Archive for October 2021
MASTER OF THE ROLLS, THE PORTALS AND 100 YEARS OF SOLITUDE
This piece appears in Issue 27 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.
By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.
The Master of the Rolls, speaking at a City of London Corporation event said that a “digital triage portal” for all civil justice claims could make England and Wales the first major economy to make the wholesale transition to online dispute resolution, saying that Covid-19 “will be seen to have changed our justice system forever”.
He said that District Judges and Circuit Judges now dealt with 80% of civil claims by way of remote video hearings, with only hearings of two hours or more being dealt with face to face, saving costs, expenses and time for lawyers, parties and witnesses.
Over half of County Court small claims are worth less than £500.
The Master of the Rolls predicted “50 or 100 online Pre-Action Portals aimed at one thing – not dispute, but resolution.”
He said that the Whiplash Portal has already dealt with 60,000 cases since it went live last May.
Now, in appropriate situations, I have no problems with portals, and I think that the old Road Traffic and Employers and Liability/ Public Liability Portals have worked very well.
However, there are a number of flaws in the arguments of the Master of the Rolls.
Firstly, the official figures in relation to the Small Claims Portal – it is not a Whiplash Portal and just 33% of claims made were Whiplash only claims – had 45,718 cases as at the end of September 2021.
It may be that that had increased to around 60,000 by the time that the Master of the Rolls spoke.
However, to say that anything like that number of cases has been “dealt with” is entirely wrong.
As at 8 September 2021, the last date for the official figures, just 463 claims had been settled.
Receiving a claim is not the same as dealing with it, and that is the equivalent of saying that the moment proceedings are issued in the County Court, the matter has been “dealt with”.
To refer to dealing only with resolution and not dispute, also fails to understand the nature of the vast majority of low value litigation, which is debt collection from a party that owes money and has never responded to anything from anyone.
The idea that in low value claims people have issued proceedings for the sake of it, without trying to resolve the matter first, is rarely the case, as any High Street solicitor in the land knows.
The speech also fails to take in to account the old adage that justice not only has to be done but has to be seen to be done.
I have grave doubts as to whether the majority of litigants dealing with a digital triage portal, whatever that means will feel anything other than lost in a difficult system.
Have a look at the new Small Claims Portal and the guidance – most of the readers of this will be lawyers. Good luck if you understand it. The chances of the lay public understanding it are low, which is no doubt why just 9.48% of claims made on the new Small Clams Portal ae by litigants in person, whereas the whole idea was that it should drive lawyers out of the system.
In Ireland a similar attempt was made, with almost identical figures.
The well-known Tweeter Judge Itis – who may or may not be a District Judge – commenting on my Tweet, tweeted:
This is the sort of myth the MR and HMTCS [Her Majesty’s Courts and Tribunal Service] promotes.
His speech reported in the LSG [Law Society Gazette] does nothing for DJ [District Judge] recruitment.
Have a career as a case processor.
Going down this route will be the death of the district bench and the County Court and therefore access to justice.
How true.
It is unfortunate that the issues of remote hearings and digital triage portals and what the Master of the Rolls calls “Claims R us” is getting mixed up with the concept of remote hearings.
I was one of those who pushed very hard to have telephone hearings for interlocutory matters and directions etc. rather than incur the cost of lawyers travelling hours for a ten minute hearing.
I have no problem whatsoever with remote hearings in appropriate cases, and I personally have no problem with evening and weekend courts.
I can see great merit in having low value claims dealt with very soon after they are issued by judges by Zoom or MS Teams or whatever in the evenings or on Saturdays, which is likely to be more convenient to the parties and witnesses than day time during the week.
The ability to save time by having remote hearings should render what the Master of the Rolls calls “three interconnecting layers” – which doesn’t sound very simple to me – unnecessary.
Low value claims where judgment is not entered in default, and where a defence is entered, could be referred to a District Judge immediately for case management, that is a short telephone conversation or video with the parties within a few days of the defence being received.
That District Judge should then decide the way ahead, which may often be a short remote hearing.
That judge could also give an indication to the parties as to whether they should settle, or whether one has a hopeless case or whatever.
That judge would not then be further involved in that matter.
This will be a far better way, for litigants and for the judiciary, rather than an ever more complicated online system.
Imagine 100 portals and 100 set of rules to deal with those portals and 100 sets of Guidance.
Let alone anything else, how would a lay person, in anything other than a very simple matter, know which portal to choose?
The Small Claims Portal itself is entirely silent on the key issue of how hybrid claims are dealt with, that is a mixture of whiplash and other injuries, in spite of everyone from both sides pointing out that this was a key issue.
Now representatives from both sides are suggesting that the matter should be got before the Court of Appeal as soon as possible for a ruling.
Rather than techno-speak, maybe we should have comprehensive and clear Civil Procedure Rules with a properly funded court system where, ultimately, if the parties wanted, a matter is dealt with by a real judge applying her or his judgment.
Law is about how society manages and controls itself, with all of the complexities and balances that that involves.
I would make these comments even if Her Majesty’s Courts and Tribunals Service had a history of state-of-the-art technology performing to the very highest of standards.
Is has not.
INTEREST ON COSTS
This piece appears on pages 3-12 in Issue 2 and page 4 in Issue 6 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.
By subscribing to the Newsletter, you are entitled to a free copy of my 1300-page, three volume book Personal Injury Small Claims, Portals and Fixed Costs and also a free copy of my book of Qualified One-Way Costs Shifting, Section 57 and Set-Off.
