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Kain Knight's August Costs Law Update for cases decided in July

Kain Knight’s regular monthly costs update on important costs cases focuses on those which are likely to have practical relevance for Practitioners. We have a “short form” which gives the headline so that Lawyers under time pressure have a thumb nail outline of the important costs cases for the past month, and a longer version which provides more details about the whys and wherefores of the decision. As always, we have been selective and those of practical importance have been chosen. For any more details, please contact Matthew Kain at matthew.kain@kain-knight.co.uk or Colin Campbell at colin.campbell@kain-knight.co.uk who will be glad to discuss any aspects with you.


Qualified One Way Costs Shifting (“QOCS”)

QOCS was a Jackson reform implemented on 1 April 2013 to be found in CPR 44.13 – (Personal Injury claim- Costs Order against the losing Claimant cannot be enforced except when rules 44.14-44.16 apply). Like the proverbial London ‘bus’ (you wait for ages and then five turn up at once) with QOCS cases, after a long lull, we have had five cases in a month!

In Jeffreys v Commissioner of Police for Metropolis [2017] EWHC 1505 (QB), Morris J decided that QOCS protection did not apply where significant parts of the claim were not for personal injury but were for substantial damages for malfeasance, loss of liberty, fear and upset.  The PI aspects were not divisible or separable and the exception in CPR 44.16(2)(b) (claim made for the benefit of the Claimant other than a claim to which QOCS applied) meant that the Commissioner could enforce the Costs Order against the losing Claimant. There was no authority for the proposition that in order for CPR 44.16(2)(b) to apply, the non-personal injury claim must be “divisible”. Nothing in the wording of the CPR supported such proposition and if two claims were to be inextricably linked or otherwise very closely related, that relationship could be reflected in the exercise of the Court’s discretion (in the Claimant’s favour) which would arise once CPR 44.16(2)(b) applied. Application for QOCS protection refused. So the Commissioner could enforce the Costs Order!

Shaw v Medtronic Corevalue LLC & others [2017] 3 Costs LR 491 concerned applications by the First, Third and Fifth Defendants to enforce Costs Orders notwithstanding the Claimant’s QOCS protection under CPR 44.13(1). It was not disputed that the Claimants action, which included damages for aggravated, exemplary and restitutionary damages, had all been claims which had arisen out of death or personal injury, and which had survived for the benefit of a Deceased’s estate. In relation to the First and Third Defendants, the proceedings had been served outside the jurisdiction and the appropriate relief was to set aside service. In respect of the Fifth Defendant, the Claimant had discontinued proceedings rather than the Court having struck out the action and an application to set aside the Notice of Discontinuance failed. It followed all the applications to enforce the Costs Orders were unsuccessful with the only crumb of comfort for the Defendants being  that Lavender J considered that the Rule Committee “may care to consider the scope of CPR 44.15-(1)(a)[no reasonable grounds for bringing the proceedings] …”.

Select Car Rentals (North West) v Esure Services Ltd [2017] 3 Costs LR 537   (Turner J) principally concerns credit hire, where the credit hire charges formed the lion’s share of the claim. Here, the losses allegedly incurred in a road traffic accident included a claim for £23,456 in respect of payments to a credit hire company under a credit hire agreement, the credit hire company having been ordered to pay 60% of the costs after the action had been dismissed at trial. The reason for making that Costs Order had been that the preponderance of the claim was for the benefit of the credit hire company, since the damages had been limited to £30,000 but because it was a claim to which QOCS protection applied, the winning Defendant could not enforce the Costs Order.  The Defendant’s case here was that there should be some modification of QOCS protection because most of the claim was for the credit hirer’s benefit rather than for the Claimant. That submission failed. There was no different or broader discretion to award costs in the context of credit hirers operating behind the veil of the QOCS regime, so the winning Defendant’s efforts to enforce its
Costs Order came to nought.

