed to give proper advice and indeed appeared not to understand to any great extent the law in relation to Conditional Fee Agreements and legal aid and the Simmons and Castle uplift and Qualified One-Way Costs Shifting.

The lost ATE insurance premium itself was over £70,000.00 and the success fee a further £25,000.00 meaning that the sum involved was £95,647.72.

 

Time and time again I see solicitors dealing with costs and funding matters involving huge sums of money and yet doing it without any specialist advice whatsoever.

 

Where damages are that sort of sum they will take extensive advice from counsel and yet on costs issue they will deal with matters inadequately themselves.

 

In AH (a Protected Party Proceeding through her Litigation Friend) v Lewisham Hospital NHS Trust [2016] EWHC B3 (Costs)

 

the Senior Courts Costs Office found that the decision of the claimant’s solicitors to switch from legal aid to a Conditional Fee Agreement backed by After-the-Event insurance shortly before 31 March 2013 deadline for recoverability of additional liabilities was unreasonable and therefore the defendant did not have to pay the success fee or After-the-Event insurance premium.

 

Here the claimant’s solicitors had put forward the benefits of switching as being that ATE would protect the client from the consequences of failing to beat a defendant’s Part 36 offer, whereas legal aid would not, and the general uncertainty about the Legal Aid Agency continuing to fund any particular claim.

 

The defendant argued that the decision was unreasonable given the stage that the case had reached by then and also sought to distinguish

 

LXM v Mid-Essex Hospital Services NHS Trust [2010] EWHC 90185 (Costs)

 

on the ground that there the solicitors were offering CFA Lite, which meant that the client would not have to pay anything and also that at that time the Simmons v Castle 10% uplift was not available whereas it now was to a legally aided client, but not to a client who had a Conditional Fee Agreement and/or After-the-Event insurance if either of those was recoverable.

 

It was common ground in this case that the client had not been advised concerning the potential Simmons v Castle general damages uplift. The defendant relied on

 

Surrey v Barnet and Chase Farm Hospitals NHS Trust [2015] EWHC 9085 (Costs)

 

where the SCCO had held that the failure to advise in relation to the Simmons v Castle Uplift and the failure to advise of the protection of Qualified One-Way Costs Shifting in legal aid cases, but not where there was a recoverable success fee or ATE premium, meant that the claimant had not been properly advised and could not have made a reasonable choice to change funding arrangements.

Again it was common ground that the whole issue of Qualified One-Way Costs Shifting had not been considered here.

 

Here the Simmons v Castle uplift was potentially worth £17,500.00 as general damages have been valued at £175,000.00.

 

In this case the court said that there were good arguments on both sides but it was the absence of advice concerning the Simmons v Castle point which weighed more heavily than any other point with the court – see paragraph 54.

 

The court also held that the adequacy of the solicitor’s advice to the client can have a bearing upon the amount that it is reasonable for the client’s opponent to pay in costs whether the opponent is the paying the party and pointed out that any other finding would effectively allow a solicitor to benefit from his or her own wrongdoing, in that the client would be persuaded, on the basis of bad advice, to switch to a CFA even though disadvantageous to the client but advantageous to the solicitor who then gets the success fee.

 

The court held that the solicitor should have said to the client:-

 

“if you move to a CFA you will forfeit immediately the right to an additional 10% of the general damages you recover, which we estimate could £175,000, so as much as £17,500”.

 

Failure to do so meant that the advice was unreasonable.

 

Comment

 

Given this and the Ramos decision, which seems to me to be absolutely correct, there are some big firms of solicitors who might wish they had spent £200.00 on one of my Jackson courses, which would have saved them hundreds of thousands, if not millions of pounds.

 

A second point arises from these cases – in each case the court has found that there was no entitlement to recoverability of the success fee or ATE premium.

 

Given that finding general damages should indeed have been 10% higher in each case as Simmons v Castle applies where there is no recoverability.

