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Kain Knight Case Law Update June/July 2018

Those of us who remember the pre Civil Procedure Rules days will recall that if you won your case by even a tiny amount, costs would “follow the event”: that is to say, there would be no deduction or adjustment in the costs order to take account of the level of the success or of the issues upon which you had been unsuccessful.

This month, judgments in group actions bring into sharp focus how that approach no longer applies and that the court will often divide up the costs to reflect the level of success (or failure) of the parties. Additionally this month, we focus on different aspects of what happens to the costs on the discontinuance of an action under CPR 38. There is then an important case on the consequences of drafting a carelessly worded conditional fee agreement and, perhaps most significantly, guidance about how to argue a case on misconduct in detailed assessment under CPR 44.11. Such applications for the disallowance of costs are relatively rare, so there are useful lessons here about how not to certify bills and whether it is the solicitor or the costs lawyer instructed to draft the bill, who carries the can when things go wrong.

As usual, these are a selection of the cases likely to be of practical help to practitioners. Not every costs decision is featured, but if you need any further details, please do not hesitate to contact Matthew Kain or Colin Campbell at, [email protected] or [email protected], respectively.

Discretion as to costs CPR 44 in Group Actions  

Atlasjet v Kupeli [2018] EWCA Civ 1264 is a large action involving a cohort of 838 claimants. In the court below, the judge had dealt with preliminary issues and had ordered Atlasjet to pay 33% of the claimants’ costs, using as guidance to reach her decision “who receives the cheque”. In fact, the number of claims which had not failed at that stage represented just 5.5% of the cohort and the Court of Appeal held that in complex Group Litigation, for the purpose of CPR 44.2(2), it was necessary to consider who had been successful in the context of the litigation as a whole. When that had been done, it was plain that 33% was wrong: that order was quashed and replaced with “no order as to costs” which presumably meant that as the action was being funded under conditional fee agreements, the lawyers went unpaid (for once, you may say!).

A similar adjustment, albeit not so dramatic, was made by Langstaff J in Various Claimants v WM Morrison Supermarkets Plc [2018] EWHC  1123 (QB). In that Group Action, the claimant employees had won overall on claims relating to disclosure of data, including success in respect of vicarious liability but had failed on the issue of direct liability, meaning that the trial had continued for longer than had been necessary. To reflect that, the claimants were awarded only 40% of their costs.

Misconduct under CPR 44.11

Your opponents or their solicitors have been up to no good? What remedy can you look to the court to impose? CPR 44.11 is the answer since it permits the court to disallow some or all of your opponents’ costs incurred before or during the assessment proceedings, and to order them or their legal representatives to pay yours.

In Bamrah v Gempride Ltd [2018] EWCA Civ 1367, the receiving party’s bill had been divided into two parts. Part 1 had been drafted by costs lawyers and certified as being true and accurate by the claimant who was also a sole practitioner. Part 2 was certified by a different firm. At the assessment, it transpired that the claimant had claimed £280 per hour, her opponent had offered £241 (which had been accepted before the truth had been uncovered) and the figure agreed in her CFA had been £232, a clear breach of the indemnity principle. A further issue had arisen over whether the claimant had given accurate information about whether she had had Before the Event insurance for the claim.

Master Leonard had found against the claimant and limited her Part 1 costs to the litigant- in -person rate of £19 per hour. Following an 11 day appeal, HHJ Mitchell overturned that decision and allowed the claimant her costs at full rate, plus the costs of the appeal on the indemnity basis. In his view, there had been no unreasonable or improper conduct and that the claimant’s Costs Lawyers had been responsible for the error in the bill about the hourly rate, which she had expressly approved by certifying its accuracy.

In a judgment temperate in tone but scathing in undertone, the Court of Appeal reversed HHJ Mitchell on all grounds of appeal, holding that the solicitor signing the bill is liable for the work of the Costs Lawyer as a subcontractor, that it is not necessary to prove dishonesty before unreasonable or improper conduct can be found, and that in certifying the bill, the claimant had been guilty of recklessness amounting to improper and unreasonable conduct. In addition, although the claimant had not intended to mislead so far as the BTE insurance had been concerned, the paying party had been misled. Accordingly, the rulings of HHJ Mitchell were reversed and the costs in Part 1 of the bill were allowed at half rate rather than at the LIP rate. Expressly exonerated was Master Leonard.

