Can an arbitrator make a costs award when they have determined they lack jurisdiction to deal with an arbitration?

October 24, 2025 Joanne ChaseLeave a comment

The recent decision of Ravfox Ltd v Bexmoor Ltd [2025] EWHC 1313 (Ch) explored whether an arbitrator had jurisdiction to make a costs award when it had been found that they lacked jurisdiction to deal with the matter.

Background

By way of background, the parties were in dispute as to the amount of service charge the defendant (Bexmoor Ltd) was required to pay the claimant (Ravfox Ltd) in respect of individual units which the defendant sublet from the claimant on an industrial estate. The defendant referred the matter to arbitration and alleged that the claimant (the respondent in the arbitration) failed to comply with its obligations under the sublease.

Within the arbitration, the respondent, Ravfox Ltd, filed a statement in reply to Bexmoor Ltd’s statement of claim, challenging the arbitrator’s jurisdiction on the basis there was no binding sublease between the parties. Ravfox Ltd sought their full costs and expenses of the arbitration from the applicant.

Arbitral Decision

The arbitrator found that there was no binding contract containing an arbitration clause and that he did not, therefore, have jurisdiction to hear the dispute. Further, he found that, in light of his lack of jurisdiction in the dispute, he lacked jurisdiction to make any determination as to costs. He added, however, that having read the submissions filed by the parties, he would have found in favour of the claimant (Ravfox Ltd), and he would have ordered that no costs were payable. As a result of this finding, he recommended that the matter be put before the Court to determine the costs of the jurisdictional challenge.

Court Decision

His Honour Judge Keyser KC reviewed the relevant provisions of the Arbitration Act 1996 and determined that the arbitrator was wrong to determine he had no jurisdiction to deal with costs. He went on to explain that:

“It would mean that a respondent making a jurisdictional challenge would be at risk of an adverse costs order if the jurisdictional challenge failed and would necessarily bear its own costs if the jurisdictional challenge succeeded, whereas the referring party would be able to recover the costs of successfully defending a jurisdictional challenge but would be at no risk of an adverse costs order if the jurisdictional challenge succeeded.”

Clarification to section 61 of the Arbitration Act 1996

The Law Commission’s Consultation Paper 257, Review of the Arbitration Act 1996, considered this point further and recommendations were made to insert a new subsection (1A) to section 61 of the 1996 Act. Effective from 1 August 2025, section 61 of the Arbitration Act 1996 now reads:

“61. Award of costs

(1) the tribunal may make an award allocating the costs of the arbitration as between the parties, subject to any agreement of the parties.

(1A) it is irrelevant for the purposes of subsection (1) whether the tribunal has ruled, or a court has held, that the tribunal has no substantive jurisdiction or has exceeded its substantive jurisdiction.”

The Law Commission considered that the inclusion of this new subsection simply “put the matter beyond doubt” rather than changing the law, to which HHJ Keyser KC agreed.

This decision makes the position clear; that where an arbitrator accepts a challenge that they do not have jurisdiction to hear a dispute, they are still able to deal with the costs arising out of such a challenge.

Joanne Chase is a Legal Director in Clarion’s Costs and Litigation Funding Team and can be contacted on 07826 166300 or Joanne.Chase@clarionsolicitors.com

Getting it Right – CPR 2.8 and calculating dates for service

November 8, 2024November 8, 2024 Joanne ChaseLeave a comment

Calculation of Time

The recent case of Corfield v Howard [2024] EWHC 2727 (Comm) is a reminder of the importance of calculating time for service and filing of Court documents.

In the above matter, the Defendant applied for declaratory relief as to the meaning of enforcement of a settlement agreement scheduled to a Tomlin order. In accordance with a consent order, skeleton arguments were due to be served and filed one clear day before the hearing. The Court staff noted that no skeleton arguments had been filed and served by the due date. Their time was therefore taken up identifying the breach and writing chasing letters to the parties’ representatives. Both parties subsequently filed their skeleton arguments. HHJ Judge Davis-White KC sated that he did not need to enquire further as to where the fault lay, however, he said that Counsel and instructing solicitors should liaise in good time to ensure that the required skeleton argument can be prepared by Counsel by the required time.

The Judge went on further to state that:

“the delivery of skeleton arguments in accordance with guidance of court order is essential for the efficient running of the courts”. Although the Judge was able to proceed with the hearing on this occasion, the Judge did warn that “the court is likely to impose sanctions in cases as egregious as these”.

Although there were no sanctions in this case, it serves as a timely reminder that compliance with court imposed deadlines is mandatory and, in an appropriate case, the Court may impose sanctions for a failure to comply. Getting it wrong can be costly, and, in the extreme, fatal to the case.

The Rules

CPR Part 6 is at the heart of the rules relating to service of documents, and Practice Direction 6A relates to service within the United Kingdom.

CPR 2.8 sets out how we go about calculating time, and parts 2.8 (2) and (3) specifically explains the clear day rule which often catches practitioners out:

“(2) A period of time expressed as a number of days shall be computed as clear days.

(3) In this rule ‘clear days’ means that in computing the number of days –

(a) the day on which the period begins; and

(b) if the end of the period is defined by reference to an event, the day on which that event occurs are not included.”

CPR 2.8 (4) continues to explain that:

“Where the specified period –

(a) is 5 days or less; and

(b) includes –

(i) a Saturday or Sunday; or

(ii) a Bank Holiday, Christmas Day or Good Friday,

that day does not count”

Examples

Where a CMC is listed for 28 March and the Court orders bundles to be filed no later than 7 days before the CMC, the last date for filing is 20 March.

Alternatively, where a witness statement must be served 5 days before a hearing listed on Tuesday 18 March, the deadline for service is Monday 10 March.

Interestingly, CPR 44 practice direction 9.5 (4) provides different rules for the filing and service of a statement of costs before a fast-track trial and other hearings;

“The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought as soon as possible and in any event –

(a) for a fast track trial, not less than 2 days before the trial; and

(b) for all other hearings, not less than 24 hours before the time fixed for the hearing.