 

Can the settlement be revisited? Will leave to appeal out of time be given? Can the clients now sue the solicitors in negligence for failing to get the 10% Simmons v Castle uplift?

 

Overall these cases reinforce the absolute importance of obtaining expert advice in relation to the incredibly complex effect of the Jackson Reforms. None of these decisions comes as any surprise to those of us who specialist in this area.

 

In Davis (a Child) v Wiltshire Primary Care Trust [2016] EWHC B6 (Costs)

 

the court held that the decision to switch from legal aid to a Conditional Fee Agreement was not a reasonable decision and was not to the claimant’s advantage and therefore the success fee and the ATE premium were held not to be recoverable from the defendant.

 

Here there was no suggestion that the switch was to avoid the new LASPO regime as it occurred in 2009 well before any changes to the recoverability of success fees and additional liabilities was mooted. The success fee and ATE premium totalled £237,000.

 

In fact, the change from public funding to CFA/ATE funding had occurred prior to service of the Letter of Response in which admissions of breach of duty and causation were made.

 

Master Leonard, in reaching his decision:

 

  • Found the Defendant’s solicitor’s request for clarification of the Letter of Claim was an entirely reasonable request for information that should have been incorporated in the Letter of Claim;

 

  • Refuted the Claimant’s suggestion that the Defendant could have admitted liability before the Letter of Claim was received, as it is not incumbent on any Defendant to formulate a case against itself or make admissions before it knows what a Claimant’s case is.  It was not the Defendant’s fault that it took three years for the Claimant’s solicitors to serve a Letter of Claim;

 

  • Found there was no convincing evidence that the Claimant needed an interim payment to the extent that justified the change to a CFA/ATE arrangement; and

 

  • Held that at no stage was the Claimant advised of the potential risk of having to bear any shortfall on the costs of the ATE premium if it was successfully challenged in whole or part.  This left the Claimant exposed to a risk that he was not advised about.

 

The Master held that the switch from public funding to a CFA backed by ATE insurance in November 2009 was not a reasonable decision, nor to the Claimant’s advantage.

As a consequence, he disallowed both the success fee and the ATE premium in full which otherwise would have been payable by the Defendants.

 

As with the other two recent cases coming to the same conclusion, this was a clinical negligence case.

 

It may be that the courts are being influenced by a reluctance to impose a further significant charge, that of the success fee and the ATE, upon a state body in circumstances where the state was already funding the claimant’s claims against the state. If that is indeed the rationale behind these decisions then one has a certain sympathy with the court.

 

In Milton Keynes NHS Foundation Trust v Hyde [2016] EWHC 72 (QB)

 

the Queen’s Bench Division of the High Court upheld the decision of Costs Judge Master Rowley that a Conditional Fee Agreement entered into because legal aid was about to run out in the claimant’s clinical negligence case was enforceable even though at the time of it being signed the discharge certificate from the Legal Services Commission had not been obtained.

 

The NHS trust had attempted to argue that the funding agreement was invalid because the lack of discharge meant that legal aid and a private funding arrangement were running concurrently.

The High Court held that solicitor’s decision was “entirely reasonable and proper”. The issue was purely one of procedure whereas as a matter of substance “the funding had come to an end and [the solicitors] were entitled to enter into a private retainer”.

 

It was common ground that there would have been no potential problem if there had been a provision in the Conditional Fee Agreement, apparently common in legal aid cases, saying that “no work is covered under this agreement until after discharge of the legal aid certificate”; but this CFA contained no such term.

 

 

In Yesil v Doncaster & Bassetlaw Hospitals NHS Foundation Trust, Queens Bench Division, Unreported, 24 February 2016

 

the court was again considering the position of a claimant who had switched from legal aid to a pre-Jackson Conditional Fee Agreement and After-the-Event insurance in early 2013.

 

Yet again the court held that the decision to switch was not reasonable as it was based on erroneous information and therefore the additional liabilities were unreasonably incurred and were not recoverable from the defendant.