In two decisions just four days apart, two different parts of the High Court came to diametrically opposed decisions on two areas of interest on costs.
Now, costs are always in the discretion of the court, and interest on those costs is an extra layer of discretion, but in each case the court assumed that its decisions were in accordance with normal practice.
Thus, each court’s understanding of normal practice was fundamentally different from that of the other court.
First in time was the decision of the Senior Courts Costs Office on 10 July 2020 in
Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs).
No Interest On Disbursement Funding Loan
In relation to this issue the Senior Courts Costs Office held that the losing defendant in a personal injury case should not be liable for interest on a disbursement funding loan taken out by the claimant.
The agreed rate of interest was 5% and the total interest was £2,484.48.
Here, the claimant sought that sum as an item of costs and alternatively by way of allowing interest to run from an earlier period, that is to award pre-judgment interest.
The court disallowed both bases of the claim, but set out the different case law and considerations in relation to these two alternative methods of seeking to recover the cost of disbursement funding.
The decision not to award interest on the cost of a funding loan was followed in the case of
Godfrey v Automotive Products Limited, 17th December 2020, Liverpool County Court Case No: F11LV253.
That decision was by a District Judge who is also the Regional Costs Judge and the judge found that he had the power to award interest but chose not to exercise his discretion to do so.
The judge said that he was not satisfied that justice required interest to be awarded. Whether or not he was influenced by the rate of interest – 15.3% – is unclear.
The judgment is worth reading as the unsuccessful claimant was represented by Benjamin Williams QC, and his submissions, set out in some detail in the judgment, set out the history of the case law in this area, much of which I also deal with below.
The judgment does not deal with the central issue raised by Benjamin Williams QC, and me below, and that is why the courts should treat personal injury claimants and commercial claimants differently.
Commercial claimants virtually always get interest on costs; personal injury claimants rarely do.
As A Costs Item
The court held in Marbrow that there was no discretion to allow disbursement funding interest as a costs item, as compared with pre-judgment interest.
In
Hunt v RM Douglas (Roofing) Ltd [1987] 11 WLUK 221
the Court of Appeal held that funding costs had never been included in the categories of expense recoverable as costs and to include them would constitute an unwarranted extension.
In
F & C Alternative Investments (Holdings) Ltd & Ors v Barthelemy & Anor [2012] EWCA Civ 843
the Court of Appeal approved the submission that “costs of funding litigation by way of bridging loans are not ordinarily recoverable in themselves as costs of litigation”.
The decision in
concerned the rate of interest that could be allowed in costs from a date earlier than judgment rather than claiming it as a separate capital item of costs.
Thus the fact that there the court upheld the lower court’s decision to allow interest on pre-judgment disbursements at 4% above base rate, rather than at any lower rate, did not affect the principle that interest of itself cannot be claimed as an item of costs.
Pre-judgment Interest
Nevertheless CPR 44.2(6)(g) does allow the court to order the payment of interest on costs from a date before judgment.
Here, the court held that while it clearly had that power, justice in this case did not require a departure from the general rule that interest should only be paid from the date of the costs order, and the court also pointed out that the high rate of interest under the Judgment Act 1838 – 8 % – “should go some way to compensating the claimant for the interest that he is liable to pay for funding the disbursement.”
The Senior Costs Judge gave his reasons for declining to exercise his jurisdiction to order pre-judgment interest:
“33. Jones was a rather different case to the present: a group action in which the disbursements came to a total in excess of £787,500. The present case is a straightforward personal injury claim. No evidence of the Claimant’s means has been produced but for present purposes I am happy to accept, on my reading of the papers, that it is unlikely that the Claimant would have had the means to fund disbursements other than by a loan. That is almost certainly the case for the vast majority of claimants in personal injury actions. Yet the incipitur rule remains the default position and parliament did not choose, when enacting the Legal Aid, Sentencing and Punishment of Offenders Act 2013, to make specific provision for the funding of disbursements whether by enabling the recovery of funding costs or by creating a default entitlement to pre-judgment interest.”
The decision not to award pre-judgment interest follows the recent case of
Nosworthy v Royal Bournemouth & Christchurch NHS Foundation Trust [2020] EWHC B19 (Costs)
It should be noted that Parliament has specifically given the courts power to award pre-judgment interest and a full High Court Judge in the case of
Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm)
said:
“Since Hunt’s case was decided, the CPR have given the court power to order interest to be paid on costs from a date before judgment: see CPR 44.2(6)(g). This power is now routinely exercised when an order for costs is made following a trial to award interest at a commercial rate from the dates when the costs were incurred until the date when interest becomes payable under the Judgments Act . In the usual way, I have made such orders in this case.”
Just four days later, on 14 July 2020, the Chancery Division of the High Court awarded pre-judgment interest on costs in the commercial case of
Sharp and others v Blank and others [2020] EWHC 1870 (Ch)
In that case the court said:
“22. CPR44.2(6)(g) provides that the Court may order interest on costs from a date before judgment. It is common ground that this jurisdiction will generally be exercised where a party has had to put up money to pay its solicitors and has thereby either lost the beneficial use of that money or has had to borrow it. It is also common ground that the rate awarded will be determined by weighing the factors identified by Sharp LJ in Jones v SoS for Energy and Climate Change [2014] EWCA Civ 363 at [17]-[18], generally with the aim of identifying a commercial rate in the circumstances. In the instant case there is no argument about the rate. The Claimants submit (and the Defendants accept) that, if ordered for any period, the appropriate rate is base rate simpliciter. The issue is whether interest should be awarded at all.