Where a fast track trial is listed for 1.30pm on the first Tuesday after Easter, taking into account the clear day rule and CPR 2.8 (4), the statement of costs must be filed and served no later than the Tuesday before. Wednesday and Thursday provide the 2 clear days, with Good Friday, Easter Saturday, Sunday and Monday not counting. Therefore, in this instance, 7 days before the hearing – suddenly the 2 days turn into 7 days.

However, if it were an interim application hearing listed for 1.30pm on the first Tuesday after Easter, the statement of costs must be filed and served no later than 1.30pm on Maundy Thursday. What is crucial here is that this rule provides for hours and not clear days. Therefore, filing and serving at 1pm on Maundy Thursday would be perfectly acceptable despite it being within no clear days of the hearing. The clear day rule does not apply when the rules specify the deadline as a number of hours rather than a number of days.

Conclusion

Being aware of this subtle difference could prove to be a very useful tool for any practitioners who are under time constraints for the filing and service of Court documents. A note of advice – if in doubt then check the rules. The rules regarding filing and service can easily catch you out, particularly bearing in mind that there are also rules surrounding the method of filing and service, i.e. service by email, fax etc., in addition to those relating to timing.

Joanne Chase is a Legal Director in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Important Considerations Regarding the Termination of a CFA by a Client

February 5, 2024February 6, 2024 Joanne ChaseLeave a comment

The case of Sellers v Simpkins [2023] EWHC 3296 (SCCO) has brought to light important considerations regarding the termination of a Conditional Fee Agreement (CFA) by a client. The judgment, delivered by Senior Costs Judge (SCJ) Gordon-Saker, provides valuable lessons for clients and lawyers alike.

The Case

In this case, Steven Simpkins, formerly practicing as Simpkins & Co in Hampshire, acted for the claimant after she was seriously injured in a road accident. The CFA was signed in May 2015, and no success fee was payable under the agreement, which was a CFA Lite. In March 2021, the claimant terminated the retainer and instructed another firm. The claim was settled in August 2021.

The Judgment

The SCJ ruled that a solicitor whose CFA was terminated by the client can charge costs in excess of the amount recovered from the defendant in the underlying proceedings. The SCJ held that “the overall cap does not apply where the solicitor elects to claim their charges before the conclusion of the claim.”

Summary

For Clients Terminating a CFA

Clients should be aware that if they terminate a CFA, they may be required to pay the previous solicitor’s costs under the CFA. This could potentially be in excess of the amount recovered from the defendant in the underlying proceedings.

For Lawyers Whose Clients Have Terminated a CFA

Lawyers whose clients have terminated a CFA should be aware that they can elect to claim their charges before the conclusion of the claim. This could potentially allow them to recover costs in excess of the amount recovered from the defendant in the underlying proceedings.

For Lawyers Advising a Client Who Has Terminated a CFA

Lawyers advising a client who has terminated a CFA should be aware of the potential for their client to be liable for costs in excess of the amount recovered from the defendant. They should ensure that their client is fully informed of this potential liability before proceeding.

Conclusion

The judgment in Sellers v Simpkins [2023] EWHC 3296 (SCCO) provides important guidance for clients and lawyers regarding the termination of a CFA. It highlights the potential for significant costs liabilities and underscores the importance of clear communication and understanding between clients and their lawyers.

The Bar Council’s Guidance on the use of Generative AI

February 1, 2024February 1, 2024 Joanne ChaseLeave a comment

The Bar Council has recently issued guidance for barristers on the use of generative Artificial Intelligence (AI), including ChatGPT and other large language model systems (LLMs). The guidance concludes that there is nothing inherently improper about using reliable AI tools to augment legal services, but they must be properly understood by the individual practitioner and used responsibly.

The guidance is not legal advice and is not ‘guidance’ for the purposes of the BSB Handbook I6.4. However, it highlights the key risks with LLMs and explores the considerations for barristers, and by extension all lawyers, when using generative AI:

Due to possible hallucinations and biases, it is important for lawyers to verify the output of LLM software and maintain proper procedures for checking generative outputs.

LLMs should not be a substitute for the exercise of professional judgment, quality legal analysis and the expertise that clients, courts and society expect from their legal representatives.

Lawyers should not to share with an LLM system any legally privileged or confidential information.

Lawyers should critically assess whether content generated by LLMs might violate intellectual property rights or breach trademarks.

It is important to keep abreast of relevant Civil Procedure Rules, which in the future may implement rules/practice directions on the use of LLMs, for example, requiring parties to disclose when they have used generative AI in the preparation of materials, as has been adopted by the Court of the King’s Bench in Manitoba.

This Bar Council guidance will be kept under review and updated periodically, however practitioners will need to be vigilant and adapt as the legal and regulatory landscape changes.

Discounted CFAs: unenforceable provisions cannot be severed and there is no quantum meruit basis of entitlement

October 26, 2023April 3, 2024 Joanne ChaseLeave a comment

The Court of Appeal’s judgment in Diag Human SE v Volterra Fietta [2023] EWCA Civ 1107, upheld the Senior Courts Costs Office and High Court rulings that solicitors who had entered into an unenforceable discounted CFA could not obtain any payment under the CFA. The unenforceable provisions could not be severed from the CFA, there was no quantum meruit basis on which the solicitors were entitled to be paid for their services, and sums paid to the solicitors on account had to be returned.

Background

From 2017-2019, Volterra Fietta (“Volterra”) represented Diag Human SE (“Diag”), a Liechtenstein based company, in a London-seated arbitration against the Czech Republic.

Diag instructed Volterra and entered into a standard retainer with hourly rates. After some months, the retainer was changed by a “side letter” to a discounted CFA (also entered into with Diag’s controlling mind, Dr Josef Šťáva). The terms of the discounted CFA provided for Volterra’s fees to be subject to an initial discount of 30%. In the event of success, various additional sums were payable to Volterra, the effect of which could have been to amount to a success fee of over 100%.

Diag fell out with Volterra and terminated the retainer. Volterra was subsequently replaced by Mishcon de Reya in the underlying arbitration. In May 2022, the arbitral tribunal issued its award, finding against the Czech Republic and ordering compensation in the sum of US $650m.

