The importance of an accurate and correctly certified Bill of Costs…….

The case of Jago v Whitbread Group plc relates to the Defendant’s application for an order pursuant to CPR 44.11(1) & (2), which reads as follows:

“The Court may make an order under this rule where –

  • a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or
  • it appears to the Court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.”

The Defendant requested that the Court disallow all or part of the Claimant’s entitlement to costs on the grounds of her solicitors improper and/or unreasonable conduct during the detailed assessment proceedings.

The following is a brief summary of the substantive case and detailed assessment proceedings:

  1. The Claimant brought a personal injury claim against the Defendant, which settled for damages of circa £41,000, with costs to be subject to detailed assessment, if not agreed.
  2. The matter settled on 4 March 2015 and on 12 March 2015, the Claimant disclosed an informal statement of costs to the Defendant. The statement of costs was a two page document which totalled £101,677.21. The statement included a success fee of 20%, various disbursements in the total sum of £537.00 and two and half hours for preparing and checking the statement of costs. The statement was signed by a senior solicitor and partner at the Claimant’s firm.
  3. On receipt of the statement of costs, the Defendant’s solicitors responded requesting disclosure of the Claimant’s conditional fee agreement, with the Claimant’s solicitors responding on 18 June 2015, stating that the Claimant “……was not subject to a CFA in regards to this matter”.
  4. The Defendant’s solicitors responded querying why therefore a success fee of 20% had been claimed in the statement of costs when no CFA was in existence.
  5. On 19 November 2015, the Claimant served notice of commencement of detailed assessment, with the bill of costs totalling £91,474.41. This bill of costs was of course over £10,000 less than the sum claimed in the statement of costs. Disbursements had been reduced to £430.00 and profit costs had also been reduced. A success fee of 25% was claimed in the bill of costs, despite the correspondence on 18 June 2015 stating that the matter was not subject to a CFA.
  6. The bill of costs was certified by the supervising solicitor and partner. A claim of three and a half hours was included by a law costs draftsman and one hour by the supervising solicitor to check the bill of costs. The certification confirmed that the bill of costs was valid and accurate (and therefore no breach of the indemnity principle).
  7. In December 2015, the Defendants served points of dispute and shortly thereafter amended points of dispute raising a number of significant queries and challenges to the bill of costs.
  8. On 15 January 2016, the Claimant filed and served a fresh bill of costs. Instead of amending the existing bill of costs, the Claimant’s solicitors effectively started the detailed assessment proceedings again with a redrafted bill of costs. The redrafted bill totalled £56,719.00, which represented a reduction of circa. £35,000.00 from the total sum claimed in the bill of costs served in November 2015.
  9. In respect of the revised bill of costs, the success fee was removed. Disbursements were reduced further to £385.00 and the profit costs sought in the bill were significantly reduced. Again, a claim of three and half hours was included in the bill of costs for a law costs draftsman preparing the same, together with an hour for the supervising solicitor/partner checking and certifying the bill of costs.
  10. On receipt of the redrafted bill of costs, the Defendant’s solicitors wrote to the Claimant’s solicitors highlighting the procedural error in that they should have simply amended the existing bill of costs rather than creating a new bill of costs.
  11. In response to that correspondence, on 8 April 2016 the Claimant’s solicitors filed and served a further bill, this time an amended bill of costs. The total sum claimed in the bill was £55,393.19. Profit costs were reduced again together with a further reduction to disbursements. Again, the bill was signed and certified by the supervising solicitor and partner.


    Outcome

    Master Whalan found the Claimant’s solicitors’ actions to be “improper” and “unreasonable” and imposed the following penalty for the “improper” and “unreasonable” behaviour:

  • The Claimant’s entitlement to costs be disallowed to the extent of 50% of the assessed costs allowed on detailed assessment.
  • Specific deductions to the bill of costs (see paragraph 41 of the Judgment). These reductions included time in relation to other work done i.e. preparing, checking and certifying the bill of costs.

    In reaching his decision, Master Whalan stated that the breaches in the case were significant, repeated and either unexplained or unjustified (paragraph 40 of the Judgment).

