Legal Costs update by Gary Knight

April showers April showers produced the darling buds of May and we now look forward to a flaming June.

The General Election has been and gone and what impact the result will have on the legal landscape dominates the legal websites and blogs.

What is certain is no matter how the future unfolds there will be costs decisions to peruse and consider and a brief summary of a few that caught the eye follows:


The above related to costs appeals raising the question of whether, where a party loses mental capacity in the course of proceedings, such loss of capacity had the automatic and immediate effect of terminating their solicitor’s retainer.

Mr Justice Phillips acknowledged that the question was currently of particular importance for solicitors conducting personal injury claims pursuant to conditional fee agreements entered into before 1 April 2013, in respect of which success fees continue to recoverable from defendants (see s.44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012). If such an agreement is found to have terminated by reason of the supervening incapacity of the claimant (such incapacity being by no means a rare occurrence in serious personal injury cases), it would not now be possible to replicate the effect of the original contractual arrangements between solicitor and client given that success fees are not generally recoverable in respect of agreement made on or after 1 April 2013 (see s.58(A)(6) of the Courts and Legal Services Act 1990). No matter  how short the period of incapacity (theoretically, even a scintilla of time), nor how quickly a deputy was appointed by the Court of Protection in respect of the claimant, the original CFA would be lost and could not, in real terms, be replaced.

In Points of Dispute, the defendant had contended that no costs were recoverable in relation to work done and disbursements incurred as claimed in parts 4 to 7, asserting that, as a result of the claimant’s mental incapacity, the CFA had automatically terminated prior to 6 March 2007, leaving Solicitors without any retainer.

That contention came before Judge Harris on 9 May 2011 as a preliminary issue. In a judgment dated 11 July 2011, but formally handed down 8 August 2011 (“the First Judgment”), the Judge took as his starting point the Court of Appeal decision in Yonge v Toynbee [1909] 1 KB 215, a case in which solicitors had conducted the defence of proceedings against their client whilst unaware that he had lost mental capacity shortly before the action commenced. The Judge set out the headnote to that decision as follows:

“Where an authority given to an agent has, without his knowledge, been determined by the death or lunacy of the principal, and, subsequently, the agent has, in the belief that he was acting in pursuance thereof, made a contract or transacted some business, with another person, representing that, in so doing, he was acting on behalf of the principal, the agent is liable, as having impliedly warranted the existence of the authority which he assumed to exercise, to that other person, in respect of damage occasioned to him by reason of the non-existence of that authority.”

The Judge went on to conclude that:

“Yonge v Toynbee is clear authority that the loss of capacity in itself terminates the contractual arrangements, and therefore it is necessary for the Claimants to show that the process that they entered into is one that would show the retainer was maintained”. ”

The Judge found support for that view in the decision of the Senior Costs Judge in Findley v Barrington Jones [2009] EWHC 90130 (costs), in which the Senior Costs Judge held that the effect of Yonge v Toynbee was that where a claimant lost capacity so that he was no longer able to give instructions, the contract of retainer was at that point frustrated.

In the appeal the claimant advanced five arguments in respect of which permission to appeal had been granted, namely:

i)                   that supervening lack of capacity on the part of the claimant did not frustrate or otherwise terminate the CFA:

ii)                 that, if the CFA was frustrated, it was adopted by the receiver/deputy following his appointment;

iii)               alternatively, that the claimant was liable for reasonable fees because the services were necessary within the meaning of section 7 of the Mental Capacity Act 2005 which came into force on 1 October 2007 and, prior to that, within the common law concept of “necessaries”;

iv)               in further alternative, that the defendant was estopped by convention from denying that Solicitors had authority to act for the claimant;

v)                 that in any event, Solicitors and the deputy (on behalf of the claimant) entered a new agreement in March 2009 by executing the draft 2009 CFA, which agreement covered work done since March 2007 retrospectively.

Mr Justice Phillips considered that whilst the decision of the Senior Costs Judge in Findley was “highly persuasive authority in the opposite direction” the decision was based on “what I consider to be a misreading of Yonge v Toynbee”.

