COURTS RESTRICT APPLICATION OF THE SOLICITORS ACT 1974

In two recent cases the Queen’s Bench Division of the High Court has adopted a restrictive approach to the power of the courts on a solicitor and own client assessment under Section 70 of the Solicitors Act 1974.

Misconduct Under CPR 44.11 Does Not Apply To Solicitors Act 1974 Assessments

In

John Poyser & Co Ltd v Spencer [2022] EWHC 1678 (QB)

the Queen’s Bench Division of the High Court held that on a solicitor and own client assessment under Section 70 of the Solicitors Act 1974, the Court had no jurisdiction in relation to CPR 44.11, which allows a court to disallow costs, or order a party or legal representative to pay costs, due to misconduct.

The High Court was hearing an appeal by a firm of solicitors against a decision by a Costs Judge to reduce the bill by 75% under CPR 44.11 for misconduct, the alleged misconduct being a failure to account fully to the client for money paid on account, and for charging for dealing with a complaint, and for charging excessive hourly rates.

The background to the case was the Solicitors Act 1974 assessment of the bill in relation to proceedings concerning a disputed will.

The High Court held that the Costs Judge had erred, and was critical of many aspects of the decision of the Costs Judge, and doubted whether there had been any misconduct that would bring CPR 44.11 into play, even if there was jurisdiction so to do, which there was not.

CPR 44.11 concerned conduct in connection with a summary or detailed assessment, and/or proceedings before those, and a solicitor and own client assessment was neither a summary nor detailed assessment.

In a Solicitors Act 1974 case the costs claimed could not be summarily assessed and a solicitor and own client assessment under Section 70 of the Act, and CPR 46.9 – 10, was not a detailed assessment within the meaning of CPR 44.1(1) as being under CPR 47.

Even if the procedure for solicitor and own client assessments incorporated some elements of CPR 47, most of that rule had no application.

There were also policy and historical reasons, set out at great length in the judgment here, supporting this conclusion and, in

Alpha Rock Solicitors v Alade [2015] EWCA Civ 685

there had been no suggestion that the sanctions on a solicitor for serious misconduct included exercise of the powers under CPR 44.11

The Court here further held that CPR 44.4, the factors to be taken into account in deciding the amount of costs, did not apply to Section 70 of the Solicitors Act 1974 assessments, where the function of the Court was to decide whether costs incurred were reasonable in amount against the backdrop of the retainer agreed with the client.

That backdrop required the special procedure rules in CPR 46.9 headed “Basis of detailed assessment of solicitor and client costs”. 

Solicitors Act 1974: Section 70: Court Cannot Consider Setting Aside Costs Agreement

In

Lisa Jones v Richard Slade and Company Ltd [2022] EWHC 1968 (QB)

the Queen’s Bench Division of the High Court allowed the appeal of the defendant firm of solicitors against the decision of the Costs Judge, who had refused to strike out the claimant client’s application to set aside a costs agreement between the parties.

The Claimant argued that she had only entered into the agreement due to undue influence or economic duress and the law firm applied, under CPR 3.4(2), to have that part of the claim struck out on the ground that it fell outside the Court’s jurisdiction under Section 70 of the Solicitors Act 1974.

The High Court held that the Costs Judge had been right not to dismiss the claim under CPR 3.4(2) as that applied only to a “statement of case” and not to points of claim.

Nevertheless, the law firm’s application raised an important point concerning the Court’s jurisdiction, which should be resolved, and if the application was well-founded which the High Court held that it was, then strike out would be achieved under CPR 3.1(2) (f) or (k).

The client had sought an assessment of bills totalling £22,090 arguing that she was induced to compromise her claim, because otherwise she would be “exposed to a rather greater costs liability” to the firm.

The High Court said that “the contours of permissible enquiry under Section 70 are not sharply defined” saying that there was a limit, and that the difficulty was locating where, precisely, that limit lies.

The Court said that it did not “consider that there is anything within Section 70 that permits the court to embark on what is in effect a freestanding enquiry into the question of whether the agreement should be set aside on grounds of undue influence. That involves the exercise of a distinct equitable jurisdiction which forms no part of an assessment of costs”.

The Costs Judge had looked at the matter the other way round and had held that there was nothing in Section 70 that excluded the power to carry out such an enquiry, but the High Court said that the fact that something is not positively excluded does not mean that it is, by omission, permitted.

The claimant was effectively asking the Court to exercise an equitable jurisdiction which it did not have.

The High Court was assisted by the principled approach to the limits of Section 70 adopted in professional negligence cases, which show that wholesale allegations of professional negligence may not be determined, as they were not relevant to the costs assessments.

However, discrete and contained allegations of negligence, that is localized negligence, or a breach of fiduciary duty, may be relevant when assessing whether the particular costs were reasonably incurred.

The Court gave an example of localized negligence as follows:

“41.. If, for example, a solicitor submits a witness statement late, and costs are incurred in securing an extension of time, then it may be relevant to enquire whether the delay was the fault of the client, or the solicitor. If the former, then the costs of securing an extension of time are likely to be reasonably incurred. If the latter, then the client might succeed in showing that they were unreasonably incurred, in that they were due to the solicitor’s negligence. In that type of case, the issue of negligence is closely tied to the exercise that the court is required to undertake – the assessment of the costs’ bill. Resolving where the fault lies is a necessary part of assessing the costs. Conversely, if a claim is issued after the expiry of the limitation period, and is, for that reason, ultimately unsuccessful, the assessment of each item of costs that was incurred during the case does not depend on whether the solicitor was negligent in issuing the claim late. Such a case of “wholesale” negligence is irrelevant to the assessment of costs.”

The fact that Parliament had given specific power to set aside non-contentious business agreements and contentious business agreements under Section 57(2) and 61(2)(b) respectively of the same Act strongly suggested that there was no power in Section 70 to set aside agreements generally.

The Court needed to look at what the statute positively allows, not that which it did not specifically prohibit.

Although more generalized allegations are less likely to fall within the scope of Section 70, there is jurisdiction to address issues going to the heart of the retainer, where necessary, as part of the costs assessment, and thus, here the Court had jurisdiction to determine whether the agreement precluded a Section 70 assessment, as that was necessary to embark upon the assessment, or not.

Here the Court set out in considerable detail the history of the assessment of bills and the procedure, and it is a very helpful judgment, worth reading in full.

This is an important judgment as the High Court rejected the idea that the alternative to dealing with the matter under Section 70 of the Solicitors Act 1974 was a Chancery Division action under Part 7.

On at least three occasions the High Court here pointed out that this could, and should, be dealt with within the non-costs bearing Small Claims Court jurisdiction.

It is time for Solicitors Act 1974 assessments to follow the normal costs rules, that is any claim valued at under £10,000 should be non-costs bearing, and any claim valued at £100,000 or less should be subject to fixed recoverable costs.

FIXED RECOVERABLE COSTS AGREEMENTS

There have been two recent cases, one in the Court of Appeal, and one on appeal to Central London County Court, which looked at the position where in cases which may, or may not, have been subject to fixed recoverable costs, the parties had apparently made a different arrangement.

It is well established that the parties are free to contract out of fixed recoverable costs, and I deal with this below.

It is logically also the case that parties are free to contract into fixed recoverable costs, which is what happened in the second case that I report below.

These matters become of much greater significance in April 2023, when fixed recoverable costs will be extended to virtually all civil litigation claims valued at £100,000 or less.

No Fixed Costs Where Detailed Assessment Agreed

In

Doyle v M&D Foundations & Building Services Ltd [2022] EWCA Civ 927

the Court of Appeal upheld the decision of the two courts below that an order for costs to be “subject to detailed assessment if not agreed” results in fixed costs being disapplied; in other words, parties are free to contract out of the fixed recoverable costs scheme.

The general rule is that once a matter has been on the Portal, then fixed recoverable costs apply unless and until it is allocated to the multi-track –

Qader v Esure Services Ltd [2016] EWCA Civ 1109

This was codified by an amendment to the Civil Procedure Rules and CPR 45.29D now reads:

“45.29D. Subject to rules 45.29F, 45.29H and 45.29J, and for as long as the case is not allocated to the multi-track, in a claim started under the EL/PL Protocol  or in a claim to which the Pre-Action Protocol for Resolution of Package Travel Claims applies, the only costs allowed are—

(a) fixed costs in rule 45.29E; and

(b) disbursements in accordance with rule 45.29I.”

Rule 45.29E sets out the fixed costs recoverable in tabular form, determined by the stage at which the claim is settled or disposed of and the amount of the damages agreed or awarded.

Rule 45.29F provides for costs orders in favour of the defendant, rule 45.29H provides for costs of interim applications and rule 45.29I provides that claims for specified disbursements may be allowed.

The rules do not make provision for the parties to contract out of the fixed costs regime, but it is recognised that there is no bar on them doing so: see –

Solomon v Cromwell Group plc [2011] EWCA Civ 1584, [2012] 1 WLR 1048  cited in 

Adelekun v Ho [2019] EWCA Civ 1988, [2019] Costs LR 1963 .

This was an employment related personal injury claim which settled for £5,000 and the consent order provided that the defendant pay the Claimant’s costs “such costs to be the subject of detailed assessment if not agreed”.

The Claimant lodged a Bill of Costs and the Defendant argued that fixed costs applied.