23. For the Claimants Mr Hill QC submits that it should not. His argument was that the Claimants obtained (in the face of opposition from the Defendants) a costs management order so that they could secure an accurate assessment of the costs risks that they faced and could compare it with the level of ATE insurance available to them. The Defendants did not signal an intention to claim pre-judgment interest on costs at any time when costs budgets were under consideration, and a possible claim for interest was not factored in to the level of ATE cover obtained. The figure at which Defendants invited the Claimants to secure insurance cover (with which request they broadly complied) did not include any element of interest at costs.
24. For the Defendants Ms Davies QC submitted (i) that interest on costs does not form an element of recoverable costs for the purpose of costs budgeting so that it is not surprising that it was not mentioned in the costs budget debates; (ii) there had been no representation that interest would not be claimed; (iii) no-one could during the costs budgeting process know for what period or at what rate interest would run and it was for the Claimants to assess their exposure on that account and (if desired) cover it; (iv) there was no justice in the current shareholders in Lloyds being deprived of compensation for the loss of the beneficial use of their money simply to benefit a group of past shareholders.
25. I accept that the Defendants had a commercial interest in the level of ATE cover obtained by the Claimants because of the great difficulties attending costs recovery under the GLO. But it was ultimately for the Claimants to decide against what risks to insure and what risks to bear themselves. A claim for pre-judgment interest on costs is commonplace, and it was for the Claimants to decide whether any protective measures were required, not for the Defendants to call for them. I shall exercise the discretion in the way in which it is customarily exercised and order the Claimants to pay interest on the Defendants’ costs at the applicable Bank of England base rate from the date of payment of each invoice until the earlier of (i) payment of such costs or (ii) the date from which interest at the rate prescribed by the Judgments Act 1838 become payable.”
So not only did the court come to a completely different conclusion but it referred to a claim for pre-judgment interests on costs as being commonplace and that it is normal for pre-judgment interest to be ordered.
So we now have two different parts of the High Court in the space of four days saying completely different things.
On 11 September 2020 the Technology and Construction Court, part of the Queen’s Bench Division of the High Court, delivered yet another decision on the subject –
Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC) (11 September 2020)
There the court followed the decision in
Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm)
and awarded interest on pre-judgment costs at the rate of 2.4% per annum, being the actual cost of borrowing of Essex County Council.
The court dealt with the matter in Paragraph 84 of its judgment:
“84. The parties agree that interest on costs should run from the date of payment of the costs rather than from the date of my costs order. As I have already observed, such order is of course made pursuant to r.44.2(6)(g). Unless the court makes a contrary order, interest on the award of costs would, however, run at 8% per annum pursuant to s.17 of the Judgments Act 1838. Given the disparity between that rate and the Authority’s true cost of borrowing, the parties are agreed that the court should make an order pursuant to r.40.8(1) delaying the running of interest on costs under the 1838 Act until 14 September 2020 and setting a more commercial rate until that date. I agree that such course is appropriate for the reasons explained by Leggatt J, as he then was, in Involnert Management Inc. v. Aprilgrange Ltd [2015] EWHC 2834 (Comm), [2015] 5 Costs LR 813 in circumstances where a significant interim payment has been ordered and it is not reasonable to expect the paying party to pay the balance of the costs liability until it has had a fair opportunity to determine what sum it accepts is properly payable. I therefore order that, subject to the order already made under r.36.17(4)(c), interest on costs shall run at the rate of 2.4% per annum from the date when the costs were incurred until 14 September 2020 and thereafter at the rate specified by s.17.”
For my critique of that difference, and why the decisions are irrational, see my blog
COURT REFUSES PRE-JUDGMENT INTEREST IN PERSONAL INJURY – BUT OK IN COMMERCIAL CASES
Post-judgment Interest on Costs
In the first of the three cases decided, that is
Marbrow v Sharpes Garden Services Ltd [2020] EWHC B26 (Costs)
the Senior Courts Costs Office held that interest should normally run from the date of the original order for costs and at the judgment rate of 8%.
This may seem obvious, but in fact it involved the court disagreeing with the decision of the High Court in
Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm)
where the court said:
“it seems to me that a reasonable objective benchmark to take is the period prescribed by the rules of court for commencing detailed assessment proceedings. Pursuant to CPR 47.7, where an order is made for payment of costs which are to be the subject of a detailed assessment if not agreed, the time by which detailed assessment proceedings must be commenced (unless otherwise agreed or ordered) is three months after the date of the costs order. In order to commence such proceedings, the receiving party must serve on the paying party a bill of costs giving particulars of the costs claimed. It is then for the paying party to decide which items in the bill of costs it wishes to dispute. Postponing the date from which Judgments Act interest begins to run by three months will therefore generally serve to ensure that the party liable for costs has received the information needed to make a realistic assessment of the amount of its liability before it begins to incur interest at the rate applicable to judgment debts for failing to pay that amount.”
Strictly the court here distinguished that decision on the basis that it was a commercial case in which the court had ordered the payment of interest at 2% over base rate from when the costs were incurred, that is pre-judgment interest, until the date three months after the date of the costs order was made.
Nevertheless, it is clear that the judgment in Involnert was wrong, and so obviously wrong that it need no longer be followed, as it failed properly to take into account a Court of Appeal decision to the contrary, and failed properly to implement an Act of Parliament.
