Author: ujjainimistry

When Can a Costs Budget Be Varied? The Importance of a “Significant Development”

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The appeal decision in Bassey v Whittaker & Watford Insurance Company Europe Ltd  [2026] EWHC 2126 (KB) reinforces the restrictions on varying an approved costs budget. Where there is no significant development in a case, the court does not have a general discretion to vary costs budgets.

Costs budgets are intended to give parties and the court a degree of certainty about the costs of future stages of litigation. That certainty would be somewhat weakened if an approved budget could be revised whenever a party believed its costs had become greater than originally budgeted.

In this judgment, Mr Justice Cavanagh provides an important reminder of the limits on the Court’s power to vary an approved costs budget. Mr Justice Cavanagh emphasises the fact the Court has a discretion to vary an approved costs budget only once the requirements of CPR 3.15A are satisfied; and a “significant development” in the litigation is an essential prerequisite to obtaining any variation under CPR 3.15A.

It is, therefore, not sufficient to merely argue that costs have increased, that the litigation has become more expensive, or that the original budget has proved to be inadequate, as reasons to vary the budget. The Applicant must state genuine examples of significant developments in the litigation to justify a revision.

Background Facts

The appeal arose in the context of a personal injury claim brought by the Respondent who suffered serious injuries when he was struck by a car driven by the First Defendant. The Appellant is the Second Defendant, the First Defendant’s insurer. The Appellant had admitted liability and the proceedings were proceeding as to quantum.

The Respondent’s budget was approved by DJ Maddison at the Costs and Case Management Conference on 18 December 2024, at approximately £1.03m. The Appellant’s budget was approved at approximately £341,000. The case was complex, involving substantial medical and non-medical expert evidence and a projected 10-day Trial.

A further hearing took place on 27 November 2025, before DJ McLoughlin, where the Appellant made an application to vary the directions set by DJ Maddison on 18 December 2024. A directions order was made, which included at paragraph 3 a direction that the parties file and serve Precedent Ts to take account of the increased costs associated with the amendments made to the 18 December 2024 Order.

The Respondent sought a further £238,350 and a Costs Management Hearing was listed for 6 February 2026. The preamble to the Order dated 6 February 2026 stated “Upon the Court recording that the amendments to the Order of DJ Maddison dated 18th December 2024 were not a significant development within CPR 3.15A but does not prevent the costs being increased”.

The issues in the appeal

The main question on appeal was whether, having found that the varied directions were not a significant development under CPR 3.15A, the District Judge had power to vary the approved cost budget.

The High Court rejected the Respondent’s argument that the November 2025 order amounted to an agreement that the budgets could be revised, or that there had been significant developments. The reference in the November 2025 order to preparing Precedent Ts was so these would be ready if it was later decided there were significant developments and budgets should be revised. The High Court also found that the District Judge had decided that there had been no significant developments, as recorded in the preamble.

 

Mr Justice Cavanagh referred to Master Kaye’s Judgment in Persimmon Homes Limited v Osborne Clark LLP [2021] EWHC 831 (Ch), on the matter of whether significant developments are a necessary pre-condition to the variation of a cost budget.

Mr Justice Cavanagh agreed with the conclusions set out by Master Kaye in Persimmon Homes, that it was clear from the purpose, structure and language of CPR 3.15 and 3.15A, that the existence of significant developments since the cost’s budgets were approved were a necessary precondition before a costs budget could be varied. This confirmed that the Court does not have a general discretion to vary costs budgets if there have been no significant developments. The court left open the position whether there was power to vary costs budgets in the absence of significant developments if the parties were agreed, as this did not arise on the facts; Mr Justice Cavanagh declared this point should be decided in a case in which it arises.

The meaning of ‘significant developments’ is not defined in the CPR. Mr Justice Cavanagh further relied on the words of Master Kaye in Persimmon, stating that “an order for variation cannot be made in order to remedy a budget in respect of developments which could or should have been covered at an earlier approval or variation.” He then went on to state that just because some estimates and assumptions change, does not mean that those developments are considered to be significant developments. It would not be in the interests of justice or the overriding objective if there was scope to continuously revise costs budgets if there are frequent developments in the litigation.

