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Kain Knight Case Law Update March/ April 2018

 

The “Hot News” is that the Electronic Bill of Costs is now mandatory for use in all courts in England and Wales for work undertaken from 6 April 2018! Where work has straddled that date, the “old” paper bill of costs can still be used, although this is optional and the new bill will be accepted whenever the work was done. PD 47, paragraph 5.1 (a), which is the amended Practice Direction, provides that the new bill is to be compulsory in Part 7 multitrack claims, and where that is the case, there must be an Excel based document following new Precedent S with a continuous spreadsheet itemising every time recorded event. If that sounds daunting, at Kain Knight, we have been holding regular internal training sessions in readiness for the changeover, so if you require assistance with Precedent S or any other aspect of the Electronic Bill, you need only to ask. Please contact Matthew Kain at matthew.kain@kain-knight.co.uk or Colin Campbell at colin.campbell@kain-knight.co.uk, (who will shortly be attending a judicial  training  day for Deputy Costs Judges: this may prove extremely useful given that not one electronic bill was assessed during the Pilot Scheme which ran for two years in the Senior Courts Costs Office)! Note, however, that the old paper bill can still be used in Part 8 claims which will include matters proceeding under the Solicitors Act 1974 and there is also an exception for litigants in person.

Back in the courts, there have been some interesting cases over the past month.

 

Part 36

First, a sequel to JMX v In Norfolk and Norwich Hospitals NHS Foundation Trust, which we featured in the February Case Law Update. In that judgment, Foskett J decided that the claimant was entitled to the benefits contained in CPR 36.17 (4) because he had obtained a result at least as advantageous to him as the proposals contained in his offer, namely that he would accept being 90% of any full award of damages.

The issue then arose – what was the “additional amount” to which he was entitled under the rule, given that only liability had been admitted and quantum had yet to be decided? Now reported at [2018] EWHC 675 (QB) and rejecting the defendant’s submission that the amount could only be 10% of the assessed costs, the judge held that no order would be made for any “additional amount” whether under CPR 36.17.(4)(d)(i) or (ii) until all issues in the case had been determined. In the event that the amount of quantum of damages could be agreed, then it would be open to the claimant to restore to the court, the issue of payment of any additional sum arising from the Part 36 offer.

An interesting case on a withdrawn Part 36 offer (also a judgment of Foskett J), is Ballard v Sussex Partnership NHS Foundation Trust [2018] 2 Costs LO 226. The defendant (D) made a Part 36 offer of £50,000. It was later withdrawn and replaced by an offer of £30,000 on terms that if (as was the case) the claimant (C) rejected it and recovered less at trial, an order for costs would be sought from the expiry of the time for acceptance [our emphasis]. C won at trial but recovered only £23,000. D contended on the question of costs that C should pay from the date of expiry of the time for acceptance of the original offer, since if that had been accepted (as it should have been), none of the subsequent costs would have been incurred. That submission failed: the judge held that D was fixed with the terms of the replacement offer, namely that if C rejected it, D would seek its costs only from the last date on which that offer could have been accepted.

Lucky claimant, but remember that if the replacement offer had been in terms that on rejection, costs would be sought from the expiry of the original offer, it would not have been a valid offer under Part 36!

 

Qualified One Way Costs Shifting (QOCS)

Another sequel, this time in the case of the Oxford graduate who sued the University for teaching him so badly that he failed to obtain a good degree, or so, he said! Having lost on that point, in  Siddiqui v  The Chancellor, Masters and Scholars of the University of Oxford [2018] EWHC 536 (QB), Foskett J had to address the graduate’s submission on costs, and in particular on  QOCS protection. His case was that the University had failed in its duty of teaching and that, accordingly, he had obtained a low mark in his degree, thereby causing him not to be admitted to a top US law School, and in consequence, his career as a lawyer had been adversely affected and he had suffered psychiatric injury. Since psychiatric injury was a personal injury, he was entitled to QOCS protection.

Following the approach of Morris J in Jeffreys v the Commissioner of Police for the Metropolis [2017] 4 Costs LO 409, Foskett J held that 75% of the case related to psychiatric injury and 25% to the freestanding claim for economic loss. Accordingly, the grumpy graduate was entitled to QOCS protection for 75%, so that part of the order could not be enforced by the University without the court’s permission.

Another lucky claimant?

Probably, but here is another one, this time with more justification for QOCS protection.

The facts in Corstophine (a child by his mother and litigation friend Laura Ellis) v Liverpool City Council [2018] 2 Costs LO 213 are complicated and this is a simple précis. C sued DI for personal injuries under a CFA. DI joined DII and DIII. C lost at trial with costs. C’s ATE insurance policy covered the claim against DI, but owing to the CFA,  there was no QOCS protection for any costs attributable to DII and DIII because it was a “pre-commencement funding arrangement” signed before 1 April 2013 (see CPR  47.17), at least so the Defendants said.

The Court of Appeal disagreed. The subject matter of the proceedings was the claim against DI as opposed to the claim against all three defendants, it having been DI who had joined DII and DIII, so QOCS protection applied. It followed that the fair, just and proportionate order to make, was to vary the costs order so as to exclude form C’s liability, any of the costs relating to DII and DIII.

A trio of lucky claimants!?!

