Author: jochase

When a simple theory becomes a complex reality; the interplay between costs management and detailed assessment

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The Jackson reforms envisaged a world where legal costs would be dealt with through the click of a button. LJ Jackson introduced costs budgeting in a bid to control the level of costs spent, he revamped the concept of proportionality to limit costs for claims where costs incurred considerably exceeded the sums in issue, and he created the electronic bill of costs in a bid to remove the pain staking process of multi day detailed assessment hearings.

However, theories do not always play out well in practice. The plethora of costs case law relating to costs management, proportionality, and bills of costs since the reforms means that it is crucial, now more than ever, that a litigator approaches costs correctly if they are to reap the full reward of their labour.

Regardless of how a case evolves, if a litigator is fortunate to be on the favourable side of an inter partes costs order then, providing the Court orders that costs are to be assessed by way of detailed assessment (and not summary assessment), it is paramount that they present the costs claimed correctly if they are to limit their outlay on detailed assessment costs and maximise their profit recovery.

First and foremost, the litigator should be on the front foot. If the litigation is approaching a mediation or joint settlement meeting, it is wise for the litigator to know exactly where they stand in terms of costs. This is particularly important if there is a sense that the paying party may have an appetite to do a deal on both damages and costs. If the case has been subject to costs management, it is crucial that the costs incurred are carefully considered and calculated to show the extent to which the costs fall (or exceed, with reasons for such) within budget. This is the first question that any competent paying party representative is going to ask. If a precedent Q has been prepared, and the litigator is armed with sufficient information for reasons why any costs may fall outside scope (such that the Court did not provide for a mediation and therefore the costs of such fall outside the budget scope) then any negotiations are more likely to prove fruitful, whilst saving the paying party the additional cost of detailed assessment proceedings. This would not be possible without a phased breakdown of costs.

If, however, the parties are unable to reach an amicable agreement as to costs, it will likely be necessary for a full bill of costs to be prepared in order for detailed assessment proceedings to be commenced. This is where it is crucial that a costs lawyer who fully understands the intricacies of costs management orders and the inter play with the bill of costs should be utilised.

The SCCO’s decision from 29 October 2018 in the matter Vertannes v United Lincolnshire Hospitals NHS Trust shows just how crucial this understanding is. This matter had been subject to a costs management order. The Court then proceeded to order that revised budgets should be prepared to reflect a significant change in the litigation. The parties prepared but were unable to agree revised budgets, and the claim settled before the Court considered the revised budgets. The Claimant proceeded to file a bill of costs that failed to comply with CPR 47 PD 47.5.8(8) (“the bill must be divided into separate parts so as to distinguish between the costs claimed for each phase of the last approved or agreed budget”), the Claimant’s argument being that the Court never approved the revised budget. However, the Court found that at no time had the original costs management order been replaced, and that the bill should therefore have been split so as to reflect the position against the original costs management order. The Claimant was, therefore, ordered to re-draw the bill of costs.

The inter play between costs management and detailed assessment can be complex. The Court may make multiple costs management orders during the life of a claim, where by a previous order is “topped up”, which impacts the way in which a bill is drawn, or the Court may elect to only costs management certain phases of the case, which, again, has an impact on the bill. It is, therefore, crucial that the costs lawyer is aware of all the elements of the case that will impact the drafting of the bill so as to ensure compliance with CPR 47 and the accompanying practice direction, together with maximising recovery.

Joanne Chase is a Senior Associate Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors.

You can contact her at joanne.chase@clarionsolicitors.com and 0113 336 3327, or the Clarion Costs Team on 0113 246 0622.

Confused by QOCS? A brief summary of everything you need to know…

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Qualified One way Costs Shifting (QOCS) was introduced in April 2013 for personal injury matters and it is essentially a rule that means a successful defendant cannot recover their costs from an unsuccessful claimant except in specific circumstances (such as the claim being fundamentally dishonest).

2018 saw 3 decisions of interest; one from the Court of Appeal, and 2 County Court decisions that conflicted each other. It is likely that the issues in the County Court decisions will be tested again, hopefully with binding authority.