Howe v Motor Insurers Bureau [2017] EWVC Civ 932 addresses the question – “what is a claim for personal damages?”. This was an appeal from a judgment of Stewart J  – see [2016] 3 Costs LO 377 relating to a failed claim brought under the Motor Vehicles (Compulsory Insurance) (Information Centre and Compensation Body ) Regulations 2003 against the Motor Insurers’ Bureau for compensation for personal injury caused by an identified driver in the European Economic Area. Below, Stewart J had held that no breach of duty or any other wrong had been alleged against the Defendant, and that, accordingly, there had been no “claim for damages … for personal injuries “so QOCS protection did not apply. Having reviewed the authorities and relevant EU Law, rules and regulations, Lewison LJ had no difficulty in characterising Mr Howe’s claim as a claim for compensation “for personal injuries”. It followed that he was entitled to QOCS protection and appeal was allowed.

Catalano v Espley-Ty Development Group Ltd [2017] EWCA Civ 1132 handed down on 28th July has finally resolved the position where a Claimant signs a pre-1 April 2013 CFA and goes  on to lose the case, having terminated that CFA after that date.

Ms Catalano had signed a CFA on 12 June 2012. It provided for a success fee but not for an ATE insurance premium as her application for adverse costs cover had been turned down. On 13 July 2013, she made a new CFA in the belief that if she lost, QOCS would protect her. On 13 January 2015 she served Notice of Discontinuance, thereby entitling the Espley-Ty to its costs, claimed in the sum of £21,675. Since the claim involved loss and damage suffered as a result of noise induced hearing loss, Ms Catalano contended that QOCS protection applied, so the Costs Order could not be enforced.

Not so, said the Court of Appeal.  CPR 47.17 provides that “This section [QOCS] does not apply to proceedings where the Claimant has entered into a pre-commencement funding arrangement (as defined in rule 48.2)” viz a pre-1 April 2013 CFA which provides for a success fee. Since Ms Catalano had signed her first CFA on 12 June 2012, the Court held that there was a pre-commencement funding arrangement, that QOCS did not give her any costs protection and that, accordingly, she must pay up.

The reason behind the decision? A Claimant, it was said, should not be permitted to cherry pick the advantages of both regimes by proceeding under the first CFA with the benefit of ATE insurance and a recoverable success fee, but then to abandon that CFA and sign another one if prospects of success change, in order to obtain QOCS protection and avoid the consequences of losing the case.


Litigant in Person Costs

In Halborg v EMW Law LLP [2017] 3 Costs LR 553 it was argued that a Limited Liability Partnership of Solicitors acting for itself was not a partnership to which CPR 46.5(6) applied, so its costs were limited to the LIP rate of £19 per hour. In fact, the words in parenthesis in that rule are to be given a purposive interpretation with the word “firm” including a Solicitor in sole practice and a “Partner” including a case where there is only one principal. Thus EMW, which had become an LLP, was entitled to summarily assessed costs of £17,600 at full rate from Mr Halborg. They would not be reduced to reflect an hourly rate of to £19.


Non-Party Costs Orders

Housemaker Services Ltd v Cole [2017] 3 Costs LR 417, [2017] EWHC 924 (Ch) (HHJ Paul Matthews) and Spartafield Ltd v Penten Group Ltd [2017] 3 Costs LR 467, [2017] EWHC 1121 (TCC) (Anthony Nissen QC) are both useful cases in which the Court considered Non-Party Costs Orders and the circumstances in which they should be made.

The answer in both, was, “not here” as the conduct of the Directors in each case had not been out of the norm and the claims had been brought in good faith.

In Housemaker, the claim been dismissed, with the Claimant Company being ordered to pay the Defendant’s costs. A successful application was then made to join a Director for the purpose of obtaining an Order that he  personally pay the costs which the Company had been ordered to pay but which, by reason of lack of assets, it was unlikely ever to be able to do. That application failed. The Court held this had not been a case where the behaviour of the Director in controlling, funding and ultimately hoping to benefit from the claim, went beyond the ordinary case of a Director and Shareholder of a company pursuing a legal claim. It had certainly not been brought in bad faith or for a collateral purpose, nor had it been improperly conducted. So the application for a non-party Costs Order failed.