    This is an excellent case which demonstrates the importance of preparing an accurate bill of costs and ensuring that a bill of costs does not breach the indemnity principle before certifying the same. What is clear from the Judgment is that Master Whalan would probably have been forgiving for the errors made in the first instance, but the failings the second time round and further failings thereafter were not capable of forgiveness and resulted in the severe penalty reduction of only 50% of assessed costs for the Claimant’s solicitors. So ensure statements of costs and bills of costs are prepared and checked properly!

    This blog was prepared by Andrew McAulay who is a Partner at Clarion and Head of the Costs and Litigation Funding Team. Andrew can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com

CFAs, Counsel and Rectification – Permission to Appeal granted

The case Frade & Ors v Radford & Anor [2017] EQCA Civ 1010 involved a renewed application for permission to appeal against an Order of Warby J from July 2016, which dismissed two appeals brought by the Appellant Defendants following the detailed assessment of their costs.

Master Howarth, Costs Judge, had found at the original detailed assessment of the Defendants’ costs that there was no agreement between the Defendants, their Solicitors Taylor Hampton, and Counsel, Augustus Ullstein QC, for the payment of any fees, and thus there was no liability for the Claimants to pay under an inter partes costs order. This was due to the wording and scope of the CFAs, and the omission to name all four Defendants within the CFA with Counsel.

Counsel’s CFA, dated 6 July 2011, named two Individual Defendants, but failed to include the remaining two Corporate Defendants. Following the making of the final inter partes order, the Defendants became aware of their oversight, and entered into a deed of rectification with Counsel on 30 July 2015 whereby the CFA was extended, with retrospective effect, to cover the proceedings against the Corporate Defendants.

The Claimants had argued on detailed assessment that, due to Counsel’s CFA failing to name the two Corporate Defendants, those clients had no liability to pay Counsel for any work done, and that on an inter partes assessment, the Claimants should only be liable for the fees incurred that the Individual Defendants were liable for.

On appeal, Warby J found that the deed of rectification was irrelevant inter partes. Warby J accepted that the deed of rectification “was effective to cure the position as between Counsel and his clients”, but that “events subsequent to the costs order against the Claimants were to be disregarded for the purpose of assessing their liability – at least if those events increased rather than diminished that liability”.

The Defendants therefore sought to appeal the Order of Warby J on 7 grounds, with ground 6 dealing with Counsel’s CFA and the finding that the rectified CFA was ineffective on an inter partes basis.

The Defendants argued that there was powerful evidence on file to support the fact that the failure to name the Corporate Defendants within the CFA was a simple oversight. He submitted that the CFA should be rectified to reflect the true agreement with Counsel, and that there was no rule of law that rendered the deed of rectification ineffective inter partes.

In response, Counsel for the Claimants argued that, whilst case law such as King v Telegraph Group Ltd [2005] and Holmes v Alfred McAlpine Homes (Yorkshire) Ltd [2006] allowed for a CFA to have a retrospective effect, Kellar v Williams [2004] made it clear that a variation in the charging basis between a receiving party and their client made after an inter partes costs order was ineffective against the paying party, particularly if it resulted in a larger costs burden. Counsel recognised that Kellar v Williams [2004] was persuasive authority only, being a Privy Council case, but argued that costs judges had previously followed it.

LJ Hickinbottom was persuaded that the circumstances of this case could be distinguished from Kellar v Williams on the basis it related to the rectification of a contract rather than a variation to the terms, and he found that this case raised a point of general importance that should further be considered by the Court. He therefore granted permission to appeal on Ground 6.

We await the appeal decision with interest. If a receiving party finds themselves in a similar position, this appeal decision may assist in recovering Counsel’s fees inter partes when a genuine mistake is identified and rectification of the CFA is required after the making on the order.

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

Service of Court of Protection Bills of Costs – Who is an Interested Party?

At our Court of Protection Masterclass yesterday, Master James spoke insightfully about the service of Court of Protection Bills of Costs on interested parties. She confirmed:

“Run-of-the-mill Assessments generally relate to general management charges appointment of Deputies etc. Since the advent of the Mental Capacity Act 2005, it is increasingly common for family members to challenge decisions such as the appointment of a Deputy, or the registration of an Enduring Power of Attorney.

