Scott -v- Hull & East Yorkshire Hospitals NHS Trust

Scott –v- Hull & East Yorkshire Hospitals NHS Trust presents a strong precedent for both the receiving and paying party. The receiving party failed to prove that there was a valid CFA in place and as such recovered no costs.

The Claimant initially put forward a Bill of Costs totalling £112,000.00. The same was calculated on an hourly rate of £400.00 per hour throughout with an additional uplift of 100%. Points of Dispute and Replies were subsequently filed and the matter was listed for detailed assessment.

Shortly before the detailed assessment, the Claimant filed an amended Bill of Costs. The amended Bill of Costs reduced the hourly rate of £400.00 to £146.00 per hour and the success fee down from 100% to 54%. The costs claimed fell from £112,000.00 to circa £36,000.00.

During the detailed assessment it came to light that Rapid Solicitors and their client (the Claimant) had entered into two separate CFAs. This was not previously stated by the Claimant and when the issue was raised by the Defendant in the Points of Dispute, the Claimant maintained that there was only CFA in their Replies. The reply was subsequently conceded.

Rapid Solicitors chose not disclose either of the CFAs but instead relied upon a witness statement from Mr Thompson, a fee earner for the Claimant. Rapid Solicitors wished to retain privilege but did advise that they were happy to show both CFAs to the Court.

During oral examination it came to light that Mr Thompson was not one of the fee earners involved with the file or with the CFAs which were being questioned. Mr Thompson was unable to confirm whether either of the CFAs were limited to Hull and East Yorkshire Hospitals or Hull and East Yorkshire Hospitals and Dr Darren Wheatley. It was also acknowledged that the witness statement of Mr Thompson referred to the wrong dates with regards to when enquiries were made of the BTE insurers.

The Judge commented that the witness evidence put forward by Rapid on the issue of proving the validity of the CFAs was no where near what was normally seen.

The Judge acknowledged that as it was a standard basis assessment any doubt was to be resolved in favour of the paying party. Rapid Solicitors chose to resolve any doubt with the witness statement and oral evidence of Mr Thompson.

Interestingly the Judge commented that he could not order disclosure of the CFA despite the Court urging that there ought to be advance disclosure of such documentation. The Judge stated that once an issue arises it is up to the receiving party how they overcome the objection.

It transpired from Mr Thompson’s evidence that the original Bill of Costs totalling £112,000.00 had been mis-certified as the CFA contractually limited the hourly rate agreed between the client and insurers to guideline rates. The Bill of Costs was only amended as a direct result of the paying party’s Points of Dispute as opposed to an acceptance that the original rate breached the indemnity principle. Owing to the original error the Judge conceded that he did not have confidence in the second bill or its certificate.

The Judge determined given the number of flaws throughout the assessment on the Bill of Costs, the Points of Reply, the witness statement of Mr Thompson and his oral evidence that it cast significant doubt over the position of the CFAs and retainer in the claim. In accordance with Part 44 of the CPR which sets out the basis of assessment, where there is doubt the Court must exercise such doubt in favour of the paying party. The Judge therefore assessed the claim at zero (or at whatever disbursements had been paid prior to the assessment proceedings).

It cannot be said that the case did not represent a just outcome given the facts of the case. What is perhaps most interesting in this case is the precedent that it may set. I very rarely see Points of Dispute in a CFA case that does not raise the case of Hollins v Russell [2003] EWCA Civ 718 in order to elicit the disclosure of the CFA / Retainer documentation. The problem is how does one identify what is a fishing expedition and does this case mean that failure to disclosure documentation creates so much doubt that a claim for costs could be completely invalidated.

Clearly it is unlikely that any Costs Judge would assess a claim for costs at zero solely on the basis that no disclosure of the retainers is provided, there is, however, a looming question over whether a paying party may now chose in addition to Hollins v Russell to attempt to refer to this case also (and in the process mis-apply it).

Myatt v National Coal Board; Garrett v Halton MBC (2006) further adds to the discussion around the disclosure of a CFA / Retainers in that it states that disclosure of the same should only be required where there is a genuine issue. Clearly this case fits that remit. The case of Scott –v- Hull & East Yorkshire Hospitals NHS Trust clearly gives more power to the paying party and rightly so. If a Receiving Party has complied correctly with the rules and regulations then there should be no reservations about disclosing the CFAs and / or retainers. The failure to disclose simply creates more doubt.

The question that arises out of this case and remains unanswered is should CFAs be disclosed at the outset of a costs claim? This would prevent any arguments being raised and resolve any doubts the paying party may have as to their liability to pay. Clearly the only people who would object to such a change would be those with something to lose. Those who do everything correctly would have nothing to lose but everything to gain.

I invite people to put forward their opinions, should CFAs be disclosed at the outset of the costs claim or should such a document remain privileged?