In the detailed judgment the Judge found that the intervening incapacity of a party did not frustrate or otherwise terminate a solicitor’s retainer finding that whilst “such incapacity does have the effect of removing the authority of the solicitor to act on behalf of the party lacking capacity for the duration of that incapacity, such authority can be restored when a deputy is appointed and provides instructions to the solicitors in that capacity, or otherwise if and when the claimant regains capacity. There was no reason, as a matter of authority or legal principle, why an inability to instruct solicitors in the intervening period (which may be quite short) should be taken to have the effect of immediately ending a solicitor’s retainer”.

In view of the Judge’s findings, the claimant’s appeal against the First Judgment was allowed, with the consequence that the defendant’s application to strike out parts 4 to 7 of the claimant’s Bill of Costs stood dismissed.


A costs appeal that arose from personal injury litigation wherein the Claimant, sought damages arising from spinal and upper limb disorders as a result of the Defendant failing to provide a safe place of work and/or safe working conditions.

The claimant originally sought damages limited by the Claim Form in the sum of £150,000.00 later amending the claim to £300,000.00 and producing a schedule of loss seeking £433,000.00.

The Defendant served an amended defence disclosing surveillance evidence suggesting the Claimant had not suffered any personal injuries or not to the extent claimed.

Following negotiations the Claimant accepted £50,000.00 with costs to be assessed if not agree.

The matter was the subject of a detailed assessment before a Costs Judge wherein the main issue related to the instruction by the Claimant of solicitors based in the City of London seeking rates of Grade A – £450.00, Grade B £320.00, Grade C £250.00 with Grade D claimed at £160.00.

The Paying Party submitted, bearing in mind the nature of the dispute and the extent of the claim, that it was unreasonable for the Claimant to have instructed City Solicitors proposing guideline rates reflecting national one firm of solicitors as the appropriate starting point.

On the assessment the Costs Judge considered it was not “objectively reasonable” for the Claimant to have instructed City of London Solicitors and in considering “which firm” ought to have been instructed the Costs Judge concluded that the Claimant was not required to approach the “cheapest” Solicitor finding that it would have been “objectively reasonable” for the Claimant to have approached a central London firm.

The Costs Judge went on the acknowledge that the guideline rates were of assistance as a “starting point” and reflecting a number of factors allowed a 20 per cent uplift on the guideline rates thus £380.00, £290.00, £235.00 and £140.00 allowed respectively.

The Paying Party appealed this decision arguing that the Costs Judge has asked himself the wrong question, had failed to provide reasons for reaching his conclusion and further and in the alternative having selected a central London firm was not entitled to apply an uplift to the guideline rates.

The Claimant lived in Oxted and worked in Croydon therefore, the Claimant argued, it was reasonable to instruct London Solicitors.  Further the Claimant referred to the claim being in the region of £400,000 notwithstanding the settlement agreed at £50,000.00.

The Judge found that there could be no criticism of the Costs Judge’s observation that the Claimant was not required to approach “the cheapest Solicitor” however expressed concern as to the question the Costs Judge posed and considered the failure of the Costs Judge to provide reasons why he selected the rates applicable to central London Solicitors and had rejected the Paying Party’s submission that the appropriate starting point was the rates for national one Solicitors.

The Judge considered that by applying the “uplift” to central London guideline rates the result was that there was little difference between the reasonable hourly rates allowed for Grades B _ D, and those originally claimed those rates being considered as unreasonable for the Claimant to recover.

The Judge held that it was not reasonable to instruct Solicitors either within the City or central London preferring rates reflecting Solicitors within national band one however the Judge acknowledged that guideline rates are only  guide and allowed, therefore, £295.00, £230.00, £175.00 and £120.00 respectively.

Author’s Comment – One does wonder if the rates were to reflect the fact that the claim for damages of £400,000 was agreed at £50,000.00 and reflecting the issue of “exaggeration”.


Clearly one that will not be quoted often for obvious reasons however Leggatt J considered an order for payment on account of costs following an unsuccessful application for leave to amend the particulars of claim in proceedings issued.

Proceedings involved substantial fraud claims with worldwide injunctions granted freezing the Defendants’ assets; The Claimant companies had also been ordered to pay the fifth named Defendant’s costs arising from an application to vary the freezing order in order to clarify that it did not apply to her assets.

An order was granted for an interim payment on account of costs with the parties consenting to the court dealing with the interim payment issue on paper absent agreement.