Conclusion

The appeal was allowed because the District Judge had no power to order variation of the costs budgets when he had found there had been no significant developments since the costs budgets had been finalised, and he had not erred in this finding

A development under CPR 3.15A will not be considered to be ‘significant’ merely because it leads to additional work and an approved costs budget is not automatically capable of being varied simply because the costs have increased. Mr Justice Cavanagh made clear that “it would not be in the interests of justice or the overriding objective if there was scope for constant tinkering with budgets if there are developments in the litigation”. There must be a genuine and significant change in the litigation which warrants revision. Filing a Precedent T does not itself establish entitlement to variation of the cost budgets.

For practitioners, the safest approach is to monitor budgets continuously, identify significant developments as they occur, record their impact on future work and make any necessary application promptly.

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

Post-Judgment Security for Costs? The SCCO Clarifies the Position

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In the case of Magomedov & Ors v Rabinovich & Ors [2026] EWHC 962 (SCCO), Costs Judge Brown considered an “unusual application” concerning whether the SCCO had jurisdiction to order security for costs in detailed assessment proceedings.

Background Facts

Following the substantive claim, the Applicants (Defendants in the original claim) served Notice of Commencement of Detailed Assessment and a Bill of Costs totalling £4.2million, pursuant to four costs orders made in their favour. No request for detailed assessment was made, and Points of Dispute had not been served. Also, interim payments totalling £1.8 million had already been received.

The Applicants applied for an Order under CPR 25 for the Respondents (the Claimants in the original claim) to provide security for the costs of detailed assessment proceedings. The Respondents opposed the application on the basis that the SCCO lacked jurisdiction to consider the application because its powers were limited to those set out in CPR 47, which provides for the court to grant an interim costs certificate ordering the paying party to pay such sum as the SCCO considers appropriate.

The Applicants sought the sum of £336,000 which was some 70% of the costs it said would be incurred of £480,000.  A bill of costs had been prepared at a cost of £220,000. It was said that some £259,000 would be incurred in the assessment, assuming a three-week hearing.

The Court referred to the relevant provisions of CPR 25, specifically 25.1 which enables the court to grant an order for the security of costs as one of the interim remedies outlined in that subsection. Subsections 25.26(1) and 25.27 were also relied upon in support of the application.

The Application

The Application was dismissed. Costs Judge Brown held that, although the court hearing the substantive claim may order security for the costs of detailed assessment as part of the overall costs of the proceedings, once the substantive proceedings had concluded, the SCCO did not possess the wider jurisdiction available to the court hearing the substantive claim and was instead limited to the narrower powers under CPR Part 47.

While CPR 25.12 allows the court dealing with the substantive claim to order security for costs “after judgment”, this did not extend to subsequent detailed assessment proceedings. CPR 47 was described as a ‘self-contained code’ governing detailed assessment and did not incorporate the provisions of CPR 25.

The Court also emphasised that CPR 47 contains mechanisms that are designed to protect the receiving party and that the only interim remedy available in detailed assessment proceedings was an interim costs certificate under CPR 47.16.

The judge identified several structural reasons for declining jurisdiction, including the absence of a clear enforcement mechanism, the difficulty in identifying the “defendant” for CPR 25 purposes once the parties had become receiving and paying parties, and the risk of creating disproportionate satellite litigation.

In any event, even if jurisdiction had existed, the judge stated that the application would have been refused as a matter of discretion, particularly because the Applicants had failed to raise the issue before the court determining the substantive claim. The appropriate course for parties seeking security for the costs of detailed assessment is therefore to apply to the court dealing with the substantive proceedings, which has sufficient power to include such costs within a security for costs order.

Conclusion

The Senior Courts Costs Office (SCCO) has held for the first time that it lacks jurisdiction to order security for costs under CPR 25, which in turn highlights the fact that CPR Part 47 operates as a ‘self-contained code’.

The judgment clarifies the limit of the SCCO’s jurisdiction, confirming that powers that derive from the CPR cannot be imported into general discretion.