As the court here pointed out the entitlement to interest on costs is automatic under section 17 of the Judgments Act 1838 which provides:
(1) Every judgment debt shall carry interest at the rate of 8 pounds per centum per annum from such time as shall be prescribed by rules of court . . . until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.
(2) Rules of court may provide for the court to disallow all or part of any interest otherwise payable under subsection (1).
Rule 40.8 of the Civil Procedure Rules 1998 provides:
(1) Where interest is payable on a judgment pursuant to section 17 of the Judgments Act 1838 or section 74 of the County Courts Act 1984, the interest shall begin to run from the date that judgment is given unless –
(a) a rule in another Part or a practice direction makes different provision; or
(b) the court orders otherwise.
(2) The court may order that interest shall begin to run from a date before the date that judgment is given.
Rule 44.2 provides (in part):
(6) The orders which the court may make under this rule include an order that a party must pay –
….
(g) interest on costs from or until a certain date, including a date before judgment.
Consequently interest is payable on costs at 8% from the date of judgment without the need for an order to that effect, unless the court makes a different order under either CPR 40.8 or CPR 44.2(6)(g) – see Hunt v R.M.Douglas (Roofing) Ltd [1990] 1 AC 398.
The court here quoted from the case of
Simcoe v Jacuzzi UK Group Plc [2012] EWCA Civ 137
which is a Court of Appeal case which pre-dated the Involnert case and the High Court there appears not properly to have considered the judgment in Simcoe.
In Simcoe the Court of Appeal said:
“47. We were referred to Fattal v Walbrook Trustees (Jersey) Ltd [2009] EWHC 1674 (Ch), [2009] 4 Costs LR 591, paras 25-30, in which Christopher Clarke J held, in summary terms, that the effect of CPR 40.8 was that (a) the general rule is that interest on costs runs from the incipitur date, (b) a departure from that general rule is justified if it is ‘what justice requires’; (c) the notion that a departure can only be justified in ‘exceptional’ cases is an unhelpful guide; (d) the primary purpose of an award of interest is ‘to compensate the recipient for [having] been precluded from obtaining a return on [his] money’; (e) ‘[s]ince the payment of solicitors’ costs involves the payment of money which could otherwise have been profitably employed, the overwhelming likelihood is that justice requires some recompense in the form of interest’.
48. I agree with all those observations, but would add two precautionary comments on his observations. First, I would discourage too detailed an approach into the facts of the particular case in hand for the purpose of determining the date from which interest should run. As Lord Ackner’s speech in Hunt [1990] 1 AC 398 implies, when making such a determination, the court should take a broad view of the position. Prolonged argument, let alone detailed evidence, on the issue must be avoided. There will often be no perfect date, and the decision inevitably will, indeed should, be broad brush. Further, if interest was to run from different dates on different components of the costs, it would, in many cases, lead to arguments which would do the legal system no credit.
The second observation is that I would not necessarily agree with the suggestion, at [2009] 4 Costs LR 591, para 30, that it may be inappropriate to award interest on costs where the case is being funded by a third party entirely voluntarily or otherwise free of any cost. I would have thought that, following the logic of reason (v) in para 11 above (and see para 46 above), if interest on costs is payable from the incipitur date, the party to whom it is paid may have to account for it to the third party, and, if that is correct, there would seem to me to be a powerful argument for saying that the third party should get interest on costs in the normal way.”
However, four days later, the Chancery Division of the High Court in
Sharp and others v Blank and others [2020] EWHC 1870 (Ch)
took a completely different view and awarded it judgment interest on costs from four months after the date of its judgment on costs, and thus followed the decision in
Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm)
Date Of Start Of Interest On Costs At 8%
Here the court said that the judgment debt rate should only apply from four months after the order for costs.
Again, this is in stark contrast to the decision in Marbrow where the court said that interest should normally run from the date of the original order, where the court held that the decision in
Involnert Management Inc v Aprilgrange Limited & Ors [2015] EWHC 2834 (Comm)
was for all intents and purposes wrong.
I agree with that statement.
However, here the court approved of Involnert saying it was “a thorough analysis” of the issues and saying this:
“Normally the interests of justice will indicate that the rate of interest applicable in the event of non-payment of a judgment debt should only run from the time when (i) the amount of that debt is known (or can at least be the subject of fair estimation for the purposes of offers of compromise) and (ii) the essential mechanics of payment can be completed.”
The complete mess that the courts are in on the issues of interest and costs can be demonstrated by my own statement in my blog on the Marbrow case – judgment given on 10 July 2020 – where I said:
“This very helpful decision should put this issue to bed. Interest on costs runs at 8% from the date of the original order for costs and Involnert was wrongly decided.”
Just four days later, the High Court has taken a diametrically opposed view.
I realise that where there is discretion, different courts will come to different conclusions.
The problem here is that both courts are assuming that the decision that they have arrived at in each case is normal and customary etc.
For full and detailed analysis of the Marbrow case – see my blog
Part 36 Uplift on Interest on Costs
There is a twist in the tale in relation to interest on costs where a claimant has matched or beaten its own Part 36 offer.
