Legal costs update by Gary Knight
As prepared by Partner and Costs Lawyer Gary Knight for the next edition of Litigation Funding magazine.
October 2018 saw a flurry of costs related decisions and I could not bid farewell to 2018 without comment:
Stephen John Culliford (1) Dawn Lane (2) -v- Jocelyn Thorpe [2018] EWHC 2532 (Ch)
Decision of HHJ Paul Matthews (sitting as a Judge of the High Court) 2 October 2018
Judgment was entered in the favour of the Defendant with the Defendant’s costs to be assessed, if not agreed. The order did not provide provision for an interim payment on account.
The Defendant sought an interim payment in correspondence with their opponents and referred to CPR r44.2(8).
The Claimant declined to make any payment.
It was necessary for the Defendant to make an application, in Form N244, supported by a witness statement.
The application was dealt with on paper.
The Claimants had challenged the Defendant’s entitlement to an interim payment on the grounds that (1) The Defendant had not requested any such payment when the order was made, (2) any application for an interim payment would have been revisited on the basis that the Claimants acted in a fiduciary capacity as personal representatives of the estate for the deceased, and that the estate had no funds until the property in dispute was sold and (3) since the Defendant had made no application for a payment before the order was sealed, the next opportunity for doing so was after the request for a detailed assessment of the costs was filed, pursuant to rule 47.16.
On considering the issue of Jurisdiction, Matthews HHJ held that, in his judgment, it was not law that, once an order for costs had been, made, drawn up and sealed, no further order could be made by the court for a payment on account of costs, finding “no justification in the rules or authorities for the Claimant’s view that, if an application is not made at the time, the next opportunity arises only after detailed assessment has been commenced.”
Accepting that the court had jurisdiction in principle to make an order for the payment on account of costs it was then simply a question of whether the court was minded to exercise that jurisdiction on the facts of the case, at the time when the court was asked to do so. It was not considered that the mere fact that the Defendant had not asked for a payment demonstrated “good reason” as per the terms of r 44.2(8).
Finding that the Claimants had acted in their own interests rather than that of the estate it was found that there was no good reason why the court should not make an order for an interim payment. The approved budget in the matter was £45,580.00, the Defendant sought £30,000.00; Reference had been made to Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch) where 90% of the approved had been allowed as an interim payment. The sum of £30,000.00 was found to be “wholly reasonable”.
The Defendant recovered their costs of the application.
This is another case that highlights the importance of seeking an interim payment in respect of costs at the conclusion of the case and particularly at the final hearing when costs are often overlooked.
Ohoud A-Najar (A Protected Party) and Others v The Cumberland Hotel (London) Limited [2018] EWHC 3532 (QB)
Decision of Master Davison – 16 October 2018
Described by the Master as, “an unusual claim arising out of the extraordinary and shocking events of the night of 5 and 6 April 2014 when a man named Philip Spence, a violent criminal, entered the Cumberland Hotel with the intention of stealing”.
Spence had gained access to the rooms, where nine members of an extended family were staying; The first, second and third Claimants were sisters and were attacked with a claw hammer, causing very serious facial and head injuries.
The matter had been directed for a limitation only trial. At the CCMC in November 2017 Master Eastwood approved the Claimants’ budget in the sum of £1,028,197.
The Claimants applied to the Master to revise the disclosure phase of the approved budget.
The disclosure phase had been approved in the sum of £62,626.50, the Claimants’ solicitors anticipating somewhere between 1,000 and 1,500 documents expected to fill twenty to thirty lever arch files (Master Davison in his judgment commented that, “it is perhaps not only with the benefit of hindsight that it might have been prudent to have recorded that in the assumptions”).
The disclosure from the Defendant comprised some 3,250 documents which filled fifty-five lever arch files.
The Claimant sought to increase the disclosure phase from £62,626.00 to £111,811 (increase of £49,185.00/78% increase). The main items increased were the number of hours for the Solicitors however the figure allowed for Counsel had doubled and the fee for the expert had gone from £1,440.00 to £9,000.00 (an eightfold increase).
It was necessary for the Master to consider if the Claimants were entitled to revise their budget because there had been, “a significant development in the litigation” as referenced in para. 7.6 of the Practice Direction.
Consideration was given by the Master, to the decision of Chief Master Marsh in Sharp v Blank & Ors [2017] EWHC 3390 (Ch) and to the Chief Master’s interpretation of a “significant development”.
