Author: angelanako

Costs Consequences of the Claimant’s Late Acceptance of the Defendant’s Part 36 offer

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A recent Court of Appeal decision provided important clarification on how legal costs were calculated when a Part 36 settlement offer was accepted late.

Background

The Claimant in Attersley v UK Insurance Ltd [2026] EWCA Civ 217 was injured in a road traffic accident in March 2018. Whilst the claim began under the Road Traffic Accident (RTA) Protocol, it exited the protocol and in February 2021, the Claimant issued Part 7 proceedings, valuing the claim up to £150,000 supported by several expert reports.

The Defendant admitted liability in March 2021 and made a Part 36 offer in the sum of £45,000. The Claimant did not accept this offer within the 21-day relevant period set by the rules. Consequently, the claim was allocated to the multi-track in January 2022, which typically allows lawyers to recover their costs based on what is considered reasonable rather than fixed amounts. The Part 36 offer was accepted in July 2022.

As the Claimant accepted the Part 36 offer outside the 21-day relevant period, and once the claim had been assigned to the multi-track, there was a dispute as to whether the costs could be recovered on a standard basis or were limited to fixed recoverable costs.

Outcome

The Court of Appeal considered the version of the civil procedure rules which applied at the time and held that the key date is when the 21-day period for accepting the Part 36 offer expires, rather than when the offer is eventually accepted, meaning that Claimants who accept an offer after the relevant period will generally be entitled to the amount of costs they would have received had they accepted the offer on the last day of the relevant period. As during that 21-day period the claim remained within the fixed costs regime, the Claimant was entitled to fixed costs which applied at that stage of the proceedings.

The court highlighted that the rules governing settlement offers are designed to encourage early settlement and clarity surrounding financial risk, therefore Defendants should be able to rely on the costs environment that existed when the offer’s relevant period expired. Allowing later events, such as the case being allocated to the multi-track, to change the cost consequences would create unnecessary uncertainty. The court outlined that:

“it is hard to see why a Claimant who [accepted the offer outside the relevant period]…should be in a better position than one who accepts the offer within time.”

Conclusion

The key point of this judgment is that if an offer is made and expires while the case is still within the fixed‑costs regime, the fixed‑costs rules apply to the consequences of accepting that offer, even if the case later evolves or moves outside the fixed‑costs regime.

Although this decision was made in the context of the pre-October 2023 fixed costs rules, it is expected that this is the same approach the Courts will apply under the new fixed‑costs rules introduced in October 2023. That is because those rules are also built around clear stages and predictable cost consequences.

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

The Government’s measures to clarify the uncertainties surrounding LFAs following the 2023 PACCAR ruling

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The Minister of State for Justice, Sarah Sackman KC MP, announced that the government will take action to limit uncertainties surrounding third-party litigation funding agreements (LFAs) following the 2023 Supreme Court ruling in PACCAR. The government will also implement proportionate regulation of LFAs, in line with the Civil Justice Council’s (CJC) recommendations.

Further background information regarding the ruling in PACCAR can be found in Anna Lockyer’s blog post here.

The Government’s next steps

The Supreme Court Judgment in PACCAR created uncertainty around the validity and enforceability of LFAs. The government has now announced that legislation will be introduced to clarify that LFAs are not damages based agreements. They have said this will be implemented with “prospective effect” (the CJC recommendation was for prospective and retrospective effect). In doing so the government hopes this will reassure funders that LFAs can continue to be used to fund cases, the government recognising that LFAs can enable individuals to bring complex claims against better-resourced organisations and that the uncertainty post-PACCAR might be preventing claimants from pursuing claims.

In addition, proportionate regulation of LFAs will be introduced, to improve transparency and fairness for claimants. Legislation will be introduced when “parliamentary time allows”. Once these two changes have been implemented, the Civil Justice Council’s wider litigation funding recommendations will be considered, and further changes will be announced.

Conclusion

When it came into office the new government made clear it would wait for the CJC report before taking decisions on any legislation concerning litigation funding. While we must still wait to see the government’s proposed timetable and the text of draft legislation, the government has said its priority is to remove the uncertainty introduced by PACCAR and ensure the litigation funding sector works fairly and efficiently for all.