In Spartafield, a non-party Director who was also the single Shareholder and sole Director, had funded 25% of the costs of the failed litigation. The Court refused an application that there should be a non-party Costs Order. The Director’s conduct had not been “out of the norm” nor had there been any evidence of dishonesty or falsified evidence. So the application for a non-party Costs Order failed here as well!


Costs Budgeting

Ashgar v Bhatti [2017] EWHC 1702 (QB).  A Claimant whose costs going forward had  been limited to applicable Court fees under CPR  3.14 for failure to serve a budget, got a second bite of the cherry when the trial was lengthened by 6 days, Lewis J held . Applicable Court fees only applied to the first six days. The other party said that that would be to undermine the Order limiting the budgeted costs to applicable Court fees, but Lewis J held that there had been a “significant development” in the case, so the limitation did not apply to the second six days.

Sir Cliff Richard OBE v BBC [2017] EWHC 1666 (Ch) is not a decision by a Red Judge, but is nonetheless persuasive (Chief Master Marsh). In the course of adjusting Sir Cliff’s costs budget, the Master expressly declined to comment on the incurred costs, specifically that they were excessive or disproportionate. “There is no significant benefit to be gained in the Court making the sort of anodyne comment that the BBC proposes,” he said!  Well said!!


Skeleton Arguments

ICAP Management Services v Berry [2017] 3 Costs LR 531. Keep those bundles and skeleton arguments concise, otherwise do not expect to be paid for preparing them, so said   Garnham J when faced with skellies exceeding 200 pages and bundles containing 44 lever arch files!


Failure to mediate

Gore v Nahmeed [2017] 3 Costs LR 509.  Unreasonable refusal to mediate results in indemnity costs? Not necessarily after all – “Speaking for myself, I have difficulty in accepting that the desire of a party to have his rights determined by a Court of Law in preference to mediation can be said to be unreasonable conduct particularly when, as here , those rights are ultimately vindicated”  Patten LJ.

But compare that with Thakkar v Patel   [2017] 2 Costs LR 233 in which Lord Justice Jackson  said just a few months earlier “The message which the Court sends out in this case is that in a case where bilateral negotiations fail, but mediation is obviously  appropriate, it behoves both parties to get on with it. If one party frustrates the process by delaying and dragging its feet for no good reason, that will merit a costs sanction. In the present case, the costs sanction was severe, but not so severe that this Court should intervene “

Our advice? Not worth putting the Patten LJ view to the test. Those who unreasonably refuse to mediate both during the action and when it comes to the costs assessment, still do so at their peril as to costs.


Relief from Sanctions – Refused!

Remember Mitchell and the so-called trivial” test which was unceremoniously dumped in Denton and replaced by a three stage test: seriousness of the breach, why did it happen, all relevant circumstances? Unfortunately for hapless Litigants and their Solicitors’ professional indemnity insurers, Mitchell is back with a vengeance.

Gladwin v Bogescu  [2017] EWHC 1287, [2017] 3 Costs LO 437,  Turner J  reversed the decision below to grant relief from sanctions and struck out Mr Gladwin’s claim for damages even though he had already succeeded on liability, on account of his Solicitor’s “ …complacency and procrastination..” including the failure to serve  his client’s witness statement . Below, the Judge had granted relief on the basis that if he had not done so, the Defendant would have been unable to cross-examine the Claimant on his evidence.

That decision had been wrong Turner J held. On an application for relief, the limits of the automatic sanction were not to be treated as if they also circumscribed the parameters of the Court’s broader case management powers, including power to strike out a claim. Here, there were justifiable doubts about the Claimant’s injuries (he had won  silver in the Kent Kyo Open Judo competition whilst maintaining a claim for damages for pain and suffering), as there were for the credit hire claim at  over £17,000 for a motor cycle that had cost £900 to repair! The claim would be struck out. Whilst it might seem unjust at first sight to do so where the fault had been due to the carelessness of the Solicitors, a policy of absolving clients from the consequences of their Lawyers default undermined the Court’s ability to enforce process requirements and encouraged sloppy practice and satellite litigation.

Not much justice for Mr Gladwin then even though he won on liability! He will now not only need to sue his own Solicitors for negligence, but also prove his case in damages and obtain an indemnity for the costs of the action. In view of his success at the judo competition, that might not be easy!