 

The judge held that the claimant’s choice did not have to be the best one with the benefit of full and competent advice but had to be a reasonable choice in all of the circumstances and those circumstances included the legal advice which was given or not given.

 

By switching to a pre-Jackson CFA the claimant was abandoning the 10% Simmons v Castle general damages uplift and in this case that was £28,000.00, the general damages being £280,000.00.

 

The court held that whilst it was not necessary for a solicitor to “slavishly go through each and every option or scenario”, it was inconceivable that a client would not consider the loss of this uplift to be a material fact.

 

The failure to raise this issue called into question the adequacy of the advice given and where one of the options is financially beneficial to the solicitor the need for transparency of advice is even greater.

 

“In my judgment it is inconceivable that a client would not consider the option of an additional 10% uplift on general damages a material factor. The omission to raise this factor, even if the claimant immediately rejected it, seriously calls into question the adequacy of the advice given. Irwin Mitchell would appear to have been not so much “leaning” one way, as giving advice tailored to a decision they had already made. Where one of two or more options available to a client is more financially beneficial to the solicitor, the need for transparency becomes ever greater.”

 

Switching also loses the client the benefit of Qualified One Way Costs Shifting.

 

Liquidators and Insolvency Practitioners

 

In Stevensdrake v Hunt [2016] EWHC 342 (Ch)

 

the Chancery Division of the High Court held that the defendant was not personally liable to pay costs to his solicitor even though the clear wording of the Conditional Fee Agreement provided that he did have to pay those costs. In reality the agreement was that the solicitor would only be paid if there was recovery of damages.

Here the claimant solicitors sued for £938,838.00 costs from the defendant who was the liquidator of a company.

 

It was common ground that the actions had ended in a success within the definition contained in the Conditional Fee Agreement.

 

There were two cases. One case settled for £125,000.00 and recovery was made; the other settled for £1.9 million pounds, but that sum remained unpaid.

 

The key issue is whether, in spite of the clear wording of the CFA, there was a contractual agreement that the solicitor would in fact only charge a percentage of what was actually recovered.

 

On the facts the court found that there was and that the CFA had to be looked at in the context of contemporary documents. Correspondence between the parties showed that the solicitor had agreed the defendant had no personal liability for the solicitor’s fees.

 

The defendant successfully relied on the fact that it was the general practice in insolvency matters where the estate had few assets for the solicitors only to charge insofar as there was recovery. The parties themselves had worked together on many cases over many years on just that basis.

 

If that was to be different in any given case then it was incumbent upon the solicitor to spell that out clearly and that had not been done here.

 

The court commented that the defendant client was a sophisticated party who was the dominant personality in the relationship, but nevertheless it always remained the solicitor’s duty to spell out clearly the costs arrangements and the consequences to the client of any particular arrangement.

 

Comment

 

The decision is right on the facts. However I do not understand why the standard CFA in such matters does not define success as recovery and not just obtaining judgment. There is no problem in relation to the indemnity principle with such a wording.

Recoverability of the success fee and After-the-Event insurance premium in insolvency matters does not apply in relation to a Conditional Fee Agreement or After-the-Event insurance policy entered into after 31 March 2016.

 

Retrospective CFAs and Retrospective Success Fees 

 

In Ghising v Secretary of State for Home Department [2015] EWHC 3706 (QB) – 17 September 2015

 

the Queen’s Bench Division of the High Court was considering an appeal against a decision of the Senior Courts Costs Office.

That court had decided that the claimant was:-

 

  • entitled to retrospective recovery of base costs under Conditional Fee Agreements for solicitors and counsel for work done before the CFAs were entered into;

 

  • entitled to recover base costs for the whole period;

 

  • entitled to recover a success fee of 67% for work done from the date of the CFAs, but not before.

 

The claimant appealed against that decision to refuse to allow recoverability of the success fee in relation to work done before the CFAs were entered into.