The key takeaway for practitioners is if an application for security for costs is required, it should be made to the court hearing the underlying claim. Once the proceedings enter the costs jurisdiction in CPR 47, the available tools to remedy matters become narrower.

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

From Millions to Nil: The Stark Warning in Winros v Global Energy

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In a judgment handed down on 19 December 2025 in the case of The Winros Partnership v Global Energy Horizons Corporation [2025] EWHC 3362 (Ch) (19 December 2025), Mr Justice Marcus Smith upheld a decision of the Senior Costs Judge Gordon-Saker in an assessment under the Solicitors Act 1974 to assess bills totalling circa £6 million at nil. The decision focusses on the circumstances in which a solicitor can terminate a CFA and preserve the right to claim fees from a client.

 

Background

The dispute arose from a long-running dispute between The Winros Partnership (formerly Rosenblatt Solicitors) and their former client, Global Energy Horizons Corporation. Winros had acted for Global Energy under a series of CFAs, which typically provided that the solicitor was only paid only in the event case succeeded.

However, the relationship deteriorated before any success was achieved under the last CFA. Winros terminated the retainer by accepting Global Energy’s repudiatory breach rather than relying on an express termination clause in the CFA.

After the retainer was terminated, Winros delivered a bill for circa £6 million, arguing it should be paid for the work they had done up to the point of termination. Winros also issued a claim in the Chancery Division for damages in relation to the termination of the CFA. Global Energy subsequently asked the court to assess the bill under Section 70 of the Solicitors Act 1974and the claim in the Chancery division was stayed pending the outcome of the assessment.

What the High Court Decided

On appeal from the Senior Costs Judge’s decision in the Senior Courts Costs Office, Mr Justice Marcus Smith upheld the assessment that Winros was not entitled to any payment and that the bill was to be assessed at nil.

Winros chose to terminate the CFA by accepting Global Energy’s repudiatory breach rather than invoking the contractual mechanism in clause 14 (which would have entitled it to fees for work done). Choosing a common law termination meant the contractual protections for payment on termination did not apply.

Furthermore, Winros argued they should have been paid on a quantum meruit basis, which is a restitutionary claim for the value of work done. However, the Court agreed with the lower court that as the CFA had already clearly set out the consequences of early termination, there was no “total failure of basis” that would justify unjust enrichment. Simply put, the contract already articulated what was to happen, leaving no gap for restitution to fill.

The Judge also commented (albeit obiter) that the detailed assessment procedure under the Solicitors Act 1974 was a regulatory process for reviewing bills, not a forum to decide standalone restitutionary claims. Those should be pursued in separate proceedings if genuinely arguable. Therefore, a detailed assessment proceeding was not the appropriate course of action.

The decision highlights the fact that courts will strictly uphold the terms of a carefully drafted CFA, particularly clear provisions on termination and payment that allocate risk with certainty—even if that results in a solicitor going unpaid. It highlights the critical importance of how a solicitor terminates a retainer, as terminating under contract versus at common law can dramatically affect entitlement to fees, with the wrong approach potentially forfeiting enforceable payment rights.

Overall, the judgment serves as a reminder that in CFAs, both procedural compliance and substantive terms are decisive in determining financial outcomes.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Does a paying party have to pay VAT on costs if an insurer is no longer trading?

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The case of Shmuel Moller & Ors v One Touch Solution Limited & Anor [2026] was a routine summary assessment of costs arising from an interlocutory hearing where the Court was required to undertake a focused examination of VAT recoverability where the receiving party was in liquidation.

Background information

The proceedings arose out of a commercial claim brought by the Claimants against One Touch Solution Limited and its insurer, Hiscox Insurance Company Limited. During the litigation, the Claimants were granted permission to amend their statement of case.

The Court ordered that the Claimants should pay the Defendants’ reasonable costs of responding to the amendment, including the costs of preparing an amended defence, such costs to be assessed if not agreed.

