Case law update – September 2019
The last couple of months have presented numerous judgments, far too many to cover here though the following caught the eye of Gary Knight:
Vivek Rattan v Carter Ruck – SCCO 20/05/19 (amended 19/07/19).
Before Master Leonard an assessment of costs between solicitor and client.
Two applications issued, (i) Defendant’s application to strike out the Claimant’s application for assessment of two bills delivered in December 2011 (ii) Claimant’s application for extension of time to request a detailed assessment under CPR 46.10
The case had a long history with the Claimant, between February 2008 and July 2011, taking advice from two firms of Solicitors in relation to a potential mis-selling claim against a bank which had provided the Claimant with advice and investment management services. The claimant said he had incurred pre-action costs of £144,822.00 with the two firms.
Between July and August 2011, the Claimant approached the Defendant for advice and subsequently provided instructions for a claim against the bank with proceedings issued in May 2013. The Defendant acted under a CFA which provided for a success fee of 100% Counsel also acted under a CFA with a success fee of 100% and ATE insurance was provided by Temple
The claim was the subject of a costs case management conference 7 March 2014. The budget prepared by the Defendant incorporated pre-issue costs of £28,523.25 but not any costs of the previous solicitors.
The budget was reduced from £849,915.50to £762,695.50 (the bank’s budget was reduced from £1,190,516.00 to £770,000).
The matter was resolved with the Claimant receiving USD $500,000 plus an additional payment of £340,000, for costs.
The settlement reflected the Part 36 offer made on behalf of the Claimant by Carter -Ruck – $500,000 plus costs and subsequent negotiations; the bank accepted $500,000 but were unwilling to meet the costs claimed in the sum of £480,000.00.
In reporting to the client Carter Ruck advised the Claimant that they intended to try to get the bank to £300,000 plus VAT and if the bank was to agree the Solicitors would accept “this recovery in full and final settlement of costs/premium-without seeking any further contribution from you” , adding ”although it is less than our base costs and without any success fee”.
The Claimant responded to the effect that he had understood from the Defendant that he would be able to recover his pre-action costs (“of £144,820.00”) less reading in costs said to be £10,000.00 and that he had relied upon that representation when signing the CFA.
The Claimant complained that the Defendant had, without his consent, excluded those pre-action costs from the costs budget considered at the CCMC.
Evidence was produced from a Partner in the Defendant firm stating that the settlement took in to account an allegation by the bank that the Claimant had fabricated a note of a meeting, the contents of which were demonstrated to be false by documents disclosed by the bank. The Defendant considered the Claimant’s credibility was seriously affected and gravely weakened his claim and strongly militated in favour of the settlement recommended to the Claimant.
Whilst not accepting of the points made by his solicitors, the Claimant set out his final position in an e mail that…as per advice, he would accept $500,000 being offered by the bank provided (a) there is no recourse from further payments or disbursements from this amount, to either your firm or any other party (b) the sum of $500,000 to be paid in to the Claimant’s bank account (c) all disbursements made by the Claimant in respect of court fees and costs of mediation would be reimbursed by the Defendant.
The matter was duly settled though the judgement refers to the sum of £340.000 being received, representing costs. The Defendant rendered to the Claimant two bills (and accompanying credit notes)settling all costs, disbursements and VAT at £340,000.00. £200,000 represented the Defendant’s professional charges, £42,905 Counsel’s fees and £26,500.00 for the ATE premium.
The Claimant issued Part 8 proceedings seeking assessment of the two bills delivered.
Usual order was made with directions for cash account, breakdown of fees and a time table for Points of Dispute and Replies.
The Defendant’s breakdown of costs was served two weeks later than provided for by the order made. The profit costs amounted to £627,641.58 with disbursements of £125,885.87 plus VAT; in total £934,799.34. Of the profit costs figure, £401,910.50 represented the Defendant’s success fee at 100%. The sum of £42,905.00 represented Counsel’s success fee.
The Points were served almost four months after the order for assessment and over two months after the master’s time limit for applying for a hearing.