The Claimant succeeded before the District Judge and the Circuit Judge, and this was a second appeal to the Court of Appeal.

The Court of Appeal here distinguished its own decision, on identical wording, in the case of

Ho v Adelekun [2019] EWCA Civ 1988

where it found that such wording referred to fixed costs in a fixed costs case.

The distinguishing feature here, one might think it a rather weak one, was that Ho involved an acceptance of a Part 36 offer, with its own “highly restrictive” rules.

The Court of Appeal held that there was no ambiguity as to the natural and ordinary meaning of “subject to detailed assessment” in an agreement or order as to costs.

 It plainly denoted that costs were to be assessed by the procedure in CPR 47.

The phrase could not be read as providing for an “assessment” of fixed costs under CPR 45 unless the context led to the conclusion that the wrong terminology had been used so that the phrase should be interpreted otherwise than according to its ordinary meaning.

There was a distinction between assessed costs and fixed costs in the rules and in particular, CPR 44.6 makes clear that summary or detailed assessments do not apply to CPR 45 fixed costs.

Ho was distinguished on the basis that something had gone wrong with the wording used in the offer letter, justifying reading the term “detailed assessment” as applying to fixed costs.

The Part 36 context indicated that it was not intended to disapply the fixed costs regime by reference to an assessment on the conventional basis.

The Court of Appeal analysed the relevant legal principles for interpreting orders, both consent orders and non-consent orders, and quotes at length from the decision of the Supreme Court in

Wood v Capita Insurance Services Ltd [2017] UKSC 24

“10. The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning…

11.. Interpretation is…a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause…and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest… Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms.

12. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated…To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.

13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process…assists the lawyer or judge to ascertain the objective meaning of disputed provisions.”

In the Ho case, the Court of Appeal had held that the use of the word “assessment” did not take the matter out of the fixed costs regime, as the fixed costs regime “does involve an assessment of some kind (particularly in relation to disbursements and cases where the court is satisfied that exceptional circumstances exists)”.

In that court case the court announced:

“I do not think, therefore, that reference to “detailed assessment” should be taken to imply an intention to displace the fixed costs regime where there are other indications that that was not intended.”

Here the Defendant relied on that decision stating that, as recognised in Ho, it was inherently improbable that the Defendant would have agreed to pay standard basis costs when the fixed costs regime was likely to be much more favourable to it.

“The proper interpretation of the Order

The natural and ordinary meaning of “detailed assessment”

44. In my judgment, and contrary to the appellant’s contention, there is no ambiguity whatsoever as to the natural and ordinary meaning of “subject to detailed assessment” in an agreement or order as to costs. The phrase is a technical term, the meaning and effect of which is expressly and extensively set out in the rules. It plainly denotes that the costs are to be assessed by the procedure in Part 47 on the standard basis (unless the agreement or order goes on to provide for the assessment to be on the indemnity basis). The phrase cannot be read as providing for an “assessment” of fixed costs pursuant to the provisions of Part 45 unless the context leads to the conclusion that the wrong terminology has been used (by the parties or by the Court) so that the phrase should be interpreted otherwise than according to its ordinary meaning.

45. This is abundantly clear from consideration of the rules themselves

i) First and foremost, rule 44.3(4)(a) expressly provides that, where an order for costs, or for assessment of costs, does not indicate the basis of assessment, the costs will be assessed on the standard basis. In other words, the effect of an order which provides for costs “subject to detailed assessment” is, by simple and direct application of the rules, an order that costs will be assessed on the standard basis. An agreement to the same effect, intended to be embodied in an order, must have the same natural and ordinary meaning.

ii) Second, rule 44.6(1), in setting out the court’s power to assess costs (either summarily or by way of a detailed assessment), expressly provides that such power does not relate to fixed costs. Fixed costs under Part 45 are dealt with separately in rule 44.6(2) and are stated to be recoverable “in accordance with that Part”. It could not be clearer that an agreement or order for the detailed assessment of costs does not (unless something has “gone wrong”) relate to fixed costs.

iii) Third, that same clear distinction is apparent from rule 45.29 itself. In circumstances where the court will consider a claim for an amount of costs greater than fixed costs under rule 45.29J, it may do so by assessing the costs (summarily or by way of detailed assessment). Such an assessment must necessarily be on the standard basis unless the court specifically directs that the indemnity basis should be used. Rule 45.29K then draws a distinction between the costs so assessed (“the assessed costs”) and the fixed recoverable costs, requiring the court to award the latter unless the assessed costs are 20% greater. Again, it could not be clearer that costs assessed summarily or under Part 47 are not the same as (and cannot include) fixed recoverable costs.”

“51. In so doing, the solicitors must, applying an objective test, be taken to have been aware of the relevant rules and principles, in particular, (i) that the fixed costs regime can be disapplied by agreement and (ii) that an order providing for detailed assessment (without more) entails an assessment on the standard basis (rule 44.3(4)(a)). In those circumstances it is difficult to see any basis on which the use of the term “detailed assessment” could bear anything other than its natural and ordinary meaning as discussed above. No matter how strictly enforced the fixed costs regime may be in cases to which it properly applies, and no matter how unlikely it was that the respondent would have been able to escape that regime had the matter proceeded, the parties reached a compromise of the dispute on the basis of a provision as to costs which, on its face, would take the case out of the fixed costs regime and entail assessment on the standard basis. There is no objective reason to believe that the solicitors did not intend the term to bear its natural, ordinary (and in my judgment, obvious) meaning, not least because it would be impermissible (and to no avail) to speculate as to the parties’ respective legal or commercial motivations for reaching a settlement on the terms they did. Indeed, the appellant has not suggested that the use of the term “detailed assessment” was a mistake or otherwise did not reflect the parties’ agreement.”

“56. In the present case the agreement reached was not the result of the acceptance of a Part 36 offer: the parties’ intentions are not to be understood in that highly restrictive context and there is no inherent ambiguity in the reference to detailed assessment, internal inconsistency within the terms of the Order or other “indication” that detailed assessment did not bear the meaning ascribed to it under the rules. Although Adelekun appears, on its face, to be a decision on similar facts to the present case, it was in reality a quite different situation, rooted in the parties’ use of the Part 36 offer and acceptance mechanism. No such fetter on the application of the natural and ordinary meaning of the agreed wording as to costs arises in the present case, where the parties reached a free-standing settlement agreement. That agreement included a simple and well-understood provision that the appellant would pay costs subject to detailed assessment, that is to say, on the standard basis.”

It is interesting that the Court of Appeal, in reference to the Ho case, had this to say:

“It is apparent, however, that even in that context Males LJ took considerable persuading before concluding in the end that the intention to depart from the fixed costs regime indicated by the term “detailed assessment” was outweighed by other considerations. He pointed out that, if parties wish to settle on terms that fixed costs will be payable, it is easy enough to say so (see [43]).”

This decision comes as close as it can, without crossing the line, to saying that the decision in Ho was wrong.

Here it was able to distinguish it on, as I have said above, the rather weak ground that that involved Part 36.

It is hard to see why that should allow for a different interpretation of identical wording agreed by experienced solicitors on both sides.

It may well be that the Court of Appeal in a Part 36 case, identical to Ho will now take a different view to the decision in that matter, and follow the judgment here Doyle.

Fixed Costs Agreement Not Displaced By Part 36 Offer

In

Soares v Wilson, Central London County Court, 27 May 2022

a Circuit Judge, sitting with a Costs Judge, allowed the Defendant paying party’s appeal, holding that the parties had agreed that only fixed costs would be payable in a matter which had dropped out of the Portal and been allocated to the multi-track and re-allocated to the fast track.

This was a road traffic accident portal claim which left the Portal as the Defendant denied liability.

Proceedings were issued for in excess of £100,000 and a defence filed and the matter was allocated to the multi-track.

It was subsequently re-allocated to the fast track and then settled for £9,000.

On 8 February 2019, the Defendant’s solicitors made a written offer to settle the claim which was expressed to be “without prejudice save as to costs” and read:

“The Defendant makes an offer to settle the claim on the following terms:

1. The Defendant shall pay the Claimant £9,000 (nine thousand pounds only) in full and final settlement of the claim. The said payment shall be made within 28 days of the approval by the court of the consent order giving effect to this offer.

2. The Defendant will also pay the Claimant’s fixed costs and reasonable disbursements, and in default of agreement the amount therefore shall be determined by the Court. The Defendant will pay the said fixed costs and disbursements within 28 days of the approval by the court of the consent order giving effect to this offer or the determination of the amount thereof by the Court (whichever is the later).”

The Claimant replied as follows on 13 February 2019:

“Please note that your offer in the sum of £9,000, plus fixed costs (pursuant to the Fast Track fixed costs regime) is accepted.

We would be grateful if you would email a notice of Part 36 so this may be accepted, and we can advise the Court of the settlement.

In respect of costs, we would request an interim payment … We would request the sum of £5346.00 being the applicable profit costs (£2655.00 pus £1800.00) plus VAT.”

The Defendant duly made the Part 36 offer by letter dated 21 February 2019 which read:

“We are instructed by our client to put forward a Part 36 offer of £9,000 (Nine Thousand Pounds) in full and final settlement of your client’s claim.