By the time the costs issue arose, One Touch Solution Limited had entered creditors’ voluntary liquidation. This gave rise to a dispute as to whether VAT on the Defendants’ legal costs was recoverable as part of the costs order. The Claimants argued that VAT should not be included because it was recoverable by the Defendant (or its estate). The Defendants contended that liquidation meant VAT was irrecoverable and therefore payable by the Claimants.

The Court was therefore required to determine, in the context of a costs assessment, whether VAT on the relevant legal services was recoverable where the receiving party was a company in liquidation, and whether any additional costs should be awarded in relation to the VAT dispute itself.

The Parties’ arguments

The Claimants argued that VAT was only recoverable if the receiving party cannot recover it as input tax from HMRC and that the First Defendant had been VAT-registered at the relevant time legal services were supplied. They also argued that the liquidation did not change the VAT position; insolvency and VAT deregistration on liquidation does not automatically render VAT irrecoverable.

Furthermore, they argued that in respect of the First Defendant’s costs that were funded by the insurer, the insurer was not the entity that incurred the legal services and had no independent right to recover VAT as costs.

The Defendants argued that VAT was irrecoverable and therefore recoverable from the Claimants as part of the costs order. They stated that the liquidation rendered VAT irrecoverable and that VAT could not be recovered in an ordinary way.

Conclusion

The Court held that the First Defendant’s liquidators can recover VAT by filing appropriate VAT returns, meaning neither Defendant has suffered a recoverable loss for VAT in their costs. The Court’s decision was based on the wording of the Regulation 111(5) of the Value Added Tax Regulations 1995. The wording clearly supported the Claimant’s position, and it was held that the Defendants’ position flew in the face of the regulation and was unexplained.

The Claimants sought £1,000 (excluding VAT) for the costs of preparing submissions on the VAT issue. The court noted that the issue had been fully argued in correspondence, the Claimants succeeded on the point, and the Defendants could have avoided further costs by addressing it clearly at the earlier hearing.

Although the Court did not hear submissions from the Defendants on these costs, it found that the Claimants were clearly successful, that the usual CPR Part 44 costs principles applied, and that the amount claimed was reasonable and proportionate.

Accordingly, the Court ordered the Defendants to pay the Claimants’ costs of £1,000, subject to the Defendants’ right to apply in writing to set aside or vary the order, with any such application to be determined on the papers and with modest further costs expected.

Key Takeaways

Although the decision in Moller is not groundbreaking, it is a timely reminder that insolvency does not simplify VAT issues—it often complicates them. VAT recoverability turns on tax entitlement, not litigation status and insurers cannot assume VAT will be recoverable from the opposing party.

VAT on costs remains a technical issue requiring proper analysis. Treating it as an afterthought can prove an expensive mistake.

The Court rejected the common assumption that where a company is in liquidation, VAT on its legal costs must be irrecoverable and therefore payable by the opponent as part of a costs order.

Therefore, the key principle remains unchanged: VAT is only recoverable as part of costs if the receiving party cannot recover it as input tax. Liquidation or VAT deregistration does not, without more, make VAT irrecoverable.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Understanding the consequences of serving a defective bill of costs

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In Hyder -v-Aidat-Sarran [2024] EWHC 3686 (SCCO), Deputy Costs Judge Roy KC dealt with two applications: from the Claimant for relief from sanctions for late service of the bill of costs; and from the Defendants who applied under CPR 44.11 to strike out the Claimant’s claim for costs due to serious and repeated failures to comply with rules, practice directions and Court orders and/or unreasonable or improper conduct during the detailed assessment proceedings.

Background Information

The applications were made against a background of procedural failures by the Claimant. A defective bill of costs, which had been prepared in the wrong format, had been served late. The Defendants served Points of Dispute in response to the defective bill, which highlighted numerous other failings, including a failure to certify and claims for costs to which the Claimant was not entitled. In the absence of Replies to Points of Dispute, the Defendants applied for an Unless Order.

As there was no serious dispute that the Claimant’s bill was defective, and on the strength of assurances given by the Claimant that an amended bill of costs had been prepared which would be served at the same time as the request for detailed assessment was filed, an Unless Order was made by consent. The Unless Order required the Claimant to file a request for detailed assessment hearing by 13 August 2024. In default of which the Claimant’s costs would be disallowed, and the Claimant would be required to pay the Defendants’ costs of the detailed assessment proceedings.

In the event, the Claimant filed the bill of costs together with a request for detailed assessment 1 day late by email, notwithstanding that the use of CE-File is compulsory in the Senior Court Costs Office. Although by this time the bill was in the correct format, none of the previously identified defects had been rectified and the filed bill introduced further defects in addition to those previously identified.

The Claimant was therefore required to apply for relief from sanctions. The Defendants opposed the application on grounds that the bill was so severely defective the Claimant could not properly be said to have belatedly complied with the Unless Order and they also applied for an order to strike out the claim for costs under CPR Rule 44.11, in any event.

The Judge dealt with each application in turn.

  1. The Claimant’s application for a relief from sanctions

The Judge referred to the Denton Principles, which is a three stage test used to guide the Court when deciding applications for a relief from sanctions under CPR 3.9.

Stage 1 was considered in relation to whether the service of a defective bill a day late was non-compliance with the order and whether that was a serious or significant breach.

The Judge stated that he was ‘ultimately against’ the Defendants submissions that the bill was so defective it should not be described as complying with the order because the bill was served within the meaning of the order in that the Unless Order did not specify a requirement to serve a fully compliant bill. Relief from sanctions was therefore granted.

  1. The Defendants’ application under CPR 44.11 to strike out the Claimant’s claim for costs

CPR 44.11(1) sets out the Court’s powers to address misconduct, which may apply where:

(a) a party or their legal representative fails to comply with a rule; or

(b) a party’s or legal representative’s conduct is unreasonable or improper.

If either limb of CPR Rule 44.11 are met, then the Court may apply one of the sanctions in CPR 44.11(2), which are:

  • disallow all or part of the costs which are being assessed; or
  • or order the party at fault or that party’s legal representative to pay costs which they have caused another party to incur.

The Judge found that both limbs of CPR 44.11(a) and (b) were made out. He found that in addition to the defects identified in the original bill, the Claimant had served an electronic bill which failed to comply with most of the requirements of electronic bills in Practice Direction 47.

The Judge agreed there were multiple significant failures within the bill, with some more serious than others. He also found it ”beyond belief” that the defects were not rectified in the electronic bill, despite being identified in the Points of Dispute. The Claimant also failed to serve evidence to explain or address the failings and failed to apologise for (or even acknowledge any of the failings) before the hearing. This was described as “serious and troubling lack of insight and contrition on behalf of the Claimant’s solicitors.”

It was also held that it was not appropriate for the Claimant’s solicitor to blame their costs draftsman for the errors on the basis that the costs draftsman is the solicitor’s agent, and the solicitor is vicariously liable for the draftsman’s failings (Gempride v Bamrah [2018] EWCA Civ 1367). The solicitor also had direct supervisory responsibilities which they did not fulfil in relation to reviewing and checking the bills of costs.

The Judge therefore found that “there have been multiple compound breaches. They have been serious. They have been persistent. They are unexplained, and they are inexcusable for the most part.”

It was then left to the Judge to decide upon the severity of the sanction to impose. Although a complete strike out of the claim for costs was possible, the Judge decided against that on grounds that the Court of Appeal had found that sanction to be draconian, even in cases of serious misconduct. Instead, the Judge recognised that a severe sanction was warranted and Ordered that the Claimant’s assessed costs would be subject to a 75% reduction.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Breakdown of agency uplift on expert fees … a step closer to clarity?

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In the recent case of JXX v Archibald [2025] EWHC 69 (SCCO) Costs Judge Rowley considered whether a breakdown of an expert’s fee is required when the expert is instructed by an agency.

The Defendant applied for a declaration that the Claimant’s bill of costs was non-compliant with the CPR and requested that the detailed assessment proceedings were stayed until the Claimant filed and served copies of the experts’ fee notes and separate breakdowns of the costs of the medical agency and experts. The application also sought that the bill of costs was to be struck out in its entirety or the claims that relate to medical evidence were to be assessed at zero.