In those circumstances the court must, unless it considers it unjust to do so, order that the claimant is entitled to costs on the indemnity basis from the date on which the relevant Part 36 period expired and, under CPR 36.17(4)(c):
“(c) interest on those costs at a rate not exceeding 10% above base rate;”
In
Essex County Council v UBB Waste (Essex) Ltd (No. 3) [2020] EWHC 2387 (TCC) (11 September 2020)
the Technology and Construction Court, part of the Queen’s Bench Division of the High Court, pointed out that the ruling in
McPhilemy v Times Newspapers Ltd & Ors [2001] EWCA Civ 933
wrongly stated that what is now CPR 36.17(4)(c) was designed to redress the unfairness that arises from the rule that interest is not normally awarded on costs before judgment.
As the court here pointed out, the court does have that power pursuant to CPR 44.2(6)(g) and indeed in the Essex case awarded such interest.
The award of interest on costs at 4% above base rate in McPhilemy became the conventional award, but the court here declined to follow the Court of Appeal decision on the basis that it was wrongly decided as it had failed properly to consider the law and the relevant Civil Procedure Rule.
Consequently the court awarded interest upon costs pursuant to CPR 36.17 at the full rate of 10% over base rate from the expiry of the period for accepting the Part 36 offer on damages.
It is important to note that the CPR 36.17 power to award this punitive rate of interest covers the period from when the date for acceptance of the Part 36 offer expired, and thus potentially can apply to years of pre-judgment costs.
This is a very important decision which has got a bit lost given the eight separate significant costs and Part 36 offers issues considered in the Essex case.
Comment
How about a nice, long, detailed and clear Civil Procedure Rule in relation to interest.
It is not rocket science.
It could deal with all normal scenarios, that is where there is a third party litigation funder, where the client borrows from a bank, where the solicitor effectively funds the case, where there is only disbursement funding etc, etc.
The rule could then end with the statement:
“A court shall only depart from the above provisions if there are exceptional circumstances, which would make the application of these provisions clearly unjust.”
INTEREST: ADJUDICATION
In
the Court of Appeal held that an adjudicator had declined to award interest in the erroneous belief that she had no power to do so, rather than thinking that she had the power but should not exercise it.
The decision was unclear.
The High Court upheld her decision, but the Court of Appeal overturned it, holding that it was an error of law.
The Court of Appeal remitted the matter to the Adjudicator to exercise her power to decide whether an award of interest was appropriate in this case, the Court of Appeal having held that she did have the power to award interest.
This was an NHS contract within the meaning of the National Health Service Act 2006.
The Court of Appeal said that the starting point is that interest is payable and general equitable principles and the Late Payment of Commercial Debts (Interest) Act 1998 were relevant by analogy.
“25. Whatever the pre-existing practice, I can see no justification for a blanket policy or decision not to include an award of interest as a constituent part of the appropriate resolution of a dispute where a party has been kept out of sums of money to which it was rightfully entitled. Put another way, if a party to a dispute has been kept out of their money, it is prima facie appropriate that the resolution of that dispute should include provision to reflect and compensate the party for that fact. There may of course be reasons why that may not apply in a given case; but that should be for the decision of the adjudicator on the facts of the particular case. I would hold that the general powers available to the Adjudicator under ss. 9(11) and 9(12) confer a power to award interest where it is appropriate to do so. When considering whether or not such an award is appropriate it is open to the Adjudicator to take into account the considerations that would apply and weigh with a decision maker if the arrangement were a contract at law and the Adjudicator were a court. To that extent the 1998 Act and general equitable principles may be relevant by analogy; but, ultimately, the decision as to what is appropriate is a matter for the Adjudicator to decide on the facts of a given case taking all relevant matters into account.”
UPDATES
PRE-JUDGMENT INTEREST ON COSTS
In
Puharic v Silverbond Enterprises Ltd [2021] EWHC 389 (QB)
a Deputy High Court Judge awarded pre-judgment interest on costs saying that “Such awards are common in modern litigation….”
“6. Pursuant to CPR 44.2(6)(g). The court has the discretion to award interest on costs incurred by a successful party for periods prior to the date of judgment. Such awards are common in modern litigation, and I see no reason in principle not to award such interest in this case. I reject the Claimant’s submission (paragraph 15 of the written submissions) that it would be unjust to do so.
7. The Defendant seeks interest from the date which its costs were paid. I accept that is the appropriate period. The Defendant claims interest at 2% over the applicable base rate from time to time, in the total sum of £2,057.75. The Claimant has made no submissions about the applicable rate, and has not challenged the figures. In my judgment the rate claimed is reasonable, and I will make an order for pre-judgment interest in the sum of £2,057.75.”
NEW SMALL CLAIMS PORTAL: A DISASTER
This piece appears in Issue 27 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.
The new Small Claims Portal, together with the related Whiplash Tariff, which reduced awards in whiplash claims by up to 80%, came in on 31 May 2021.
Figures for the first three months of its operation to 30 September 2021, show that claims are down by around two thirds, with 45,718 claims being received.
Comparisons with 2020, when there were far fewer accidents due to cars being off the road during the pandemic, are less relevant than comparisons with pre-pandemic 2019, but still show a more than 50% reduction.
In the same period in pre-pandemic 2019, there were 168,217 motor claims registered with the Compensation Recovery Unit, some, but not a huge number, will have been non-portal claims due to their value.
Even value comparison is difficult, as claims which would have been valued at more than the portal limit, will now be in it due to the slash in general damages in whiplash claims; thus, there are potentially more claims for the new portal, but far fewer have been made.
On a straight comparison, claims are just 27.17% of what they were, that is down 72.83%.
As indicated, that is not the whole story and a key figure will be the number of claims received on the old portal for the same period, although that too has to be treated with caution, as old claims, that is pre-31 May 2021 accidents, are not subject to the new Small Claims Limit, nor the Whiplash Tariff.