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Actor ordered to pay Guardian News indemnity costs and a £3 million payment on account of costs

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Mrs Justice Steyn in Clarke v Guardian News & Media Ltd [2025] EWHC 2575 (KB) examined the issue of costs following the dismissal of actor, Noel Clarke’s, defamation and data protection claims against the Defendant newspaper. To determine the appropriate costs, the judgment addressed the Claimant’s conduct, the costs approved in the costs budget and the various “costs reserved” orders made during the proceedings. Whether the Claimant should make a payment on account of the costs pending detailed assessment and the amount of the payment is also considered in detail.

Background

The Defendant in this case had succeeded on the defences to defamation and the issue of serious harm in respect of 8 articles published about the Claimant actor. The Court determined that the Defendant had been wholly successful and therefore entitled to an order that the Claimant pays costs subject to detailed assessment.

Indemnity Basis Costs

With regards to the basis of assessment, the Judge referred to the legal principles in relation to exercising the court’s discretion to award costs on the indemnity basis summarised within the White Book at 44.3.8 to 44.3.10. The Judge cited the importance of the Court having regard to all the circumstances of the case and the conduct of the Claimant being a key element of this.

The Judge found that the Claimant’s pleaded case and the evidence at trial contained many statements that the Judge found to be untrue and dishonest. Mrs Justice Steyn referred to Esure Services Limited v Quarcoo [2009] EWCA Civ 595, which concluded that if a court finds a claim to have been brought or maintained dishonestly then “it will be normal for a court to seek to mark its disapproval” by making an order for indemnity costs.

Further, the Judge made reference to the Claimant making “wholly unfounded allegations of dishonesty against three professional journalists” and aired those publicly.

It was also highlighted that an order for indemnity costs does not require the Defendant to show that the Claimant’s unreasonable conduct increased its costs. Consequently, the Judge ordered the Claimant to pay the Defendant’s costs of the claim to be subject to detailed assessment on the indemnity basis, if not agreed.

Payment on Account of Costs

When addressing the issue regarding a payment on account of costs, the Judge referred to CPR 44.2(8) which states: “Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs unless there is good reason not to do so.”

The Judge had regard for the way the claim had been pursued by the Claimant and the fact that costs would be assessed on an indemnity basis. The Judge also took into account the Defendant’s Precedent H of July 2024 where the total of the Defendant’s budgeted costs and incurred costs were £3,184,519.98, not including the estimated costs of disclosure, which were left to be agreed or subject to detailed assessment. This figure also did not include costs in respect of the Trial Preparation and Trial phases.

The Judge concluded that it was reasonable for a payment in the sum of £3 million to be sought by the Defendant.

Additional Costs Points

“Costs reserved” orders were made during the proceedings, regarding the Defendant’s application for an interim non-disclosure order and an Amendment and Joinder Application. The Judge concluded that the Defendant was entitled to these costs.

The Claimant asked the Judge to stay the costs order pending a potential application for permission to appeal. This was rejected as the Claimant already had more than the usual time to consider any grounds to seek leave to appeal and the Judge was not prepared to provide an extension of time to seek permission to appeal.

Conclusion

At paragraph 39 of the judgment, Mrs Justice Steyn articulates the reasoning behind her decision as she states: “Bearing in mind that the sum claimed by the Defendant on detailed assessment will be in excess of £6 million and having regard to the nature of the claim and the way in which it has been pursued by the Claimant and his lawyers; bearing in mind also the Defendant’s rates as they appear on the Precedent H forms and what appears, on the face of it at least, to be a reasonable use of more junior solicitors where appropriate; and also bearing in mind that I have ordered that costs will be assessed on an indemnity basis; it seems to me that the sum of £3 million sought by the Defendant is appropriate and no more than ought reasonably to be ordered in this case. It is a “reasonable sum” to require the Claimant to pay on account. It is substantially lower than the Defendant’s likely level of recovery on detailed assessment and so, in my judgment, it does allow for a suitably wide margin of error. Accordingly, I shall order the Claimant to make a payment on account in the sum of £3 million within 28 days.”

