Author: Joanne Chase

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

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

No Fixed Costs until October 2023

Joanne ChaseLeave a comment

The introduction of Fixed Costs in most cases with a value up to £100,000, which was originally expected in April 2023 has now been pushed back to October. Speaking to the Civil Justice Council on 18 November 2022 Lord Bellamy said:-

We’re very conscious of how important it is to get this right… a little more time… will give the sector more time to adjust

Lord Bellamy – Civil Justice council, 18 November 2022

Fixed costs are controversial amongst some in the legal sector. Lord Bellamy accepted that fixed costs required a “complex set of rules” and it “hasn’t been easy”. Many practitioners remain skeptical that fixed costs as currently proposed are workable. In particular, some have pointed out continuing satellite litigation in relation to the existing Fixed Costs regimes in RTA and EL/PL claims as evidence that Fixed Costs do not reduce the volume of litigation.

Whilst some may breathe a sigh of relief, this is only a delay. Lawyers should use this time to prepare and test their business models to ensure that they are robust. There should be particular emphasis on reviewing client contracts and retainers to reflect the changing market and the Belsner judgment.

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

How to Serve Legal Documents by Email

Joanne ChaseLeave a comment

The court has warned litigators that sending a document to multiple email addresses does not constitute good service, even where the party receiving the documents has agreed to it.

The Rules

Documents may be served by email where the receiving party has given prior agreement in writing to the party serving that they are willing to accept service by email, and provided the e-mail address (CPR PD 4.1(1)). The requirements of PD 4.1(1) will be deemed to be satisfied if the email address:-

  • Is provided on the solicitor’s writing paper and states that it may be used for service; or
  • Is set out on a statement of case or a response to a claim filed with the court.

Multiple Email Addresses

In Tax Returned Ltd & Ors, R (On the Application Of) v Commissioners for His Majesty’s Revenue and Customs [2022] EWHC 2515 (Admin) the Claimant purported to serve a Claim Form by email. The Defendant had provided two email addresses upon which documents should be served. The Court concluded that the meaning of the letter giving permission to serve by email did not give the Claimant a choice to serve on either address; it required documents to be served on both.

The judge identified that CPR 4.1 refers to “email address” in the singular and that interpreting it in the way the Claimant sought would require inserting significant words into the rule.

Plainly the situation would become absurd if parties could submit multiple email addresses to which documents were to be sent before good service had been effected.

Para 74

The Court went on to find that the consequence of a party failing to provide a single email address is that 4.1 has not been complied with and service cannot take place by email.

Litigators should ensure that they only provide one email address for service. If another party provides multiple email addresses for service a request for a single address for service should be sent, failing which service should be effected by other means.

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

Joint and Several Liability and Litigation Funding Agreements

Joanne ChaseLeave a comment

In ECU Group Plc v HSBC Bank Plc [2022] EWHC 1616 (Comm) Moulder J addressed the issue of joint and several liability in a case involving multiple litigation funders.

Background

The matter involved fraud proceedings, where the Defendant having successfully defended the matter, applied under the Senior Courts Act 1981 s51 for an order requiring a specific litigation funder to pay the Defendant’s costs. The funder in question had the dominant financial interest in the litigation and had effectively controlled the proceedings. Whilst the funder was one of several commercial funders its contribution amounted to 66%. After providing judgment for the Defendant, the court ordered the Claimant to pay the Defendant’s costs to be assessed on the indemnity basis. In addition, the funder was added as a party for the purpose of costs.

In response the funder submitted that it should only be liable for costs in the same percentage as its contribution, and only for costs incurred after the date of the litigation funding agreement.

It was held that the funder should bear joint and several liability with the Claimant for the Defendant’s costs irrespective of the other litigation funders. It was emphasised that the funder in question had the dominant financial interest and had controlled the litigation. The court held that the Defendant, who had no choice but to incur costs of defending the claim, should not be in a position where recovery of the costs should be reliant on its pursuit on numerous individuals/entities, with potentially an uncertain outcome. The funder was subsequently jointly and severally liable (with the Claimant) to pay the Defendant’s costs.

Summary

The matter can perhaps be seen as a warning shot to litigation funders who have a dominant financial interest and who seek to control the direction of the litigation. Whilst these funders stand to gain the most if a case is successful, they may also be held to be liable for the full amount of costs if a case is unsuccessful. The matter emphasises the courts wide discretion in relation to costs and a funder with a dominant interest may not be able to rely on the existence of other funders to reduce their liability.  The court considered that it would not be reasonable for the Defendant to have to pursue numerous funders where one dominant financial funder exists.