Each quarter’s figures will show a more accurate comparison as the old cases disappear.
Any which way, claims are down by two thirds or more.
Of those 45,718 claimants, 41,387, that is 90.52% were represented, with just 9.48% acting as litigants in person.
These figures show that the Government’s aim of excluding lawyers from the process has not worked.
The inevitable conclusion is that around two thirds of people who would previously have brought a claim are now not doing so.
We do not yet know the reason or reasons for that, and it is likely to be a combination of:
(i) not worth bringing due to low damages;
(ii) fewer lawyers prepared to take on these claims;
(iii) difficulty following the extremely complex rules and the portal process.
Of the 45,718 claims representation is as follows;
| Solicitors | 30,658 |
| Alternative Business Structures | 10,622 |
| Litigants in person | 4,331 |
| Claims Management Companies | 107 |
| Total | 45,718 |
436 claims were settled by 8 September 2021, the vast majority from unrepresented claimants, even though they made up just 9.48% of claims.
That very strongly suggests under-settlement on a huge scale by unrepresented parties.
2,763 claims exited the portal other than due to settlement.
Just 33% of claims were Whiplash Tariff only, with the balance being hybrid, that is multiple injury claims, and we have no idea how those claims will be dealt with, as in hundreds of pages of guides, rules and protocols there was silence on this key point, which we now know involves over two thirds of claims.
That strongly suggests that whiplash only potential claimants are not claiming, probably for the reasons set out above.
Admissions of liability by compensators appear to be similar in relation to both represented and unrepresented claimants.
During the quarter liability had been admitted in part or in full in relation to 21,680 claimants and of these 19,366 were represented and 2,314 were unrepresented.
Liability was denied in full in 2,447 cases, and 4% of those involved litigants in person.
Comment
None necessary.
Justice is being destroyed in this country.
I am not against portals; generally the old ones work very well indeed. This was a nakedly political and class action; political because it pays off the insurance paymasters, class because the loss of £2,000 or so has a hugely greater effect on poor people than others.
The Master of the Rolls has recently spoken of a Claims R Us portal – leave aside that Toys R Us went bust- “with 50 or a hundred online pre-action protocols”, and also an Ombudsman process – leaving aside that that is an unmitigated disaster that is about to be scrapped.
The Court of Appeal, with the Master of the Rolls sitting, should declare this whole scheme a breach of Article 6 – the right to a fair trial- and declare it unlawful, just as the Supreme Court did with employment tribunal fees, notably overturning the decision of the Court of Appeal.
Then we may have more confidence going forward with other portals.
QUALIFIED ONE-WAY COSTS SHIFTING: NO SET-OFF OF COSTS AGAINST COSTS SAYS SUPREME COURT: WRONG DECISION
This piece appears in Issue 27 of Kerry On Costs… And So Much More…, a fortnightly publication costing £500 a year plus VAT, and available until 31 December 2022, including back Issues for 2021 here.
In
Ho (Respondent) v Adelekun (Appellant) [2021] UKSC 43
the Supreme Court unanimously overturned the decision of the Court of Appeal and held that in a QOCS case a defendant could not set-off costs due to it against costs due to the claimant, but could only set-off its own costs against damages and interest awarded to a client.
The Supreme Court held that CPR 44.14 (1) created a monetary cap on the amount of costs that a defendant could recover in a QOCS case, and that cap was the sum of damages and interest, but not costs, awarded to the claimant.
A defendant should keep a running account of costs recoveries from the claimant and cease enforcement once the cap is reached.
The Supreme Court said that it had reached this decision as one of construction and not policy and that the Civil Procedure Rules Committee was a more appropriate venue for consideration of these issues than the court.
The Supreme Court recognized that its ruling may, at first blush, give rise to counter- intuitive and unfair results, but that was the effect of CPR 44.14.
“No one has claimed that the QOCS scheme is perfect. It is, however, the best solution so far that the opposing sides in the ongoing debate between the claimant’s solicitor and defendant’s insurers have been able to devise.”
Although the QOCS regime under CPR 44.14-17 was not a complete code, nor wholly excluded set-off of costs against costs under CPR 44.12, the Supreme Court held that it was intended to be a complete code in relation to defendants in personal injury actions.
In a settled claim, damages are not usually ordered and therefore the cap will be zero, thus preventing the defendant from enforcing any cost order, following the decision of the Court of Appeal in
Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654
where the court took a narrow view of “damages and interest ordered” reflecting the wording of CPR 44.14, which throughout, refers to “orders”.
In Cartwright the court held that where sums are payable under a Schedule to a Tomlin order, or following acceptance of a Part 36 offer, no damages or interest have been “ordered” and so there is nothing against which the defendant can set-off any costs orders in its favour.
The Supreme Court recognized that its conclusion may mean that a defendant with a substantial costs order in its favour might have to pay out costs to a claimant whilst unable to enforce its own order for costs against that claimant.
Nevertheless, the Supreme Court said:
“It [the QOCS scheme] works to achieve the aims for which it was introduced in the great majority of straightforward cases in which one side or the other is entirely successful.”
Here, Ms Adelekun was injured in a road traffic accident and the matter settled with Ms Ho paying damages and costs but a dispute arose as to the basis of those costs with the defendant arguing that the claimants costs were fixed recoverable costs, and the claimant arguing for open, standard, costs.