Following the falling out, Diag argued that the CFA was unenforceable because it did not comply with the Courts and Legal Services Act 1990 s.58 and s.58A. Volterra put in a bill seeking only the discounted fees (70% of the normal fees) and the clients commenced detailed assessment under s. 70 Solicitors Act 1974.

The Volterra CFA entered into by Diag and Dr Šťáva was deemed by the Court to be unenforceable by the SCCO. A ruling by Mrs Justice Foster DBE in in the High Court upheld the decision, confirming that Diag had no liability for costs under the unenforceable retainer. The ruling found that Volterra were not therefore entitled to any payment under its CFA and the US $1.6m they had already paid was to be refunded.

In this appeal it was accepted by Volterra that the CFA was unenforceable, but they argued that all of the parts of the side letter other than the 30% discount could be severed, alternatively that they were entitled to a quantum meruit in the amount of the discounted fees. They also argued that they were in any event entitled to retain the sums paid on account, which the clients sought the return of.

Result

All of Volterra’s arguments were rejected. The main judgment was given by Stuart-Smith LJ, with a short concurring judgment from Andrews LJ. Newey LJ agreed with both judgments.

The Court took as its starting point that the CFA as a whole was rendered unenforceable and reiterated Dyson LJ’s dicta from Garrett v Halton BC [2006] EWCA Civ 1017 to the effect that the CFA legislative regime is deliberately draconian.

Severance: to implement the severance proposed would fundamentally change the nature of the contract so that it would cease to be the sort of contract that the parties had originally entered into. Andrews LJ rejected Volterra’s submission that the discounted fees would always be payable. She noted that, if that was right:

“there would be little incentive to solicitors to adhere to the straightforward requirements of the regulations laid down for the protection of their clients, if the worst that could happen if they failed to do so would be that they would be paid the amount that the client had agreed to pay for their services win or lose.”

Quantum Meruit: Having dismissed the possibility of severance, quantum meruit was also dismissed:

“The clients cannot be said to have been ‘unjustly’ enriched by the receipt of services for which solicitors cannot claim to be paid under a contract which failed to comply with the specific requirements that would have made it a lawful and enforceable CFA. Equity will not step in to relieve the solicitors from the consequences of providing services pursuant to an unlawful agreement which they are precluded from enforcing”.

Repayment: The Court held that s. 70 Solicitors Act 1974 gave rise to a self-contained regime, under which repayment of sums paid on account of a bill being assessed would automatically be ordered if the bill was assessed at less than what had been paid.

Conclusion

The case highlights the importance of complying with all relevant CFA regulations. Law firms must ensure that their CFAs are clear and contain all the information that clients need to make an informed decision about whether to enter into the agreement. It is also a reminder to law firms that they must ensure that CFAs comply with all relevant rules. The case has once again emphasised the serious implications for solicitors.

The Supreme Court’s decision in R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28 (handed down between argument and judgment in Diag) gives the case significance for litigation funders.

The PACCAR judgment held that most litigation funding agreements were DBAs. The implication of that decision is that many (if not most) litigation funding agreements will not be enforceable as they were not drafted with the DBA regulations in mind. Since PACCAR it was thought that funders would be able to sever the offending clauses as a matter of principle or, at least they would be entitled to be paid on a quantum meruit basis. The decision in Diag does not determine either point but demonstrates the potential difficulties that lie ahead for funders in making either argument. Courts will have to consider whether the funder should face the full consequences of the unenforceability of their agreement or whether to allow those consequences to be ameliorated or avoided by permitting severance or the payment of a quantum meruit.

Who pays court costs in a probate dispute?

September 27, 2023September 27, 2023 Joanne ChaseLeave a comment

Legal costs are an essential tactical consideration for any case that goes to court. The general rule in civil litigation in the High Court or County Court is that the losing party is ordered to pay the winner’s costs. The outcome in probate disputes, which is to say court cases about the will of a person who has died, usually follows the ‘loser pays’ principle.

There are however some important exceptions. Two recent High Court cases showcase how these exceptions can be used. In this blog post we will look at them both from a contentious probate and a costs law perspective.

The exception for justifiable investigations

The Facts

The first exception is where the circumstances justify an investigation. This is illustrated in the February 2023 decision of Boult v Rees [2023] EWHC 972 (Ch).

The Boult case was a dispute over the Will of Tilly Clarke, who died in 2019. Tilly’s niece claimed that Tilly’s Will was invalid because she lacked testamentary capacity when she made it. The widow of Tilly’s nephew argued the Will was valid. The burden of proof was on the niece to prove a real doubt as to Tilly’s capacity. The case involved the medical evidence, including evidence from a doctor appointed as the ‘single joint expert’.

The court found that the Will was valid. Normally, this would mean that the losing party (i.e. the niece) would have to pay the costs of the winning party (i.e. the nephew’s widow). The niece tried to get out of paying by arguing it was reasonable for her to investigate Tilly’s capacity.

The Law

The court summarised the first exception as follows:

… the exception can apply where there are circumstances that justify an investigation into the capacity of the testator. In such circumstances the rule is not that the costs are payable out of the estate but that the unsuccessful party will not be “condemned in costs”, ie will not be liable to pay. An example of that exception being applied in modern times, is Perrins v Holland [2009] EWHC 1945 (Ch). […] Even where it applies, the exception is not an all-or-nothing principle. It may be that an investigation was justified at the outset but that as the case progressed the issues became clearer and, from some point later on, the normal rule that costs follow the event should apply.

In addition, the niece argued she shouldn’t have to pay costs because she made many offers of mediation which were rejected. This argument is explored in more detail in the second case discussed in this blog post, below.

Decision

The court found that it was justified to investigate Tilly’s capacity to make a Will given it was clear that she had lost capacity at some point in time, and that she was placed in a care home only a few months after making her Will. There was a lack of medical records, and the solicitor who made the Will did not do a good job of it.

However, the court also felt that investigations were no longer required from the time the single joint expert prepared a report downplaying the significance of a finding of ‘mild cognitive impairment’.