The Defendants produced a schedule for costs in the sum of £945,000.00.  The Claimant companies did not attempt to agree interim payments applying instead for a detailed assessment of the costs on the ground that the claim was disproportionate, alternatively a half day hearing was requested to be fixed if there was to be an order for payment on account.

The Judge considered the request for a hearing was contrary to the terms agreed for the matter to be dealt with on paper. The request was also described as “a disproportionate and wasteful request” the Claimants had written to the Court accusing the Defendants of abusive litigation tactics and of attempting to “bleed the Claimants dry”.  The Judge stated that the complaint may have carried more credence if the Claimants had not themselves on a previous occasion submitted a schedule of costs in the sum of £809,000 for their costs of resisting an application to discharge the freezing injunction!

The judge commented that none of the parties had showed any sense of moderation and that in cases involving allegations of dishonesty concerning very large sums and some complex transactions there might be a situation where a party may consider it reasonable to spare no expense however when determining the costs recoverable it did not follow that such expense was reasonably or proportionately incurred or reasonable or proportionate in amount.

The Judge went on:

Where, as here, the court is not actually assessing the amount of costs to be recovered and has nothing like the level of information that could be required on a detailed assessment, there is additional reason to be conservative. The fact that the total costs claimed are very high cannot by itself be allowed to increase the sum awarded as an interim payment. I am sure that the costs claimed by the main group of defendants are neither reasonable nor proportionate. By what factor they should be discounted, however, to arrive at a reasonable and proportionate amount can only properly be determined by a detailed assessment.

For present purposes the approach that I intend to follow is a necessarily approximate one of estimating the recoverable amount in broad terms based on my knowledge of this case and of the issues raised by the applications and also drawing on such experience as I have of the costs of commercial litigation from summarily assessing and awarding payments on account of costs in other cases. I will then discount this figure to reflect the margin of error in my estimate and the principle that an interim payment should err on the side of awarding less than is ultimately likely to be recovered.

Applying, as an appropriate starting point for considering the First Defendant’s schedule, an assessment of the standard basis the Judge considered £100,000.00 as a reasonable payment on account; Defendants 2 and 3 also awarded £100,000 on account and dealing with the Fifth Defendant’s application to amend the freezing order an additional £20,000.00 was allowed.

MICHAEL DENNIS DALTON and others –v- BRITISH TELECOMMUNICATIONS PLC – Mr Justice Phillips– 13 March 2015 – [2015] EWHC 616 (QB)

The Claimants as employees of the Defendant brought personal injury claims for noise-induced hearing loss. The Claimants’ Solicitors acted under conditional fee agreements containing provision for success fee.

Matters were settled pre-trial and dispute arose with regard to the appropriate level of success fees dependant on whether the injury was “disease” or “injury” that is whether noise-induced hearing loss could be described as “disease” thereby qualifying for a higher success fee per CPR Pt 45, sections IV, V.

Pre- 1 April 2013 the recoverable success fee for “disease” was 62.5% whereas “injury” attracted only 25%.

Following a number of decisions at District Judge level resulting in inconsistent conclusions the Regional Costs Judge directed the issue to be considered by a High Court Judge as a preliminary issue in four nominated cases.

Phillips J found that the term “disease” if viewed in isolation was far from easy to interpret however considered that the term “disease” had been used in legislation relating to employers’ liability claims and insurance as far back as 1906 and that the legislation had consistently used the term “disease” to cover conditions (including “injuries) which had arisen by process rather than by accident

The Judge noted that exact distinction was adopted, only shortly before section IV and V were introduced, in the definition of ‘disease’ utilised in the Pre-Action Protocol for Disease and Illness claims. Pre-Action Protocols are published pursuant to a Practice Direction and their use is governed by provisions of the CPR and can have costs consequences: CPR 44.2(5)(a).

In my judgment consideration of the legislative history in this case strongly indicates that Parliament intended the term ‘disease’ in sections IV and V of CPR 45 to include any illness (whether physical or physiological), disorder, ailment, affliction, complaint, malady or derangement other than a physical or physiological injury solely caused by an accident or other similar single event. The provisions of section IV are therefore restricted to injuries caused by accidents (or other single events), preserving the long-established distinction.