This led to the question – is the Claimant obligated to provide a breakdown of the expert fee note to show the percentage of the fee being taken by the medical expert agency?

Background information

A Consultant Ophthalmologist was instructed by the Claimant, directly in the first instance and then through the medical agency for further evidence; with fees amounting to around £120,000. Medical and Professional Services Limited (‘MAPS’) was the agency used in this case and the Defendant’s noticed a ‘stark and shocking’ difference in the fees of the expert from when they were directly instructed, compared to when they were instructed via MAPS. The invoices provided by the expert to MAPS had been increased by approximately 60%

In the Defendant’s Points of Dispute, they stated that the “Claimant was accordingly required to file and serve a breakdown in respect of each, and every fee rendered by MAPS… and the Court can arrive at a reasonable and proportionate allowance. […] Pending this further information the Defendant puts in dispute each and every fee charged by MAPS and declines to make any offer for any such fees at this time.”

The Claimant responded to this point, in an attempt to justify their use of MAPS and submitted that all expert fees were “reasonable and proportionate on a global basis, particularly taking into account the specialist skill, knowledge and expertise of the experts involved.” The Claimant also requested a breakdown from MAPS.

The Claimant’s argument against MAPS’ approach

The Claimant argued that MAPS was instructed to prepare a medical report and to provide all relevant services, and the fee claimed was one which the Claimant was liable to pay and was appropriately invoiced and vouched for on the assessment.

Unhelpfully, MAPS declined to provide a breakdown of the expert’s fees, and the managing director claimed it was not part of MAPS’ standard policy to supply such information as it was regarded as being “unimportant and misleading when considering the overall reasonable cost of obtaining the medical expert evidence … as well as being confidential”.

Cost Judge Rowley stated that “the approach of MAPS has left the Claimant in something of a bind” on the basis that MAPS’ involvement required a ‘slight’ increase in the fee but would result in a ‘significant’ drop in the Solicitor’s own charges. The extent of MAPS’ charges was to be justified by showing the work it has done, but as there was no evidence provided, the position was not expected to change.

He also goes onto say that “if the MRO decides not to justify its charged by way of evidence, it seems to me to be likely that the composite fee would be reduced on assessment.” A justification of the charges is based on a comparison of the work done by the third party and if it would be cheaper if it was carried out by the Claimant’s solicitor.

This comparison means looking at whether it was reasonable for the report (or similar work product) to be produced by the expert without any additional quasi-legal work being carried out.

Conclusion

There are two options a Claimant could take when faced with a composite invoice; they could pursue assessment:

  1. on the basis of the expert’s evidence and the agency work in obtaining that evidence if the information sought by the Defendant is provided; or
  2. on the hypothetical basis that there has been no MAPS involvement, and the fees claimed are solely for the expert’s evidence, if no such information is provided.

The Defendant would then be entitled to produce and rely on comparative evidence, dependant on the approach taken.

On a practical level, when contemplating instructing a medical agency, calculating and comparing the additional time of the lawyer in the event of a direct instruction versus the costs of the agency, may be useful when determining the overall costs benefit.

Practitioners may opt to instruct experts directly and avoid using medical agencies altogether.

This is an example of yet another case in favour of evidencing the breakdown.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Uplifted Guideline Hourly Rates from 1 January 2025

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The Guideline Hourly Rates have increased with effect from 1 January 2025.

In December 2023, the Master of the Rolls accepted the recommendations of the Civil Justice Council Costs Review, which was published in May 2023. One of the recommendations was to annually review and increase the Guideline Hourly Rates in accordance with the Services Producer Price Index (SPPI).