If you have any queries in relation to this blog please contact Sean Linley on 0113 336 3327 or sean.linley@clarionsolicitors.com or the Clarion Costs Team on 0113 246 0622

Proportionality – How This Has Changed Post Jackson

Following the Jackson Reforms (1st April 2013), the issue of proportionality has seen big changes.

Pre-April 2013

Before 1st April 2013, proportionality was clearly defined under CPR 1.1(c):

“(c) dealing with the case in ways which are proportionate-

  • to the amount of money involved;
  • to the importance of the case
  • to the complexity of the issues; and
  • to the financial position of each party

(d) ensuring that it is dealt with expeditiously and fairly; and 

(e) allotting to it an appropriate share of the Court’s resources, while taking into account, while taking into account the need to allot resources to other cases”. 

In addition to the above principles Costs Practice Direction Section 11 under CPR 44.5 provided that the following factors would be considered:

“11.1 – The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.

11.2 – In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.

11.3 – Where a trial takes place, the time taken by the Court in dealing with a particular issue may not be an accurate guide to the amount of time properly spent by the legal or other representatives in preparation for the trial of that issue.

11.6 – In deciding whether the base costs are reasonable and (if relevant) proportionate the Court will consider the factors set out in Rule 44.5”.

Prior to the Jackson reform, Lowndes v The Home Office (2002) clearly set out the principles whereby the Court would assess a Bill of Costs using a two-stage test.

Using the principles in Lowndes the Court would first look at the costs claimed on a global approach. If the costs were deemed to be proportionate and inline with CPR 44(2), the Court would allow each item if reasonably incurred and reasonable in amount. Should the Judge see these to be disproportionate then the Court would assess each item individually and allow only the items which were necessary as well as reasonable.

Post-April 2013

Following the CPR amendments which came into force from 1st April 2013, proportionality is now defined under CPR 44.3 (2):

“a) Only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably incurred or necessarily incurred”.

CPR 44.3 (5) provides that:

“(5) the costs incurred are reasonable if they bear reasonable relationship to:

  • the sums in issue in proceedings;
  • the value of any non-monetary relief in the issue in the proceedings;
  • the complexity of the litigation
  • any additional work generated by the conduct of the party; and
  • any wider factors involved in the proceedings, such as reputation or public importance”.

What does this mean for Costs Lawyers?

Where a Bill of Costs prior to the Jackson reforms would be split according to the applicable VAT rates, different funding arrangements, previous Solicitors etc., the Bill of Costs post Jackson must be split from 1st April 2013 to allow the Court to apply the new proportionality tests.

One question which appears to be an area of uncertainty within the costs world is when the proportionality split should apply. In my experience it has been widely understood that the Bill of Costs should be split where Court Proceedings are issued after 1st April 2013. Any work which has been undertaken after this date will be subject to the new proportionality rules. Work undertaken where Proceedings were issued prior to 1st April 2013 will fall under the scope of CPR 44.5.

Where Proceedings have not been issued prior to settlement of the Claimant’s damages, a split should also apply from 1st April 2013. These cases would fall within the new proportionality rules.

Conclusion

It is highly important that the new proportionality principles are fully understood and complied with accordingly. Non-compliance with the new rules may lead to various problems commencing Detailed Assessment Proceedings, potentially resulting in the Judge’s refusal to assess the Bill of Costs.

If you have any questions or queries in relation to this blog please contact Kirsty Black (kirsty.black@clarionsolicitors.com and 0113 222 3245) or the Clarion Costs Team on 0113 2460622.

Dufoo – v – Tolaini and Ors, Court of Appeal – Civil Division, November 27 [2014] EWCA Civ 1536

This is an interesting costs case whereby three Claimants issued proceedings against the Defendant. Two of the Claimants settled their claims and the third one went on to trial and lost. The issue of costs liability was considered at the Court of Appeal and it was held that regardless of the fact that two of the Claimants had already settled their claims and it was agreed by the Trial Judge that no costs were to be paid by the first two claimants, they were in fact still liable to contribute to the costs to be paid by the third Claimant to the Defendant. It was therefore ordered that the first two Claimants contribute to the costs payable.

Main point to note from this case

The Judge held in this case that “the Judge fell into error at paragraph 6 of his costs judgment when he held that the settlement agreement was a sufficient reason for refusing the contribution claim. That is to mis-state the significance and effect of the settlement agreement”.

What can be learnt from this is in any case where there are joint Claimants, it cannot assumed that because one or more Claimants are successful, they are automatically omitted from any liability for costs payable by the unsuccessful joint Claimant. As the Judge provided, “in a multi-party action the Court has power under CPR 44.2 to order that Party A should contribute to the costs payable by Party B to their mutual adversary. In the unusual facts of this case it is appropriate to exercise that power”.

If you have any questions or queries in relation to this blog please contact Kirsty Black (kirsty.black@clarionsolicitors.com and 0113 222 3245) or the Clarion Costs Team on 0113 2460622.