Regarding the argument about mediation, the court felt that on the facts it was reasonable for the nephew’s widow to refuse mediation. She had engaged in alternative dispute resolution (also called “ADR”) by making reasonable settlement offers.

On the grounds of the ‘reasonable investigations’ exception, the court made no order as to costs for the first part of the case. However, the usual ‘loser pays’ costs applied from the date the single joint expert produced their report.

The exception for failing to engage in mediation

The Facts

Another argument that can be used to vary the ‘loser pays’ principle is when the winning party unreasonably refuses to engage in mediation. This was argued in the recent case of Jones v Tracey [2023] EWHC 2256 (Ch).

The Jones case was a claim to have the last Will of David Charles Turner approved by the court, known as an application for a grant in solemn form. The deceased’s sister opposed the application, arguing that because the original will could not be found it should be presumed the deceased had intended to destroy it. The court considered witness evidence about the making of the will and the deceased’s relationship with his friends and sister. It concluded that the deceased had not intended to destroy his Will, and that a copy of the lost Will could be admitted for probate.

The defendant sister tried to get out of paying costs by arguing that the claimant had unreasonably refused mediation.

The Law

The court summarised the defendant sister’s costs argument as follows:

… It is said a failure to respond to an offer to mediate should be treated as a refusal to mediate. The third defendant cites a number of well-known authorities, including Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576 Dyson LJ at [16] and PGF II SA v OMFS Co 1 Limited [2013] EWCA Civ 1288 Briggs LJ at [30], [42] and [51]. As a consequence, it is said the claimant should be deprived of a proportion of his costs.

Decision

The court found it surprising that the claimant refused ADR without any explanation. However, this conduct was not so serious as to warrant changing the ‘loser pays’ rule. In reaching this conclusion, the court took into account the fact the claimant had a very strong case, the fact ADR had not been proposed until a very late stage, as well as the third defendant’s own poor behaviour throughout the case including filing papers late and failing to comply with proper procedure.

Commentary and analysis

CPR 44.2 (1) explains how the court has discretion to determine whether costs are payable by one party to another, the amount of those costs and when they are to be paid. That is the starting point.

Once the court proceeds to make an order about costs, CPR 44.2 (2) sets out the ‘loser pays’ general rule, but it is acknowledged that the court may make a different rule, as sought by the parties in the above two cases.

It is important to remember that the general rule does not apply for probate matters in the Court of Appeal in accordance with CPR 44.2(3).

Litigation is often heavily contested and the court, when making an order in respect of costs, will have regard to all the circumstances, including the conduct of all the parties, whether a party has succeeded on part of its case (but not necessarily all of its case), and any admissible non-Part 36 offer (CPR 44.2 (4)).

The refusal to engage in mediation is a point of conduct of the parties. The niece in the case of Boult argued that she had made many offers to mediate; however, the fact that the nephew’s widow had engaged in ADR through settlement offers was enough to satisfy the court that the lack of engagement with an offer to mediate did not warrant a costs sanction.

Further, in the case of Jones, whilst the court expressed its surprise at the Claimant’s refusal to mediate, it considered all of the circumstances and found that it was not serious enough to overturn the general rule of costs.

Therefore, a running theme through the two cases is that the court will consider all of the facts of a specific case when deciding what order to make about costs. Whilst case law can be persuasive, each case is different. As practitioners, it is therefore important to monitor what occurs in your cases, however minor at the time, so that you have a complete picture when the issue of costs is being considered. If there is to be an “exception” to the rule, then the arguments put forward will be considered in the context of the case as a whole.

Once the court has determined that a costs order is appropriate, the court has a wide range of discretion in ordering exactly how those costs are to be paid; they can be ordered on a percentage basis, relate to specific steps only, or from a certain date only (as in the case of Boult).

Therefore, it is important to remember when seeking a costs order in your client(s)’ favour that the court has discretion to make a wide range of orders. Advocates must be briefed fully with the facts of the case so as to provide the court with all of the circumstances of the case to enable such discretion to be exercised.

For more information about probate litigation contact our Contentious Private Client team here. For more information about costs, contact our Costs team here.

Nicholas Choiniere is a Senior Associate Solicitor in Clarion’s Contentious Private Client Team and can be contacted on 07388 227 952 or at nicholas.choiniere@clarionsolicitors.com.

Joanne Chase is a Legal Director and Costs Lawyer in Clarion’s Costs and Litigation Team and can be contacted on 07826 166 300 or at joanne.chase@clarionsolicitors.com.

Solicitors’ Duty of Care to their Clients (Forster v Reynolds Porter Chamberlain LLP)

June 16, 2023April 3, 2024 Joanne ChaseLeave a comment

Introduction

Mr Justice Fancourt, Vice-Chancellor of the County Palatine of Lancaster, in the Business and Property Court in Leeds held that Reynolds Porter Chamberlain LLP (RPC) owed a duty of care to its client, Deborah Forster (‘the Claimant’). Specifically it had a duty to keep her informed of the ‘staggeringly high level of costs’ that were accruing throughout the retainer, with the commensurate risk of a shortfall in costs recovery that would erode any judgment she obtained.

By the time the case settled, the costs had reached £5m. The Claimant had agreed to pay these costs under the terms of a conditional fee agreement (CFA), however, she argued that RPC had been negligent in failing to keep her informed of the costs of litigation, and in failing to advise her on the risks of incurring high costs.

This case is significant for practitioners in the field of commercial litigation, as it clarifies the duties that solicitors owe to their clients under a CFA. The court’s decision in this case makes it clear that solicitors must keep their clients informed of the costs of litigation, and that they must advise their clients on the risks of incurring high costs, even if the client has agreed to pay those costs on a ‘no win, no fee’ basis.

As a separate point, the case highlights the importance of choosing the right expert in commercial litigation. The court’s decision in this case suggests that solicitors should advise their clients to use experts who are likely to be cost-effective, in addition to providing reliable and accurate evidence.

What are the practical implications?