 

Relief from Sanctions; failure to serve Notice of Funding

We are not going to dwell upon Springer v University Hospitals of Leicester NHS Trust [2018] 2 Costs LO 247 since this is a journey back to the days of the “Costs War” when the claimants hoping to recover additional liabilities (success fees and ATE insurance premiums) needed to give information about their funding arrangements if their solicitors were providing legal services under a CFA (see paragraph 9.3 to CPR 43.2(1)(k)). Here the CFA had been made as long ago as June 2010! Suffice to say that the court refused to give relief from sanctions in respect of the disallowance of the success fee and ATE insurance premium on the basis that the late notification had meant that the NHS Trust had lost the opportunity to act in a different and proactive way prior to the issue of proceedings.

 

Costs Budgeting, “good reason” and hourly rates

Authorities on what constitutes “good reason” under CPR 3.18(b) to depart from the last agreed or approved budget on detailed assessment, are still sparse. The safest case in this context is Denton v White: a receiving party who obtains an order for costs on the indemnity basis is freed from the strictures of their costs budget.

What about hourly rates? If lower rates are allowed on assessment for the incurred costs than were advanced for approval Precedent H on costs budgeting, is that rate then applied to the budgeted costs, on the basis that “It is not the role of a court in the costs management hearing to fix or approve the hourly rates claimed in the budget” (see PD 7.10 to CPR 3.18)?  In RNB v London Borough of Newham, the court held that it was and an appeal on that issue (with the permission of the Master) had been listed before a High Court Judge on 16 March, only for the matter to be compromised on agreed terms the day before the hearing.

A pity because we now have another decision at Master level going completely the other way. In Nash v Ministry of Defence [2018] EWHC B4 (Costs) Master Nagalingham held that hourly rates are one of many constituent elements underlying the details which contribute to each of the budgeted phase totals. Accordingly, it would defeat one of the key purposes of costs budgeting, i.e. increased certainty and reduced costs of dealing with future assessment of costs, if hourly rates on detailed assessment were to be given an elevated status over and above all the other constituent elements underlying the details in the budget. For that reason, he held that a reduction in the rates for the incurred costs was NOT a “good reason” to apply those rates to the budgeted costs.

 

Solicitors Act 1974 /Conditional Fee Agreements

Like London buses, you wait for ages and then three come along at once! After a hiatus in 2017, cases under the 1974 Act are coming in thick and fast!

Herbert v HH Law [2018] EWHC 580 (QB) is about obtaining the consent of the client to terms in the solicitor’s retainer. Here the solicitor had signed Mrs Herbert up to a CFA with a 100% success fee (capped at 25% as this was a personal injury claim). Having won her case, the solicitors had taken the success fee from her damages in accordance with the terms of a document she had signed at the outset of the case, in which she had given her consent to the deduction.

In the court below, the judge had held that the success fee should have been 15% because it had been calculated based upon the firm’s business model, rather than following an assessment of risk. Had that been done, it would have revealed that the risk of losing was minimal, given that Mrs Herbert had suffered whiplash following a “rear end shunt” in which liability had been admitted.

Soole J agreed, holding that Mrs Herbert’s consent had not been “informed” that is to say, having been given following a fair exposition of the relevant factors.

Herbert is an important case and a lesson to solicitors that they must do more than simply obtaining a signature from the client to a particular term in their retainer. It illustrates the dangers of taking a shortcut and readers are reminded of the decision in Thomas v Hugh Jones Ford Simey [2017] 5 Costs LO 643, in which Jackson LJ, in finding for the solicitors,  placed considerable weight on the fact that the solicitors had explained everything to the client in a meeting, rather than having taken brief instructions over the telephone and never seeing  the client at all.

What happens if you are consulted by a dissatisfied beneficiary under a will or intestacy who is horrified at the charges made by the solicitors who have administered the deceased’s estate? In theory, as third parties, such beneficiaries have an entitlement to apply for detailed assessment under section 71 of the Act, but if the charges have already been approved by the executor/client, thereby rendering the bill unsusceptible to challenge under section 70, the court cannot make any reductions under section 71 (see judgment of Lloyd LJ in Tim Martin Interiors Ltd v Akin Gump LLP [2012] 2 Costs LR 325. This means that a third party assessment is likely “to be of limited use”. Instead, the dissatisfied beneficiary should bring a claim for an account – see judgment at paragraphs [101] and [102].

However, whether or not that is advisable, it would seem to be in doubt following the recently handed down judgment of HHJ Matthews in Mussell v Patience [2018] 2 Costs LO 239. In his view, all that needed to be provided on the taking of the account were receipts referring to the estate in question since: –

“…the executor is not required at the outset to prove by his or her vouchers that the charge made is reasonably incurred or reasonable in amount.”

In view of this guidance, (the court having not been referred to any authorities on the point), it appears that a claim for an account by a dissatisfied beneficiary will also be of “limited use” which begs the question – where the executor is a solicitor who practises in the same firm that administers the estate, what remedies do beneficies have against potential overcharging? Based upon Akin Gump and now Mussell, the answer would appear to be very few, if any at all.

 

Proportionality, payments on account and hourly expense rates

We make mention in passing of the decision of Leggatt LJ in Dana Gas PJSC v Dana Gas Sukuk Ltd [2018] 2 Costs LO 189 which draws together several important aspects of interlocutory costs that arise when the court is asked to make a payment on account under CPR 44.2(8). It illustrates that in heavy commercial litigation, claims for payments on account are likely to be heavily penalised if they appear to be disproportionate having regard to CPR 44.3(5). But at least with a payment on account, the receiving party can have another bite of the cherry at detailed assessment. Contrast that with what happens on a summary assessment – what you get, is what you get, so if there is a significant shortfall, that is for the client pay and there is no second chance.

Matthew Kain

Colin Campbell

9 April 2018

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