The offer relates to the whole of the claim and is inclusive of interest as set out in Part 36.5(4)

…

This offer is intended to have the consequences of Part 36. If accepted within 21 days of service of this letter … our client will also pay your client’s fixed recoverable costs in accordance with Part 36.13 to be subject to detailed assessment if not agreed.

If this offer is accepted after that date, your client will be liable for our client’s costs under Part 36.13(5) unless the parties agree or the Court orders otherwise.”

The Claimant replied on the same day:

“We confirm your Part 36 offer in the sum of £9,000 is accepted. We enclose a copy of our letter to the Court confirming the settlement. We await your client’s cheque within the next 14 days.”

The Claimant then served a Bill of Costs not limited to fixed costs, and claiming open, standard costs for the period when the matter was in the multi-track, and fixed costs once the matter had been re-allocated to the fast track.

On an oral review of the decision, the Judge rejected the Defendant’s case that the parties had “made a binding and enforceable agreement in respect of which the Claimant cannot now resile in order to claim costs other than fixed costs”.

The Court here allowed the appeal, holding that the wording and intention was clear and that the reference to assessment did not alter that, as the “courts regularly determine issues on assessment relating to cases in which fixed costs are payable”.

The Court dealt with the Part 36 issues as follows:

“50. Having reached agreement on a compromise, and on the basis of the costs to be paid, the mechanism to give effect to that might have been to lodge a consent order or a draft Tomlin order. But they would have had the disadvantage of delay, a need for a court fee, and the requirement of a decision of a judge or judicial officer. The mechanism offered by Part 36 produced an immediate stay of the claim with no fee and no need for judicial intervention in a context in which the trial date was looming. The fact that the Claimant proffered it and the parties seized it as a pathway to give effect to the compromise they had agreed is readily understandable and to my mind in no way detracts from the fact that compromise on the fixed costs basis had been agreed. I accept the case advanced by the Defendant that the Claimant invited the Defendant to make a Part 36 offer simply so as to finalise the proceedings; the parties had already agreed terms on which the proceedings would conclude.”

The Court went on to say:

“51. Seventh, and as ever, context is all. This is a claim which, being a relatively low value RTA claim (settled at an offered sum of £9000 without any negotiation) was only ever on anything other than its obviously appropriate track (the fast track) because it had been initially quantified at “in excess of £100,000”. That situation had been corrected by an order bringing it back onto its fitting track, the fast track – being one in which costs were fixed. The suggestion that, against that contextual background, the proper construction of the offer was one of “assessed costs from inception to track re-allocation and thereafter fixed costs” is something that I simply cannot accept. To my mind, the observations from Ho at [34] as to the construction of the offer letter in that case (dated 19 April) are equally apposite to the construction of the February 2019 offer letter in this case:

“…the fixed costs regime is designed to ensure that “both sides begin and end the proceedings with the expectation that fixed costs is all that will be recoverable” … That makes it the more unlikely that the letter would reasonably have been understood to be offering something other than fixed costs.”

The Court then concluded on this point:

“56. In Ho one of the questions determined by the Court of Appeal was the significance of the reference to 36.13 in a Part 36 offer and whether this was determinative of the actual costs that would be payable. Newey LJ stated at [29]:

“I do not think the fact that the 19 April letter refers to CPR 36.13 instead of CPR 36.20 is of any great significance.

…What matters more, it seems to me, is that CPR 36.13 itself highlights the fact that CPR 36.20 applies to a claim formerly under the RTA Protocol and, in effect, sends the reader on to that latter rule.”

“57. Tenth, I consider it of significance that, despite the meticulous detailed provisions of the CPR, parties to litigation are free to contract-out of their precise effect in any given case. In my judgment there is no bar on contracting out of the fixed costs regime or on contacting into it. If the latter, there is no impediment to the parties agreeing that its operation shall be modified to achieve a particular specified result.”

“58. In short, with great respect to the different reasoning and conclusions of the judge, my reading of the offer and acceptance correspondence is that the parties reached an agreement to conclude an RTA fast track case that was coming up to imminent trial and that agreement was one to offer and accept fixed costs. The judge was wrong to hold to the contrary.”

Comment

A correct decision.

These matters will become of much greater significance in April 2023 when the fixed recoverable costs scheme spreads to virtually all civil litigation claims of £100,000 or less.

Parties need to make it crystal clear what they are agreeing in relation to costs in such matters.

WASTED AND NON-PARTY COSTS UPDATE

There have been a number of recent High Court decisions concerning the Wasted Costs and Non-Party Costs provisions of section 51 of the Senior Courts Act 1981.

Here I look at four such cases, and at the end of this piece I set out the relevant Statute Law and the relevant Civil Procedure Rules.

LITIGATION FUNDER JOINTLY LIABLE WITH CLIENT FOR COSTS

In

ECU GROUP PLC V HSBC BANK PLC AND OTHERS [2022] EWHC 1616 (Comm)

the High Court held one of the claimant’s funders, Therium, jointly and severally liable with the claimant for an indemnity costs order made against the claimant, a specialist currency debt management firm which lost a claim against HSBC when a claim was struck out as being out of time.

The order ran from 30 November 2018, from when Therium agreed to fund the proceedings retrospectively, although the Litigation Funding Agreement was not signed until 19 September 2019.

The case is also notable in that it appears to be the first one where such an order has been made against a single funder, irrespective of the involvement of other funders.

Since the claimant had first sought legal advice in 2016, at least 27 parties had provided funding for the proceedings, with all of them except Therium being shareholders and/or bondholders in the claimant company.

Therium accepted that it had a liability for costs, and that that liability was on the indemnity basis as that was the order made against the claimant, but argued that it should only be liable for a proportion, and not all, of the costs as there were other funders.

The court held that Therium should bear joint responsibility with ECU for the costs of the proceedings irrespective of the other funders or investors, stating that:

“Therium had far and away the dominant financial interest in the outcome of the proceedings and effectively controlled the proceedings through the LFA .“  – [Litigation Funding Agreement].

The defendant had no choice but to incur costs in defending the claim and it would not be fair to make recovery of those costs dependent on the pursuit of numerous individuals and entities.

While Therium might, in due course, seek to join the claimant’s other funders, it was not just to delay making an order against Therium in order to give it time to do so.

The Court back-dated the liability to 30 November 2018 as Therium had retrospectively agreed to fund the matter from that date.

The Court said:

“In my view, although Therium did not “cause” those past costs to be incurred, by agreeing to fund the litigation it was not just the “inheritor” of those costs but took a positive decision that as part of the funding arrangements it would fund those incurred costs.”

However, Therium should not have any liability for the period before 30 November 2018 which was not covered by the Litigation Funding Agreement.

Therium had provided £9.3million under the Litigation Funding Agreement to fund the proceedings, and had they been successful would have recovered a contingency fee of three times that amount plus 20% of any recovery, net of costs, above £100 million, as well as reimbursement of the costs paid out.

Having taken the potential upside of the contingency fee calculated by reference to all of the funding costs, it will be unfair for Therium to avoid the corresponding downside of liability for those incurred costs.

WASTED COSTS AGAINST SOLICITORS WHO HAD NO AUTHORITY TO ACT

In

Rushbrooke UK Ltd v 4 Designs Concept Ltd [2022] EWHC 1687 (Ch)

the Chancery Division of the High Court made a wasted costs order against a firm of Solicitors which had acted for a limited company without checking whether the person instructing them had authority to do so.

The Solicitors acted for a company which made an unsuccessful application to restrain a winding-up petition, the application being struck out on the basis that the director who authorized it had no authority to do so on his own.

He was one of two directors.

The Court ordered the company to pay the other side’s costs but declined to make the individual director jointly and severally liable.

The other side made an application for wasted costs or against the Solicitors who had acted for the company without authority.

“14. In my judgment, there is prima facie evidence of a “significant breach of a substantial duty imposed by a relevant code of professional conduct” by the solicitors in this case. There is also prima facie evidence of unreasonable conduct. In my judgment, it is prima facie unreasonable for solicitors instructed by one director, at a time when the only two directors have fallen out and cannot agree on anything, to take instructions on behalf of the company to engage the company in legal proceedings without first satisfying themselves of the director’s authority to do so. I also consider that this is prima facie evidence of negligence by the solicitors. A reasonably competent solicitor would regard it as fundamental to be clear at the outset on the authority of the person representing the client to instruct the solicitor.”

“19. If Mr McAndrew is seeking to suggest that the wasted costs jurisdiction requires conduct which is vexatious or designed to harass opponents, then I respectfully disagree. It requires conduct which is improper, unreasonable or negligent. Good faith on its own is not a defence. In my judgment Mr McAndrew provides no evidence to rebut my initial view that there was a significant breach of a substantial duty imposed by a relevant code of professional conduct (at least to be clear about the source of his instructions to act), and therefore his behaviour was improper, and also that it was unreasonable of him in the circumstances to assume that Mr Steventon-Smith had authority on his own on behalf of the company. On the face of it, it seems negligent as well, but I need not decide that.”

“22. The third requirement for a wasted costs order is that it is just in all the circumstances to order the legal representative to compensate that party for the whole or part of those costs. On the face of it, in circumstances where the company is or is likely to be insolvent, so that the respondent will not be able to recover its costs (in whole or in part) from the company, it seems to me obviously just that the solicitors who allowed these proceedings to go ahead by failing to satisfy themselves of the director’s authority to give instructions should compensate the respondent for the expenditure of the unnecessary costs. It is the more so in circumstances where the respondent in pre-application correspondence expressly raised the issue of the authority of Mr Steventon-Smith to instruct solicitors on behalf of the company, but this was simply brushed aside. As before, there is nothing in the witness statement of Mr McAndrew to rebut this view. I quite accept the good faith of NRG. But that does not prevent a wasted costs order from being made, or prevent its being just to make one.”

The High Court also said that there is another jurisdiction available allowing the Court summarily to order Solicitors to compensate parties who have suffered loss because of the breach of the implied warranty that they had their client’s authority to bring the proceedings.

In

Zoya Ltd v Ahmed [2016] 4 WLR 174, [29]

the Court said that:

“in all cases, the liability was strict and that it was not necessary to prove that the agent knew or should have known of the want of authority.”

The High Court said that given its conclusion on wasted costs order it did not need to decide this point, but had it so needed it would have made an order under the Court’s breach of warranty jurisdiction.

Comment

This is often a difficult area, that is who, from a limited company, has authority to instruct a Solicitor, and how is that authority evidenced.

As this case makes clear, it is essential that Solicitors satisfy themselves that they do have such authority, both as a matter of professional conduct under the Solicitors’ Code of Conduct and the breach of the implied warranty jurisdiction, as well as the wasted costs jurisdiction.

Wasted costs orders are not easy to obtain, but as shown here, the Court has an easier and less demanding  way of supplying a remedy, and that is by finding a breach of the implied warranty that a Solicitor has authority to act for the client.

WASTED COSTS JURISDICTION INAPPROPRIATE TO GET ROUND COSTS RESTRICTIONS

In

Kerseviciene v Quadri & Anor (Costs) [2022] EWHC 1757 (QB) (07 July 2022)

the High Court refused the respondent’s costs in relation to attending a permission to appeal hearing.

Here the appellant had been granted permission to appeal on two out of three grounds in relation to the admissibility of a Witness Statement and made an oral application for permission to appeal on the third ground.

That application was refused, and the respondent, who had attended the permission hearing with leading counsel, sought the costs of the application from the appellant’s solicitors under the wasted costs jurisdiction under section 51 of the Senior Courts Act 1981.

The costs were £67,095.78, most of this being the costs of leading counsel at £47,500 plus VAT.

As well as refusing the application on the ground that it had not been necessary for the respondent to attend, the court also said that the wasted costs jurisdiction should not be used to sidestep the usual restrictions on respondents recovering costs of attending permission to appeal hearings.

The respondent’s attendance had been unnecessary. If it felt it necessary to correct the position which they say had been wrongly created by the appellants, it should have been done by way of a short letter, and not by attending the hearing:

“The cost of preparing a letter would have been trivial by comparison.”

The usual position is that respondents to prospective appeals will not receive the costs of attending a permission to appeal hearing – see CPR 52B.8.1 and Practice Direction 52C.20 set out below.

Even without such a letter and any attendance by the respondent, the court was able to identify the appropriate order.

From the pre-hearing reading and oral submissions by the appellant’s counsel, it was apparent that the additional ground had not been relied upon below, that it was not appropriate to allow it now to be run, and that it had no real prospect of success.

Even had permission to appeal been granted, the consequences would not be severe on the respondent as it could have advanced the same arguments at the appeal hearing, as permission had been granted on two grounds already, and that approach would have been far more proportionate than incurring over £67,000 costs on the oral renewal application.

The High Court said that the wasted costs jurisdiction should not invoked to get round the usual position that respondents to prospective appeals will not receive the costs of attending a permission to appeal hearing.

In any event the shortcomings in the appellant’s application were unlikely to amount to unreasonable or improper conduct such as would have given rise to a Wasted Costs Order.

Furthermore, any Wasted Costs Order should generally only be sought after trial.

CPR Practice Direction 52B:

“8.1 Attendance at permission hearings: Where a respondent to an appeal or cross-appeal attends the hearing of an application for permission to appeal, costs will not be awarded to the respondent unless–

(a) the court has ordered or requested attendance by the respondent;

(b) the court has ordered that the application for permission to appeal be listed at the same time as the determination of other applications;

(c) the court has ordered that the hearing of the appeal will follow the hearing of the application if permission is granted; or

(d) the court considers it just, in all the circumstances, to award costs to the respondent.”

CPR Practice Direction 52C.20:

“Respondent’s costs of permission applications

20.

(1) There will normally be no order for the recovery of the costs of a respondent’s written statement. In most cases an application for permission to appeal will be determined without the need for the respondent to attend a hearing. In such circumstances an order for costs will not normally be made in favour of a respondent who voluntarily attends a hearing.

(2) If the court directs the respondent to file submissions or attend a hearing, it will normally award costs to the respondent if permission is refused.”

HIGH COURT SETS ASIDE NON-PARTY COSTS ORDER MADE AGAINST LOCAL AUTHORITY IN PRIVATE LAW PROCEEDINGS

In

Peterborough City Council v K and others [2022] EWFC 61

the Family Court set aside a non-party costs order made against a local authority in private law children proceedings, stating that such an order could not be used as a device for funding costs in private law family proceedings.

Private law proceedings had been issued in relation to four children and was heard before a Circuit Judge who was critical of the local authority’s failure to issue private law proceeding itself and made an order against the local authority for non-party costs, covering all past and future litigation costs that the applicants may incur.

The case involved four children who left their mother’s care and went to live with their adult sister and her partner, who applied for a child arrangements order.

The local authority had been involved with the children, who were the subject of child protection plans, and following two directions for reports under section 37 of the Children Act 1989, the local authority decided not to issue care proceedings and the applicants were not eligible for legal aid.

The High Court held that although the local authority conduct could be criticized it was not unreasonable or reprehensible and there were no exceptional circumstances justifying a non-party costs order.

The Family Court cannot direct a local authority to issue care proceedings and costs orders cannot be made to provide funding to parties because they are not eligible to receive legal aid.

The High Court said that it was apparent from the judgment as a whole that the costs orders had been designed to provide the parties with funding for legal advice and representation to which they had no entitlement under the laws enacted by Parliament.

The court pointed out that it was a striking feature of the order that it not only ordered the non-party to pay past costs of the proceedings, but also all the future costs.

The High Court set aside the order and also gave extensive guidance from the authorities in relation to the principles to be applied in non-party costs orders in private family proceedings concerning the welfare of children.

“46. Having regard to the authorities it seems to me that the following guidance applies to non-party costs orders in private family proceedings concerning the welfare of children:

i) The Court has a wide discretion to make costs order including against non-parties but an application for a costs order against a non-party should be treated with caution and such an order will be exceptional by comparison with the ordinary run of cases.

ii) A non-party costs order should only be made if it is just to do so in all the circumstances.

iii) In considering whether a non-party costs order is just, the court should keep in mind that in the ordinary run of family cases concerning the welfare of children, inter-party costs orders are not made.

iv) The circumstances justifying a non-party costs order are not closed but where the conduct of a non-party is relied upon as the basis for making such an order, the non-party must have been guilty of reprehensible behaviour or unreasonable conduct in the proceedings.

v) In considering whether the behaviour of a non-party Local Authority was reprehensible, or its conduct within the proceedings was unreasonable, regard must be had both to the powers entrusted to and the obligations of Local Authorities and the finely balanced judgments that Local Authorities may have to make in exercising those powers and fulfilling those obligations.

vi) The non-party should have a close connection with the proceedings such that it is fair that they are bound by the findings made in the substantive proceedings.

vii) The circumstances which should be taken into account include the financial consequences to the potential costs recipients of the acts or omissions of the non-party. If the potential costs recipients would have incurred the same financial liabilities in any event then it would be unjust to make a non-party costs order. Hence, ordinarily, the court should have regard to the amount of costs sought to be recovered from the non-party and consider whether there is a causal connection between those costs and the non-party’s acts or omissions.

viii) A non-party may well suffer injustice if not warned that an application or costs may be made against them.

ix) A non-party should be joined as a party for the purposes of the costs application only and be given a reasonable opportunity to attend a hearing at which the court will consider the matter further – CPR r.46.2(1).

x) The judge who has determined issues in the case (at a finding of fact hearing or a final hearing) should be the judge who determines an application for a non-party costs order.

xi) The procedure for determining the application should be summary in nature in that the judge should base their decision on the evidence given and findings made in the substantive proceedings.

xii) A non-party costs order should not be used as a device to circumvent other rules or provisions concerning the funding of advice or representation.”

The High Court said that this guidance provides consistency in approach in relation to inter-party costs, wasted costs against legal representatives, and non-party costs orders in private proceedings concerning the welfare of children.

The same guidance might also apply to public law proceedings, but here the court was only dealing with private law proceedings.

Wasted Costs Orders-  Statute Law

Originally, there was an inherent jurisdiction in the court to require a solicitor for one party to pay to another party costs which had been wasted by the solicitor’s undue delay or misconduct: see Myers v Ellman [1940] AC 282, HL.

This jurisdiction was given statutory recognition by the Solicitors Act 1957, section 50(2).

It was however regulated by the procedural rules only in 1960.

The relevant rule later became RSC 1965 Ord 62, rule 8(1), and then in 1986 RSC Ord 62, rule 11.

Now wasted costs orders are governed by section 51(6) and (7) of the Senior Courts Act 1981.

“(6) In any proceedings mentioned in susbsection (1), the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court.”

“(7) In subsection (6), “wasted costs” means any costs incurred by a party—

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or

(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay.”

Civil Procedure Rules

The relevant Civil Procedure Rules in relation to wasted costs are CPR 46.8 and CPR Practice Direction 46, paragraph 5.

46.8

(1) This rule applies where the court is considering whether to make an order under section 51(6) of the Senior Courts Act 1981 (court’s power to disallow or (as the case may be) order a legal representative to meet, ‘wasted costs’).

(2) The court will give the legal representative a reasonable opportunity to make written submissions or, if the legal representative prefers, to attend a hearing before it makes such an order.

(3) When the court makes a wasted costs order, it will –

(a) specify the amount to be disallowed or paid; or

(b) direct a costs judge or a district judge to decide the amount of costs to be disallowed or paid.

(4) The court may direct that notice must be given to the legal representative’s client, in such manner as the court may direct –

(a) of any proceedings under this rule; or

(b) of any order made under it against his legal representative.

46

5.1  A wasted costs order is an order –

(a) that the legal representative pay a sum (either specified or to be assessed) in respect of costs to a party; or

(b) for costs relating to a specified sum or items of work to be disallowed.

5.2  Rule 46.8 deals with wasted costs orders against legal representatives. Such orders can be made at any stage in the proceedings up to and including the detailed assessment proceedings. In general, applications for wasted costs are best left until after the end of the trial.

5.3  The court may make a wasted costs order against a legal representative on its own initiative.

5.4  A party may apply for a wasted costs order –

(a) by filing an application notice in accordance with Part 23; or

(b) by making an application orally in the course of any hearing.

5.5  It is appropriate for the court to make a wasted costs order against a legal representative, only if –

(a) the legal representative has acted improperly, unreasonably or negligently;

(b) the legal representative’s conduct has caused a party to incur unnecessary costs, or has meant that costs incurred by a party prior to the improper, unreasonable or negligent act or omission have been wasted;

(c) it is just in all the circumstances to order the legal representative to compensate that party for the whole or part of those costs.

5.6  The court will give directions about the procedure to be followed in each case in order to ensure that the issues are dealt with in a way which is fair and as simple and summary as the circumstances permit.

5.7  As a general rule the court will consider whether to make a wasted costs order in two stages –

(a) at the first stage the court must be satisfied –

(i) that it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and

(ii) the wasted costs proceedings are justified notwithstanding the likely costs involved;

(b) at the second stage, the court will consider, after giving the legal representative an opportunity to make representations in writing or at a hearing, whether it is appropriate to make a wasted costs order in accordance with paragraph 5.5 above.

5.8  The court may proceed to the second stage described in paragraph 5.7 without first adjourning the hearing if it is satisfied that the legal representative has already had a reasonable opportunity to make representations.

5.9  On an application for a wasted costs order under Part 23 the application notice and any evidence in support must identify –

(a) what the legal representative is alleged to have done or failed to do; and

(b) the costs that the legal representative may be ordered to pay or which are sought against the legal representative.

Non-Party Costs Orders

The relevant statutory provision is section 51(1)-(5) of the Senior Courts Act 1981 and in the Civil Procedure Rules the relevant rule is CPR 46.2.

51(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in—

(a) the civil division of the Court of Appeal;

(b) the High Court; and

(c) county court,

shall be in the discretion of the court.

51(2) Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal or other representatives or for securing that the amount awarded to a party in respect of the costs to be paid by him to such representatives is not limited to what would have been payable by him to them if he had not been awarded costs.

51(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.

51(4) In subsections (1) and (2) “proceedings” includes the administration of estates and trusts.

51(5) Nothing in subsection (1) shall alter the practice in any criminal cause, or in bankruptcy.

Civil Procedure Rule 46.2

46.2

(1) Where the court is considering whether to exercise its power under section 51 of the Senior Courts Act 1981 (costs are in the discretion of the court) to make a costs order in favour of or against a person who is not a party to proceedings, that person must –

(a) be added as a party to the proceedings for the purposes of costs only; and

(b) be given a reasonable opportunity to attend a hearing at which the court will consider the matter further.

(2) This rule does not apply –

(a) where the court is considering whether to –

(i) make an order against the Lord Chancellor in proceedings in which the Lord Chancellor has provided legal aid to a party to the proceedings;

(ii) make a wasted costs order (as defined in rule 46.8); and

(b) in proceedings to which rule 46.1 applies (pre-commencement disclosure and orders for disclosure against a person who is not a party).

Practice Direction

The Practice Direction does not deal with non-party cost orders.

INDEMNITY COSTS IN FIXED COSTS CASES FROM APRIL 2023

April 2023, when fixed recoverable costs will apply to virtually all civil litigation claims valued at £100,000 or less, will be on us before we know it.

Below I set out the current state of play in relation to personal injury matters and indemnity costs and fixed costs, and, at present, fixed recoverable costs only apply in personal injury cases, but that all changes in nine months’ time.

But the new system, from April 2023, in relation to Part 36 is that instead of a claimant getting indemnity costs for matching or beating its own Part 36 offer, it will get a 35% uplift on fixed recoverable costs.

The rules have not yet been published, but it seems obvious that rather than fixed costs plus indemnity costs, which is the current rule, the successful claimant will simply get a 35% uplift on the fixed costs sum from the expiry of the date of accepting the Part 36 offer, generally 21 days after it has been made.

That still leaves the issue of when the enhancement runs from, that is whether it is the end of that stage, or the stage within which the offer expires.

Let us take a specific example to make that clear.

In a Band 4 case worth £100,000 and settled before issue, the fixed recoverable costs will be £16,000.

The claimant makes a Part 36 Offer, which is not accepted, and ultimately the matter goes to trial, and the claimant matches or beats that offer.

Clearly the claimant gets the 35% enhancement from the beginning of Stage 2, assuming the time for accepting the offer had expired in Stage 1.

The issue is whether the claimant also gets the 35% uplift, that is £5,600 plus VAT, in relation to the Stage 1 fixed costs.

That may not seem a great deal of money in the context of a claim that has gone to trial, but there have been arguments about much lower sums in the current fixed costs scheme.

The same point applies to unreasonable conduct, which will attract a 50% uplift on fixed costs in the new regime.

The issue is whether, if the court finds misconduct, the uplift applies to the whole of the fixed costs, or whether the court has to determine the point at which the misconduct began.

If, for example, the misconduct started pre-action, then it seems that all of the fixed recoverable costs will attract the 50% uplift.

Where the position is unclear is where there is misconduct over a particular aspect of the claim, for example, in relation to the preparation for trial.

The issue will be whether it is simply that stage which attracts the 50% uplift, or the whole of the fixed recoverable costs.

It seems likely that a court must look at all of the circumstances, as it does now, to decide whether there has been misconduct overall justifying the 50% uplift, rather than looking at a 50% uplift for certain stages, and not others.

There is also the question of the interplay between the Part 36 uplift and the misconduct uplift, in circumstances where the claimant matches or beats its own Part 36 offer, and the defendant is guilty of misconduct.

The order of application does not matter as it produces the same result, as shown by taking an example where the misconduct started pre-issue, and assuming that the court orders the 50% uplift for the whole of the case, and assuming that the claimant matched or beat its Part 36 offer, where the time for acceptance of that offer expired pre-issue, and that the new rule will mean that the uplift is available for the stage in which the offer expired, and does not commence to the next stage.

Let us assume that the fixed costs are £50,000.

The maths is as follows:

Alternative basis:

Thus, the order of the application of the Part 36 uplift and the misconduct uplift is neutral.

However, what has not been decided, is whether that is the correct method at all, or whether one simply applies each uplift separately to the original fixed costs, which is logical, and that gives the following equation:

These are far from straightforward matters, and it is to be hoped that explicit guidance is given on these points, with worked examples as above, being given in the Civil Procedure Rules themselves.

I have stated what I think to be the logical approach, which is the last one.

However, as will be seen from the piece below, the Court of Appeal took what might seem an illogical view in awarding fixed costs and indemnity costs for the whole post-expiry period, rather than simply ruling that indemnity costs replace the fixed costs.

There is logic in the Court of Appeal decision both in terms of its encouraging early settlement, but also given the fact that indemnity costs, calculated on the old fashioned hourly rate, can actually be less than fixed recoverable costs.

I will look at this elsewhere in the context of the exceptional circumstances escape from fixed costs under CPR 45.29J.

Below is the law in relation to the current personal injury fixed costs scheme.

Personal Injury Fixed Costs Scheme

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

As far as fixed costs are concerned this resolved the issue between the two different lines of authority, both entirely justifiable on the wording of the different rules, one saying that fixed costs were just that and that an indemnity costs order made no difference, and one holding that Part 36 and its provision for indemnity costs trumped CPR 45.29B, which deals with fixed costs.

One of those lines of authority was the Smith v Taylor line where the court found that Part 36 took priority and not CPR 45.29B and here the Court of Appeal dismissed the appeal against that decision.

The other line of cases was generally known as Dixon v Bennett but in fact the appeal here was in a case called Broadhurst v Tan where the lower court had come to the same conclusion as in Dixon v Bennett, that is that nothing above fixed costs could be awarded following a successful claimant Part 36 offer.

The Court of Appeal allowed the appeal in that case.

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

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

The Explanatory Memorandum to the 2013 Amendment Rules which was laid before Parliament to accompany the draft statutory instrument is admissible as an aid to the construction of the rules. See

R v Secretary of State for the Environment ex parte Spath Homes Ltd [2001] 2 AC 349.

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

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

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

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

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

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

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

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

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

Let us say that the claimant makes a Part 36 offer when the matter is out of the portal but before proceedings are issued. The claimant subsequently matches or beats that offer at trial.

The claimant will get full fixed costs, including the advocacy fee and in addition will get full indemnity costs from 21 days after the successful Part 36 offer was made. For all intents and purposes, the claimant, or rather the claimant’s solicitor, will be paid twice – once at the level of fixed costs and once at the full indemnity rate.

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

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

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

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

SCHEDULES OF COSTS FOR SUMMARY ASSESSMENTS AND LATE OR NO SERVICE

Any court must now always consider making a summary assessment of costs, unless it is making an order for fixed costs.

That is the effect of Practice Direction 44, paragraph 9.1 which reads:

“When the court should consider whether to make a summary assessment

9.1

Whenever a court makes an order about costs which does not provide only for fixed costs to be paid the court should consider whether to make a summary assessment of costs.”

CPR 44.1 defines “Summary Assessment” as meaning the procedure whereby costs are assessed by the Judge who has heard the case or application.

The summary assessment does not have to take place on the day.

Paragraph 9.7 of the Practice Direction reads:

“No summary assessment by a costs officer

9.7

The court awarding costs cannot make an order for a summary assessment of costs by a costs officer. If a summary assessment of costs is appropriate but the court awarding costs is unable to do so on the day, the court may give directions as to a further hearing before the same judge.”

CPR 44.3(1) states that the basis of those costs is unaffected by whether they are subject to summary assessment or detailed assessment.

Practice Direction 44, paragraph 9.2 provides:

“Timing of summary assessment

9.2

The general rule is that the court should make a summary assessment of the costs –

(a) at the conclusion of the trial of a case which has been dealt with on the fast track, in which case the order will deal with the costs of the whole claim; and

(b) at the conclusion of any other hearing, which has lasted not more than one day, in which case the order will deal with the costs of the application or matter to which the hearing related. If this hearing disposes of the claim, the order may deal with the costs of the whole claim,

unless there is good reason not to do so, for example where the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.”

Paragraph 9.5(1) states that:

“Duty of parties and legal representatives

9.5(1)

It is the duty of the parties and their legal representatives to assist the judge in making a summary assessment of costs in any case to which paragraph 9.2 above applies, in accordance with the following subparagraphs.”

9.5(2) sets out what the schedule must contain and 9.5(3) states that the statement of costs should follow as closely as possible Form N260 and must be signed by the party or the party’s legal representative.

9.5(4) reads:

“9.5(4)

The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought as soon as possible and in any event –

(a) for a fast track trial, not less than 2 days before the trial; and

(b) for all other hearings, not less than 24 hours before the time fixed for the hearing.” 

The opening paragraph of Practice Direction 9.5 makes it clear that the purpose of filing form N260 at court is to assist the Judge in making a summary assessment of costs in any case to which paragraph 9.2 applies, and 9.2(a) covers all fast track claims.

The penalty provision is in paragraph 9.6 of Practice Direction 44 and reads:

“9.6

The failure by a party, without reasonable excuse, to comply with paragraph 9.5 will be taken into account by the court in deciding what order to make about the costs of the claim, hearing or application, and about the costs of any further hearing or detailed assessment hearing that may be necessary as a result of that failure.”

The leading case on the serving of Costs Schedules where summary assessment of costs is sought is:

Macdonald v Taree Holdings Ltd [2001] 1 Costs LR 147

In that case a Deputy District Judge refused Mr Macdonald his costs of a successful application to set aside a statutory demand as he had not filed and served the Schedule of Costs, and was thus in breach of the Practice Direction.

Mr Macdonald appealed, and the High Court held that the correct approach in such circumstances is for the court to take the failure into account, but to ensure that its reaction is proportionate.

A court should consider whether there was a mere failure to comply, or whether there were additional aggravating factors, for example a history in the litigation of failure to file and serve on time.

Where there is a mere failure to file and serve on time, it would not be right to deprive a party of their costs altogether.

In the Macdonald case, on the facts, the High Court found that there had been a mere failure to comply, with no aggravating factors, and therefore that the Deputy District Judge was wrong to refuse Mr Macdonald all of his costs.

Other cases, following this decision, have taken the same approach, namely that the failure to serve Costs Schedules on time should not lead to the party losing all of its costs.

The issue of failure to provide Costs Schedules, and the costs consequences, recently came up in a whole series of cases brought by North Warwickshire Borough Council, being committal applications arising from breaches of an injunction in relation to a protest at an oil terminal.

In

North Warwickshire Borough Council v Milner-Edwards [2022] EWHC 1458 (QB)

the High Court declined to make an order as to costs as the claimant had failed to file or serve a Schedule of Costs.

The court commented that neither the court nor the defendant had had the opportunity of understanding what costs were being sought, and that a Schedule should have been provided if costs were going to be pursued.

The judgment in relation to costs took up just one paragraph:

“25.    I am not going to make any order as to costs because the claimant has failed to file or serve a schedule of costs. Neither the court nor the defendant has thus had the opportunity of understanding what costs are sought. A schedule should have been provided if costs were going to be pursued.”

In

North Warwickshire Borough Council v Webb [2022] EWHC 1516 (QB)

the High Court came to exactly the same conclusion, for the same reasons, and again dealt with the issue of costs in one paragraph:

“21. I am not going to make any order that you pay the costs of the proceedings. The claimant has failed to provide a schedule of costs, as they should have done, to either the court and or to the defendants. You are disadvantaged in to responding to an application for costs. I therefore make no order as to costs, a position which mirrors that I have adopted with other defendants in a similar position.”

In

North Warwickshire Borough Council v Coleman & Anor [2022] EWHC 1459 (QB)

the facts were slightly different, but again the High Court dealt with the issue of costs in one paragraph, and again refused to make an order for costs, the reason being that the claimant had this time served a Costs Schedule, but it was irrelevant to this particular case.

“19. The claimant has made an application for costs. Unlike similar cases that have proceeded before the court over the past two days, the claimant has now prepared a costs schedule. However, the costs schedule relates to the hearings on 4 and 5 May 2022. On 4 May neither Mr Colemann or Mr Johnson’s cases were listed. They were not part of the protest group arrested and produced on 5 May. The costs schedule is thus irrelevant to either defendant. In the absence of the claimant serving a relevant costs schedule, I am not prepared to make a costs order. There will therefore be no order as to costs as between the claimant and Mr Coleman and Mr Johnson.”

In

North Warwickshire Borough Council v (1) Lucia Whittaker De Abreu (2) Alyson Lee [2022] EWHC 1460 (QB)

the claimant finally managed to serve a correct Costs Schedule and was rewarded with some costs, and again the High Court dealt with the matter in one paragraph.

“19. The claimant has made an application that you pay a contribution towards its costs in the sum of £195 each. The claimant has produced a costs schedule setting out their costs of the hearings that were listed on 4 May and 5 May. You were supposed to attend court on 4 May but failed to do so. On 5 May you were produced from custody following your arrest. Counsel on behalf of Ms Whittaker De Abreu opposes the making of a costs order on the basis that other defendants that appeared before the court over the past two days have had not been ordered to pay costs. Over the last two days the claimant has failed to file or serve a schedule of costs and therefore the court and the defendants had no information before them as to how those costs were being quantified. The position today is different. The claimant has now provided a schedule of costs. The defendants have had the opportunity to consider that. It is a schedule which is generous to the defendant as it does not include any costs from the hearing on 28 April or in relation to today. I am going to make an order that the defendants make a contribution to the claimant’s costs. Whilst that will mean that there is not parity between all the defendants facing contempt of court matters, that is the good fortune of the defendants who appeared earlier this week and not a reason why the claimant should be deprived of its costs now that it have got their house in order. The general rule is that costs follow the event, and there is no reason to depart from that rule. As to the quantum of those costs, the sum of £195 is sought from each defendant. That is a perfectly proportionate sum and I order each defendant to pay the claimant the sum of £195. Having considered the financial circumstances of each defendant, Ms Whittaker De Abreu has modest savings and Ms Lee’s financial position generally is such that the sums are to be paid in full to the claimant by 1 June 2022.”

It should be noted that the costs in each of these cases were low, generally £195 per defendant, and therefore the consequences of disallowing those costs altogether was relatively insignificant in monetary terms, and of course the claimant in each case is a public body.

Nevertheless, these are a number of High Court decisions where failure to file and serve a Costs Schedule led to no costs being awarded.

In

Gee, Re The Estate of [2022] EWHC 1590 (Ch)

the Chancery Division of the High Court was considering an argument about whether the costs incurred by the claimant in an attempt to prevent a breach of a court order were recoverable, and entirely unsurprisingly, the Court held that they were as they were incidental to the application.