The case has a number of practical implications for practitioners in the field of commercial litigation. First, it clarifies the duties that solicitors owe to their clients. Under a CFA, a solicitor agrees to represent a client on a ‘no win, no fee’ basis. This means that the client does not have to pay their solicitor’s fees unless the client wins the case. However, the client is still liable for the other party’s costs if they lose the case.

The court’s decision makes it clear that solicitors must keep their clients informed of the costs of litigation. The court also held that solicitors must advise their clients on the risks of incurring high costs, including the risk that the client may be unable to recover their costs from the other party if they lose the case.

Second, the case highlights the importance of choosing the right experts in commercial litigation. The court’s decision suggests that solicitors should advise their clients to use experts who are likely to be cost-effective, and who are likely to provide reliable and accurate evidence. Practitioners will need to be more mindful of the risks of incurring high costs, and they will need to advise their clients on how to mitigate those risks.

Overall, the decision is a reminder to all practitioners of the importance of managing costs in litigation and keeping their clients informed of the costs of litigation and risks of incurring high costs.

What was the background?

The Claimant, Deborah Forster, was a director of a company called Stayput Solutions Ltd. In 2008, two other directors, Kate Bleasdale and John Cariss (the Opponents) acquired overall majority control of the company and then caused it to sack the Claimant. The Claimant brought a claim against the Opponents for fraudulent misrepresentation, and for relief under section 994 of the Companies Act 2006.

In October 2011 the parties agreed, by way of Tomlin Order, that the Claimant would receive £350,000 compensation and 80% of her costs of the claim and the petition. However, only £50,000 of this was paid by the Opponents, who were eventually made bankrupt on the Claimant’s petition in 2015. Nothing more was recovered from them.

The Claimant’s subsequent claim for damages from RPC was essentially for loss of the opportunity to enforce the Tomlin Order promptly and thereby recover more of the agreed sums. The Tomlin order should have been converted to a judgment debt and then enforced against the Opponents’ assets in late 2011 and 2012. The issue of the solicitor’s breach of duty also then arose as part of this claim.

The main issues before the court were therefore:

whether the Claimant suffered loss as a result of RPC’s negligence
whether RPC owed a duty of care to the Claimant to keep her informed of the costs of litigation
whether RPC was negligent in failing to advise the Claimant on the risks of incurring high costs
if so, what damages should the Claimant be awarded?

What did the court decide?

The court held that RPC owed a duty of care to the Claimant to keep her informed of the costs of litigation. The court also held that RPC was negligent in failing to advise the Claimant on the risks of incurring high costs. The fact that the claim was funded under a CFA did not mean costs were not a matter for the client. There remained a risk to the Claimant of being liable to pay the shortfall between chargeable fees and disbursements and the costs recovered from the Opponents.

Whilst that was a breach of duty, it had caused no loss. However, the Claimant had suffered a loss of chance regarding enforcement of the settlement due to a conflict between the solicitors and funders who had made a loan to the Claimant. Judgment was entered for £192,500.

Analysis

The court’s decision in Forster v RPC is significant for solicitors, as it clarifies their duties to their clients when acting under a CFA:

solicitors have a duty to keep their clients properly informed of the costs of litigation
this duty is not limited to cases where the client is paying the costs of litigation themselves
solicitors must keep their clients informed of the costs of litigation, even if the client is being funded by a third party
solicitors must take reasonable steps to ensure that their clients understand the costs of litigation
solicitors must warn their clients of the potential for significant costs in litigation
solicitors must take steps to mitigate the risk of their clients incurring significant costs

The court’s decision is therefore likely to have implications for the way that CFAs are drafted and used. Solicitors will need to be more mindful of the risks of incurring high costs, and they will need to advise their clients on how to mitigate those risks. Solicitors will also need to be more transparent about the costs of litigation, and they will need to ensure that their clients are fully aware of the risks before they agree to a CFA.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

If you have any queries, please contact us for a more in depth discussion.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at costs.support@clarionsolicitors.com.

Analysis of the Proposed Implementation of the Extended Fixed Recoverable Costs (FRC) Regime

May 3, 2023April 3, 2024 Joanne ChaseLeave a comment

Introduction

Fixed costs are costs that are awarded to a party in a civil case, regardless of the amount of work that their legal representatives have done. At present this applies to many cases with damages worth up to £25,000, with several exceptions.

The Civil Procedure Rules Committee has confirmed that from 1 October 2023, fixed recoverable costs (FRC) will be extended to cover cases with under £100,000 damages that are not particularly complex. The fast track will remain with several changes, and a new intermediate track will be created for matters worth £25,000 to £100,000.

The extension to FRC is the government’s response to Sir Rupert Jackson’s 2017 report which set how fixed costs could apply to higher-value claims.

There are several key issues to consider in relation to the extension of FRC in light of the draft rules published on 20 April 2023. These rules are still in draft form, and it is possible that some of the potential issues raised will be addressed before the rules come into force.

When will the new rules apply?

The new FRC will apply to all cases issued on or after 1 October 2023, save for personal injury and housing claims.

The new FRC will apply to personal injury claims where the cause of action accrues on or after 1 October 2023; and will only apply to disease claims where the letter of claim has not been sent to the defendant before 1 October 2023.

HMCTS court forms will be amended as appropriate for implementation in October 2023.

Exclusions

Proposals on introducing FRC for clinical negligence cases up to £25,000 are being taken forward separately by the Department of Health and Social Care (DHSC) and are not being introduced as part of this package of reforms.

It has been decided to delay the application of FRC for housing claims for two years.

Cases that are allocated to the small claims track will continue to be governed by the small claims track rules.

Rule 26.9(10) confirms that the following case types will be allocated to the multi-track rather than the new intermediate track, and will thereby be excluded from FRC:

A mesothelioma claim or asbestos lung disease claim.
One which includes a claim for clinical negligence, unless both breach of duty and causation have been admitted.
A claim for damages in relation to harm, abuse or neglect of or by children or vulnerable adults.
A claim that the court could order to be tried by jury if satisfied there is in issue a matter set out in section 66(3) of the County Courts Act 1984 or section 69(1) of the Senior Courts Act 1981.
Claims against the police involving an intentional or reckless tort, or relief or remedy in relation to the Human Rights Act 1998. This exclusion does not apply to a road accident claim arising from negligent police driving, an employer’s liability claim, or any claim for an accidental fall on police premises.