The High Court held that a retrospective success fee was not of itself contrary to public policy and thus followed:-

 

Birmingham City Council v Forde [2009] EWHC 12 (QB)

 

 and disagreed with the statement in

 

King v Telegraph Group Ltd. [2003] EWHC 1312 (QB)

 

where the Senior Courts Costs Office held that it was quite wrong and contrary to public policy to permit the claimant’s solicitors to recover a success fee prior to the signing of the Conditional Fee Agreement.

 

Consequently the appeal was allowed and the matter returned to the Senior Courts Costs Office for a detailed assessment.

The High Court raised the issue of whether a success fee can be reasonably applied to work undertaken before the Conditional Fee Agreement was signed, given that the success fee is based on the risks as they reasonably appeared to the solicitor at the time the CFA was entered into.

 

In Birmingham City Council v Forde [2009] EWHC 12 (QB)

 

the High Court said:-

 

“150. In respectful disagreement with Master Campbell and Master Hurst, I do not regard it as necessary to hold that a retrospective success fee is per se contrary to public policy. There is, in my view, insufficient warrant for effectively precluding solicitor and client from making such an agreement. In some, perhaps many, circumstances a retrospective success fee, or its amount, may be unreasonable, either as between the parties or as between solicitor and client. But this will not always be so. The Court has, in my opinion, enough weapons in its armoury, in the form of the criteria applicable on a detailed assessment and the provisions of the Costs Practice Direction and the Practice Direction on Protocols, to disallow or reduce retrospective fees that are unreasonable, as in this case.”

 

The Senior Courts Costs Office had recognised that it had a discretion to allow a recoverable retrospective success fee but chose not the exercise it here.

 

In spite of reading the High Court Judgment several times I cannot identify the error of law that the Senior Courts Costs Office is supposed to have made.

It is hoped that details of the Detailed Assessment, directed to take place on paper, will throw light on this issue.

 

 

Written by kerryunderwood

March 3, 2016 at 7:54 am

Posted in Uncategorized

CLAIMANT’S PART 36 OFFER OVERRIDES FIXED COSTS

with 37 comments


I deal with this in my new book – to buy it click here or visit Amazon.

 

In Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016)

the Court of Appeal held that a claimant who matches or beats its own Part 36 offer in a fixed costs case gets indemnity costs, as well as the other enhancements such as a 10% increase in damages and additional interest etc. in addition to fixed costs.

The same priniciple appears to apply to provisional assessment and thus a receiving party who matches or beats its own offer will get indemnity costs. It remains to be seen if the court will follow the Broadhurst line and award the capped maximum costs of £1,500.00 in addition to indemnity costs.
As far as fixed costs are concerned this resolves the issue between the two different lines of authority, both entirely justifiable on the wording of the different rules, one saying that fixed costs were just that and that an indemnity costs order made no difference, and one holding that Part 36 and its provision for indemnity costs trumped CPR 45.29B, which deals with fixed costs.

One of those lines of authority was the Smith v Taylor line where the court found that Part 36 took priority and not CPR 45.29B and here the Court of Appeal dismissed the appeal against that decision.
The other line of cases was generally known as Dixon v Bennett but in fact the appeal here was in a case called Broadhurst v Tan where the lower court had come to the same conclusion as in Dixon v Bennett, that is that nothing above fixed costs could be awarded following a successful claimant Part 36 offer. The Court of Appeal allowed the appeal in that case.

The Master of the Rolls made it clear that although these cases concerned the version of Part 36 which applied before 6 April 2015 “the provisions applicable to this appeal remains substantially the same” and therefore this is the law in relation to post 6 April 2015 Part 36 offers.

It was accepted that there was a tension between CPR 45.29B and CPR 36.14A. The former states that the only costs to be awarded in a Section III A cases are fixed costs, whereas the latter says that, in such cases, rule 36.14 will apply subject only to the modifications stated in rule 36.14A, and following, and none of those modifications affects rule 36.14(3).

The Explanatory Memorandum to the 2013 Amendment Rules which was laid before Parliament to accompany the draft statutory instrument is admissible as an aid to the construction of the rules. See R v Secretary of State for the Environment ex parte Spath Homes Ltd [2001] 2 AC 349.