The Court hearing these applications has the usual armoury of costs orders at its disposal and in a number of cases it may make a costs order against the interested party or Applicant. In other cases, it will simply order the Deputy’s costs to be paid from the estate of P.

Other situations arise where P dies before a Deputy’s bill for general management charges or other matters has been assessed. In all these situations, often when the bill is lodged, it is clear that there are objections from family members, unsuccessful applicants to the Court, or beneficiaries under the will or intestacy of P, to the costs that are claimed.”

It’s important to note that Master James said in her notes “in all these situations, the Deputy or party seeking payment must make these objections clear when lodging their bills for Assessment. In these circumstances, the bills are usually referred to a Master for a Direction to be made pursuant to CPR Rule 47.19A (3) – see link to Part 47 at page 3 above:

“The Court may direct that the persons seeking Assessment may serve a copy of the request on any person who has a financial interest in the outcome of the Assessment”.

What is or is not a “financial interest” is explained in CPD Part 47 paragraph 18.2; here is a link to the Practice Direction:

https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part-47-procedure-for-detailed-assessment/practice-direction-46-costs-special-cases2#18.1

She proceeded to confirm, “there have been cases proceeding before Costs Officers and/or a Master where it is not apparent that there is an interested party with the result that a Final Costs Certificate (FCC) may be issued without the full knowledge of who the relevant parties are.

In some cases, the FCC has subsequently had to be rescinded and the process of Detailed Assessment restarted at considerable cost either to the estate of P, Solicitors or Deputies.”

We recommend that any interested parties are highlighted for the SCCO’s attention in your letter to the SCCO, enclosing your bill of costs.

If you have any questions, please do not hesitate to contact the COP Costs Team at Clarion, COPCosts@clarionsolicitors.com or call 0113 336 3402.

What Costs Are Reasonable for a Deputy? JR v Sheffield Teaching Hospitals NHS Foundation Trust provides an explanation.

At a glance, the costs of a professional Deputy may seem expensive. However, the level of knowledge and work undertaken by a Deputy justifies these costs, especially in a case where the award was of substantial value. Once broken down, the costs of a Deputy are reasonable and can be justified.

Case summary

The Protected Party is a 24-year old with severe cerebral palsy. He suffered intracranial haemorrhage and brain injury following a traumatic premature birth and during a breech delivery. His litigation friend brought a clinical negligence claim on his behalf, arguing that the Protected Party’s injuries could have been avoided by a caesarean delivery. The Defendant accepted liability as the brain injury could have been avoided.

At the settlement hearing, some heads of loss had been agreed, but the costs of the professional deputy remained in dispute.

All parties accepted that the Protected Party lacked capacity to look after his own financial affairs, and predicted that this would be the case for the remainder of his life time. Therefore, a Professional Deputy was to be appointed; the cost of which continued to be argued.

It was deemed that although the Protected Party’s parent were supportive, it was not appropriate for them to administrate the Protected Party’s financial and property affairs. They had stated that they wanted to work alongside the Deputy, not against them. The Protected Party had some level of understanding and communication, so the Deputy was obliged to liaise directly with him.

What is considered reasonable for Deputyship costs?

For annual management

Year Claimant Costs Defendant Costs Award
1 30,605 plus cost of 2 visits 14,000 inclusive of 2 visits 30,000 inclusive of visits
2 21,492 plus cost of 2 visits 9,000 inclusive of 2 visits 20,000 inclusive of visits
3 17,040 plus cost of 1 visit 8,000 inclusive of 1 visit 15,000 inclusive of visits
4 17,040 plus cost of 1 visit 8,000 inclusive of 1 visit 15,000 inclusive of visits
5 onwards 11,232 plus cost of 1 visit 7,000 inclusive of 1 visit 10,000 inclusive of visits

The parties agreed that for extras such as transfers of Deputies, Wills, co-habitation or pre-nuptial agreements and “crisis payments”, a further £38,160.00 was reasonable.