That issue reached the Court of Appeal, which decided that only fixed recoverable costs were payable that is £16,700.
The successful paying party was awarded its costs at £48,600 and the issue throughout was whether the fund against which they could set-off those costs of £48,600 included the costs of the claimant, that is fixed costs of £16,700, or not.
The Court of Appeal held that it could set-off against those costs, thus meaning that Ms Ho would have to pay nothing by way of costs to Ms Adelekun as her own costs order in her favour for winning in the Court of Appeal exceeded the costs payable to the claimant in the substantive proceedings.
It was that decision which the Supreme Court here overturned.
The effect of the ruling is that the defendant Ms Ho, must pay the claimant Ms Adelekun the full fixed cost of £16,700 but cannot enforce her costs order of £48,600 against MS Adelekun.
Though the Supreme Court said that it made its decision on the basis of construction not policy, that statement is rather undermined by the opening paragraph of the judgment:
“1. This appeal is about the mechanics of Qualified One-way Costs Shifting (“QOCS”). There always has been, and probably always will be, an inherent inequality of arms between claimants and defendants in personal injuries (“PI”) cases. This is because the defendants in most cases have the benefit of insurance or, in the case of the NHS, large resources, whereas claimants are in general ordinary members of the public, only a few of whom have the benefit of legal expenses insurance or other sources for the funding of litigation. English procedural rules have for many years sought to ameliorate this imbalance, in particular by rules about costs.”
My view is that the decision is, arguably, but only arguably, right on policy grounds, but wrong in its construction of the Civil Procedure Rules, and that the Court of Appeal was right.
The Supreme Court stated that the position was ambiguous and that it would be better dealt with by the Civil Procedure Rules Committee than by the Supreme Court:
“9. We should say at the outset that we doubt the appropriateness of a procedural question of this kind being referred to this court for determination. The very fact that two eminently constituted Courts of Appeal have differed profoundly over the interpretation of a provision of the CPR suggests that there must be an ambiguity which practitioners need to have sorted out. The CPRC exists for the purpose of keeping the CPR under constant review. It is better constituted and equipped than is this court to put right such ambiguities, all the more so where, as here, the outcome is suggested by both parties and by the Association of Personal Injury Lawyers (“APIL”), intervening, to have potentially profound policy consequences for the maintenance of a reasonably fair and level playing field in PI litigation, something which this court is much less well equipped than is the CPRC to assess. Nonetheless, permission having been given, this court must decide the question of construction, leaving it to the CPRC to consider whether our interpretation best reflects the purposes of QOCS and the Overriding Objective, and to amend the relevant rule if, in their view, it does not.”
It needs to be noted here that Ms Ho, effectively the insurers, could not set-off the costs order of £48,600 against damages, as the matter had been settled by way of acceptance of a Part 36 offer, and therefore there was no “order for damages” as required by the QOCS regime.
This follows from the decision in Cartwright, referred to above.
Had the defendants gone to trial, rather than resolving the matter by way of Part 36, then there would have been an order for damages and the insurer could have set-off £30,000 of the costs awarded, the amount of the settlement, against those damages.
It should also be noted that the costs incurred in this matter in going to the Court of Appeal were totally about the issue of costs, that is whether the claimant’s solicitor should recover fixed costs of £16,700, or open costs of £42,000.
I do not know the details of the retainer between the claimant and the claimant’s solicitors, and I do not know whether the costs proceedings in the Court of Appeal were effectively on behalf of the claimant’s solicitors or not.
The effect of this decision is that due to the defendant making a Part 36 offer, rather than forcing the matter to trial, they cannot set-off their £48,600 costs order against damages, and nor, due to this decision against costs.
Thus, the defendant, successful on all costs issues, and which made a genuine and successful Part 36 offer to settle the matter, is forced to pay full damages and costs and is deprived of its own costs.
The Supreme Court refers to the “commendable brevity” of the QOCS scheme as set out in CPR 44.
That is a misconceived statement.
To overturn centuries of costs law by introducing One-Way Costs Shifting may, for policy reasons, may have been a very sensible move.
To try and implement that in half a page of A4 in the Civil Procedure Rules was extremely unwise, and has led to a huge amount of satellite litigation.
There is an enormous benefit in detailed rules.
A key point in the defendant’s case was CPR 44.12 which reads:
“44.12
1) Where a party entitled to costs is also liable to pay costs, the court may assess the costs which that party is liable to pay and either –
a) set off the amount assessed against the amount the party is entitled to be paid and direct that party to pay any balance; or
b) delay the issue of a certificate for the costs to which the party is entitled until the party has paid the amount which that party is liable to pay”
I have always said that it must be highly significant that the Civil Procedure Rules Committee chose to place the rule about set-off in all types of civil litigation, whether or not QOCS applies, immediately above the QOCS rule.
Thus, the rule on set-off is CPR 44.12 and the rules on QOCS is CPR 44.13-17.
As the court here recognized at paragraphs 27-29, before the QOCS regime, the Court of Appeal had allowed a costs against costs set-off against a legally aided claimant in two cases;
Lockley v National Blood Transfusion Service [1992] 1 WLR 492
and
R (Burkett) v Hammersmith and Fulham London Borough Council [2004] EWCA Civ 1342
It is hard to see how the policy decisions in relation to QOCS are any different from legal aid, which was of course a fully fledged Qualified One-Way Costs Shifting system in that a successful defendant against an unsuccessful legally aided claimant could not recover its costs.