The Guideline Hourly Rates are now as follows (the brackets reflecting the rates effective from 1 January 2024 to 31 December 2024):

Grade Fee Earner London 1 London 2 London 3 National 1 National 2
A Solicitors and legal executives with over 8 years’ experience £566

(£546)

 £413

(£398)

 £312

(£301)

 £288

(£278)

 £282

(£255)
B Solicitors and legal executives with over 4 years’ experience £385

(£371)

 £319

(£308)

 £256

(£247)

 £242

(£233)

 £242

(£233)
C Other solicitors or legal executives and fee earners of equivalent experience £299

(£288)

 £269

(£260)

 £204

(£197)

 £197

(£190)

 £196

(£189)
D Trainee solicitors, paralegals and other fee earners £205

(£198)

 £153

(£148)

 £143

(£138)

 £139

(£134)

 £139

(£134)

 

 

There has been an average of a 5%  increase to Grade A rates and 4% increase to Grade B, Grade C and Grade D rates.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Can the paying party go to prison for not paying costs owed?

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The appeal of Smith v Kirkegaard [2024] EWCA Civ 698 involved a contempt application and consideration of whether non-compliance with an order for costs amounted to a contempt of court punishable by committal to prison.

Case Background

In 2018, Respondent – Mr Kirkegaard, discontinued his original claim for libel against Appellant – Mr Smith, because four allegedly defamatory blogs, published by Mr Smith, were deemed to be ‘expressions of opinion’ at a preliminary hearing in 2019. This meant that a claim for libel was likely to fail. Mr Kirkegaard was ordered to pay half of Mr Smith’s costs, which were summarily assessed in the sum of £13,500 and payable within 14 days of the order. But this was not paid.

Following discontinuance of the claim in May 2020, Mr Smith was thereby entitled to his costs of the action. A final costs certificate was issued by the SCCO in September 2021 in the sum of £26,668.43 to be paid by Mr Kirkegaard; this was endorsed with a penal notice. This was also not paid.

Mr Kirkegaard failed to make any payments under the costs orders despite several attempts by Mr Smith to enforce them, including initiating enforcement proceedings in Denmark and Germany, investigating public records, and filing an application to be questioned about assets. Mr Smith alleged that Mr Kirkegaard evaded service by hiding his location generally.

Application to commit for contempt.

In July 2023 Mr Smith proceeded to file a contempt application, alleging that Mr Kirkegaard had made a false statement regarding his named address and had failed to pay two costs orders. This was dismissed by the judge for a range of issues. Permission to appeal this decision was however granted by Warby LJ in March 2024.

Was the failure to pay costs enforceable in contempt proceedings?

It was determined that a failure to pay a costs order could not be pursued by contempt proceedings.

Mr Smith relied on Australian case law (PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2020] FCA 685) to argue that the court could treat a deliberate failure to pay a judgment debt as contempt if they had the means to pay. This argument was based on the fact that in March 2020, Mr Kirkegaard had proffered to have an annual income of £72,000 and could make £500 monthly instalments.

The Appeal Decision

Lord Justice Dingemans dismissed Mr Smith’s line of argument on the basis there is a different procedural and statutory regime relating to non-payment of judgment debts in England and Wales.

Although CPR 81.4 provides for enforcement by an order for committal for disobedience of a judgement or order, the Debtors Acts 1869, effectively abolished committal to prison for non-payment of judgment debts, apart from some exceptions in sections 4 and 5.

LJ Dingemans suggested that the section 4 exceptions and Section 5 as a whole, did not apply in this case. The default remains a contempt in these circumstances, but not punishable by committal.

Conclusion

LJ Dingemans, LJ Bean and LJ Asplin all agreed that the non-payment of the costs order was a contempt of court, but it could not be enforced by imprisonment for contempt.

The courts have developed other remedies, such as the freezing order, to help creditors enforce judgment debts. The courts may also exercise a discretion not to permit a defaulting party to participate in further proceedings – but that did not arise in this case.

Clarion’s Costs and Litigation Funding team can be contacted at civilandcommercialcosts@clarionsolicitors.com

A substantial reduction of costs on the indemnity basis in a summary assessment

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Mrs Justice Knowles summarily assessed the costs of a dismissed committal application, made by the wife in Alvina Collardeau v Michael Fuchs & Anor [2024] EWHC 642 (Fam). The costs of the First and Second Respondents were assessed on the indemnity basis, but they were substantially reduced for the reasons set out below.