The Judge allowed a total of £898,993.00

Finally, it’s noteworthy that all Deputyship costs are assessed by the Senior Courts Cost Office and the fee earners are regularly limited to the SCCO Guideline Hourly Rates whilst costs are awarded for Deputyship work, this is further scrutinised on assessment based on what is reasonable, proportionate and necessary in the Protected Party’s best interests.

If you have any queries, please do not hesitate to contact Georgia Clarke or the team at COPCosts@clarionsolicitors.com

Indemnity Basis Costs Awards

The case of MacInnes v Hans Thomas Gross [2017] contains some very useful information for any law firm or litigant considering the issue of indemnity basis costs awards. Pages 2 and 3 are the relevant pages to consider in the judgment.

In the case, the First Defendant applied for an indemnity basis costs award against the Claimant, but this was rejected by The Honourable Mr Justice Coulson, and in doing so he considered a number of authorities in relation to such awards. Those very useful authorities are at paragraph 3 of the judgment and are as follows:

  1. Indemnity costs are appropriate only when the conduct of the paying party is unreasonable “to a high degree. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight” see Kiam v MGN Limited [2002].
  2. The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it “out of the norm” in a way which justifies an order for indemnity for costs, see Excelsior Commercial & Industrial Holdings Limited v Salisbury Hammer Aspden & Johnson [2002].
  3. The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided the claim was at least arguable. The pursuit of a hopeless claim (or a claim which a party pursuing it should have realised was hopeless) may well lead to such an order, see Wates Construction Limited v HGP Greentree Allchurch Evans Limited [2006].

The review of key authorities in the judgment is very useful and provides an excellent starting point for anyone tasked with considering whether to apply for an indemnity basis costs award.

Do remember that an indemnity basis costs award should always be sought in the appropriate cases, due to the fact that proportionality is not a consideration/factor when costs are assessed on the indemnity basis. There is also case law that supports the position that a receiving party is not restricted/held to its costs budget where costs are assessed on the indemnity basis (Slick Seating Systems [2013] and Kellie v Wheatley [2014]). CPR 3.18 also supports this.

The new test of proportionality has had a real impact (negatively for receiving parties) on some reported cases (see, for example, The new test of proportionality – 66% reduction) and therefore an indemnity basis award would provide protection for a receiving party from the new test of proportionality. Furthermore, there is a strong argument that an indemnity basis costs award escapes fixed costs (Broadhurst v Tan [2016]) and therefore applications for indemnity basis costs awards may well be on the increase given the likely extension of fixed costs for civil and commercial litigation in the not too distant future.

This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding Team. Andrew can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com.

 

Qualified One-way Costs Shifting – when tactics are not an abuse of process

In Shaw v Medtronic [2017] EWHC 1397 (QB), the Court of Appeal found that the claimant had not abused the Court process by filing a notice of discontinuance against the fifth defendant to benefit from the protection of qualified one-way costs shifting (QOCS).

The parties agreed that section 2 of CPR 44 applied, and in particular CPR 44.14(1) which states subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.

In this particular case, the claimant had not received any award for damages or interest, and therefore the rule would in effect mean that no costs order could be enforced against them.

During the main claim, the fifth defendant had filed an acknowledgement of service on 11 October 2016, and on 17 October 2106, they had written to the claimant’s solicitor to highlight the weaknesses of the claim. This prompted a response from the claimant’s solicitor which stated that they were not prepared to file, at that stage, a notice of discontinuance. The fifth defendant therefore, on 25 October 2016, filed an application to strike out the claim. If the fifth defendant were successful it would “bring the fifth defendant within the scope of the exception in CPR 44.15(a) to the general rule concerning qualified one-way costs shifting”.

CPR 44.15 (a) states that Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that –

(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;

The first judgment was given on 20 January 2017, and the claimant proceeded to file a notice of discontinuance on the fifth defendant in March 2017, before the fifth defendant’s application could be heard.

The fifth defendant attempted to persuade Mr Justice Lavender to utilise his powers under CPR 38.4 and set aside the notice of discontinuance on the basis it was an abuse of the process of the Court. However, Mr Justice Lavender found that whilst it was striking that the claimant has opted to discontinue against the fifth defendant whilst maintaining claims against the first, third and fourth defendants (through the Court of Appeal), that it may be that the claimant had realised, albeit later than they may have done, that the prospects of success in their claim against the fifth defendant were not favourable. Justice Lavender found that “it does not, in those circumstances, strike me that this is a case of abuse of process of anything sufficient to justify setting aside the notice of discontinuance”.

The fifth defendant was refused permission to appeal on the basis the decision was made on the facts of the case.

Therefore, as a litigator, the power of QOCS should always be borne in mind, particularly if the case being brought by a claimant is for non-monetary award. The filing of a notice of discontinuance is a powerful tool for claimants to have as their exposure to adverse costs would be nil. As a defendant, you should always be on the lookout for any aspects of the case which may kick into effect CPR 44.15 in order to escape the parameters of QOCS.

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

The importance of the precedent H Costs Budget! Harrison on appeal – no second bite of the cherry.

Jacqueline Dawn Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] WECA Civ 792 – the Court of Appeal has found that the budgeted costs will not be departed from in the absence of a “good reason”. Davis LJ further found that incurred costs do not form part of the budgeted costs and the good reason test does not apply to those incurred costs. Davis LJ confirmed that the proportionality test can be applied to the final claim for costs. This is despite the proportionality test having been applied when the costs budget was approved, this may result in claims for costs being subject to detailed assessment on the issue of proportionality alone.

Davis LJ summarised the Applicant’s submissions regarding what reliance should be placed on the budget at detailed assessment, as follows:

“The premise underpinning Mr Hutton’s argument thus was that CMOs in effect are but summary orders which at best give no more than a snapshot of the estimated range of reasonable and proportionate costs: often reached, as Mr Hutton would have it, on a broad brush or rough and ready judicial approach after a hearing which would have been limited in time, rushed in argument and incomplete in the information advanced”.

Davis LJ considered this to be a sceptical appraisal, commenting:

“that to sanction, at detailed assessment, a departure from the budget in the absence of good reason would overlook (among other things) that budgeted costs are already required to have regard both to reasonableness and to proportionality; that the aims of costs budgeting include a reduction in detailed assessments and of issues raised in points of dispute; and that the element of certainty to clients (in the form of knowing what costs they are likely to face, in terms of payment or recovery) would be removed.

Moreover, if approval of a costs budget by a CMO has the more limited status which the appellant would ascribe to it then that would have a potentially adverse impact on parties thereafter attempting to agree matters without requiring a detailed assessment.  Although Mr Hutton queried if that was one of the perceived prospective benefits of the costs budgeting scheme, it seems to me – as it did to the editors of Cook on Costs – wholly obvious that it was indeed designed to be one of the prospective benefits of cost budgeting that the need for, and scope of, detailed assessments would potentially be reduced.”

The court’s attention was then drawn to incurred costs. The respondent presented what was described by Davis LJ as an ingenious argument to the court regarding incurred costs being potentially, in essence, approved ‘through the back door’. The respondent submitted that:

the incurred costs will have acquired a special status: in that, while not “approved” as such, they will have been taken into account by the court at the costs management hearing in managing the future estimated costs.”

Davis LJ disagreed and found that:

With respect, this will not do.  Either incurred costs are within the ambit of CPR 3.18 (b) or they are not.  Since they are not approved budgeted costs, by the terms of paragraph 7.4 of PD 3E and of the Rules, they are not within that sub-rule.”

Davis LJ recognised that practical problems remained surrounding incurred costs and advised that the CPR committee’s intention was to amend the rules to decouple incurred costs from budgeted costs.

In summary, a good reason is required to depart from the budget, the proportionality test can be applied to budgeted costs, thus a reason to escape the restrictions of the budget; incurred costs should be considered in isolation to the budgeted costs and the rules still require amendments regarding incurred costs to ensure that costs management works.

It is therefore essential that an accurate budget is presented to the court, this Court of Appeal decision has ruled that a budget cannot be departed from unless there is a good reason to do so, this is a difficult test to overcome. There is no second bite of the cherry.

Sue Fox is a Senior Associate and the Head of Costs Budgeting in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.