Court of Appeal – 28/06/18: Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

This was a NIHL (Noise Induced Hearing Loss) claim where the claimant pursued 2 defendants (as is often the case with industrial disease matters).

The claimant successfully negotiated settlement against defendant 1, and dismissed the claim against defendant 2. Defendant 2 argued that their costs (following the discontinued claim) could be enforced against the claimant up to the level of damages recovered from defendant 1. It was argued that the purpose of QOCS was to ensure that the claimant was no worse off after litigation had been conducted than before it had started. The court of appeal agreed – defendant 2 was entitled to their costs, limited to the amount of damages recovered from defendant 1.

This decision confirmed that a claimant was not entitled to QOCS protection when they issued against a defendant (in a multi defendant case where they succeeded against a different defendant) and their claim was ultimately unsuccessful (prior to this decision, the rule had been if no fundamental dishonesty had been proven by a successful defendant, then the claimant would be protected by QOCS in this scenario – the county court decision of Bowman).

The Cartwright decision means that litigators now need to be extremely vigilant when deciding against which defendants to issue their claim. If they do not adequately consider and evaluate the risks against each and every defendant, there is potential for a professional negligence claim.

The second issue decided in Cartwright was whether a successful QOCS defendant could enforce a tomlin order (remembering that a tomlin order is a record of settlement and not an order of the court). The rules state that QOCS applies to orders for costs made against the Claimant and therefore Cartwright found that defendants would not be able to enforce a tomlin order or Part 36 agreement in order to benefit from QOCS on the basis they are not orders made by the court. The order must either have been made at trial, or be within a consent order or provisional damages order.

Ketchion v McEwan – Jun 2018 (County Court decision)

This was an RTA matter where the claimant brought a claim for financial loss (but not personal injury). The defendant denied liability and issued a part 20 counterclaim for personal injury. The matter proceeded to a fast track trial – the judge found the defendant to be 100% at fault and therefore entered judgment and dismissed the counterclaim.

The claimant sought their costs but the judge ordered that the defendant was protected by QOCS (given the existence of his unsuccessful counterclaim). Therefore, despite the claimant succeeding in full, their costs were not recoverable as the defendant had QOCS protection. The claimant sought permission to appeal but this was dismissed – the judge found that the rules referred to “proceedings” and that this captured the claim AND counterclaim. It should not be limited to just the claim – any successful claim could be precluded from recovering costs by an unsuccessful counter claim.

Waring v McDonnell – Nov 2018 (County Court decision)

This was a claim involving 2 cyclists. One brought a claim for personal injury, the other a counterclaim for personal injury. The counterclaim was unsuccessful and the court found that the defendant/Part 20 claimant was not protected by QOCS. This decision was to deter the bringing of frivolous counter claims in order to avoid a costs order/benefit from QOCS. It was found that the defendant was not an unsuccessful claimant, but an unsuccessful defendant and that he would only have been entitled to QOCS protection if he had brought his own PI claim.

So, what’s next? 

It is recognised that there is currently some tension in the drafting of the QOCS rules, and that they need to be re-worded in order to iron out issues.  Currently, the term “proceedings” in Cartwright encompasses multiple defendants, however, in the county court decisions, “proceedings” do not include counterclaims.

There is also an increasing trend in defendants arguing fundamental dishonesty in order to set aside QOCS. There is currently limited authority on what constitutes fundamental dishonesty, however, the Court of Appeal decision of Howlett v Davies & Another [2017] EWCA Civ 1696 concluded that fraud did not have to be pleaded for the Court to make a finding of dishonesty. The defendant merely had to have given adequate warning to the claimant of their intention to submit evidence that could lead to the Court making such a finding, such as within their defence.

Finally, there is talk about extending the QOCS regime to non-clinical professional negligence claims, and also private nuisance proceedings. It, therefore, appears that QOCS is going to expand beyond the realms of personal injury in the not too distant future.

Joanne Chase is a Senior Associate Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors.

You can contact her at joanne.chase@clarionsolicitors.com and 0113 336 3327, or the Clarion Costs Team on 0113 246 0622.

 

Proactive Costs Recovery – Thinking Ahead

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The traditional approach to costs recovery has been to prepare a statement of costs for trial, perhaps convert it into a without prejudice schedule of costs for negotiation and, when all else fails, instruct your costs specialist to prepare a formal bill of costs and commence detailed assessment proceedings. Unsurprisingly, this whole process can take many months and, if the paying party are unwilling to make a payment on account of costs, it can cause difficulties with cash flow. This is particularly noticeable for firms with a large caseload.

The tide, however, has started to turn and we are receiving an increasing number of instructions to prepare a skeleton bill of costs in readiness for a JSM. This proactive approach means that your costs are summarised and presented to the opponent on an occasion where, hopefully, they have the appetite for negotiation and therefore there is a realistic chance that both damages and costs can be concluded in one go.

For matters subject to costs management, it is essential that the costs are presented in accordance with precedent H phases to enable the paying party insight into whether there has been any over spend in a particular phase. Costs that fall outside costs management should be isolated and thought should be given to good reasons for departure from the budget if there has been an overspend. This will equip you with the information required to try and persuade the opponent to reach an agreement on costs and avoid the costs associated with detailed assessment.

And, of course, if you are unable to settle your costs then the skeleton bill can be updated and converted into a formal bill of costs in readiness to commence detailed assessment proceedings.

Those clients who adopt a proactive approach to costs recovery are reducing the amount of time it takes to conclude costs negotiations and, ultimately, for the money to reach their bank account. They, wisely, think about the costs aspect of their case in tandem with their client’s claim and they reserve their Costs Lawyer well in advance of the JSM.

Joanne Chase is a Senior Associate Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at joanne.chase@clarionsolicitors.com and 0113 336 3327, or the Clarion Costs Team on 0113 246 0622.

When a CFA describes the claim rather than the work it covers

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The recent Court of Appeal decision of Malone v Birmingham Community NHS Trust [2018] EWCA Civ 1376 reinforced the importance of a clearly drafted funding document.

The case involved a prisoner at HMP Birmingham who pursued a claim for failure to diagnose testicular cancer between August 2010 and January 2011. The prison was operated by the Ministry of Justice, and health care services were provided by Birmingham Community NHS Trust, and Birmingham and Solihull Mental Health Foundation Trust.

The Claimant initially instructed Ross Aldridge Solicitors, who had difficulty in identifying the correct Defendant, and in March 2012 the Claimant transferred instructions to New Law Solicitors. They, too, encountered uncertainty when trying to identify the correct negligent Defendant.

The Claimant entered into a CFA with New Law Solicitors on 16 January 2013, which stated that the agreement covered “All work conducted on your behalf following your instructions provided on [sic] regarding your claim against Home Office for damages for personal injury suffered in 2010.”

On 04 October 2013, after proceedings were issued but yet to be served, Birmingham Community NHS Trust admitted responsibility for the Claimant’s treatment, and on 20 March 2014 damages were agreed in the sum of £10,000 plus costs.

A detailed assessment of costs commenced, and the Defendant challenged the enforceability of the CFA on the basis that it was limited to a claim against the Home Office/Ministry of Justice only. DJ Phillips, regional costs judge for Walker, found on 27 April 2015 that the CFA excluded a claim against the Defendant and therefore costs were not recoverable under the agreement as the Claimant had no contractual liability to pay his Solicitor for the work done in suing the Defendant.

The Claimant applied for permission to appeal, which was initially dismissed by HHJ Curman QC in a judgment dated 25 September 2015, but was later granted by Brigg LJ by way of order dated 28 July 2017.

On appeal, Patten LJ and Hamblen LJ considered whether the critical wording of the CFA (highlighted in bold above) merely identified the claim to which it related, or whether it limited the scope of the CFA to a claim against the Home Office only. It was necessary to consider the principles established in paragraphs 11-13 of Wood v Capita Insurance Services [2017] UKSC 24 to ascertain whether a textual analysis of the agreement was required or whether greater emphasis should be given to the factual matrix (contextualism).

[A textual analysis is typically used for agreements that have been negotiated and prepared with the assistance of skilled professionals. Alternatively, consideration of a factual matrix can also lead to the correct interpretation of an agreement, particularly if a contract had been made without skilled input].

Hamblen LJ stated that the “insertions made to the CFA demonstrate it as poor quality drafting and little attention to detail. The critical wording consists of only one sentence and yet it contains three manifest mistakes: (i) the omission of the date of the instructions and (ii) the omission of the definite article before “Home Office” and (iii) the description of the claim being against “Home Office”. The Home Office had not been responsible for operating prisons for some years”. The poor drafting led to a greater emphasis being placed on the factual matrix of the agreement rather than a close textual analysis.

Hamblen LJ considered the most natural reading of the critical wording as being a CFA that covered “all work conducted” on the Claimant’s behalf following “instructions provided” in respect of his claim “against Home Office” and he concluded that the wording was descriptive of the instructions received rather than of the work to be done. Further, he suggested that if the CFA had meant to provide only a limited coverage, greater care and precision would have been expected, but that in any event it would have been in neither party’s interest to seek to impose a strict definitional limit on the agreement so early in the claim.

Therefore, taking into account both textualism and contextualism, it was found that the CFA was not limited to a claim against the Home Office/Ministry of Justice only and the Claimants appeal was allowed.

Whilst in this case the judgment goes in favour of the receiving party, it highlights the importance of giving careful consideration to exactly what a retainer provides for, both at the outset and during the life of a claim, to ensure there are no pitfalls on assessment. It is crucial that time is invested into the creation of a retainer at the outset of a matter, and that it is regularly reviewed throughout the life of a case.

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

Evaluating Litigation Risk & Part 36 Offers

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In the clinical negligence matter between JMX (A child by his Mother and Litigation Friend, FMX) v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB), Mr Justice Foskett found that a Part 36 liability offer of 90% was a genuine offer, which resulted in the Claimant securing the costs benefits listed in CPR 36.17(4).

These benefits included:

1) costs on the indemnity basis following expiry of the offer;

2) interest payable on those costs at a rate not exceeding 10% above base rate;

3) the recovery by the Claimant of an additional amount to be determined after the damages have been assessed pursuant to rule 36.17(4)(d).

The matter had been listed for a liability only trial on Monday 31 October 2017. On 06 October 2017, the Claimant had made a Part 36 offer to accept 90% of the damages to be agreed or assessed. The offer expired on Friday 27 October 2017 and was not accepted by the Defendant. The matter proceeded to trial and the Claimant achieved a result more advantageous than the offer.

CPR 36.17(5) provides that “In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the Court must take into account of the circumstances of the case including-

a) the terms of any Part 36 offer;

b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

c) the information available to the parties at the time when the Part 36 offer was made;

d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

e) whether the offer was a genuine attempt to settle the proceedings.”

The Defendant had tried to argue that the offer was not realistic and failed to reflect any realistic assessment of the litigation risks. They argued that the Claimant’s Part 36 offer letter did not explain why only a 10% reduction was being offered, which went against the Court of Appeal’s guidance in the case of Huck v Robson [2002] EWCA Civ 398.

This, however, was not accepted by Mr Justice Foskett, who found that “Whilst, of course, it is open to the offeror to explain this kind of thinking in the letter making the offer if it is thought helpful, I do wonder whether in most cases it would assist. I can see the letter prompting a reply (sometimes expressed in language that does not help the settlement process) and it may be thought better simply to leave it to the recipient of the offer to assess the offer as it stands”.

The judgment highlighted the power that Part 36 offers have, and whilst the judge did not criticise the Defendant for failing to accept the offer at the time it was made, he did stress that “Part 36 was drafted in a way that provides an incentive to a defendant to view seriously and, where appropriate, to accept a claimant’s Part 36 offer. The decision not to do so may be perfectly understandable and reasonable even if, in due course, it turns out to have been the wrong one. It is simply a reflection of the litigation risk that each party has to evaluate”.

The judge considered the appropriate interest rate to be awarded (CPR 36.17 (4)(c)), and confirmed that 5% above base rate from 28 October 2017 would do justice.

Whilst a 10% deduction may not, in some cases, amount to much in monetary terms, the judge recognised that in high value serious injury cases worth several million pounds, a 10% reduction would not be an insignificant amount of money, particularly when saved for the public benefit in matters against the NHS.

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

It’s all in the detail – the costly lesson of getting your retainer wrong: Radford & Anor v Frade & Ors [2018] EWCA Civ 119

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In July 2017, the grounds on which the Appellants brought an appeal were considered in the blog CFAs, Counsel and Rectification – Permission to Appeal granted. This blog focused on the decision of Frade & Ors v Radford & Anor [2017] EQCA Civ 1010.

Fast forward to 07 February 2018, and the Court of Appeal have now considered, and subsequently dismissed, the appeal. Lord Justice McCombe ordered that work done outside the scope of a CFA was not recoverable inter partes, and that retrospective rectification of Counsel’s CFA did not permit costs to be recoverable when they would not have been recoverable save for the rectification.

The Solicitor’s retainers

The Appellants’ argued that a conventional retainer that was entered into before the CFA covered work which was not covered by the CFA. They argued that whilst the CFA superseded the original retainer, there was no basis to conclude that the CFA revoked this retainer. The Appellants relied on the fact that the original retainer letter was sent to their clients at the same time the draft CFA was sent. However, on appeal, the Judge found that there was no co-existing retainer to capture the work which was not covered by the CFA. He concluded on this point that “it only makes sense that the solicitors and clients understood that the CFA superseded the original conventional retainer which had been entered into in circumstances of urgency and before the viability of a CFA could be assessed”, and that “I simply can find no room, on the facts of this case, for the two types of express retainer to have subsisted side by side or for the original retainer to spring back into life, when, contrary to all expectations, the CFA did not cover all the steps taken”.

Therefore, it was a costly lesson to the Appellants that their failure to review the terms of their CFA resulted in work being undertaken that they would not receive payment for.

Counsel’s CFA and retrospective rectification

In terms of the retrospective rectification of Counsel’s CFA, the Appellant’s argued that the rectification of the CFA, which post-dated the order for costs, corrected an error of the omission of two corporate Defendants on the CFA, and that the rectification of the document rendered those Defendants’ liable for Counsel’s fees. And therefore, as a result of such, Counsel’s fees were recoverable on an inter partes basis.

However, the Respondents argued that there was no evidence that the corporate Defendants had ever agreed to retrospectively be responsible for Counsel’s fees, and that it was not open to the Appellants to add to the paying party’s liability for costs after the date the costs order was made. The Respondents relied upon Kellar v Williams [2004].

The Court of Appeal considered the argument and agreed with the original finding of Warby J on this point:

“The underlying rationale is in my judgment that the effect of a costs order is to create a liability to pay, subject to assessment, those costs which a party has paid or is liable to pay at the time the order is made. The liability to pay costs crystallises at that point and, although its quantum will remain to be worked out, that process must be governed by the liabilities of the receiving party as they stand at that time. To allow enforcement of a retrospective agreement which increases those liabilities would be to alter retrospectively the effect of the court’s order.”

The Judge followed the decision in Kellar v Williams [2004] and found that a retrospective rectification of Counsel’s CFA cannot be effective to increase the liability of the paying party after the making of the inter partes costs order.

The decision is therefore an important lesson to litigators. When working under CFAs, it is essential to consider and monitor the retainers to ensure two things; that the work being undertaken is covered by the scope of the retainer, and that for any CFA entered into with Counsel, the parties responsible for Counsel’s fees are documented within the CFA.

 

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

Part 36 offers, the basis of assessment, and knowing your expert

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It is well known within the costs profession that there is some tension in the provisions of CPR 36.17, which deals with the costs consequences following judgment.

When a Claimant beats their own Part 36 offer, CPR 36.17 (4) provides that the Claimant is entitled to: interest not exceeding 10% above base rate from the date of expiry of the offer on the whole or part of any sum of money awarded, their costs on the indemnity basis from the date of expiry of their offer, interest on those costs, again, at a rate not exceeding 10% above base rate, and a prescribed percentage uplift limited to a maximum of £75,000 (10% on awards less than £500,000, and for awards more than £500,000, 10% on the first £500,000 and 5% of any amount above that figure thereafter).

However, for the Defendant, the rules are not quite so generous. CPR 36.17 (3) provides that the Defendant is entitled to costs from the date on which the relevant period expired, and interest on those costs. There’s no mention of indemnity basis costs, and no mention of any enhanced interest.

The recent costs decision in the case The Governors and Company of the Bank of Ireland (1) and Bank of Ireland (UK) PLC (2) v Watts Group PLC [2017] looked at this point closely, with the Defendant trying to persuade the Hon. Mr Justice Coulson that they should be awarded their costs on the indemnity basis following expiry of their first Part 36 offer, which they beat at trial, and which expired on 23 October 2015 (the parties had previously agreed that the Defendant should recover interest at 2% above base rate for the relevant period).

The Defendant relied on three main arguments; that the claim was hopeless and should never have been brought, that the Defendant had beaten their own Part 36 offer, and that the Claimant’s expert was heavily criticised by the trial judge.

The Hon. Mr Justice Coulson considered the principles that he had set out in Elvanite Full Circle Limited v Amec Earth and Environmental (UK) Limited [2013] EWHC 1643 (TCC), and summarised that “indemnity costs are appropriate only where the conduct of a paying party is unreasonable “to a high degree”. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight”. He went on to say that “The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable”

In this case, he did not regard the case as being hopeless from the start, and he stated that the claim was, at least in part, supported by expert evidence and detailed witness statements.

He recognised that if the Claimant had beaten their own Part 36 offer then, in accordance with CPR 36.17(4)(b), they would have automatically been entitled to indemnity basis costs, however, he stated that whilst the rules were misaligned and considered unjustified by some, it remained the law that the same rules did not apply to successful Defendants.

He did, however, allow costs on the indemnity basis in relation to one discrete aspect of the case – the expert’s conduct, and he relied on the decisions of Balmoral v Borealis [2006] and Williams v Jervis [2009] in doing so. He considered that the expert’s conduct should be reflected in the costs order, but he did not consider that an order for indemnity basis costs in their entirety was appropriate. He recognised that the expert’s inadequacies had already been a factor in the Claimant losing at trial, and therefore “to order indemnity costs as well would be penalising the Bank twice over for the conduct of their independent expert”. He ordered that costs of the Defendant expert should be assessed on the indemnity basis, as well as costs of and occasioned by the oral evidence given by the Claimant’s expert at trial.

The Claimant paid a heavy price for relying on an expert who had never given oral evidence at a trial. However, the conduct of the expert did not persuade the Court to allow indemnity basis costs throughout. Nor did the fact that the Defendant had beaten their own Part 36 offer. And whilst the Claimant bank accepted that they lost the litigation “badly”, they denied that the claim was unreasonably brought and they warned about the dangers of applying hindsight to such decisions.

It, therefore, seems that there is a high bar to clear in persuading the judge to award indemnity basis costs in a claim where the Defendant has successfully beaten their own Part 36 offer. Like in this case, a paying party would need to consider and rely upon the factors listed in CPR 44.2 (4), in order to formulate a case that would persuade a judge to make such an award in the circumstances.

If you have any questions or queries in relation this blog or legal costs in general please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 246 0622.

When cherry picking is not allowed: More on QOCS and CFAs

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The Court of Appeal decision of Catalano v Espley-Tyas Development Group Ltd [2017] EWCA Civ 1132 relates to an appeal brought by the Claimant against a decision of Deputy District Judge Harris, who found that she was not entitled to QOCS protection under a post-01 April 2013 CFA after she had previously terminated a pre-01 April 2013 CFA.

Implemented on 01 April 2013, the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) abolished the ability of the winning party to recover both a success fee, and an after the event insurance premium, from the losing party. Instead, any agreed success fee was to be recovered out of the Claimant’s damages, and under CPR 44.13-44.17, Qualified One-way Costs Shifting (QOCS) was introduced. QOCS provides that any adverse costs orders made against an unsuccessful Claimant in a personal injury action could only be enforced to the extent that the amount did not exceed any damages and interest awarded to the Claimant. Therefore, if the Claimant recovered nil (or discontinued their claim or lost on liability) they, in theory, would not have to pay any amount in costs to the Defendant.