It is worth noting that the new rules will not apply to cases allocated to the fast track or the intermediate track, when the court orders otherwise. Judges will retain the discretion to reallocate more complex cases valued at under £100,000 to the multi-track, so that complex cases will not be inappropriately captured by the extended FRC regime.

Changes to the CPR Provisions

In drafting the new rules, a generic approach has been taken so far as possible such that all categories of case are covered by the same rules. An exception to this is noise induced hearing loss (NIHL) claims, the rules for which are included in section VIII of Part 45.

There have been substantial changes to Part 45 (Fixed Costs), which has been largely re-written. A new Practice Direction for Part 45 sets out the relevant tables of fixed costs.

Changes have also been made to Part 26 (Case Management – Preliminary Stage) and PD 26, as well as Part 28 (The Fast Track and Intermediate Track) and PD 28. Changes have also been made to Part 36 (Offers to Settle).

Consequential changes have been made to other Parts.

Complexity Banding

New bands of complexity will come into force on 1 October 2023. The court will allocate a case to a complexity band based on the factors set out in CPR 26.12-26.14.

The complexity bands provide an ascending scale of allowable costs commensurate with the complexity of the claim. These bands can be summarised as:

Band 1: Cases that are relatively straightforward and can be dealt with quickly and efficiently.

Band 2: Cases that are more complex and will require more time and resources to resolve.

Band 3: Cases that are very complex and will require a significant amount of time and resources to resolve.

Band 4: Cases that are exceptional in their complexity and will require a very significant amount of time and resources to resolve.

The actual tables with specific examples are reproduced at the end of this article.

Part 45

The proposed changes to CPR 45 are substantial.

The new FRC fees in the fast track and the intermediate track are confirmed in 45.44 and 45.50, which are reproduced partially below.

CPR 45.44For so long as the claim is allocated neither to the small claims track, the intermediate track or the multi-track, the only costs allowed in any claim which would normally be or is allocated to the fast track are—

(a) the fixed costs in Table 12; and

(b) the disbursements as set out in Section IX of this Part.

45.50(1) For as long as the case is not allocated to the multi-track, the only costs allowed in any claim which would normally be or is allocated to the intermediate track are—

(a) the fixed costs in Table 14; and

(b) the disbursements as set out in Section IX of this Part.

…

The proposed new FRC fees are set out in tables 12 and 14 of PD 45.

Progression through the FRC stages is unchanged from the existing fast track FRC:

Pre-issue.
Post-issue but pre-allocation.
Post-allocation but pre-listing.
Listed for trial.

Section IX of Part 45 consists of rules 45.57–45.62 and details the disbursements that will be recoverable in various scenarios.

The Table of HMRC Fixed Commencement Costs, which were previously located in Table 7 of Part 45, has been simplified. The new Table is found at Table 11 in Part 45.

CPR 45.1 confirms that the court will have more flexibility to vary the fixed costs that are awarded in each case. This will help to ensure that the fixed costs regime is fair and proportionate in each case. For example, the court may vary the fixed costs if there are exceptional circumstances, such as the complexity of the case or the resources of the parties.

The court will be able to award fixed costs more quickly and efficiently, for example, at the end of a trial.

It is worth noting that the figures for FRC costs (which had previously been fixed at July 2016) have been uprated for inflation using the January 2023 Services Producer Price Index. The figures have been rounded so that the extended FRC regime starts off with a clearer set of figures. This is a positive development for claimants, as it was not expected that the rates would be uprated.

Part 36

The proposed changes to CPR 36 are designed to make Part 36 offers more attractive to parties and to encourage more settlements before trial:

Increased financial incentives: the amount of costs that a party can recover if they accept a Part 36 offer will be increased. Under the current rules, a party can recover their costs up to the amount of their Part 36 offer, plus 10%. The proposed changes to CPR 36 include a new 35% additional amount to be awarded where the claimant obtains judgment against the defendant which is at least as advantageous to the claimant as the proposals contained in their Part 36 offer. This means that if a claimant makes a Part 36 offer and the defendant does not accept it, and the claimant then goes on to win the case at trial, they will be entitled to recover their costs from the defendant, plus an additional 35%. The purpose of this new 35% additional amount is therefore to encourage defendants to accept Part 36 offers.

Reduced time limits: the time limits for making and accepting Part 36 offers will be reduced. Under the current rules, a party must make a Part 36 offer at least 21 days before the trial date. Under the proposed rules, a party will have to make a Part 36 offer at least 14 days before the trial date.

Improved flexibility: the court will have more flexibility to vary the terms of a Part 36 offer. Under the current rules, the court can only vary the terms of a Part 36 offer if it is satisfied that it is in the interests of justice to do so. Under the proposed rules, the court will be able to vary the terms of a Part 36 offer if it is satisfied that it is just and equitable to do so.

Mass issuing of non-PI cases

One potential issue with the extension of FRC is that it could lead to a mass issuing of non-personal injury (non-PI) cases prior to October 2023 in order to avoid the fixed costs regime. This is because non-PI cases are generally more expensive to litigate than PI cases, and the fixed costs regime could make them uneconomical for claimants to pursue.

This could lead to a situation where claimants are discouraged from bringing legitimate claims, simply because they are afraid of the costs involved. This would be a negative development for the justice system, as it would mean that fewer people would be able to access the courts to seek justice.

Alternatively, a claimant who is considering bringing a claim for damages for breach of contract may decide to issue the claim in the small claims track in order to avoid the fixed costs regime. However, if the claim is found to be outside the scope of the small claims track, the claimant may be ordered to pay the defendant’s costs, which could be significant.

Allocating and Banding Arguments

Another potential issue with the extension of FRC is that the allocating and banding arguments could become more complex and time-consuming. This is because the court will need to consider a number of factors in order to allocate a case to a complexity band, and this could lead to delays in the litigation process.