At paragraph 7.1(e) that Explanatory Memorandum states:-

“New rules 36.10A and 36.14A make provision in respect of the fixed costs a claimant may recover where the claimant either accepts or fails to beat a defendant’s offer to settle made under part 36 of the CPR. Provision is also made with regard to defendants’ costs in those circumstances. If a defendant refuses a claimant’s offer to settle and the court subsequently awards the claimant damages which are greater than or equal to the sum they were prepared to accept in the settlement, the claimant will not be limited to receiving his fixed costs, but will be entitled to costs assessed on the indemnity basis in accordance with rule 36.14.”

The counterview, rejected by the Court of Appeal, was that although rule 36.14(3) applies in a fixed costs case there is no difference between profit costs assessed on the indemnity basis and the fixed costs provided in Table 6B of rule 45.29C.

It was common ground that under CPR 45.29J the court had a general discretion to allow additional costs in exceptional circumstances – the so-called escape clause.

It was also common ground that the matching or beating of a claimant’s Part 36 offer would not of itself bring the matter within the escape clause.

As to the practical application of this rule the Court of Appeal, at paragraph 31, said:-

“Where a claimant makes a successful Part 36 offer in a section IIIA case, he will be awarded fixed costs to the last staging point provided by rule 45.29C and Table 6B. He will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective. This does not require any apportionment. It will, however, lead to a generous outcome for the claimant. I do not regard this outcome as so surprising or so unfair to the defendant that it requires the court to equate fixed costs with costs assessed on the indemnity basis… a generous outcome in such circumstances is consistent with rule 36.14(3) as a whole and its policy of providing claimants with generous incentives to make offers, and defendants with countervailing incentives to accept them.”

Thus one looks at the date of settlement or judgment and the claimant gets fixed costs to that stage in the usual way, whether or not a Part 36 offer has been made. That is straightforward.

In addition the claimant gets costs on the indemnity basis from the date that the offer became effective. I take that phrase to mean from 21 days after the offer was made.

Let us say that the claimant makes a Part 36 offer when the matter is out of the portal but before proceedings are issued. The claimant subsequently matches or beats that offer at trial.
The claimant will get full fixed costs, including the advocacy fee and in addition will get full indemnity costs from 21 days after the successful Part 36 offer was made. For all intents and purposes the claimant, or rather the claimant’s solicitor, will be paid twice – once at the level of fixed costs and once at the full indemnity rate.

As I understand the judgment no credit for the fixed costs has to be given against the indemnity costs.

As the court said “this does not require any apportionment.” Also there would be no need for the reference to this being a generous outcome for the claimant; if the claimant just received indemnity costs and not fixed costs as well, then it would be just the same as any non-fixed costs case and so there would be no additional element of generosity.

This is a view shared by Professor Dominic Regan and I am grateful to Dominic for considering this piece.

An alternative interpretation is that the claimant gets fixed costs to the point where the Part 36 offer was made and indemnity costs thereafter, but again that would not involve nay element of that being a generous outcome for the claimant. It would also make less difference than normal as in fixed costs cases part of the recoverable fee is essentially a recoverable contingency fee related to the amount of damages, whatever stage the case has reached. I suppose that that could be interpreted as the element of generosity.

Provisional Assessment

My view expressed here has now been confirmed by the Queen’s Bench Division of the High Court in Lowin v W Portsmouth and Co Ltd [2016] EWHC 2301 (QB)  and I analyze this case in detail in my post Claimants’ Part 36 Offers: Six New Decisions.

I referred above to the situation in relation to provisional assessment. CPR 47.15(5) provides:-

“(5) In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party.”

Provisional assessment is a form of Detailed Assessment.

CPR 47.20(4) imports the provisions of Part 36 into the costs of Detailed Assessment with the appropriate change in terminology, for example CPR 47.20(4)(a) provides that “claimant” refers to “receiving party” and “defendant” refers to “paying party”.