The Points complained about the inclusion of success fees, stating the Defendant had agreed to waive the same. At paragraph 22 of the judgement Master Leonard comments “This misses a fundamental point about detailed assessment between solicitor and client. A solicitor is (subject to the permission of the court to amend) bound by the bill rendered and cannot ask for payment beyond what he has billed. On assessment, however, the solicitor’s breakdown is not limited to the costs actually billed. The breakdown may demonstrate the reasonableness of a bill by showing that a higher charge could have been justified”.
The challenge to the inclusion of Counsel’s success fee was, however, considered, by the Master, to be “a rather better point”.
The points of dispute included allegations, at considerable length, with regard to the solicitor’s failings in the conduct of the bank litigation.
Following service of the Points of Dispute, no procedural steps were taken in the assessment proceedings until the Defendant’s application to strike out made four years after delivery of the bills and just over three years after service of the Points of Dispute.
The Claimant stated that it had been his intention to bring a claim for negligence against the Defendant following the settlement with the bank and that a letter of claim had been sent 1 September 2016 though proceedings were not issued until12 April 2018.
The master considered the negligence proceedings noting an overlap between the Particulars of Claim and the Points of Dispute.
When considering the Claimant’s application for an extension of time the master agreed with the Defendant’s submission that rather than being an application for extension the application needed to be considered as an application for relief from sanction the reasons being that an application for extension did not engage CPR 44.11and that whilst a refusal was likely to have costs consequences, that was true of all applications.
Referring to quoted case law including Haji-Ioannou v Frangos & Ors and Less & Ors v Benedict, the master stated that they had been decided years before the CPR were amended, in April 2013, with the emphasis placed on the importance of compliance with rules, directions and orders and prior to the decision in Denton of equal importance, the master found, was that these cases related to costs between the parties and not between solicitor and client.
The delay of over three years was “self-evidently serious and significant”.
The master did not accept the Claimant’s contention that the matter was ready for hearing; the master considered the criticisms of the Defendant’s conduct, set out in the Points of Dispute were, in a number of ways “prolix and unclear” and that there were significant concerns with regard to their merit.
If the matter was to proceed directions would be required with regard to witness evidence, likely to be determined as preliminary issues. The master anticipated any assessment being heard over a number of days.
The master agreed with the Defendant’s submission that it was highly unsatisfactory that the claimant was seeking to determine the same issues simultaneously, in two different courts. If it were right for there to be a detailed assessment, the master opined, it would be necessary to stay the matter until the conclusion of the QB claim adding years to the process.
The Claimant failed to provide good reason for his delay, reference to “family difficulties” did not “come close” to explaining the delay and the fact that the Claimant had acted for part of the time as a litigant in person had no bearing upon the matter
Even if it were not right to treat the application as one seeking relief from sanction the master was required to consider if the application was consistent with the overriding objective to allow the Claimant the very exceptional extension of time he sought; the master answered “no”.
The Claimant had not been forced to accept the settlement arrangements; his solicitors had not threatened to act. The master agreed with the Defendant that it was unlikely, in any event, that the Claimant would achieve any significant reduction in the Defendant’s billed costs
In summary the master refused the Claimant’s application for an extension of time to apply for a detailed assessment hearing; the delay being over three years; adding “were I to grant the extension of time he seeks, the consequences would most probably be to extend these proceedings for months, possibly years, in order to accommodate several days of hearings from which it is highly unlikely that the Claimant will derive any material benefit.
I have previously admitted an interest in cases where specialist Costs Counsel cross swords I was, therefore, taken with the following:
XDE (By her husband and Litigation Friend) v North Middlesex University Trust Hospital Trust – Neutral Citation [2019] EWHC 1482 (QB) – Mr Justice Lay (with Master Haworth, Costs Judge as an Assessor
The above pitted Mr Benjamin William QC against Alexander Hutton QC, a real heavy weight match- up.
An appeal against the decision of Master Rowley whereby he had determined, on a preliminary issue, that the Claimant’s success fees and ATE insurance premium were to be disallowed.
The claim related to a delay in the diagnosis of the Claimant’s tuberculous meningitis with catastrophic consequences.