The successful claimant sought its costs of that application, but had not filed form N260,

“18. Lastly, I turn to the question of detailed assessment and payment on account. The applicants did not provide a schedule of costs, and therefore it is not possible for me to conduct a summary assessment of those costs. The respondents observe that this was an application which lasted less than one day. Therefore, the general rule is that the court should assess the costs summarily: CPR rule 44.6, PD 44 para 9.2. However, because there is no costs schedule, I cannot properly go down that route. I must therefore order a detailed assessment, unless the parties are able to agree the amount of the costs (which, in the circumstances, I consider very unlikely).”

As we have seen, it is not correct that the inability to deal with the matter on the day means that summary assessment cannot be ordered, and the judge could have adjourned the matter for serviceof the costs schedule and consequent summary assessment, and reserved the matter to himself.

The significance of this decision, in the context of this piece, is that the Court did not impose any penalty under paragraph 9.6 of Practice Direction 44.

At Paragraph 21 the High Court considered the percentage of claimed costs to award by way of an interim payment and, in spite of the absence of a schedule of costs, ordered approximately 40% of what was being claimed.

In October 2021, a new edition of the Guide To The Summary Assessment Of Costs was issued and in his Foreword, the Master of the Rolls said that he wished to emphasize that the guide “is, as it has always been, no more than a guide and a starting point for judges carrying out summary assessments. This Guide is no different to its predecessors in that it continues to offer assistance to Judges. In every case, a proper exercise judicial discretion has still to be made, after argument on the issues has been heard.”

A piece will appear in forthcoming edition of this Newsletter suggesting that the Guide, and the hourly rates in the Guide, are now far more than a starting point, and for all intents and purposes are normally a finishing point, even on detailed assessments, let alone summary assessments.

The Guide has some useful sections on the relevant law and principles in relation to summary assessments.

“Where the receiving parties legally aided

3. The court should not make a summary assessment of the costs of a receiving party who is legally aided. However, the court may make a summary assessment of costs payable by an assisted person. Such an assessment is not in itself a determination of that person’s liability to pay those costs under s.26(1) Legal Aid, Sentencing and Punishment of Offenders Act 2012.”

“Where the receiving party is represented under a conditional fee agreement

4. Where an order for costs is made before the conclusion of the proceedings and a legal representative for the receiving party has been retained under a conditional fee agreement the court may summarily assess the costs. Although most conditional fee agreements provide that the client is liable to pay the legal representative only if the client succeeds in the proceedings, such agreements commonly provide that the client is also liable to pay the base costs of an interim hearing (but not the success fee) if the client wins at that hearing, whether or not the client ultimately succeeds in the claim. An order for the payment of the summarily assessed costs should not be made unless the court is satisfied that the receiving party is at that time liable under the agreement to pay to the legal representative at least the amount of those costs. If the court is not so satisfied, it may direct that the assessed costs be paid into court to await the outcome of the case or shall not be enforceable until further order.”

“Where the receiving or paying party is a child or protected person

5. The general rule is that costs payable by or to a child or protected party should be the subject of detailed assessment. The court may carry out a summary assessment of the costs of a receiving party who is a child or protected party if the solicitor acting for the child or protected party has waived the right to further costs. If the costs payable consist only of a success fee or a payment due under a damages-based agreement to the child’s or protected party’s solicitor, the court may direct that the costs be assessed summarily: r.46.4(5). Such costs, if incurred in respect of a child in a claim for damages for personal injury, should be assessed summarily only where the damages do not exceed £25,000: r.21.12(1A). The court may carry out a summary assessment of the costs payable by a child or protected party if an insurer or other person is liable to and financially able to discharge those costs.”

“STATEMENTS OF COSTS

7. Statements of costs should follow as closely as possible form N260 and must be signed by the party or the party’s representative: Practice Direction 44 para 9.5(3). Forms N260A and N260B may be used in paper, pdf and electronic spreadsheet versions for the costs of interim applications and trials respectively. Where a party files an electronic spreadsheet version it must also file and serve a paper/pdf form.

8. Statements of costs must be filed and served not less than 2 days before a fast track trial and, for other hearings, not less than 24 hours before the start of the hearing: Practice Direction 44 para 9.5(4). Failure to comply with those time limits will be taken into account in deciding what costs order to make and about the costs of any further hearing that may be necessary as a result of that failure: para 9.6. Any sanction should be proportionate. The court should consider what, if any, prejudice had been caused to the paying party and how that should be taken into account. Possible courses to take include a short adjournment to enable the paying party to consider the statement of costs, adjourning the summary assessment to another date, ordering a detailed assessment, disallowing some of the costs which might otherwise have been allowed, or making no costs order at all.”

“GENERAL PRINCIPLES TO BE APPLIED IN SUMMARY ASSESSMENT

The indemnity principle

17. A party in whose favour an order for costs has been made may not recover more than he is liable to pay his own solicitors: Harold v Smith [1865] H & N 381, 385; Gundry v Sainsbury [1910] 1 KB 645 CA. There are exceptions to the principle, notably costs funded by the Legal Aid Agency and fees payable under certain types of conditional fee agreement.

18. The statement of costs (N260, N260A and N260B)) filed for summary assessment must be signed by the party or its legal representative. That form contains the statement:

The costs stated above do not exceed the costs which the [claimant/defendant] is liable to pay in respect of the work which this statement covers. Counsel’s fees and other expenses have been incurred in the amounts stated and will be paid to the persons stated.

19. The signature of a statement of costs by a solicitor is, in normal circumstances, sufficient to enable the court to be satisfied that the indemnity principle has not been breached: Bailey v IBC Vehicles Ltd [1998] 3 All ER 570 CA. A solicitor is an officer of the court and as Henry L.J. stated:

In so signing he certifies that the contents of the bill are correct. That signature is no empty formality.… The signature of the bill of costs … is effectively the certificate of an officer of the court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client…”

“Time for payment of the summarily assessed costs

20. As a general rule, a paying party should be ordered to pay the amount of any summarily assessed costs within 14 days. Before making such an order the court should consider whether an order for payment of the costs might bring the action to an end and whether this would be just in all the circumstances.”

EXTENSION OF FIXED RECOVERABLE COSTS AND INJUNCTIONS

Fixed recoverable costs will be extended to virtually all civil claims valued at £100,000 or less, with effect from 3 April 2023.

However, in his review of civil litigation costs: Supplemental Report: Fixed Recoverable Costs, Lord Justice Jackson recommended that the new fixed recoverable costs scheme should not yet include Part 8 claims, which are often for non-monetary relief.

This is dealt with in Chapter 7, paragraph 6, at pages 110 to 111 of the Report.

Lord Justice Jackson suggested that there be a review of these matters four years after the spread of fixed recoverable costs, both upwards to £100,000, and across to virtually all civil claims.

If that recommendation is followed, then Part 8 proceedings, with limited exceptions that do not apply here, will not be brought within fixed recoverable costs until April 2027 at the earliest.

However, in Chapter 5 of his Report – The Fast Track – Lord Justice Jackson states that a claim for a declaration or injunction should be treated as the equivalent of a claim for £10,000, with the court having power to vary that figure upwards or downwards.

Costs would then be calculated in accordance with matrix of fixed recoverable costs for fast track claims, which appears at paragraph 5.4, Table 5.2 of Chapter 5 of the Report at page 85.

Consequently, this is a little confusing.

My view is that injunction only proceedings issued under Part 8 will not be subject to fixed recoverable costs, whereas injunction proceedings issued in conjunction with a fast track claim will be covered by fixed recoverable costs.

Lord Justice Jackson gives as an example, a housing disrepair claim where the defendant is ordered to carry out repairs and where is an injunction requiring such work.

That would be covered by the fixed recoverable costs scheme.

Under the new fixed recoverable costs regime, this appears to have the bizarre effect of open costs on a simple Part 8 application, with fixed recoverable costs if the matter is transferred to Part 7 because there is a substantial dispute of fact.

CLAIMS EXITING SMALL CLAIMS PORTAL

There is no provision for transferring a claim from the Official Injury Claim portal, which is the Orwellian name for the Small Claims portal which came in in May 2021, to the Old Ministry of Justice portal, that is the one where you got some money, although it is not specifically prohibited.

My view, on balance, is that if the matter exits the small claims portal, then it does not go to the Ministry of Justice portal, but rather the claimant litigates by issuing proceedings under Part 7.

This is also the answer given on the portal website in response to frequently asked questions.

This issue comes sharply into play in relation to vehicle damage and associated costs, as compared with personal injury.

If there is anyone on the planet who purports to understand the portal in relation to vehicle costs, will they please enlighten me?

Is it barely a secret that most senior judges and officials recognise that the portal is barely comprehensible, and they are concerned about it, as obviously the almost zero take up by litigants in person has implications for the Funnel System, which the Master of the Rolls is so keen on.

A personal injury claim where the channel damages are valued at £5,000 or less, goes on to the new portal, whatever the value of the vehicle related damages.

However, if no personal injury claim is brought the vehicle related damages are taken into account in considering the appropriate track.

This is also the position if agreement cannot be reached, that is that vehicle related damages are not brought into the calculation in the portal, but are as soon as the matter exits the portal.

Consequently, a whiplash claim, now worth just a few hundred pounds, drags a fifty thousand pound credit hire claim down into the small claims track.

Jettison the almost worthless personal injury claim, and it goes straight into multi-track, with full costs, and those costs were far exceeded the whiplash claim.