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

An Insight into the Court’s Approach to Disproportionate Costs following a line-by-line assessment

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Introduction

The judgment of Costs Judge Nagalingam in XX & Anor v Young & Anor [2025] EWHC 2073 (SCCO), provides a useful breakdown on how a bill might be reduced after a line-by-line assessment to yield a proportionate figure by taking into account the factors in CPR 44.3(5) and the Court of Appeal’s approach in West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220.

Background

Costs Judge Nagalingam, undertook a three-day line-by-line assessment of the costs in XX v Young as the Defendant had raised the issue of proportionality. He held that the costs were disproportionate and therefore the bill of costs total was reduced from £517,985.00 to £339,565.16, a reduction of almost 35%. Despite this reduction, the Judge held that the total sum remained disproportionate and subsequently further reduced the bill following the line-by-line assessment.

The Judgment

CPR 44.3(5)

In order to assess proportionality, the Judge relied on several factors outlined in CPR 44.3(5) which states that “Costs incurred are proportionate if they bear a reasonable relationship to:

  • the sums in issue in the proceedings;

In this case the Judge considered the realistic range of possible outcomes in the case to be £149,000 (the settlement sum) to £2.5million (the pleaded sum). The likely value of the claim was determined by considering the accident circumstances, the factor of contributory negligence and the complexity of the case. The Judge concluded that the sums in issue would realistically have been closer to £149,000 than the £2.5million fully pleaded claim.

(c) the complexity of the litigation;

The Judge made clear that whilst the litigation was not complex it was also not straightforward. Liability was in dispute, significant injuries were sustained and the medical complexity created legal complexity in quantifying the general damages and past and future losses. Liability also remained a factor under consideration.

(d) any additional work generated by the conduct of the paying party; and

In this case, the Defendant disputed liability until the joint settlement meeting and did not make a good and early Part 36 offer or protective settlement proposals prior to the joint settlement meeting. Therefore, it was determined that the Claimant could not be criticised for continuing with the litigation.

(f) any additional work undertaken or expense incurred due to the vulnerability of a party or any witness.

The Judge concluded that the receiving party’s solicitors were at times dealing with a vulnerable client due to factors such as injury recovery, isolation, the Claimant’s age and language barriers.

Surveillance / Exaggeration

In West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 (17 July 2019) it was outlined that the factors in CPR 44.3(5) are not an exhaustive list. Surveillance evidence and the Defendant’s attempts to seek findings of misconduct and exaggeration were also considered.

The allegation based on surveillance evidence was that that the Claimant had recovered more than reported to the experts and consequently the claim settled at a sum far less than pleaded. However, the Judge declined to engage in a de facto retroactive trial of exaggeration as an issue and noted that if the Defendant had wished to pursue this factor of exaggeration, then they should not have settled or should have negotiated settlement terms which included a percentage based costs order.

Internal Communications

The Judge referred to West in XX v Young, opining that a line-by-line assessment must be completed first and that “one must be careful not to facilitate a result which would amount to double-counting of deductions”. Therefore, reductions were only applied where it was considered that costs were unreasonably incurred or unreasonable in amount. Although concerns were raised regarding the internal time claimed, this did not mean that internal communications were to be reduced irrespective of the circumstances.

Whilst the costs of internal communications had already been reduced from £27,724.50 plus VAT to £22,946.15 plus VAT following a line-by-line assessment, it was later concluded that the costs for internal communications were to be further reduced to £10,000 plus VAT using a broad-brush approach based on the facts and circumstances in the case. The bill total was therefore reduced to £324,029.77.

Conclusion

Overall, the Judge concluded that the assessed sum was “disproportionate in all the circumstances” through considering the factors within CPR 44.3(5) as well as the points of dispute, replies, skeleton arguments and submissions.

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors.
You can contact the team at civilandcommercialcosts@clarionsolicitors.com

An Insight into the General Principles and Rationale of the Costs Budgeting Process

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Introduction

The judgement of Master Brightwell in Atlantic Ways Holding SA v Freetown Terminal Holding Ltd [2025] EWHC 674 (Ch), provides an insight into the costs budgeting process and emphasises the importance of proportionality in the costs management process, regardless of whether costs in the first instance were reasonable in nature.