The Judge had “no doubt that NIHL falls within section V of the former CPR Part 45” and then considered if NIHL is a ‘disease’ for the purposes of sections IV and V of the former CPR 45 before determining the preliminary issue in favour of the claimants: NIHL is a disease which falls within section V of the former Part 45 of the CPR, claims for damages for NIHL therefore attracting a 62.5% success fee if settled before trial. Such claims are not subject to section IV of Part 45.

The Judge did have words of criticism for the Defendants adding “that defendant’s insurers attempt to re-open (if not renege on) the industry agreement made in 2005 does them little credit. The large number of NIHL claims in which the argument about the success fee has been raised will have been funded by CFAs which were entered on the basis that a 62.5% success fee would be recovered. To seek to limit such success fees to 25% is an opportunistic attempt to avoid part of the overall bargain (in relation to NIHL) whilst taking the benefit of the remainder (for example, in relation to asbestos claims, fixed at 27.5%).

HAYWARD–v- ZURICH INSURANCE COMPANY PLC – COA– 31 March 2015 – [2015] EWHC Civ 327

The Claimant had commenced proceedings against his employers in May 2011 seeking damages for injuries sustained as a result of an accident at work in June 1998.

The Claimant sought just under £420,000.00 exclusive of damages for pain and suffering.

Liability was admitted at an early stage, subject to a 20% reduction to reflect contributory negligence.

The Defendant disputed the level of damages relying on video evidence to argue exaggeration of the consequence of the Claimant’s injuries.

Shortly before trial of the quantum issue the parties reached an agreement, embodied in a Tomlin order, with the Claimant recovering £134,973.11 in full and final settlement and costs.

Some two years later neighbours of the Claimant approached the employers to say they believed the claim was dishonest and that from their observation of the Claimant’s conduct and activities they believed the Claimant had fully recovered from his injury at least a year before settlement going so far as to provide a statement for the Defendant’s insurers.

Insurers commenced proceedings against the Claimant in 2009 seeking damages for deceit.

The Claimant sought to strike out the proceedings on the ground that the Tomlin order created an estoppel in the alternative the proceedings were an abuse of process as the issue of fraud had had been compromised by the settlement.

The application was dismissed, reversed on appeal and restored following an appeal t the Court of Appeal which held that the settlement gave rise to no estoppel of any kind and was not an abuse of process.

The Insurer’s action came on for trail in the Cambridge County Court in November 2012 an in the judgment circulated the Judge found  that the effects of the injury had been dishonestly exaggerated and ordered the original settlement agreement to be set aside.

It followed that the issue of quantum in the original action remained to be tried. Following a further hearing of that issue on 6 September 2013 the Judge handed down a judgment awarding the Appellant damages in the sum of £14,720. An order was made in the later action directing him to re-pay the sum paid under the settlement less that amount.

The matter was then the subject of this appeal.

Lord Underhill in the Judgment considered that the contract of settlement in issue was a settlement agreement and the misrepresentations relied on comprised the very allegations advanced as part of the claim being settled before allowing the appeal in this action. The result is that the settlement in the original action remains binding.

Lord Underhill did state that he found the result  “unattractive” as it meant that the Claimant retained the benefit of a settlement far in excess of the value of his actual loss, before adding that there was “a wider principle at stake, that parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later”.

Lord Justice Briggs in agreeing that the appeal should be allowed added…”I would gladly have embraced any sound basis for upholding the trial judge’s decision to strip the Appellant of the grossly inflated amount which he received upon the settlement of his fraudulently exaggerated claim”.

One can only imagine the tension between the Claimant and his neighbours.


The Claimant (A District Judge) sought damages arising from the Defendant’s alleged negligence in failing to identify and to report the presence of a right middle cerebral aneurysm following a MRI brain scan undertaken on the Claimant.

In 1991 the Claimant was involved in a road traffic accident resulting in discomfort in her neck and back.

In or about March 1999 the Claimant, then working as a barrister in court experienced an episode of visual disturbance lasting some 90 minutes.

On referral the Claimant underwent an MRI scan of the lumbar spine and MRI scan of the brain.

The brain scan was reviewed by the Defendant who reported the scan to be normal.

Some 11 years later the Claimant collapsed and lost consciousness and a CT scan revealed a right sided middle cerebral artery aneurysm had ruptured.