For example, the court will need to consider the following factors when allocating a case to a complexity band:

The nature of the claim
The amount of money in dispute
The complexity of the legal issues involved
The number of parties involved
The likely length of the litigation process

This could lead to a situation where the court is required to hold a hearing to determine the complexity band of a case. This could add to the cost and delay of the litigation process.

Unreasonable Behaviour

There is a risk that the new provisions could lead to an increase in unreasonable behaviour.

They could encourage parties to make unreasonable demands in the hope that the other party will settle rather than face the risk of having to pay the additional costs.

They could encourage parties to take unreasonable steps to delay or obstruct the litigation process, in the hope that the other party will give up or make a settlement offer.

They could encourage parties to engage in aggressive or abusive behaviour, in the hope that the other party will be intimidated or discouraged from continuing with the litigation.

However, new CPR 45.13 is intended to deter parties from engaging in unreasonable behaviour during litigation. The court will be able to award additional costs if it finds that a party has acted unreasonably in any of the ways described above. The court will have discretion to award additional costs, and the amount of the additional costs will be determined by the court on a case-by-case basis.

CPR 45.13 will apply to all cases, regardless of the track on which the case is allocated. The provision is intended to encourage parties to act reasonably because of the very real risk of having to pay additional costs if they are found to have acted unreasonably.

Why are the new rules being introduced?

Sir Rupert Jackson’s 2017 report had the following stated aims for the extension of FRC:

Fairness: the new rules are intended to make the costs regime fairer and more transparent. The amount of recoverable costs is based on the complexity of the case, rather than the amount of money in dispute. The new rules require the court to take into account the resources of the parties when making costs orders. This can help to ensure that costs are not awarded in a way that is unfair or disproportionate.

Speed and efficiency: they are also intended to make the litigation process more efficient, which can lead to cost savings for both parties. For example, the new rules encourage parties to engage in early settlement discussions, which can help to avoid the need for a full trial. The parties know in advance how much they will be able to recover in costs, which can help to reduce the need for protracted negotiations and disputes.

Certainty and predictability of costs: FRC provides certainty and predictability of costs for both parties to a litigation. This is because the amount of recoverable costs is fixed in advance, based on the complexity of the case. This can help to reduce the risk of unexpected costs.

It remains to be seen whether these stated aims will be achieved.

It is worth noting that the Law Society does not support the current proposals, either across the existing fast track or to intermediate cases. The Law Society is concerned that the proposals pose a substantial risk to access to justice and that they are based on out-of-date data. They believe that the actual costs of civil litigation must be reduced by streamlining processes before FRCs are extended.

Conclusion

The new rules make a number of changes to the CPR provisions relating to costs. These factors will need to be considered by parties when bringing a claim, and there are several potential issues that could arise as a result of the changes.

It is unknown how effectively the new rules will be implemented in practice, but they will undoubtedly have a significant impact on the way that civil litigation is conducted in England and Wales.

The MoJ propose to review the tables of costs and the extended FRC regime more generally in 3 years’ time. Anything that is particularly egregious should be resolvable by way of case law in the interim.

Extending FRC is not a panacea for all the problems with the civil litigation system, but it may be a valuable tool for improving the efficiency and fairness of the civil litigation system, at the substantial risk of reducing access to justice.

If you have any queries or concerns regarding these changes, please contact us for a more in depth discussion.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

You can find out more about our services here or you can contact the Costs and Litigation Funding team at costs.support@clarionsolicitors.com.

Circumventing QOCS via a non-party cost order

March 29, 2023April 3, 2024 Joanne ChaseLeave a comment

Introduction

The case of PME v The Scout Association and Bolt Burdon Kemp LLP [2023] EWHC 158 (SCCO) dealt with issues related to enforcing adverse costs through a non-party costs order (NPCO) against a claimant’s solicitors.

As it stands, the application of QOCS usually prevents defendants from enforcing their entitlement to costs against a claimant if the matter settles before trial.

That was the position in this case, as without the permission of the court, the Defendant had no means of recovering from the Claimant the costs which the Claimant was ordered to pay. The Defendant confirmed that it had no intention of attempting enforcement against the Claimant and instead an application was made by the Defendant to seek to enforce their costs orders against the Claimant’s solicitor.

The Law

The operation of the QOCS rules, as clarified by Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654 and Ho v Adelekun [2021] UKSC 43 (On appeal from: [2020] EWCA Civ 517) confers an indirect benefit upon any solicitor acting under a “CFA lite” or capped CFA arrangement, in that they can pursue the costs of the claim at reduced financial risk because defendants often cannot enforce their entitlement to costs against a claimant.

Before QOCS they would have borne the cost of any adverse costs orders themselves rather than passing them on to their client. Now, absent an NPCO, they may risk only their own costs and expenses. That, again, is just a consequence of the way the QOCS regime works.

Section 51 of the Senior Courts Act 1981, empowers courts to make costs orders against parties other than those who have brought or defended litigation. There must be good reason to do so. In this case, it was the applicant’s position that BBK were more than a solicitor simply acting as a solicitor as permitted by the Courts and Legal Services Act 1990.

The Defendant asserted that only BBK, and not the Claimant, had had any financial interest in the outcome of the proceedings, based upon the terms of the retainer agreement between the Claimant and BBK.

The Claimant argued that it was no part of (and was never suggested in) the Jackson reforms, or the policy behind the introduction of QOCS, that one of the effects of QOCS should be to shift, in whole or part, the liability for costs of any part of personal injury proceedings from Claimants to their solicitors. Rather, the intention was to remove that liability (in most circumstances) in return for defendants being relieved of the obligation to pay ATE premiums and to enhance access to justice.

It was therefore contended that the Defendant’s application was an attempt to circumvent what it perceived to be the unsatisfactory operation of the QOCS rules as drafted; hence the attempt to reinterpret CPR 44.16 as changing the basis upon which an NPCO can be made.