The transitional provision in CPR 44.17 states that QOCS does not apply where the Claimant had entered into a pre-commencement funding agreement. CPR 48.2 explains that a pre-commencement funding arrangement includes a pre-01 April 2013 CFA which provides for a success fee.

Ms Catalano originally funded her claim against the Defendant for loss and damages relating to noise induced hearing loss under a CFA dated 13 June 2012 (hence a pre-commencement funding arrangement). This, in the event of success, would have sought a success fee from the Defendant, and the Defendant was advised of this CFA via the letter of claim dated 06 September 2012.  The Claimant applied for ATE Insurance, however, this was rejected, leaving her exposed to adverse costs in the event of loss.

On 01 April 2013, the new QOCS rules came into force. The Claimant entered into a new CFA on 15 July 2013, which replaced the old agreement. An updated Notice of Funding was filed which confirmed that the matter was funded under a CFA dated 15 July 2013, but which also referenced the original CFA dated 13 June 2012. The box which indicated this CFA was terminated remained unticked.

The matter was listed for trial on 14 January 2015 and, just one day prior on 13 January 2015, the Claimant served a notice of discontinuance. The Defendant interpreted this notice as their deemed costs order under CPR 38.6, which automatically entitled them to their costs – they proceeded to serve a bill on the Claimant totalling £21,675.52 excluding interest.

The Claimant argued that she had the protection of QOCS on the basis the matter was funded under a CFA dated after 01 April 2013, and therefore the amount due to the Defendant was nil. However, Deputy District Judge found that the new regime was not applicable, basing his finding on a previous decision of Landau v The Big Bus Company (31 October 2014), in which Master Howarth held that QOCS did not apply where there was a pre and post 01 April 2013 funding agreement that covered only one matter. The Claimant appealed, with the decision being leapfrogged to the Court of Appeal.

On appeal, the Claimant argued that the Solicitors had terminated the first CFA and therefore, in accordance with a county court decision of Casseldine v The Diocese of Llandaff (03 July 2015), they were not entitled to any costs under it. Further, the Claimant argued that the second CFA replaced the first CFA which was no longer in force, and that the matter was therefore funded under a post 01 April 2013 CFA, without ATE insurance, and that she should have the benefit of QOCS.

In response, the Defendant argued that, whilst it was accepted that the first CFA had been terminated once the second CFA had been made, the Claimant was inserting an unwritten word into rule 48.2(1)(a)(i) so that it read “an un-terminated funding arrangement”, and that “it could not have been the intention of the rule to allow a Claimant to cherrypick the advantages of both regimes” and that since the Claimant’s application for ATE Insurance had been declined yet she continued to proceed, she was always going to face costs consequences if she lost.

Lord Justice Longmore considered the wording of CPR 48.2 (1)(a) and found that in this case there was undoubtedly a pre-commencement funding arrangement. He also found that the Claimant was “seeking to read a word into the rules which is not there”, and that “the framers of the rules could not have intended that a claimant should be able to blow hot and cold.”

The appeal was dismissed, with Lord Justice Longmore highlighting the fact that Ms Catalano and her Solicitors faced no injustice as, following the refusal of ATE insurance cover, they were open to adverse costs risks in any event.

This is a further case which considers QOCS and the parameters by which it protects unsuccessful Claimants in personal injury claims. In this case, the Claimant and her solicitors sought to benefit from the new QOCS regime so that she was protected from adverse costs risks after she was declined ATE Insurance. This, however, was unsuccessful and the Claimant was faced with not only the Defendant’s bill totalling £21,675.52 excluding interest, but also the Defendant’s costs of assessment, and the appeal costs. The Claimant was ordered to make a payment on account in respect of the appeal costs in the sum of £10,000.

If you have any questions or queries in relation this blog or legal costs in general please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 246 0622.

CFAs, Counsel and Rectification – Permission to Appeal granted

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

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

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

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

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

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

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

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

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

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

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