The logic and public policy reasons for the decision of the Court of Appeal in Broadhurst in relation to fixed costs must apply with equal force to provisional assessment proceedings. Others have suggested that whether assessment is on the standard basis or the indemnity basis the £1,500 cap is just that – an absolute cap- and that capped costs are conceptually different from fixed costs.

However the Broadhurst points still apply and if it was clear that the standard costs in a provisional assessment case are going to hit the cap then a claimant’s Part 36 offer becomes much less important as does the defendant’s incentive to settle. Why import Part 36 at all if that is the case? Indemnity costs capped at £1,500 are hardly worth the effort and concession.

A counter argument is that the 10% uplift on costs for the effort of making one Part 36 offer taking a few minutes makes it very much worthwhile and that here, as compared with the substantive case, that is where the reward lies rather than in extra costs for a long period of a piece of contested litigation.

The judgment is also of great importance for two other reasons.

Indemnity Costs for Claimant on Settlement

Firstly it is a recognition that a claimant gets indemnity costs even if the matter does not go to trial. Otherwise there would be no need to refer to “the last staging point” as it would only apply if the matter had gone to trial and no consideration of the different stages within the preparation for trial matrix would be necessary.

This had not previously been clear.

Underwoods Method

At paragraph 32 of the judgment the Master of the Rolls recognises, with neither approval nor criticism, the existence of the Underwoods Method, that is of a solicitor and own client hourly rate with the overall charge to the client capped at a percentage of damages. This is a crucial section and is a wholesale rejection of the obiter comments made by District Judge Lumb in A & M (by their litigation friend) v Royal Mail Group (2) [2015] MISC B30 (CC).

The relevant part of the Court of Appeal Judgment appears at paragraph 32 and reads:-

“He says that the way in which lawyers are typically engaged in this part of the market is heavily reliant on CFAs and legal expenses insurance. Both forms of funding typically provide for lawyers to charge on a conventional hourly basis, but may cap their right to enforce payment with reference to the amount recovered. He adds that it is still very common for costs beyond fixed costs to be deducted from claimants’ damages. There is no evidence before us to support this statement either, although I have no reason to doubt it.”

Clearly lawyers who stand to get costs on the indemnity basis will wish to have an appropriate hourly rate in the client care retainer, but equally clearly the client will want to be assured that they will not lose all or most of their damages by way of the unrecovered solicitor and own client costs, given the relatively low level of fixed costs.

The comments of the Master of the Rolls are eminently sensible and helpful and should go a long way to removing the fears of civil litigators concerning fixed costs.

This decision of the Court of Appeal is of great importance and will of course become very much more significant now that it is proposed to introduce fixed costs in all civil work of all kinds where the damages are valued at £250,000.00 or less. The potential rewards to claimants solicitors for getting the Part 36 offer right in such cases is enormous as not only will the solicitor receive fixed costs but they will also get indemnity costs on top. Being indemnity costs they are not subject to proportionality.

However the indemnity costs, not being fixed costs, are subject to the indemnity rule and thus very careful drafting of the retainer is necessary.

A retainer that provides for the solicitor to charge the client fixed costs as per the matrix will result in the solicitor getting no extra costs at all as the costs on the indemnity basis, that is the basis of the solicitor and client retainer, will be identical in amount to fixed costs as that is the wording of the retainer.

This is one of a series of recent decisions by the superior courts clarifying the law in relation to Part 36 offers. They have all gone in favour of claimants and this is a welcome redress to what appeared to be an anti- claimant bias in some earlier, lower court, decisions.

Many thanks to Professor Dominic Regan for his help with this piece.

I am grateful to Kevyn Thompson for discussions re CPR 47.

Please see my related blogs:-

PART 36: THE DRY SALVAGES : UNIFIED

PART 36 – IMPORTANT RECENT CASES

Written by kerryunderwood

March 1, 2016 at 8:55 am

Posted in Uncategorized

%d bloggers like this: