Following the introduction of court fees charged as a percentage of the value of the claim[i], paying parties regularly challenge the issue fee on assessment. This can have a huge effect on the amount recovered and even lead to claims of professional negligence by the solicitor.
The paying party’s argument will ordinarily be that, as the claim settled for less than the value stated on the claim form, it should be liable only for the issue fee which would have been applicable if the amount stated on the claim form had been the amount for which the claim settled.
In the case of Drew -v- Whitbread[ii] it was held that the court may take an exaggeration of the value of the claim into account when considering the appropriate costs order to make. There is therefore some superficial attraction to the argument, however the very judgment which would appear to support the position that the court should interfere is the key to why this is not the case.
Pursuant to CPR 16.3(2) ‘the claimant must, in the claim form, state (a) the amount of money claimed…’ It is this amount upon which the issue fee is calculated. Any subsequent settlement of the claim is a compromise agreement and is entirely separate and distinct from the ‘value’ of the claim.
It should also be noted that, were the court to adopt the approach that the true value of the claim was the amount for which the claim settles, it would clearly be an application of hindsight contrary to the principles established in Francis v Francis and Dickerson[iii] and which was revisited in Argyll (Duchess) –v- Beuselink[iv] and affirmed in KU -v- Liverpool City Council[v]. It is therefore clear that the correct test for the court to apply is whether the value stated on the claim form was correct, taking into account the circumstances as they appeared to the claimant at the time.
If the amount claimed on the claim form satisfies this test, then it must follow that it was both reasonable and proportionate for the claimant to pay the attendant issue fee. It should be noted that the only test which the court will apply is that of reasonableness and proportionality; the issue fee must inherently satisfy both of these criteria because:-
- Without paying it the claimant cannot bring their claim; and
- The issue fee is set by the court, and must therefore be inherently proportionate to the value of the claim as, were this not so, it would be tantamount to a finding that the court itself was acting contrary to the Overriding Objective by setting fees at a disproportionate level (which is a topic for another day).
Once this test is satisfied the claimant is free to settle the proceedings for any sum which it wishes. Indeed there is a clear public policy argument that it is not in the interest of the parties or the courts to discourage settlement by refusing to allow part of the court fee in any case which settles for an amount less than the full value of the claim.
There is an exception to this general position, which is where a claimant has failed to state the true value of the claim on the claim form.
The case of Lewis and Others v Ward Hadaway[vi] concerned claims brought by a number of former clients of the Defendant for professional negligence. In brief, the Claimants’ original claims had been issued (but not served) just prior to limitation expiring, and contained statements of value which were much lower than the true value of the claim. Kerry Underwood looks at this judgment in detail in is article Fees and Fee Remissions.
Which brings us back to the position in Drew -v- Whitbread, which is that the court can only interfere in circumstances where there has been an exaggeration of the value, and that whether there has been an exaggeration will be determined with reference to the circumstances as they appeared to the claimant at the time.
Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com
[ii] [2010] EWCA Civ 53
[iii] [1956] P 87 at 91
[iv] [1972] 2 Lloyds Rep 172
[v] [2005] EWCA Civ 475
[vi] [2015] EWHC 3530 (Ch)
Some great points, I particularly like point 2. Furthermore, parties should raise issues regarding exaggeration at the trial and secure the appropriate court order. If no such cost order is made, then this should not be revisited during the detailed assessment procedure.
I agree that the issue of exaggeration should be raised before the trial judge as it is not the purpose of the court on assessment to make findings of fact but simply to assess whether the costs incurred were reasonable and proportionate. Thus it must be that a court fee is always reasonably and proportionately incurred unless there is a finding of fact in relation to a procedural aspect (such as premature issue or exaggeration).