Archive for March 2016
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.
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.
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.
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 .
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  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  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  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  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.”
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:-
(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  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.
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  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
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.
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.
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.
DOES A CLIENT WITH A PRE-JACKSON CONDITIONAL FEE AGREEMENT WITH A NIL SUCCESS FEE GET THE 10% UPLIFT
In the initial decision in the case of Simmons v Castle  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
“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.”
“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).
- … 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:-
- that is to be paid; due, owing; falling due
- that can be paid; capable of being paid
Pay is defined as:-
“The action of paying, as a verb it is defined as:-
- to give
- (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.
- to give a recompense for, to recompense, reward, requite (a service, work, or action of any kind)
- 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).
- to give or hand over the amount of, give money in discharge of (a debt, dues, tribute, tithes, ransom, fees, hire, wages, etc.)
- 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  EWCA Civ 1288.
the Court of Appeal held that the 10% uplift applies to all claimants except those covered by Section 44 (6).
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.
the Court of Appeal held that the 10% uplift on general damages as set out by the Court of Appeal in
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
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  EqLR 691 EAT and
The Sash Window Workshop Ltd v King  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
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  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.
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.
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  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)  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.
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.
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