Background of the case

A cost management hearing took place on 25 February 2025, where there was a disparity between the budgets of the Claimant and the Defendant. The Claimant’s budget had been agreed at £449,000 and the Defendant’s budget was drawn at £808,000 and was disputed. Due to this disparity, Master Brightwell set out the general principles of each parties’ proposals, in comparison to the principles of costs management.

The Judgement

Master Brightwell made clear that a budget is set by the Court without undertaking a detailed assessment in advance. However once set, the Court would not depart from this without adequate reason, and it is the role of the Court to set the budget “with an eye to what would be permitted on a detailed assessment on the standard basis” meaning any doubt will be resolved in favour of the paying party. It was also highlighted that the Court is to avoid comparing parties’ budgets, whilst acknowledging that it remains impossible to fix one budget and ignore the other. The Master went on to confirm that the budgeted costs are still considered reasonable and proportionate if they fall at the outer end of the range.

In respect of hourly rates, Master Brightwell emphasised that it is not for the Court to set or approve the charging rates or the time spent by each level of fee-earner and Counsel. However, if the charging rates are not within a reasonable range, then this would affect the reasonableness and proportionality of the budget. The rates used in the Defendant’s costs budget significantly exceeded even the London 1 rates which are for “the heaviest corporate and commercial work,” and whilst the claim was not insignificant, it still was not the most substantial case type dealt with by the Court. Therefore, the London 1 guideline rates would be the maximum permitted.

Master Brightwell then explained his rationale for the budget set for the Defendant by applying the principles of reasonableness and proportionality to each phase.

Each phase of the budget was reduced. However, whilst the amount sought by the Defendant for the expert reports is unclear, the Master granted the Defendant’s budget for this phase at £55,000 in comparison to the Claimant’s budget at £40,000 to allow margin for error. This itself is another useful insight into the budgeting process and acknowledges that the Courts are willing on occasion, to allow variations during a hearing where developments justify it.

Duplication and involvement of multiple fee-earners was addressed by the Court, with reductions made due to fears regarding duplication. The Master noted Practice Direction 57AC, highlighting that witness detailed investigations of documents were not to be conducted and what was said in documents was not to be recited, rather the idea of the witness statement phase is to take the witness’ own evidence. Attendance at trial by multiple fee earners was also reduced by the Court, with attendance by two fee-earners and another present for assistance being provisioned, as opposed to four fee earners that were sought.

Despite DKH Retail Ltd and others v City Football Group Ltd [2024] EWHC 3231 (Ch) where the court ordered for mediation to occur before trial, Master Brightwell in this case reduced the budget for ADR to exclude the assumption of mediation. Master Brightwell explained that if mediation was to occur, then the budget could be revised on the basis of a substantial development.

Conclusion

Overall, the case provides a useful step by step approach to each phase of a costs budget during the cost management process and emphasises the application of the principle that proportionality trumps reasonableness, even at the cost budgeting stage.

 

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors.  You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Complexity pays – securing hourly rates in excess of guideline rates

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Introduction

The case of Micula & Ors v Romania [2024] EWHC 3566 (SCCO) involved the enforcement of an arbitral award issued by the International Centre for Settlement of Investment Disputes (ICSID). The issue of hourly rates charged by legal professionals was a central point of discussion in the judgment, focusing on the importance of the complexity of the matter in determining the appropriate hourly rate to award.

Background of the case

Micula & Ors v Romania involved the enforcement of an arbitral award issued by the ICSID. The Claimants were investors who were eligible for a tax incentives scheme, and the Defendant, Romania, had repealed the scheme. To compensate for the damage sustained from the repeal of the scheme, the Micula brothers requested the establishment of an arbitral tribunal under the ICSID convention and, in 2013, an arbitral award of EUR 178 million was awarded to the Claimants in compensation for the repeal. The Claimants subsequently took steps to enforce the arbitral award.

The decision regarding the hourly rates and legal costs

The issue of costs recovery in respect of the enforcement proceedings was heard before Costs Judge Leonard in the Senior Courts Costs Office (SCCO). The hourly rates charged by the Claimant’s legal team were considered and discussed in relation to the complexity of the case and the expertise required.