The issue of liability, including causation, was concluded by agreement 98%/2% in favour of the Claimant.
The issue of quantum was compromised in “a very substantial sum”. The Claimant’s Bill of Costs in connection with liability was in excess of £1million pounds inclusive of success fee for solicitor and counsel. The liability bill did not include ATE premium.
The Claimant had previously been advised under a legal aid certificate; this was discharged, at the Claimant’s request, 11 May 2012 and the Claimant entered into a CFA with Solicitors.
The issue before the Costs Judge had been is the discharge of the Legal Aid Certificate had been reasonable and therefore whether or not all additional liabilities incurred following the CFA in October 2012 should be disallowed
Reference was made to the limitation placed on the certificate in respect of costs and the fee earner’s interpretation of a letter from the LSC that an increase to the allowance (£55,490.00) would not be approved at a stage when time record amounted to £57,000.00 with costs at the point of issue likely to be £67,000.00.
Given that the Claimant’s solicitors were unable to progress the case to the end of stage 2 within the current costs limit it was proposed that the certificate be discharged with alternative funding explored.
The fee earner wrote to the Litigation Friend explaining the restriction on the certificate and suggesting the certificate be discharged; the fee earner explained the “no win, no fee” funding advising that under the proposed arrangement the Claimant would be in broadly the same position “in that she will be protected from any deductions to her compensation as she lacks capacity…”
The certificate was discharged.
There was some delay in signing the CFA, the Client was advised that any thing not paid by the Defendant would be written off.
Consideration was given to the statement provided by the Claimant’s solicitor dealing with the change of funding.
On the assessment of costs, the master gave consideration to the decision of the Court of Appeal in Surrey v Barnet and Chase Farm Hospitals Trust and others [2018] 1 WLR 5831 (Mr Williams QC and Mr Hutton QC were both instructed in Surrey)
There were, in essence, three grounds of appeal:
- The master had been wrong to equate this case to Surrey (in the index case the 10% Simmons v Castle uplift could have no application
- In the alternative the master should not have held that the switch was unreasonable: The Claimant had no choice because her legal budget had been exhausted
- The master’s conclusion that it was a “fundamental defect” in the Claimant’s case that the Litigation Friend was not consulted amounted to a “laconic” finding which rested “on the fallacies impeached already”, in particular the fact that the switch was involuntary
In dismissing the appeal Jay J found that the real reason for the switch to a CFA was that the legal aid limit had been exceeded. By then there was no prospect of an extension to the certificate; indeed, the Claimant’s solicitors were “effectively asking for the certificate to be discharged”.
The advice to the Litigation Friend was described as “deeply unhelpful” to the Claimant
The Judge considered that the Solicitors had failed to inform the LSC in respect of two additional experts, or that all five experts would be attending a conference with Counsel in October 2011. In December 2011 an application had been made for an additional funding of £10,000.00 on the basis, as found by the master, that it was sufficient to cover the funding of the litigation to the end of stage 2 however, in the view of the judge, inadequate particulars were supplied in support of the application and the sum sought was plainly insufficient to cover the whole of the relevant period.
Such figures as existed were only provided to the LSC in May 2012, by which time it was “far too late” As at 8 May £57,500.00 had been spent. It was estimated that £67,000.00 would be spent by the date of issue. Solicitors did not provide any estimate of the costs to the end of stage 2; the master’s rough calculation was that a figure of £90,000 was about right therefore it followed that (i) a significant overspend would have occurred even without the two additional experts, and (ii) solicitors had probably exceeded the costs limit in March or April.
The Judge did not find that a letter written by the LSC 17 January 201 came close to ruling out a properly constituted application for additional costs and the solicitors had made no attempt to make the required application or provide the necessary information in the CLSAPP8.
The master had, in his judgment, given two reasons for his conclusion that the solicitors had acted unreasonably:
- Solicitors should have attempted to keep the case within budget, should have provided calculations to demonstrate their adherence to the budget or otherwise, and in the event that the case plan was not being followed should have made timeous and properly constituted applications for additional funding.
- Solicitors had acted unreasonably in failing to make a properly constituted application in December 2011
The Judge agreed.
There was another clash of the titans in the High Court with an appeal again against a decision of Master Rowley, Costs Judge
EPX (A Child by her mother and Next Friend) v Milton Keynes University Hospital NHS Trust [2019] EWHC 1508 (QB)
On this occasion the referee was Mr Justice Stewart (with Master Gordon-Saker as Assessor)
Again, the matter concerned an appeal against the master’s decision to disallow the Claimant’s success fees and ATE premium.
Success fees in the sum of £125,116 and ATE £27,324.00
Again, a matter where the Claimant started out under a Legal Aid Certificate but changed to a CFA.
The judgment is lengthy but warrants careful review.
The certificate was limited to initial investigations, obtaining medical records etc with a limit of £3,500.00. The limitation was increased to £7,500.00 following application.
The certificate was increased to £20,000.00 to allow for completion of the investigation into liability and causation.
In the Letter of Response, the Defendant denied liability in relation to the claimant’s hospital stay up to 14 August 2005 and sought further particulars of the second limb to the claim, care provided following admission 21 August 2015, which the Claimant declined to provide.
A conference was held with Counsel and experts and solicitors wrote to the LSC requesting an increase to £27,500.00
The LSC responded suggesting the claim was not supported by the medical evidence and requesting a copy of counsel’s advice in the matter.
Solicitors wrote to the Litigation Friend advising her that the LSC were not prepared to increase funding and had asked for Counsel’s advice
Counsel was instructed and provided an advice May 2012.
On receipt of the advice the Litigation Friend was advised that counsel considered the matter to have chances of success of not less than 60%
The advice was sent to the LSC 29 May 2012 in support of the request for increase sent to the LSC 11 April 2011.
The LSC expressed concern with regard to merits od the claim but considered the scope of the funding was sufficient for the Claimant to issue and advised that an increase to funding would only be considered once the Defence was received.
The Litigation Friend was advised along the lines that whilst they were allowed to issue proceedings, solicitors had no funding to instruct counsel for particulars of claim, nor to pay the court issue fee.
The Litigation Friend was advised that the LSC “remain concerned” about the merits of the claim and the Solicitor opined that on receipt of the Defence it was anticipate that the LSC “will cease to fund the claim”.
The Solicitor then went on the explain alternative methods of funding.
The LSC was requested to extend funding to £27,000.00 to allow issue and counsel to settle POC.
The LSC responded by reminding the solicitor that whilst the certificate authorised four experts under stage 1 (investigative help); it had not authorised quantum experts; the certificate authorised the issue of proceedings, the financial limitation remained.
After consideration and following discussion with the Litigation Friend the solicitor applied for the discharge of the certificate of public funding and entered in to a CFA with ATE (premium £27,600 plus tax recoverable against the Defendant is the claim was won and if unsuccessful paid by the insurer.
The first and second grounds of appeal submitted that (1) The master had been wrong to reject any reliance of change of funding regime on 1 April 2013. Whilst not the immediate reason for the transfer to CFA plus ATE, it was argued that it was “obviously important context to any issue of timings”. (2) The master had been wrong to reject the Claimant’s case that it was reasonable to change funding before receiving the Defence
In rejecting these grounds of appeal, Stewart J agreed with the master that (1) there was little documentation regarding the consideration allegedly given to the change if funding with only one attendance note that suggested that if the claimant lost her LSC certificate post April 2013: “then it is likely any success fee will have to come out of the damages”.
(2) The Claimant’s Solicitor’s as a firm, did not adopt a policy of moving all of their legal aided clients onto a CFA
(3) There was no evidence of communications with the Litigation Friend as to the pros and cons of the possibility of a success fee coming out of the Claimant’s damages in a post April 2013 CFA
In the circumstances the master was entitled to find as he did “To put it in the words of the Surrey case, at paragraph 71: “it formed no part of the decision making process. In other words, this was not one of the reasons for the switch”.
On the issue of the Claimants’ concern as to the availability of ATE after service of a Defence, Stewart J rejected the appeal on the grounds of insufficient evidence that the lack of ATE insurance post April 2013 was ever actually taken into account nor was there “anything in the contemporaneous documents to support this”. In particular there was no evidence or any contemporary documentation to suggest that the matter had been discussed as a potential risk with the Litigation Friend.
On the third ground; that the LSC might have withdrawn funding in the event a Defence was filed and served and described by Counsel as the solicitors’ “overwhelming reason for the change of funding”; Counsel argued that the master had not been entitled to reach his conclusion, “it being contrary to the untraversed evidence”., Stewart J held that the appeal “must fail” as the evidence was not “untraversed”. Reference was made to various attendance notes dealing with funding issues, none of which supported the Claimant’s submission.
A new point arose on the appeal
It was that the Surrey cases concerned the position where two courses of action were reasonable. It was in those circumstances that the Court held that the real issue is the reasons why the receiving party made the choice he did. If the reasons are contained in the advice, then the advice constitutes the reasons. Mr Marven, for the Clamant, submitted that where there was in reality only one reasonable decision, i.e. only one reasonable choice available to the receiving party, then whether costs had been reasonably incurred because of the switch from LSC to CFA funding did not depend on the advice given to the client or the reasons why the client made the choice. The sole question was whether there was, objectively speaking, only one reasonable decision.
In the context of the present case, the submission was that, even if the Master was correct in finding that the possibility of the LSC withdrawing funding was not a reason for the switch to CFA, nevertheless it was the only reasonable decision. This was because of the Claimant’s solicitor’s evidence in para 38 of her witness statement where it was said the case would have become uninsurable because the ATE insurer would not be prepared to issue an ATE policy where the Defence denied liability and the LSC had discharged the legal aid certificate because of the poor chances of success.
Stewart J acknowledged that this point was not addressed in Surrey. Nor was the case argued in this way before the master; it formed no part of his judgment. There was no Ground of Appeal to the court based on it.
Stewart J considered the fact that this point was not raised until in oral submissions before him. At first, neither the Court, nor Defendant wished to take a purely procedural point. However, as the matter developed, so did the procedural concerns. First, the Defendant had taken a decision not to cross-examine the Claimant’s solicitor before the master. She was available for cross-examination. That decision would have been made on the arguments reasonably expected to be, and in fact, presented. There was at no stage any suggestion that, even if the actual reasons for the decision to switch funding did not include the possibility that the LSC funding would be withdrawn, nevertheless the decision was objectively justified. Had that been an argument before the master, the Defendant may have asked to cross-examine. Mr Marven said that was not realistic, but Stewart J (a) did not understand why not and (b) Mr Hutton for the Defendant stated that, though he could not say he would have asked to cross-examine, nor could he say he would not have done. Secondly, the master, though he did make a finding in para 30, may well have approached that finding and his reasons for it somewhat differently had it been potentially critical to his decision, rather than being seemingly non-critical based as it was on a reading of Surrey which was not sought to be distinguished before him.
The judge did not consider it right for the new point to be raised on the appeal whilst he did make comments about the factual position, including the observation that if the risk of losing funding was so key “it was extremely odd that (a) the client was never told this and (b)it is never referred to in any of the contemporaneous documentation”.
In respect of the fourth and final ground of the appeal; the Claimant submitted that the master had been wrong to conclude that it was unreasonable to obtain quantum evidence; his decision reflecting the alleged need to be aware of the likely value of the case – master Rowley referring to the case of SG v Hewitt Neutral Citation Number: [2012] EWCA Civ 1053
Secondly, the LSC were not responsible for costs of the quantum experts
Dealing with the second point first, the Judge found that the master was “absolutely correct”; the appropriate question is what the certificate authorised and in the instant matter the certificate did not authorise the use of legal aid funds to instruct quantum experts; as Mr Hutton for the Defendant submitted “if it was the solicitors’ practice to instruct quantum experts in the early stages without authority from the LSC to do so, then they did this at their own risk”.