Proceedings were commenced and the issue before the court was a relatively narrow one, namely, whether the MRI scan in 1999 did indicate the presence of an aneurysm which a reasonably competent neuroradiologist would have identified and reported. The issue, though narrow, had sharply divided the two neuroradiology experts who gave evidence before the judge. In the event the important witnesses at trial, who were extensively cross-examined, were Dr Butler and Dr Molyneux (consultant radiologists) and Mr Kirkpatrick (neurosurgeon). All these witnesses expressed views on the core issue, and in essence their views remained the same as those expressed in their reports.

It became apparent that there had been contact, possibly significant contact between the Defendant and his expert Dr Molyneux from about August 1984, and in particular from about March 1989, when he became senior registrar, until October 1991 when he became a consultant neuroradiologist in Southampton.

The Defendant had attached a curriculum vitae to his witness statement of 10 July 2014, which showed that he had received his medical education at the teaching hospitals in Bristol and Birmingham, before he became a registrar in radiology at “Oxford RHA” in August 1984. He remained a registrar until March 1989, when he became senior registrar in neuroradiology at the Radcliffe Infirmary, Oxford. He remained in that position until October 1991. He stated that he had spent four and a half years in “general radiology”, saying that:

“The Oxford course provided a wide general radiological experience as well as the specialised techniques of a teaching Hospital, the latter allowing concentrated experience of body computed tomography, ultrasound, neuroradiology, angiography and interventional radiology….”

As to his “neuroradiology training”, Dr Barker stated:

“The Department of Neuroradiology, Radcliffe Infirmary, provided comprehensive service for the Oxford Region. I spent a total of nine months on rotation through the Department prior to my appointment as Senior Registrar in Neuroradiology and then two and a half years in this specialist post. I received training in myelography, angiography, computed tomography, magnetic resonance imaging and interventional neuroradiology.”

The Defendant did not mention Dr Molyneux at all. Dr Molyneux produced a curriculum vitae, in which he stated that he had been a consultant neuroradiologist at the Radcliffe Infirmary, Oxford.

The Judge in his judgment when considering if there was a possible conflict stated “Someone comparing these respective CVs would reasonably infer that Dr Barker would have had contact, possibly significant contact, with Dr Molyneux from about August 1984, and in particular from about March 1989, when he became senior registrar, until October 1991 when he became a consultant neuroradiologist in Southampton. However, someone looking at the respective CVs would not know the exact nature and extent of any connection between Dr Barker and Dr Molyneux, because neither of them in their written statements condescended into setting out particulars of any such connection. On the contrary, neither referred explicitly to any such connection

On behalf of the Defendant it was suggested that the respective CV’s should have put the Claimant, or at least her legal representatives and proposed experts, on notice that there was likely to have been some sort of connection, and that they ought then to have pursued the matter with the Defendant; this suggestion was firmly rejected by the Judge who considered the burden was fairly and squarely on the Defendant, in particular on Dr Molyneux who was to be the Defendant’s key (in the event, sole) expert witness at the trial, to state frankly, with adequate particulars, the nature and extent of any connection between Dr Barker and Dr Molyneux.

The Judge further commented that The Claimant should not be expected to engage in the time consuming detective work, the output of which might be incomplete or inaccurate, in order to ascertain the full picture bearing on Dr Molyneux’s independence as an expert witness. Furthermore, if the Claimant had been given full particulars, the issue of Dr Molyneux’s independence could have been explored, as it should have been explored, before the trial began.

It was only in cross examination that the connection between the Defendant and Expert was revealed and that connection was a lengthy and extensive Dr Molyneux having trained the Claimant during his seven years of specialist radiology training, and in particular had trained him for two and a half years as a registrar and senior registrar in neuroradiology.

The Judge considered there had been “a very substantial failure indeed, both on the part of the defence more generally but also specifically on the part of Dr Molyneux himself, to disclose, with adequate particularity, the nature and extent of Dr Molyneux’s connection with Dr Barker, so that the Court would have a complete understanding of all matters that could realistically affect Dr Molyneux’s independence as an expert witness. That failure occurred notwithstanding paragraph 17 of the order of Master Cook on 2 June 2014 in which he specifically directed that:

“Experts will, at the time of producing their reports, incorporate details of any employment or activity which raises a possible conflict of interest.””

Leading Counsel for the Claimant invited the Judge to entirely exclude the evidence of Mr Molyneux.