From the PD and the decision of the Chief Master Davison identified the following broad principles:
a) Whether a development was “significant was a question of fact depending primarily on the scale and complexity of what had occurred.
b) If what had occurred was something that should have been reasonably anticipated by the party seeking to revise the budget, then that party would probably be unable to label it “significant” or, for that matter, “a development”.
c) There was, however, no requirement that the development must have occurred other than in the normal course of the litigation, the Master finding it clear from the final sentence of para. 3.7 of Master Marsh’s decision and also from the fact that in that case a revision of trial estimate, the disclosure of 984 documents and the service on an expert report were all characterised as “significant developments”.
d) As a matter of policy, the bar for what constitutes a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous (to them) assessments of what was to be anticipated.
e) Whether the figures in the revised budget were reasonable and proportionate in light of the development.
The additional disclosure was considered to be a significant development by the Master; the scale and complexity was much larger than had been budgeted. The Master considered the original assessment for the disclosure phase in the approved budget had been a reasonable one and it followed that the disclosure that came in as double what had been anticipated amounted to a significant development in the litigation.
Applying a rough assessment of three hours per ring-binder of documents disclosed and allowing Counsel to double the approved figure, the revised figures appeared reasonable; the only issue of concern was the increase to the Expert’s costs; in the absence of any additional information the expert’s fees were “doubled but no more than that”.
This decision highlights the importance of recording assumptions made when calculating future costs and is a reminder to Solicitors to carefully monitor approved phases and when it appears likely that the phase/phases will be exceeded, make an early application and provide as much information as to the “significant development” and the costs of the same.
Miss Seyi Adelekun v Mrs Siu Lai Ho [A0YQ205]
Decision of HHJ Wulwick – 18 October 2018
Miss Adelekun (The Claimant) appealed against a decision of a Deputy District Judge in February 2018 when the DDJ decided that the costs of a road traffic accident personal injury claim, following acceptance of a Part 36 offer in the sum of £30,000.00 gross and a subsequent consent order dated 24 April 2017 were to be determined under the fixed costs regime under Section IIIA of CPR 45. The DDJ refused permission to appeal. On 15 March 2018 HHJ Roberts granted permission to appeal on the papers.
The notice of appeal included:
- The DDJ had wrongly varied the consent order which provided for the Claimant’s costs to be assessed if not agreed;
- Due consideration had not been given to the reallocation of the claim to the multi-track
- In making the decision he did, the DDJ had wrongly interfered with the detailed assessment proceedings, it being said that notwithstanding any power to vary the consent order the fixed costs issue should have been taken by the Defendant on detailed assessment.
It should be noted that a consent order in Tomlin form was forwarded BY THE Claimant to the Defendant for signature. At the same time the Claimant emailed the court to confirm that the matter had settled, that they were in the process of agreeing a consent order and asking for the hearing on 24 April to be vacated, that hearing having been listed in respect of the Claimant’s application to reallocate the claim to the multi-track. Both parties signed the Tomlin order; the Claimant’s application to reallocate was never heard.
HHJ Wulwick considered the matter in some detail (the judgment is extremely lengthy) and in particular consideration was given to the following three authorities:
Solomon v Cromwell Group Plc & Ors [2012] 1 WLR 1048;
Sharp v Leeds City Council [2017] EXCA 33, and
Hislop v Perde & Ors [2018] EWCA Civ 1726
The Judge found that there was nothing in either Sharp or Hislop to cast doubt on what was said by Moore-Bick LJ in his judgment in Solomon (para. 22) namely that there was no reason in principle why, if the parties choose to agree different terms, the agreement should not be enforceable by ordinary process.
The Judge found that the parties agreed in the consent order that the Defendant was to pay to reasonable costs of the Claimant “on the standard basis” (emphasis added by HHJ Wulwick) to be the subject of detailed assessment if not agreed. “That cannot be construed as an agreement to pay costs on the usual basis of fixed costs”.
An important reminder to Solicitors on both sides of the table to ensure the order for costs meets your need.
Mr Kieran Vertannes -v- United Lincolnshire Hospitals NHS Trust Case No A06YM353/SCCO REF: PN 1706607
Decision of Master Nagalingham, Costs Judge – 29 October 2018 SCCO
The Costs Judge undertook a detailed assessment of the Defendant’s preliminary issues in this matter and reserved judgment in relation to Preliminary Point 2 within the Defendant’s Points of dispute, entitled “Costs Management” and issue taken with the format of the Bill of Costs.
The bill was split, as required, between the work undertaken pre and post April 2013 and was subject to a costs management order 9 April 2015.