Richard Platts is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Departure from Guideline Rates not justified (even on the indemnity basis)

Joanne ChaseLeave a comment

In Eurohome UK Mortgages 2007 1 Plc & Ors -v- Deutsche Bank AG, London Branch & Anor [2022] EWHC 2408 (Ch) the court ordered the Third Claimant (‘C3‘) to pay the Defendants’ costs on the indemnity basis. The judge summarily assessed the costs.

The costs related to an application by the Defendants to strike out the claim. The basis of the application was that, in part, that C3 had no standing in the proceedings. C3 did not engage with the application, serve evidence, or attend the hearing. Accordingly, the court ordered that C3 pay the Defendants’ costs on the indemnity basis.

The Defendants claimed costs of £72,287 for the application. The Defendants’ solicitor claimed an hourly rate of £710 per hour as against a guideline rate of £512. Considering the rates Mr Justice Miles held that:-

These are guidelines and are not fixed but they are an important starting point. I do not think this is a case of such complexity to justify a departure from the guideline rates.

Para 49

Following the increase to the guideline hourly rates in 1 October 2021, courts have been much less willing to allow uplifted rates. Solicitors should be prepared to factor this into their advice to their clients.

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

High Court gives guidance on delegation and recovery of costs

Joanne ChaseLeave a comment

In Rushbrooke UK Ltd -v- 4 Designs Concept Ltd [2022] EWHC 1416 (Ch) the Court gave guidance in relation to the principle of delegation when considering the reasonableness of costs. Where there has been insufficient delegation, it is likely the court will find costs are unreasonable. The key findings are at paragraph 14.

The Judgment

The starting point is that solicitors should delegate work:

I am unhappy with the notion that everything here has been done by a single Grade A fee-earner. One of the important skills of a solicitor is to know how to delegate.

Drawing on his 30 years’ experience in practice HHJ Paul Matthews went on to say:

In my experience as a commercial litigation solicitor, there were no cases in which no work could have been delegated.

In his judgment, whether or not there was a junior fee earner to delegate the was not relevant:

Sometimes it is said that, well, there was no one else to delegate to… the answer to that plea is of course that, as between himself and his solicitor the client is quite entitled to insist on a grade A fee earner doing everything. On the other hand, they are not entitled to require the opponent to pay for it. The question is whether the costs are reasonably incurred and reasonable in amount. Reasonableness takes into account of potential delegation.

In relation to the burden of proof the judge held:

It is not for the paying party to have to identify work which could have been done by a more junior fee earner.

Summary

Delegation should be the rule not the exception. The receiving party will have to justify a decision not to delegate. The test of whether an item could have been delegated is objective; if it was suitable for delegation then it should be allowed at a lower rate even if there was no fee earner to delegate to.

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

Absence of a Signature on a Solicitor/Client Statute Bill is not Always Fatal

Joanne ChaseLeave a comment

In Sweeney v Wise Solicitors Ltd [2022] EWHC 2314 (SCCO) Costs Judge Rowley dismissed a claimant’s application for an assessment of costs against his former solicitor.

Background

The claimant instructed the defendant firm of solicitors in a personal injury action.  In that action he received £3,000 by way of interim payment.  This was sent to him, together with a note that any deductions would be made at the end of the case. 

At settlement on 26 July 2021, the claimant then received a further £10,000.  The defendant deducted 25% of the total damages by way of fees (that is 25% of £13,000). The claimant took umbrage, stating that he expected the deduction to be 25% of the £10,000.

In response the defendant firm provided invoices breaking down the fees and the deduction. The claimant told the solicitors that if the deduction was not discounted then he would bring an action to recover the whole of the 25%. The defendant declined and the claimant was directed to consider the agreement that the claimant had signed up to at the commencement of the claim.

The claimant then signed a consent form allowing the defendant to pay to him the settlement damages, less the 25% deduction on 100% of the damages.

The claimant contacted a third party firm to bring a claim against his former solicitor who then issued an application under s70 of the Solicitors Act 1974 seeking an assessment of the costs. However, they did not bring the claim until more than 30 days had elapsed since the defendant had provided the invoices, in breach of the time limit provided for by the Act.

The defendant solicitors sought to strike out the action on two, different grounds.

First ground

It was argued that the invoices could not be assessed as bills because they had not been signed and they had been provided by email.

The judge found that final statute bills had been delivered to the claimant and so he was entitled to bring s70 proceedings in principle based upon the invoices delivered.