Next in Lakhani v Mahmud   [2017] EWHC 1713 (Ch)  Daniel Alexander QC refused to give relief from sanctions when the Defendant had been one day late in serving his costs budget, a sin that had gone  unpunished by the Court of Appeal when News Group Newspapers was similarly late in Mitchell.  Here, the Court had ordered revised costs budgets to be served 21 days before a costs and Case Management Hearing listed on 10 January 2017. The Claimant had served his budget on 19 December 2016 with the Defendants doing so the following day. That was one day late, according to the Judge, in addition to which the Solicitors had been tardy in making an application for relief from sanctions (which was heard at the CCMC on 10 January 2017), because their offices had closed for  Christmas between 23rd December and 3 January. That meant that the bulk of the hearing been taken up with sanctions, so that there would need to be a further budgeting hearing thereby wasting valuable Court resources. Perish the thought that that should happen! Application for relief refused. Mr Mahmud’s budgeted costs were thus limited to applicable Court fees.

Not much justice, for Mr Mahmud either, nor any comfort for him when he read the transcript in Mitchell, in which a similar failure by NGN not raised a judicial eyebrow: indeed, Elias LJ had stated during the course of argument that one day late, was “de minimis”.



Conditional Fee Agreements

Kupeli v Atlasjet [2017] 3 Costs LO 517 – the Court of Appeal has just handed down its decision. The Judgment of Mrs Justice Slade has been upheld.

The appeal concerned cancellation notices. In a prospective group action, 669 interested Claimants had signed CFAs in the local community centre because they could not all fit into the Solicitor’s offices. Atlasjet contended that the agreements had been concluded at a meeting  which was “an excursion organised by [a] trader away from his business premises” and that, accordingly, the clients should have received notices of cancellation under the Cancellation of Contracts made in a Consumer’s Home Place of Work etc Regulations 2008. Since the omission to do so rendered the CFAs unenforceable, by operation of the indemnity principle, there were no costs for Atlasjet to indemnify and their liability for the costs of the action were then nil.

That submission failed both below and on appeal. The Court held that the location and purpose of the meeting had been well advertised in advance, there had been no element of surprise and accordingly no written notice of the right to cancel under regulation had been required.

Stevensdrake v Hunt [2017] EWCA Civ 1173. Lucky Solicitors, unlucky Insolvency Practitioner! The latter was a long standing client. The deal (so the Insolvency Practitioner said) was that in insolvency matters, the Solicitors would act under CFAs and be paid out of realisations in successful claims. Unfortunately in this particular case there was a phyrric victory, because although the action was won, nothing was recovered from the insolvent Defendant so there was no money to pay the Solicitor’s bill. The Insolvency Practitioner said that what had been agreed with the Solicitor (but not stated to be so in the CFA) was that no realisation meant no payment. That worked in the Court below, but the Court of Appeal disagreed and found that there was no contractual justification for going outside the terms of the CFA, nor was an implied term required to give business efficacy to it.

The bill was a mere £400,000, plus costs “here and below”!

The lesson? Look at the terms of the agreement. If it works, the Court will not imply terms into it to make it work differently.

But in the end, it proved to be unlucky solicitor. An appeal on a point about estoppel by convention failed, so overall the solicitors lost and could not recover their fees.


Coming up

The decision in Budana concerning assignments of CFAs has been reserved by the Court of Appeal. However, in Frade v Radford  [2017] EWHC 1600 (QB), on a renewed oral application for permission, Hickinbottom LJ has granted permission to appeal against the decision of Warby J that a Conditional Fee Agreement cannot be rectified after the Costs Order has been made. Thus far, Counsel has lost all his fees because his CFA did not name the Defendants for whom he was acting, and Warby J declined to let him rectify the agreement by adding them in after he had made his award of costs in their favour.

Was he correct? The appeal has been listed in December and will also address the point about the extent to which (if at all) work done outside the scope of a CFA can be recovered from the paying party. Watch this space!


Matthew Kain

Colin Campbell


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