The Costs Judge considered CPR 44.4 (3) to highlight the ‘factors to be taken into account in deciding the amount of costs’, and he suggested that the application of hourly rates should be grounded on the circumstances of the claim. He noted that the work was undertaken between 2014 and 2017 when guideline rates had not increased since 2010, claiming that during this time they were of less value as a starting point in any context, much less a detailed assessment, indicating that the hourly rates claimed were to be analysed based on other factors alongside the guideline rates.

Moreover, Costs Judge Leonard then referred to Choudhury J in Powerrapid and emphasised that the Master of the Rolls had made clear that guideline rates were no more than a guidance and a starting point for judges undertaking summary assessment, and a possible helpful starting point on detailed assessment.

It was made clear by the Judge that facts such as international elements, value, and importance may justify significantly higher rates. The Costs Judge also explained that Choudhury J himself accepted that whether guideline hourly rates were helpful as a starting point was a matter for the Costs Judge, having regard to the relevant circumstances. However, it was also mentioned that increased hourly rates claimed later in the bill were excessive beyond what could be awarded, making clear that the rates must remain reasonable and proportionate.

Ultimately, the Costs Judge allowed an hourly rate at a maximum of £700 per hour for Grade A, £500 per hour for Grade B, £380 per hour for Grade C and £200 per hour for Grade D. In reaching this decision, the Costs Judge concluded that it was a “complex case with substantial international elements” meaning that the case was “top end” for commercial litigation and required the skill, effort and responsibility undertaken by the receiving party’s solicitors to also be top end of the scale.

Conclusion

The Micula & Ors v Romania case underlines the significance of considering the circumstances of a case when determining the appropriate hourly rates. It provides insight into the approach adopted when assessing hourly rates and it sets out the key components that are taken into account by the Costs Judge at detailed assessment.

 

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors.  You can contact the team at civilandcommercialcosts@clarionsolicitors.com

The Precedent U Document: A Practical Guide

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The Fixed Costs Determination process (FCD) was implemented on 1 October 2024 and with this new procedure the Precedent U was also introduced. The Precedent U is the first formal document, implemented for use specifically in the fixed costs regime.

For an overview of the FCD procedure, please see our comprehensive overview of the same. Below is a guide on how the form looks and what information is required to complete it.

Section A

This first section outlines the case details and the receiving party is also required to set out the track, band and value of the claim. The receiving party is also required to complete the relevant fixed costs calculations, and outline disbursements and court fees that they are seeking to recover.

It is at this stage that the receiving party should also indicate whether they are seeking costs pursuant to CPR 45.9, CPR 45.10, or CPR 45.50 (3) and / or CPR 45.13. The provisions deal with increased costs based on exceptional circumstances, vulnerability, and unreasonable conduct as well as assessment of fees on non-issued personal injury cases.

For the information provided within Section A to be valid, a statement of truth must also be signed by the receiving party to verify the costs which are being sought.

Section B

This section has three columns.

The first column is completed by the receiving party and outlines the sum of the fixed costs claimed, disbursements and court fees claimed and an explanation in support of those fees.

The second column provides the paying party the opportunity to respond to the receiving party’s claim, with the chance to make an offer for each item and outline an explanation as to why the original sums are not agreed.

The third column is completed by the Court if the parties are unable to reach agreement and the matter is determined by them.

Section B also requires a signature by the paying party.

Section C

Section C requires the receiving party to outline the basis of their claim for additional sums and provides the receiving party the opportunity to respond.

As touched on above, this section only requires completion when costs are sought pursuant to CPR 45.9, 45.10, 45.50(3) and/or 45.13. Therefore, Section C will only be used when claims are made for costs exceeding fixed recoverable costs where there are exceptional circumstances, unreasonable conduct and/or there is a vulnerable party or witness. It will also be used in the context of stage S1 costs, in non-personal injury claims where the costs are subject to a cap as opposed to being fixed.

When claiming costs under any of the conditions exhibited above, a separate N260 must be completed and submitted.

The form is limited in size and it may also be the case that a witness statement and supporting evidence is prepared and advanced when this section is completed.

 

Angela is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com