Thus, the costs of such steps outside the costs limitation could not be counted as costs counting towards the costs limitation in the certificate.
On this basis alone Stewart J found that the master’s decision was correct.
Turning briefly to the master’s other reason why the Claimants obtaining quantum evidence at the early stage was not reasonable. He noted from the SG case, that it was clear from the judgment that Claimants as a whole might be in some difficulties from a well-judged early Part 36 offer. Nevertheless, the court emphasised the exception to the general rule on Part 36 offers, namely, the general rule will be followed unless the court “considers it unjust to do so”.
Stewart J did state that the master’s judgment at [41] and [42] caused concern on this point. Citing, by way of example: “.
Stewart J, by way of some additional comments, stated that experienced personal injury solicitors would have some “ball park figure” understanding of value of a claim once medical evidence, including evidence as to condition and prognosis has been obtained. To suggest otherwise flies in the face of the knowledge acquired over time by such practitioners. In summary it may not be unreasonable to obtain early quantum reports; however, it is not unreasonable not to obtain them. Such reports are commonly not obtained until after a liability/causation trial. This reflects the way LSC funding is outlined in the Checklist. Of course, there is always a risk that a defendant may make a speculative Part 36 offer before any quantum reports have been obtained. However, such an offer is usually made where liability looks very problematical for the Claimant and the Defendant makes a low offer which the court is asked to approve because of the very substantial danger of total failure. It would be rare indeed for either (a) a defendant to make a very substantial offer of a 7-figure lump sum plus periodical payments without any quantum reports and/or (b) a court being asked to (or approving) an offer in a case which was strong on liability and which did not have the benefit of some quantum evidence. If such offers became a real problem in large-scale personal injury litigation, such that Claimants were being put at serious cost risk when they could not obtain quantum reports because of LSC certificates, then one would have expected it to have surfaced and that either the SG exception would be utilised perhaps more than it is, or there would be other steps taken to counteract the problem”.
In Conclusion
The master had correctly directed himself as to the principles of law set out in the Surrey case. These included:
(i) “Where the client is faced with a choice between two alternative courses of action which will involve incurring costs, it may well be the case that both courses of action are reasonable, even if one is more costly than another…Whether the incurring of costs is or is not reasonable will depend on the facts that are relevant to the particular case under consideration.” (Paragraph 14)
(ii) The burden of proof lies on the receiving party. “The paying party is at least entitled to ask the question: why did you switch? In those circumstances I consider it is up to the receiving party to justify his choice; and that entails examining the reasons why the choice was made” (Paragraph 30).
(iii) Where (as here) the litigant followed the solicitor’s advice then (paragraph 32) “…the real issue is not the advice as such, but the reasons why the receiving party made the choice that he did. If the reasons for that choice are contained in the advice, then the advice constitutes the reasons. In my judgment a costs judge is entitled to examine the reasons why a receiving party made the choice that he did; and in many cases that will entail looking at the advice that he received.”
The master found in paragraph 50 that neither of the reasons put forward by the Claimant’s solicitors justified the change in funding. He therefore disallowed the additional liabilities.
As the Court of Appeal made clear in Surrey (paragraph 27) the test that I am required to apply is that described in the Solutia case namely,
“Essentially the test requires the appellate court to consider whether or not, in a case involving the exercise of discretion, the judge has approached the matter applying the correct principles, has taken into account all relevant considerations and has not taken into account irrelevant considerations, and has reached a decision which is one which can properly be described as a decision which is within the ambit of reasonable decisions open to the judge on the facts of the case.”
In Surrey at paragraph 28 the Court said that rather than being a discretion, the decision in the Surrey case (as in the present case) is rather “an evaluative judgment” adding, however, “to describe the decision as an evaluative judgment, rather than an exercise of discretion does not, I think, significantly alter the test in which an appellate court must apply. But if the decision is to is described as a finding of fact the burden of persuading an appeal court to reverse a finding of fact is even higher…however, I am content to proceed on the basis that the test is as stated in the Solutia case.”
The appeal was dismissed.
Gary Knight, Partner and Costs Lawyer