Clearly finding himself in difficulty the Judge stated: “I must say that, in the light of the accumulation of facts and matters that I have set out at some length above, I came very close indeed to ruling that Dr Molyneux’s evidence was not admissible, on the ground that I could not properly have the confidence which the Court demands it should have in the impartiality and objectivity of an expert witness. However, I did hear the evidence, and the consequence of non admission would be potentially fatal for the Defendant. There is no doubt about Dr Molyneux’s expertise and competence to assist the Court on the remaining central issue.

I believe that I can fairly admit the evidence, but I must bear powerfully in mind, when I assess the weight that I should give to the evidence, the reservations that I retain about Dr Molyneux’s independence and objectivity in this case”.

The judge went on to find  that “a competent practitioner would have concluded that the images in the 1999 MRI scan showed the presence of an aneurysm, and that the aneurysm that ruptured in 2011 was the same aneurysm as that evidenced by the abnormality in the 1999 images of the MRI scan. No questions of causation call for decision and I therefore conclude the issue of liability in favour of the Claimant”.

Clearly a case that shows the importance of an expert disclosing their history of dealing with the person on whose behalf they are reporting.


Consideration given to an appeal from a judgment and order of a Costs Judge brought by the Defendant in a Road Traffic Accident the Costs Judge having held that for the purpose of CPR 45.16 and 45.17 the trial of the action had commenced and accordingly the Claimant was entitled to recover a success fee of 100% the effect of which was an additional £320,000.00.

The hearing of the claim had been listed for three days to commence 8 June 2011.  The trial on the issue of quantum was adjourned on the first day, 8 June 2010 and the trial of liability was stood out on 9 June 2011. The claim was settled before the next hearing.

The question before the Costs Judge was whether the trial of the issue of liability had commenced before it was stood out on 9 June 2011 – The Costs Judge held that the trial had so commenced after the application to adjourn the issue of quantum was determined.

The transcript of the proceedings on 8 and 9 June 2011 were considered:

On 8 June 2011 the Claimant’s Counsel advised that the matter was “listed as a trial on issues of Liability and quantum.”

Counsel advised that the “liability issue” was restricted to “contributory negligence” and Counsel sought an adjournment of the trial on the issues of quantum”.

The application was opposed and judgment was given after lunch 8 June 2011 when the application was granted.

The trial Judge considered there was no reason why the case could not proceed “on liability today”.

The court adjourned for 15 minutes and when the court reassembled an application, by consent, was made to adjourn to 10:30 the following day following disclosure by the Claimant of an interview with a police officer. The Court enquired as to how long the trial on liability would last and was advised that there would be a day and a half’s evidence. Both Counsel invited the Judge to read various witness statements, principally those by experts before the next morning.

The Court reconvened 9 June 2014 when Leading Counsel for the Defendant informed the Judge that as a result of the documents disclosed it was clear that there was “another independent witness to the accident.”

The Experts having proceeded on the basis of no independent witness evidence had prepared reports and the Defendant considered the evidence of the new witness would impact the evidence provided. The matter was adjourned until 2.00 PM.

When the Court resumed Leading Counsel for the Defendant advised with regard to the position with regard to additional statements which required consideration by experts and invited the Judge to stand the matter out.

The Judge was invited to reserve the case to himself and the Judge advised that he would speak to listing. The Judge rose and on his return advised that there was no problem if he reserved the case to himself.

On the detailed assessment the Costs Judge considered that the hearing of the issue of liability began after the short adjournment on 8 June 2011.

The Judge dealing with the appeal disagreed preferring the Defendant’s submission that all that had happened on 8 and 9 June 2011 after the judgment on the adjournment of the quantum issue and discussion on costs was that there were successive applications to adjourn the liability proceedings which were granted and just as with the quantum issue, the trial of the liability issue had not commenced and that the steps taken did not constitute the commencement of the trial of the liability issue.

The Claimant’s claim for 100% success fee was dismissed.

This is an interesting decision with consideration given to other costs decisions dealing with similar issues including but not limited to: Gandy v King [2010] EWHC 90177 (Costs), Loizou v Gordon & Patsias [2012] EWHC 90221 (Costs) and Cutler v Stephenson and Manchester Council [2008] EWHC 3622 (QB).