The judge provided his reasoning, including the following:

“Where, as here, the client is in possession of invoices which are ostensibly suitable for assessment under the Act, the absence of a signature by the solicitors seems to me to be of no consequence. As was expressed by the Court of Appeal in Ex Parte d’ Aragon [1887] 3 TLR 815, and referred to in Parvez, relying on a lack of signature is not an attractive device for a solicitor to seek to avoid the scrutiny of his bill by the court when requested in time by the client to do so.”

“S70 requires the bill to be delivered but is not prescriptive as to how that delivery is undertaken. Consequently, there is also no need for me to consider the question of whether a bill can be delivered electronically without the consent of the recipient.”

Second ground

It was then argued that the action seeking an assessment of costs was issued more than 1 month after the defendant had provided the invoices, in breach of the time limit provided for by the Solicitors Act 1974. The assessment could therefore continue only if the claimant could show special circumstances that allowed him to bring a claim out of time.

The judge confirmed that a client needs to agree to monies being applied to pay the bills. “Mere acquiescence” is not sufficient and the existence of the retainer between solicitor and client is not sufficient in itself either.

In this case, however, the claimant had signed an authority within 8 minutes of receiving it on 26 July 2021. That authority specifically stated that the claimant understood and consented to the deductions and that he further understood that he was not liable for any other shortfall in the solicitors’ charges. The judge considered whether the claimant agreed to the deduction. Because he signed an authority form it was perfectly clear that he did. The judge inferred that:

“…the claimant simply wanted to hold onto as much of his damages as possible because he was not satisfied with the end figure. That view might be entirely reasonable in itself but it does not support an argument that the claimant was pressured into authorising the solicitors to retain monies from the damages.”

The judge found the bills had been paid on 26 July 2021. The claimant had therefore needed to issue proceedings by 25 August 2021.  Proceedings were, in fact, issued after that date.

Whilst the breakdown provided did confirm the time limit, the judge found that solicitors are not under any obligation to inform their client of the time limits in relation to the assessment. He relied upon the very recent case of Richard Slade and Company LLP v Erlam [2022] EWHC 325 (QB) . In this case HHJ Gosnell, sitting as a Judge of the High Court, expressed the view that previous case law did not say that a solicitor should tell the client that, if such a bill had been delivered, this started the clock running for the purposes of an assessment under the Act. He pointed out that it was not normal for provisions explaining the legal consequences of contractual terms to be applied into a contract unless there was some additional statutory or regulatory obligation to do so. If there had been any perceived need for consumer protection, it had not resulted in any change to the Act or other regulatory reform.

The judge found that the claimant was aware of his rights, but did not bring the proceedings in time.

“There is nothing to which he can now point to cause the court to exercise its discretion in holding that any special circumstances exist.”

Accordingly, the defendant’s application to strike out the claimant’s application under s70 was successful.

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.

Apply for Fee Remission or pay the price

Joanne Chase1 Comment

In Gibbs v King’s College NHS Foundation Trust [2021] EWHC B24 (Costs), it was held that a party which failed to apply for fee remission (of court fees) where they would have been eligible to do so may not recover those fees from their opponent on assessment of costs. This reverses the position in Cook -v- Malcolm Nicholls Ltd (Coventry County Court , 11 April 2019) and Ivanov -v- Lubble (Central London County Court, 17 January 2020) in which it had been held that as a matter of public policy a decision not to rely on the public purse was not unreasonable.

Solicitors should ensure that they investigate their client’s eligibility for fee remission and ensure that they have evidence to support any claim that their client is not eligible. It may be prudent to complete and submit a request for remission in all cases (even where it is believed the client is ineligible) as confirmation from the court of ineligibility would be powerful evidence upon assessment. It would also be sensible to implement procedures for monitoring and updating the client’s eligibility. A policy to send a financial information form to the client whenever a court fee is payable would minimise the risk of non-recovery.

Parties may apply for fee remission after the court fee is incurred however time limits to do so apply. Practitioners should therefore check historic cases and apply for fee remission retrospectively where necessary and possible.

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

Client not bound to consider solicitor’s interests under a CFA when settling – Candey -v- Bosheh

Joanne ChaseLeave a comment

In Candey Limited -v- Bosheh & Salfiti [2022] EWCA Civ 1103 the Court of Appeal held that a client is not bound to consider their solicitor’s interests when settling a claim.