Indemnity Basis:

Mrs Justice Knowles saw ‘no justification for departing ’’ from the principle that indemnity costs are usually imposed in contempt proceedings, and she, therefore, assessed the costs on this basis. The Judge noted that the applicant’s case was ‘weak and evidentially flawed’’ as well as being ‘improperly motivated and disproportionate’.

CPR 44.4(1)(b) outlines the factors to be considered in deciding the amount of costs to be awarded when assessing on the indemnity basis. Costs will be allowed if they are not unreasonably incurred, or they are not unreasonable in amount; any doubt will be resolved in favour of the receiving party. The Court do not need to have regard to proportionality when assessing costs on the indemnity basis. This means that the receiving party is likely to obtain a higher percentage of their costs claim on assessment than if costs were assessed on the standard basis.

Despite Mrs Justice Knowles ordering that the costs be assessed on the indemnity basis, she did determine that the costs incurred by both respondents were ‘manifestly excessive and unreasonable’. The total spent between both respondents was £510,876.90. The Second Respondent submitted that he was entitled to have regard to the wife’s profligate approach to litigation costs when instructing his own legal team. The Judge deemed this as a ‘wholly unreasonable approach, which encourages exorbitance, if not profiteering’.’ This Respondent’s total costs exceeded £330,000.

The First Respondent’s costs were reduced by 33% as it was not justifiable to have 2 of each grade of fee earner preparing the case, charging a significant rate. Counsel’s fees were also reduced by 50%.

The Second Respondent’s fees were reduced by 44%. But this was still considered unreasonably high and excessive. There were 3 Grade A fee earners on this matter, which was deemed unnecessary. The costs associated with any obtained expert evidence was deducted in full as the court did not grant authorisation for expert evidence to be adduced.

Mrs Justice Knowles considered all features of the case and in order to reach a just decision, costs were assessed on an indemnity basis, but the costs were heavily reduced as they were considered to be wholly unreasonable.

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

Reductions to costs won’t be applied automatically- rules the High Court

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Where a paying party requests a reduction in costs on the basis that “there is always a reduction,” the request will not necessarily be granted and a lower figure automatically awarded, where the costs are deemed reasonable and proportionate.

In his decision in Next Generation Holdings Ltd & Anor v Finch & Ors [2023] EWHC 2925 (Ch), HHJ Johns KC said that it ‘would be wrong’ to lower any costs payable, simply on the assumption that reductions are often made.

Background Information

The case involved a financial dispute which arose following a Share Purchase Agreement. Subsequently, allegations of fraudulent misrepresentation were made against the Defendant, who proceeded to seek a contribution from a Third Party (KD).

At the end of the 3-week trial in June 2023, HHJ Johns KC decided that the third party was not liable, but the initial defendants were.

A consequential judgment on matters resulting from the initial judgment, including costs, was handed down on 17 November 2023.

Summary Assessment

The sum of £65,640 plus VAT was sought by the third party for costs, which included advice and representation by the direct access barrister instructed on her behalf, with this figure including a sum of £52,500 for representation at trial. It was at this stage that Counsel for the Defendants, sought a reduction of costs on the basis that ‘there always is’ […] a reduction in costs. He also insisted that the hourly rate of Counsel, at £495, was too high and that trial preparation claimed, at over 5 days was too long.

Delivering judgment, HHJ Johns KC opined that the £52,500 trial fee was reasonable for a complex fraud trial that involved a significant amount of documentation. It was highlighted that the role of the Third Party’s Counsel was a smaller role than that of the other parties instructed Solicitors but five days trial preparation was proportionate in the matter.

The suggestion that the hourly rate was too high was also immediately dismissed, on the basis that the guideline rate for an equivalent Solicitor was £512. Furthermore, the Defendant’s Counsel fees of £525,425 were also deemed demonstrative of the fact that the sums claimed by the Third Party’s Counsel were proportionate. HHJ Johns KC considered that the total sum of £65,640 was “well within the range of proportionate figures” and it would have been wrong for any reductions to have been made, especially considering the fact the Third Party would have been defending a claim with a value of over £3 million if found liable. 

This case demonstrates that to obtain reductions to costs claimed, paying parties must have legitimate reasons for seeking to do so.

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