CPR 44.11 applications are relatively uncommon, but certifying the bill as being accurate is a mandatory requirement. Bamrah emphasises that the signature is extremely important and care must be taken when checking the bill, to ensure that it is accurate. At the end of the day it is the solicitor who will be held to account if it is not.

Late applications to amend or adjourn: who pays the costs?

Several cases this month.

The judgment in Crown Bidco v Vertu Holdings OY [2018] EWCA Civ 67 has only just become available. It provides useful guidance about what costs order to expect when a late application is made to adjourn the trial.  In Bidco, the court upheld Blair J’s decision not to reserve the costs but to order the party applying to amend its defence to plead fraud, to pay the costs caused by the adjournment. Although another judge might have reserved the costs to the trial judge, in not doing so, Blair J had not been plainly wrong, and his decision had been well within his discretion.

In Al Baho v BGP Global Services Ltd [2017] EWHC 1494 (Ch), Mr Al Baho had been ordered to pay security for costs pending his appeal. He had also failed to pay several costs orders made against him in favour of the respondent in the course of the litigation. He argued that having to pay up now would stifle his appeal since he did not have the funds to do so. That submission failed because he had advanced no evidence about how he was managing to fund his costs of legal representation, still less had he volunteered a valuation of a property which he contended provided adequate security. No stay!

Likewise in Hincks v Sense Network Ltd [2018] EWHC 1241 (QB), Lambert J was asked for a stay of payment of any costs pending appeal, but with no evidence before her as to the prospective appellant’s level of earnings, nor how he had funded the litigation, nor about his assets, the application fell on stony ground. As to what payment should be made on account, this being a budgeted case, 90% was ordered. That appears to be the norm these days.

Costs on discontinuance under CPR 38: Qualified One Way Costs Shifting under CPR 44.13

The default rule is well known: the party discontinuing pays the costs of the action. Last month we featured Ashany and Harrrap. Hot on their heels is Alpha Insurance v Roche [2018] EWHC 1342 (QB), which also involves QOCS.

In Roche, the claimant had discontinued the day before the trial was due to start. No explanation had been given and the claimant had said nothing about the defendant’s insurer’s allegation that the second claimant (her son) had not been a passenger in the car at the time of the accident in which injuries had been caused through the admitted negligence of the defendant driver. Ordinarily in a personal injury claim such as this, QOCS protection under CPR 44.14 would apply, so the costs order cannot be enforced against the party discontinuing. However, in view of the late discontinuance, the court allowed the insurer’s application that there should be a further hearing to decide whether the claimants should lose their QOCS protection due to their claim being “fundamentally dishonest “under CPR 44.16.

Conditional Fee Agreements and too much information

Just when we thought we had clarity about the ramification of defects in CFAs (see Radford v Frade [2018] 1 Costs LR 59), the Court of Appeal has handed down an important judgment which addresses the thorny issue about what happens if you give too much information in identifying the opponents in the claim you are bringing using a CFA.

Until Malone v Birmingham Community NHS Trust [2018] EWCA Civ 1376, it appeared to be trite law that the ability to recover costs from an opponent in litigation could be defeated by the “sin of addition”. Suppose D1 is named in the CFA, but D II against whom you succeed is not. Having unnecessarily named DI as the opponent but then omitting to add further parties, no costs could  be recovered from the un-named defendants in relation to the claims against them, unless they are identified in the agreement -see Engeham v London & Quadrant Housing Trust [2016] 3 Costs LO 357.

Malone stands all that on its head. Without mentioning Engeham in its judgment even though it was in the bundle of authorities, the court held that the wording of the CFA was not limited in its scope to the claim only against the named “Home Office”. Accordingly, the fact that D II (the NHS Trust against whom the costs order had been made) had not been named in the CFA, did not mean that no costs could be recovered from that defendant. On the contrary, the wording “all work conducted on your behalf following instructions regarding your claim against the Home Office” had been descriptive. The CFA had been entered into before proceedings had been commenced and when the identity of the correct defendant had been unclear. Since that had been one of the main questions that the solicitor had been appointed to determine, the Court of Appeal held that the CFA covered the claim against the NHS Trust even though it had not been named in the agreement.