Background

In summary, Bosheh (the client, “C”) entered into a CFA with Candey Limited (the solicitor, “Sol”). The relevant term of the CFA was “…if… we obtain an order or agreement that our hourly rate costs… be paid by your opponent then we shall be entitled to recover those costs from your opponent, and you are always liable to pay these costs to us to the extent that we recover them from your Opponent. You will always seek to recover costs by order or agreement”. During the course of the primary litigation Sol received an offer from their opponent by which C would receive up to £1m, and that neither party would pay the other’s costs.

Sol advised C that any money paid to C under the terms of that settlement would go to Sol in payment of its legal fees. C did not accept that this was a correct interpretation of the CFA terms. The claim was ultimately settled on a drop hands basis.

Following settlement, Sol terminated its retainer with C and commenced proceedings alleging inter alia breach of its duty of good faith in failing to seek a settlement on terms that Sol would be paid.

Judgment

Finding for C, the High Court found that a retainer between a solicitor and client is not subject to a duty of good faith (para 84). This finding was upheld by the Court of Appeal which added “There is no authority that supports the proposition that, when retaining a solicitor to act for him or her, the client owed that solicitor a duty of good faith. The absence of authority is perhaps unsurprising: it is a startling concept. Many would say that, if a duty of good faith was applicable at all, it would arise the other way round and be owed by the solicitor to the client” The Court continued at paragraphs 53 – 54 that:–

  1. First, Mr Bompas’ answers demonstrate the potential conflict of interest that can arise under a CFA between the client and the solicitor where the terms are drafted in such a way that the solicitor’s costs recovery is itself dependent on the client recovering something – anything – from the proceedings… Such conflicts cannot be resolved by an implied duty owed by the client to consider the solicitor’s financial interests rather than his own; it is for the solicitor to ensure that such conflicts do not arise in the first place.
  1. Secondly, it is self-evident that, irrespective of any duty of good faith, the client cannot be in breach because he or she chooses a settlement which they perceive to be as good as or better for them than the one that obviously suits the solicitor. Any other conclusion would fundamentally alter the solicitor/client relationship. In the present case, the Boshehs were quite entitled to conclude that a ‘drop hands’ settlement was certainly not a substantially less advantageous (and arguably a better) deal than the earlier proposal made by the Sheikh.”

Summary

The judgment highlights the risks to solicitors acting under a CFA. Solicitors should check their client retainers to ensure that they minimise the risk that a client may settle the proceedings on terms that prevent them being paid. Whilst it is difficult to imagine wording which would provide complete protection, a clause within the CFA to the effect that if the claim is settled on terms where there is no specific provision for costs, the solicitor will be entitled to be paid their costs capped at a percentage of the settlement sum agreed.

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

Compulsory mediation could be extended to all claims in the County Court

Joanne ChaseLeave a comment

Under current government proposals mediation will be compulsory in all claims allocated to the small claims track. However, it is also considering whether to extend that requirement to all claims in the County Court. You can consider the proposal and have your say via the Consultation Paper. 

The Proposals

The proposals seek to tackle low levels of uptake of mediation and drive a culture shift in attitudes to litigation. The paper makes it clear that there will be no requirement to settle. Furthermore, as the current small claims mediation service (SCMS) is court sponsored and therefore costs neutral to the parties, it will not be an “onerous” obligation.

In reality, costs of mediation will be passed on to all court users through court fees. It will only be costs neutral if it succeeds in reducing the number of cases going to trial. 

The Role of Mediation in Settlement

Statistics show that mediation has a high success rate (up to 86%). But we should be wary of the assumption that mandatory referral to mediation will reduce the number of cases going to court by a similar amount. About 96% of civil cases in England settled outside court. However, 1.2 million claims were issued in the Civil Courts in 2020 but in the same year there were only 16,500 mediations (1.38%). This means that at least 94.62% of all of all claims settle other than by mediation.

It is questionable what benefit mandatory mediation will bring to the vast majority of cases which would have settled anyway. Particularly if court fees increase to fund it. And in those cases where agreement is not possible mandatory mediation will simply be a box ticking exercise.

The Report gives the mandatory mediation scheme in Ontario, Canada as an example of how mandatory mediation can be successful. But a 2001 report showed that mandatory mediation resulted in “full settlement of 40% of cases earlier in the process”. Overall, around 98% of cases settle before trial in Ontario.

Summary

Mediation is a useful tool for parties who want to settle. Indeed, it can force parties to review the weaknesses of their case and make settlement more likely. However, making it mandatory it is unlikely to make a significant difference to the number of cases proceeding to trial and any benefits will probably be outweighed by the costs.

You can have your say by visiting the Consultation, which closes on 4 October 2022.

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