It would have been very easy for the rules dealing with QOCS to displace CPR 44.12, but they do not do so, and as I have just stated, it must be significant that CPR 44.12 appears immediately above a QOCS rule.
I set out in full paragraphs 38 and 39 of the Supreme Court Judgment, surely not its finest hour.
“38. We consider that rule 44.14(1) works in the following way. First, it requires two comparators to be constructed. First, the aggregate amount in money terms of all costs orders in favour of the defendant. Secondly, the aggregate amount in money terms of all orders for damages and interest in favour of the claimant. We will call them A and B. If A is less than or equal to B, the defendant can enforce his costs orders without limit. If A is more than B, then the defendant can only enforce his costs orders up to the monetary limit of B. The effect of this cap, as we have called it, is to require the defendant to keep a running account in money terms of all costs recoveries which it makes against the claimant, and to cease enforcement when limit B is reached.
39. The question remains: does the defendant have to bring into account the benefit in money terms of the set-off of a costs order in his favour; in other words does the limit B only apply to the net amount of costs owed by the claimant, having set off any costs the defendant is ordered to pay to the claimant? Plainly the defendant must bring into account the monetary benefit of setting off costs against the claimant’s damages, despite the fact that this may not generate actual cash but only save the defendant from having to put his hand in his pocket to pay the damages and interest to that extent. That is what “money terms” means. For example, assume that the claimant is ordered an award of £20,000 in damages and interest, but that the defendant has costs orders for an aggregate amount of £30,000. If the defendant has not yet paid the damages, it can set off its damages liability against the claimant’s costs liability, but only up to £20,000. It must bring that £20,000 into account under rule 44.14(1) and cannot enforce the balance of its costs entitlement of £10,000, by any means of enforcement. If the defendant has already paid the damages before its costs are assessed, then it can enforce its costs orders by any other available means (set-off being in practice unavailable), but only up to £20,000. It cannot therefore be said that use of a set-off is not a means of enforcement, where costs are set off against damages.”
The effect of this ruling is that, provided that there is a court order, the claimant can lose all of their damages and interest by way of set-off of a costs order in the defendant’s favour, but the claimant’s solicitors can keep all of the costs.
Now insures should not write to represented claims direct, but imagine the email:
“Dear Mrs Jones
You will recall that you were awarded £30,000 damages at court; we are very sorry that you have suffered the injuries that you did, and wish you well in the future.
As you probably know, your solicitors went to the Court of Appeal to try and get their costs increased from £16,700 to £42,000.
They lost and you have been ordered to pay our costs of £48,600.
The law allows us to deduct from the costs that you were ordered to pay us the damages that we were ordered to pay you.
Consequently, you will receive nothing for your injuries.
The law does not allow us to deduct from the costs due to us the sum of £16,700 costs due to your solicitors, which costs we always agreed and always accepted were payable, and so we have to send them the cheque for £16,700.
You may want to give your solicitor a call.
Yours sincerely
Insurance Company Limited”
Another bizarre consequence of this ruling is that in cases where legal aid remains, and they are very few and cover the most serious matters, such as birth defect claims, then the defendant would be able to enforce a costs against costs set-off following the decisions in Lockley and Burkett.
Thus, in the very limited category of cases where Parliament has decided to retain legal aid clients get less protection.
This decision also casts doubt on the various decisions stating that it was unreasonable for solicitors to switch from legal aid to Conditional Fee Agreements shortly before the abolition of recoverability on 1 April 2013.
Matthew Hoe, director of litigation and dispute resolution at Taylor Rose MW, who acted for the defendant, said the outcome was ‘alarming’ and severely restricted the court’s ability to make a claimant pay a successful defendant’s costs.
‘Reaching the decision by focusing only on the words of the QOCS rules and not wider usages in the CPR will make the outcome of future cases about the CPR harder to predict,’ said Hoe. ‘Concerningly, it paves the way for claimants pursuing bad points – as the claimant had originally done in Adelekun – forcing defendants to incur costs the claimant will not have to pay, perhaps thereby applying improper pressure to settle. An urgent review of the QOCS rules by the CPRC is required to ensure the intended checks and balances operate.’
Hoe, a member of the Forum of Insurance Lawyers’ costs focus team, said it was difficult to see why damages in orders could be enforced against defendants’ costs but damages from settlements should be kept safe.
‘There is no real difference between the two, and distinctions like this encourage parties to play games to get their preferred results. The CPRC should review the QOCS rules again.’
Before the Supreme Court, the defendant urged judges not to give a green light to the pursuit by claimants of weak interim applications and unmeritorious points, arguing as well that upholding the appeal would remove any real incentive to settle before trial.
Jonathan Tetley, partner at defendant firm Plexus Law, said:
‘This will make cases more difficult to settle for defendants and their insurers by removing some of the teeth from their Part 36 offers and result in their having to pay out more in costs to claimants in cases involving late acceptance of Part 36 offers.’
Comment
Well I think I have made my comments. A poor decision.
The Court of Appeal was right and here is my write up of that decision –
QOCS AND SET-OFF – COURT OF APPEAL DECISION
This is so unfair that it should be overturned by primary legislation if needs be. Indeed, given the abject failure of the Civil Procedure Rules Committee properly to set out clear rules in relation to Qualified One-Way Costs Shifting, it will be useful if Parliament did so.
Parliament has already done this in relation to Part 36, which was adopted in a statutory instrument, rather than simply being part of the Civil Procedure Rules.
Kerry Underwood 