In any event, in relation to claims that drop out of the new small claims portal, it appears that the court must allocate such a claim to the fast-track or multi-track, and fixed recoverable costs do not apply, as they only apply in relation to Ex-Ministry of Justice portal cases.

In relation to vehicle costs, the guidance at paragraph 5.2.4 states:

“Where these losses are protocol vehicle costs you will be asked to provide details of the losses before you request an offer. Where they are non-protocol vehicle costs they will usually be dealt with outside of this process. If however you are unable to agree settlement of the claim and choose to go to court to ask it to value your claim, you will need to add the non-protocol vehicle costs at that stage.”

That of itself is unclear.

At one level, it suggests, that if either liability or quantum has not been agreed, and obviously if the parties are “unable to agree settlement of the claim”, something has not been agreed, then you can indeed issue Part 7 proceedings.

However, the structure of the new portal means that if liability is not agreed, then you go to court on liability, and if the claimant is successful, the matter returns to the portal for the valuation of damages.

Consequently, the guidance that I have quoted above could be interpreted as meaning that liability must be dealt with, and it is only if damages cannot be agreed that you add on the non-protocol vehicle costs.

On balance, but it is only on balance, my view is that in these circumstances, you can indeed add in the non-protocol vehicle costs and go to court utilizing Part 7 for the whole action.

The whole document and guidance is hopelessly complicated.

Examples could have been given, with different explanations, along the lines of:

“These are the damages taken into account if liability is admitted and this is how your claim proceeds.”

and

“These are the damages that are taken into account if liability is not admitted and this is how the matter proceeds.”

OFFICIAL INJURY CLAIMS PORTAL: A DISASTER THAT THE REST OF THE CIVIL JUSTICE SYSTEM MUST BE SPARED

Matters on the Small Claims Portal, often wrongly referred to as the Whiplash Portal, and officially The Official Injury Claims Portal, are taking six months on average to settle, even though the number of claims has slumped.

That is according to the Official Injury Claims Portal itself, which covers all road traffic claims where the injuries are valued at £5,000 or less, not just whiplash claims, and those figures show that for the cases closed between April and June 2022, the average time for settlement was 175 days, up from 139 days in the previous period.

Of the claims involving whiplash injuries, just 30% were whiplash only, with the balance being multiple injury cases, where the portal architects abdicated responsibility for deciding how these cases should be valued, as the whiplash element, but only the whiplash element, is subject to a fixed tariff.

I covered this extensively in Issue 14, pages 3 – 8, with Gordan Exall’s piece –

HOW MUCH IS AN ARM AND A NECK? THE ASSESSMENT OF DAMAGES FOR PAIN AND SUFFERING IN MULTIPLE INJURY CASES AFTER THE CIVIL LIABILITY ACT 2018.

When the Government approved and implemented this clueless approach, it said that the issue of mixed claims needs to be determined in court.

That is an absurd approach for any government, or any portal designers, or indeed anyone else to adopt.

It amounts to saying:

“We do not understand how to do this. We cannot draft any clear rules. We do not know what we are doing. We will leave it to the courts.”

Widely regarded as a disaster, the Official Injury Claims Portal, designed to be quick, easy and suitable for Litigants in Person, is very slow, very difficult to understand, even for experienced lawyers, and is being almost totally ignored by Litigants in Person, with over 90% of claimants being legally represented.

Claims are around 30% down compared with the position before the portal was introduced – May 2021 – even though vehicle use has increased significantly following the end of all pandemic restrictions.

Matthew Maxwell Scott, the executive director of the Association of Consumer Support Organisations, said the latest data showed that the system may be reducing claims but is suffering from rising delays.

He said:

“While more complex claims explain some of that increase, 36% of claimants waiting for more than six months to have their claim settled is no advertisement for what we were promised would be a state-of-the-art-digital journey, built around the needs of the consumer.”

MEDCO, the Medical Organisation through which all medical reports in soft-tissue matters must be obtained, has dropped the rule that medical reporters must have a 24 hour answering service.

This was designed to serve Litigants in Person who could only phone out of office hours.

MEDCO said that the volume of work from unrepresented claimants had been expected to be significant, but was in fact at a much lower level.

Around 69 litigants a day use the portal, so spread across all the medical experts, that is not many calls.

These figures have now been fairly constant for the last three quarters.

Of the nine percent of the unrepresented claimants who use the portal, around one third exit it because they find it too complex, according to Matthew Maxwell Scott,  meaning that the true cohort of Litigants in Person is around six percent of the total.

Claims management companies, which are generally structured to deal only with simple claims, and who were heavily involved in this type of work, that is low value road traffic accidents, have almost completely deserted the system with just over one claim a day on average being made by a claims management company.

Matthew Maxwell Scott again:

“While much of the broader trend data is unremarkable, it is becoming ever clearer that the “user-friendly” OIC portal promised by ministers is complex, legalistic and difficult for claimants to use without professional support.

“Unrepresented claimants remain fewer than one in 10 of the total, and one in three of those then exit the portal because they find it too complex. These numbers do not support the view that this a process that is fit for purpose.”

John Hyde writing in the Law Society Gazette on the 31 May 2022 said:

“Of the 243,000 claims lodged with Official Injury Claim, just 23,000 have progressed to settlement. Liability has been admitted in most cases, but taking the next step has proven difficult, as thousands wait for a medical diagnosis (now mandatory) and half of claimants with injuries in addition to whiplash are left in limbo while a test case is selected to work out this issue. Hybrid claims were always going to be a problem when tariffs restricted and reduced compensation and it seems faintly ridiculous we are no nearer to finding a solution a year on from the portal’s launch.”

In addition to all of these matters, the actual technology is not working properly for firms doing volume work with claimant lawyers finding it almost impossible to submit cases in any great number.

The number of law firms doing this kind of work has fallen dramatically, and as set out above, virtually no claims management companies are doing anything, and Litigants in Person are effectively only six percent of the total.

Any pretence that this system was designed to provide Access to Justice, or is capable of doing so, is absurd, and fully justifies the criticisms made by huge numbers of lawyers and others, that this was a system implemented by the Government, to be run by the insurers and for the insurers and in return for favours done by insurers to the governing party.

John Hyde again:

“The industry is paying for the portal essentially on the basis that a good chunk of people would be forced to do without a lawyer and would need help. Like a property developer offering to build a community centre in return for permission to build a 50-storey skyscraper, this was a quid pro quo arrangement with the government.

Except in this case, the community centre is a white elephant. The portal was designed to cater for litigants in person and – at most – just 9% of claimants are using it without a lawyer.

To put into language they might understand, insurers have bought travel cover at great expense, only for everyone to refuse to leave home.”

No one, that is neither the Government, the Civil Justice System, nor the insurers has said how much the system is costing the insurers.

Thus, we have a compulsory part of the Civil Justice system which has been privatized to a party that is always the defendant in such proceedings, and who refuses to say how much money they are putting into it.

This is seen as part of a wider attack on the Civil Justice System, with the Government having announced that it will force non-judicial telephone mediation on parties with claims of under £10,000, with the aim of introducing it for all of County Court Claims, potentially of up to round £250,000.

In addition, from the 1 June 2022, the right to a trial in a small claims matter has been abolished, with the Judge able to decide the matter on the papers, even if one, or both parties want a real trial.

The irony of these assaults on human rights and the work generally done by District Judges, who themselves have to operate with hopeless technology in courts that are falling down, is that it is likely severely to delay, if not wreck, the digital Justice System so much admired by some of the senior Judiciary, who of course, do not have to deal with it.

Having said all of that, clearly an online system, such as the old Ministry of Justice Portal which works very well, is desirable, and the problem here is that the new portal system was handed over to one of the parties.

It is the equivalent of handing over the administration and management of the Employment Tribunal system to the Socialist International.

I fully support proper online procedures, subject to them being truly independent and judicially monitored, and also subject to the important point that those who are unable or incapable of using such technology should be fully provided for.

There is no joined-up thinking here.

It was proposed that Lasting Powers of Attorney become fully digital, but it was pointed out that around 5.5million adults, generally those over fifty, and statistically more likely to make Lasting Powers of Attorney, had no access to the internet.

In addition, there are adults with educational and learning difficulties.

This whole issue needs to be thought through with much greater care, and with heavy involvement of experts, and ultimately the decision should be a political one and not a judicial one.

As with so many other things, the risk here is that a great idea has been wrecked by privatization.

SOLICITORS REGULATION AUTHORITY FINING POWERS UP FROM £2,000 TO £25,000

The fining powers of the Solicitors Regulation Authority are to be increased from £2,000 to £25,000 in what is seen as part of an ongoing programme to force all small firms of solicitors out of the market.

Fixed penalties will be introduced for what are perceived as lower level breaches, but there will be a consultation on this aspect.

The Law Society expressed concerns about the Solicitors Regulation Authority “acting as investigator, prosecutor and judge, in potentially many more serious and significant cases which currently go before the SDT.” [Solicitors Disciplinary Tribunal].

Solicitors will retain the right of appeal to the Solicitors Disciplinary Tribunal.

Ethnic minorities, men, and older solicitors and over-represented in the enforcement processes.

Solicitors Regulation Authority Guidance will be amended to state that cases involving sexual misconduct, discrimination or harassment should result in striking-off, or suspension.