From that decision, in terms of who now has ”the upper hand” in the enforceability of CFAs, it appears that the pendulum is swinging firmly in favour of upholding the validity of these agreements, Radford apart , see for example Budana on the validity of assigning a CFA. That is in stark contrast to the hard line taken by the Court of Appeal a decade ago when many such agreements foundered in the minefield of the CFA regulations then in force. Nonetheless, as there is no requirement to name a defendant or potential defendants in the CFA, we would advise avoiding the “sin of addition” by leaving out their identities altogether.

Part 36

A reminder. As a claimant, you make a Part 36 offer, which your opponent fails to beat at trial; the costs are yours on the indemnity basis from the last date on which the offer could have been accepted. However, as a defendant making a Part 36 offer, which the claimant does not beat, there is no automatic entitlement to indemnity basis costs. Accordingly, in Shalaby v Sense Network Ltd [2018] EWCA Civ 1323 the Court of Appeal corrected the judgment of Andrew Baker J below on that point  (taking care to point out that the error was not of the judge’s  making as he had been misled by learned counsel!), and standard basis costs were allowed instead.

Fixed costs under Section IIIA Part 45

Hot off the Court of Appeal’s press, we have Hislop v Perde [2018] EWCA Civ 1726, in which the court has  held that in cases subject to the fixed costs regime, where a defendant accepts a Part 36 offer out of time, fixed costs still apply. Hitherto, the law was clear that in a case governed by the fixed costs regime, neither party can recover more or less by way of costs than is provided for by that fixed costs regime ; see Solomon v Cromwell Group Plc [2012] 2 Costs LR 314. Conversely a claim subject to the fixed costs regime which goes on to trial, and by way of judgment, the claimant receives more than the Part 36 offer, their entitlement is indemnity costs from the date the offer became effective ; see Broadhurst v Tan [[2016] 2 Costs LO 155. Left in the middle have been cases in which the defendant has accepted a Part 36 offer later than the time limit set out in the rule, but before the matter went to trial. In such a case, so the Court of Appeal has just held, fixed costs apply to the date of acceptance: there is no discretion to award standard or indemnity basis costs. If a claimant wants greater costs, an application can be made under CPR 45.29J if “exceptional circumstances” can be shown, but mere late acceptance does not amount to exceptional circumstances (see the conjoined appeal in Kaur). So success for the paying parties in both appeals.

Retainers and the Solicitors Act 1974

Costs Practitioners will be aware that the Senior Costs Judge recently gave a speech to the Civil Justice Council in which he stated that in his view, it is time to review the distinction between interim bills, statute bills and final bills. We mention en passant, four judgments in which the retainer of the solicitors with their clients has just been put under the judicial spotlight. We shall return to these next month with more detail about the ramifications, but they re- emphasise that retainer issues and the Act can be a caution to rattlesnakes when things go wrong.

Hugh Cartwright & Amin v Devoy-Williams: “high temperature” litigation between a firm of solicitors and their former client about hourly rates, counsel’s fees and offers.

JXA v Kettering General Hospitals NHS Trust: inter-parties bill, but focusing on hourly rates and the “local solicitor” point.

Robinson v EMW Law LLP Griffith v Gourgey. Retainer issues. Had Mr Robinson retained the solicitors, in which case by operation of the indemnity principle, there would be no costs to indemnify with liability for them therefore being nil?

Griffith v Gourgey: Breach of warrant of authority; “Improbably…, three successive law firms…wrongly believed that they had the authority of the directors of [the defendant company] to represent it in the proceedings.” (Fancourt J). Indemnity basis costs orders followed against those firms in favour of innocent parties affected by their negligent mistakes.

More in August! Enjoy the summer break.

Matthew Kain

Colin Campbell

July 2018

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