The Bill narrative included:
“CPD 47.5.8 (8) – The Claimant is aware of the requirements under CPD 47.5.8 (8). However, it is considered that there is no approved budget and therefore that CPD 47.5.8 (8) does not apply in this matter. An initial costs budget was approved on 11.04.2015. However, due to the considerable developments in the case, it was subsequently accepted by the Court that updated costs budgets were necessary on more than one occasion. Updated costs budgets were dully [sic] prepared and served pursuant to Court Order. However, the revised budgets did not reach the stage of a Costs Management Hearing and were never approved. As the revised budgets were ordered by the Court it is considered that the initial approved budget of 11.04.2015 is deemed to be superseded and that there is no approved budget in this case or in any event, it is a circumstance which allows the court to assess the costs without being constrained by the outdated original budget”.
The Defendant’s position was that a costs management order was in place therefore a phased bill should have been provided.
The Claimant provided replies to the Defendant’s submission:
- “The Claimant is aware of CPD 47.6, para 5.8 (8) and CPR 47.6.1.c. However, the Claimant’s stance is that in light of the circumstances of this case and the orders referred to above, the CPR 47 PD 5.6(8) and 47.5(1)(c) no longer apply.”
- “Further or alternatively that in light of the matter set out, this is a case where it is appropriate for the Court to order that the detailed assessment proceed on the basis that CPR 47 PD 5.6(8) and CPR 47.6.1(c) shall not apply to the Bill and assessment of this case.”
- “Further, or in the alternative, the Claimant will contend, as necessary, that to the extent that the original CMO is held to continue to apply in principle, the facts and circumstances of this case as set out above and in the narrative to the Bill are clearly such as that the Court should conclude that there are good reasons to depart from the original CMO.”
The Defendant, represented by Counsel, Mr Robin Dunne suggested that the essence of the Claimant’s argument was that the costs case management order dated 9 April 2015 had lost relevance by reason of events that took place after the costs management order was made.
Applications had been made which resulted in further permissions and an alteration to the previous timetable. An order 4 April 2016 included:
“7. The parties, if so advised, to file and serve any amended budgets by 4.00pm on the 1st April 2016.
8. There be a Costs Case Management Hearing to consider the revised budgets on the first available date after the 15th April 2016, time estimate 2 hours and reserved to D.J. Capon. Not by telephone.”
For the Defendant Mr Dunne submitted that the order “does not and cannot set aside the costs management order.”
Reference was made to the further order 5 September 2016 following further applications:
“3. The Costs Case Management Hearing and the question of the costs reserved of the Hearing of 4 March 2016 be adjourned to the first available date after 19 September 2016, time estimate 2 hours, reserved to District Judge Capon.
a) The hearing be in person.
b) Parties to file dates of Counsel’s availability by 12 September 2016.
c) Parties to file and exchange short skeleton arguments on the question of the costs of the hearing of 4 March 2016, limited to no more than 4 sides of A4, 2 clear days before the Hearing by e-mail.
d) The parties shall seek to agree the costs budgets.
e) The Claimant shall draft the following documents as soon as practicable (and to submit these to all other parties for comment, with a view to the contents being agreed at least 10 working days before the costs case management conference)
i. case summary incorporating a statement of issues;
ii. chronology;
All parties must cooperate with the process to enable the Claimant to comply with the direction for the preparation and filing of the hearing bundle.”
Once again Mr Dunne submitted that the order “does not and cannot set aside the costs management order.”
It was the Defendant’s position that a detailed assessment hearing under CPR rule 3.18 could not take place with the bill of costs in its current format; Mr Dunne set out the requirements of rule 3.18 which includes the reference to the court having regard to the receiving party’s last approved or agreed budgeted costs for each phase and to not depart from the approved/agreed budget without good reason.
On behalf of the Claimant Mr Roger Mallalieu did not dispute that a costs management order had been made and further accepted that the subsequent orders did not set aside the costs management order.
Mr Mallalieu invited the costs judge to consider that the intention of the subsequent orders was to recognise that the costs budgets of both parties needed to be re-cast. In the alternative the court had inherent powers under CPR rule 1.1 to further the overriding objective to depart from the rigour of a practice direction which is intended to cater for the generality of cases.
In the event the costs judge was against Mr Mallalieu in respect of the 2 limbs above, Mr Mallalieu submitted that the costs judge should observe good reason to depart was very likely to be achieved therefore the preparation of a new bill would serve no purpose.