Judgment

Costs Judge Leonard, applying his substantial experience of these types of cases, concluded that:

“… if an NPCO could be justified whenever a costs order is made against the client of a solicitor pursuing costs under a CFA lite or capped CFA, merely because the client has no significant stake in the recovery of costs, then NPCOs would not be exceptional. They would become routine.”

He was not, therefore, satisfied that it would be just or consistent with established authority to make an NPCO against BBK. The application was therefore dismissed.

Analysis

This is another test case in relation to QOCS that was decided against the defendant. However, for most cases going forward this judgment will have no effect. From 6 April the Civil Procedure Rules will be changed significantly to permit enforcement in most circumstances against claimants.

I would expect further test cases in relation to the application of these new rules going forward.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

Important Changes to the Qualified One Way Costs Shifting (QOCS) Rules

February 15, 2023June 14, 2023 Joanne ChaseLeave a comment

Introduction

Qualified One-Way Cost Shifting (QOCS) is a legal rule in the UK that was introduced in 2013 to limit the liability of a claimant for the defendant’s costs in personal injury and related claims.

For the time being claimants can settle claims in a number of ways before trial and still be able to rely upon QOCS protections.

Key judgments

Cartwright v Venduct Engineering Ltd [2018] EWCA Civ 1654

Defendants could not enforce costs against damages recovered via settlement where deemed costs orders (Tomlin Orders and accepted Part 36 offers) are relied upon. They are not orders of the court for the purposes of QOCS. If it had been the intention for rule 44.14 to cover settlements of whatever kind, different words and greater guidance would have been required.

Ho v Adelekun [2021] UKSC 43

The Supreme Court held that setting off costs against costs is a form of enforcement, and therefore covered by the QOCS provisions just as a set off between costs against damages would be.

Further judgments at the end of 2022 reinforced these appellate decisions where lacunae were identified and clarity provided:

Chappell v Mrozek [2022] EWHC 3147 (KB)

Master Stevens rejected the argument that a defendant’s entitlement to costs, arising from late acceptance of a Part 36 offer, could be enforced from a claimant’s damages.

University Hospitals of Derby & Burton NHS Foundation Trust v Harrison [2022] EWCA Civ 1660

The Court of Appeal rejected the defendant’s argument that QOCS protection was lost when the court was called upon to make an order under r.36.22(9) providing permission to accept an offer.

April 2023 Amendments to CPR

In May 2022 the Civil Procedure Rule Committee recommended changes to QOCS following the Supreme Court’s comments in Ho .

On 2nd February 2023 The Civil Procedure Amendment Rules 2023 were laid before Parliament with the stated intention that they should come into force on 6th April 2023, amending the Civil Procedure Rules 1998 from that date.

Among many other changes, rule 24 of the Amendment Rules amends CPR 44.14 so that deemed orders can be enforced, and offset against an aggregate of damages, interest and costs. The proposed changes to rule 44.14 are underlined below:

(1) 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~~, or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.

(2) For the purposes of this Section, orders for costs include orders for costs deemed to have been made (either against the claimant or in favour of the claimant) as set out in rule 44.9.

(3) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.

(4) Where enforcement is permitted against any order for costs made in favour of the claimant, rule 44.12 applies.

(5) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.

Key Points

Four key points arise from these amendments:

The rule at new CPR 44.14(1) will allow a defendant to enforce their costs entitlement up to the extent of any aggregate settlement, to include all damages, costs and interest made in favour of the claimant.
Cartwright has been explicitly reversed: the rule at new CPR 44.14(2) will allow a defendant to enforce their costs against any type of settlement, including deemed costs orders such as Part 36 and Tomlin Orders.
Ho has been explicitly reversed: the rule at new CPR 44.14(4) will allow set-off of the defendant’s costs against the claimant’s costs.
Rule 1(3) of the Amendment Rules confirms that the amendments set out in rule 24 are subject to transitional provisions. This means that they only apply to claims where proceedings are issued (not served) on or after the 6 April 2023.

Outcome

The transitional provisions are helpful in providing clarity to the position as, in my experience, defendants have not settled costs on the basis that the changes could be retrospective.

In the short term, our advice to claimant firms would be to issue any claim before 6 April 2023, where possible, to ensure that your client retains the more favourable QOCS rules.

Any accusations by defendants that the issue of these claims was premature should be simply rebutted by the argument that it was reasonable to take advantage of the transitional provisions, and to do otherwise was not in the claimant’s best interest.

It is very likely that many claimant firms will seek to issue relevant claims before 6 April 2023 to preserve the QOCS protections of the existing regime for those cases. This increase in issued claims over the next 2 months is likely to have a detrimental effect on court capacity and waiting times. Given the existing backlog, this is not inconsequential.

Litigants and litigators on both sides will need to factor in the rule changes when considering case strategy and settlement post April 2023.

Defendants will be motivated to make early Part 36 offers, in some cases before any, or adequate, expert evidence has been obtained. These early offers will need to be given extremely thorough consideration and could result in many claims settling prematurely simply because of the very real concerns of the claimant regarding their potential costs liabilities.

These rule changes may well stimulate claimant lawyers to seek ATE insurance products that insure the claimant’s lawyers’ own fees, to ensure that these are not drained by setoff. The cost of this ATE insurance will not be recoverable.

Longer term, there could be an increase in satellite litigation. This could be prompted by the very different QOCs regimes running in parallel for a period of years, or due to unintended and unforeseen consequences of the changes.

Analysis

QOCS was pivotal to the Jackson reforms of personal injury litigation that took place in 2013. These amendments constitute a significant change to the QOCS rules and reverse one Supreme Court decision and a number of Court of Appeal decisions.

Defendants will claim that the new rules “level the playing field” in personal injury litigation and bring back teeth to defendants’ offers to settle.

It is certainly evident that claimants will have more “skin in the game” moving forward. Claimants will have to consider carefully the costs consequences of any defendant’s offer as the costs protection provided by the current version of the QOCS rules will be lost.

These rule changes have made bringing a claim much more uncertain and will therefore raise further questions around access to justice.

If you have any queries or concerns regarding these changes, please contact us for a more in depth discussion.

Andrew Crisp is a Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at costs.support@clarionsolicitors.com.