In his judgment, Master Nagalingam referred to an “inescapable reality” being that a “costs management order” had been made on 9 April 2015 and that notwithstanding the approach invited in the bill narrative, the replies and by Mr Mallalieu’s submissions, the fact was “there is simply no mechanism by which a costs management order can be deemed to be superseded”.
The Claimant’s bill of costs was found not to have been drafted in compliance with the requirements of CPD 5.8(8) to rule 47 therefore the costs judge considered the overriding objective per Mr Mallalieu’s suggestion that the costs judge should use his inherent powers to depart from the practice direction.
The invitation did not “sit well” with the costs judge who acknowledged that it would undoubtedly incur expense to draft a new bill but the fact of the expense did not “excuse non compliance with a rule, practice direction or order”. The costs judge further found that there was no justice at all in allowing the detailed assessment of a costs managed case to continue in the absence of a phased bill.
It was not “unfair” to the Claimant to require them to adhere to a costs management order and practice direction simply because the expected cost of litigation increased due to “substantial” or “considerable” developments. The costs judge rejected the suggestion that he had discretion to effectively disregard paragraph 5.8(8) of the costs practice direction to CPR rule 47.
Finally the costs judge gave consideration to the Claimant’s submission that there was no utility in re-drafting the bill of costs. Whilst finding, on the face of it, there was good reason to depart from the budgeted costs it did not follow that there was good reason to depart from the costs order entirely.
“In conclusion the costs judge held that the Claimant had “erroneously failed to draft their bill in compliance with paragraph 5.8(8) of the costs practice direction to rule 47. The utility of the detailed assessment process, and upholding of the costs budgeting regime, to include compliance with orders and practice directions supplementing the civil procedure rules, is best served by any future assessment of the Claimant’s costs in this matter being undertaken on the basis of a phased bill of costs”.
As a Costs Lawyer instructed by both Claimants and Defendants the judgment must be correct.
Frank Warren -v- Hill Dickinson LLP – [2018] EWHC 3322 (QB)
Decision of The Honourable Mr Justice Pepperall, sitting with Master Haworth as a costs assessor – 30 November 2018
Mr Warren (the Claimant) is a well known boxing promoter and manager. He sought a detailed assessment of four bills rendered by his former solicitors, Hill Dickingson LLP, which totalled £922,890.03. The bills were rendered pursuant to the purported assignment of two conditional fee agreements (“CFAs”) entered into by the Claimant with his former solicitors PSB Law LLP.
The bills were challenged on four grounds:
- The CFA was unenforceable as it did not reflect the true agreement between the parties.
- There was no liability under the CFAs as the Claimant had not been successful in the underlying litigation;
- The costs billed were unreasonable
- The CFAs had not been validly assigned to Hill Dickinson.
Issues 2 and 4 were tried as preliminary issues by Master Leonard who found that the CFAs had been validly assigned and that the underlying proceedings had been concluded successfully.
The Claimant appealed the master’s judgment on the assignment point arguing (1) that having found that PSB Law ceased to practice on 30 September 2013, the master was wrong to conclude that the CFAs remained capable of valid assignment and (2) that the master was wrong to treat himself bound by Budana v Leeds Teaching Hospital NHS Trust [2017] EWCA Civ 1890 arguing that Budana ought to have been distinguished such that the master should have held that the CFAs could not be assigned without the Claimant’s informed consent, which, he argued , was not properly obtained.
Budana has been widely reported – The Court of Appeal held that a pre-LASPO CFA can be transferred from one firm of solicitors to another – even post-LASPO – without losing the right to recover success fees from the defendant. The decision depended highly on policy considerations.
The Claimant sought to argue that the CFAs could not be assigned by a law firm that has ceased to practice and which was thereby incapable of performing its obligations under the agreements; in any event, the Claimant argued, PSB Law had terminated the CFAs.
Pepperall J found no merit with the argument that the CFAs could not be assignment or novation because they ceased to trade agreeing with Budana and the original decision of the costs judge that there was no material distinction between a law firm ceasing to carry out personal injury work (as in Budana) and a firm ceasing to practice (as in this case).
The costs judge had also been right to hold that PSB Law had not been in breach (let alone repudiatory breach) of the CFAs, but that – even if it had been – such agreements would not have been terminated unless the Claimant had accepted the alleged repudiation. Here, he instead consented to the transfer of the CFAs to Hill Dickinson.
On investigating the second point the costs judge was again upheld with the finding that Master Leonard was clearly entitled to find that these CFAs had been transferred to Hill Dickinson with the Claimant’s informed consent.
