The Hourly Rate Debate: the effect of costs management on hourly rates

There has recently been a flurry of case law in respect of the effect of costs management on hourly rates at detailed assessment.

With regard to costs management, there are two rules of central importance, both contained within Practice Direction 3E:-

Para 7.3 provides that “The court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.”

CPR PD 3E (7.10), which states that It is not the role of the Court in the costs management hearing to fix or approve the hourly rates claimed… the underlying detail… is provided for reference purposes only”.

As to Detailed assessment, the relevant rule is Part 44.3(1), which provides that:-

Regardless of the basis upon which costs are assessed “…the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount”.

The starting point is the judgment in Harrison -v- University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792, which held that where there is an approved budget, the court is empowered to sanction a departure from the budget if it considers that there is good reason to do so. What the judgment did not say is that the figure allowed for a particular phase in a costs management order will be allowed unless there is good reason to depart from it. The distinction is subtle, but important.

Following a month later, the judgment in RNB -v- London Borough of Newham [2017] EWHC B15 (Costs) gave guidance on how the Court would approach hourly rates in the context of a costs management order. In RNB it was held that if hourly rates were reduced on assessment, that reduction would apply to all of the costs claimed, whether they were incurred pre- or post- the costs management order.

In Bains -v- Royal Wolverhampton NHS Trust, 18th August 2017, The County Court at Birmingham (Unreported), District Judge Lumb expressly disagreed with the position in Nash and found that “to reduce hourly rates for budgeted costs to the same levels as those allowed for the incurred costs… would be to second guess the thought process of Costs Managing Judge and would impute a risk of double jeopardy...”

In the absence of a report or transcript, we do not know what reasoning underpinned the judge’s finding in Bains. What is clear is that a central assumption to the finding in Bains was that the judge at costs management may have accounted for a reduction to hourly rates when making the costs management order. It could be said that such an assumption would be tantamount to a finding that the judge at costs management had breached CPR PD 3E (7.10), by in effect setting the hourly rates when making the costs management order. It might well be argued that such an assumption was unreasonable.

Furthermore, the judgment in Bains explicitly states that there is a risk of double jeopardy; in other words, that the judge on assessment may have considered a reduction to hourly rates when making the costs management order. At least on a standard basis assessment, CPR 44.3(2)(b), any doubt as to whether the court on costs management had done so should be resolved in favour of the paying party. Thus in the absence of an explicit finding that the judge on costs management had factored in a reduction to the hourly rates, the court on assessment should assume that they did not.

A little later, in Nash -v- Ministry of Defence [2018] EW Misc B4 (CC), Master Nagalingam of the Senior Courts Costs Office held that a reduction to hourly rates in respect of the incurred costs would not be a ‘good reason’ to depart from the budget for future costs. This has led to some litigants arguing that where there is a Costs Management Order, so long as the party is within budget for the given phase, a reduction to hourly rates will not ‘carry through’ to the future costs in the budget. It is important to recognise that, in Nash, the receiving party’s budget had been agreed.

The central question here is whether or not a reduction to hourly rates is a ‘departure’ from the costs management order. As stated above, hourly rates are not to be fixed or set by the court on costs management. Therefore, if the hourly rates do not form a part of the costs management order, a reduction to hourly rates for ‘future’ costs cannot be said to be a departure from it. By analogy, an additional liability (such as an ATE premium, which is recoverable in Clinical Negligence matters) does not form a part of the budget, and therefore a reduction to such a premium does not constitute a departure.

It is also important to note that CPR PD 3E 7.3 provides that the purpose of costs management is for the court to identify a range of costs which it considers to be reasonable and proportionate for the conduct of the claim. However, the fact that a costs management order has been made does not justify a party incurring costs which are individually unreasonable so long as they fall within budget. In the context of hourly rates, therefore, if it is found that an hourly rate of say £450 per hour is unreasonable, then that hourly rate is unreasonable regardless of whether the work was done before or after the costs management order was made.

Some commentators have argued that the judgments in Bains and Nash are an attempt by the Courts to implement the intention of Jackson LJ to remove the need for detailed assessment. Returning to Harrison, Davis LJ commented that the case had “descended into a kind of arms race in collecting views or comments… with an aim of… extracting some kind of clue as to what [had been] intended…” when the rules were drafted. Importantly he went on to comment “this is beside the point… what we have to do is construe the wording of [the CPR]”. It is quite clear that, in the judgment of the Court of Appeal, it is not the function of the Court to decide what the intention behind the rules was, but only to interpret what the Rules mean and how they apply to the facts.

The difficulty faced by litigators and judges at present is that the rules are unclear, and there is little guidance as to how they should be implemented. This results in a lack of clarity and certainty when proceeding to assessment of costs. In my opinion, there are two potential routes by which the rules might be improved:-

  1. The detailed approach

The Precedent H is amended to remove reference to hourly rates and time. There could then be no question of the assessing judge taking hourly rates into account. As the court cannot set the hourly rates in any event, this should have no practical impact upon the making of costs management orders; the judge on costs management will have a feel for the case and will be fully qualified to consider the work which needs to be done in each phase and make a judgment as to the amount of costs which it would be reasonable and proportionate to incur in doing it.

  1. The summary approach

The court is empowered to set rates at costs management, and also to make a judgment in relation to incurred costs. Under this system, the judge would summarily consider the costs already incurred in the litigation and include within the costs management order what each party will be allowed at the conclusion in respect of the costs already incurred. The court will set a limit for future costs, and the successful party is entitled at the conclusion of the litigation to the amount allowed by the court in respect of incurred costs, plus all amounts incurred after the costs management order so long as they are less than the budget.

The first approach would continue to provide for a detailed assessment at the conclusion of the proceedings, the second approach would not. Of course, the problem with the second approach is that it could give rise to unfairness as parties would not be able to deal with their opponents’ costs in detail.

What is clear is that under the current rules, there is significant doubt over how they should be interpreted, and we will have to wait and see whether this doubt will be rectified by the rules or by binding judgments in the courts.

Matthew Rose is a Solicitor in the Costs and Litigation Funding department at Clarion Solicitors. You can contact him at matthew.rose@clarionsolicitors.com, or the Clarion Costs Team on 0113 2460622.

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INDEMNITY COSTS FOLLOWING DISCONTINUANCE OF PROCEEDINGS

CPR 38.3 provides that a Claimant may discontinue a claim by filing and serving a Notice of Discontinuance on the other parties. Under CPR 38.6(1) it states the following:

“Unless the court orders otherwise, a Claimant who discontinues is liable for the costs which a Defendant against whom the Claimant discontinues incurred on or before the date on which the Notice of Discontinuance was served…”.

Under CPR 44.9(1), such an order is a deemed order for costs and the basis of assessment is the standard basis.

The case of Two Right Feet Limited (in liquidation) -v- National Westminster Bank PLC and others is a case where the Claimant discontinued proceedings against the Defendants and the Defendants made an application for costs to be awarded on the indemnity basis due to the following issues:

  1. failure to engage pre-action;
  2. improper and unjustified allegations;
  3. an exaggerated claim;
  4. a case which was speculative (both in facts and law);
  5. a claim which was brought without proper investigation;
  6. concerns as to the approach to disclosure; and
  7. delayed discontinuance, other delays and more minor points.

Background

On 3 March 2015, the Claimant commenced proceedings against the Defendants.  In the claim form, the Claimant alleged that the Defendants were liable for deceit and conspiracy.  The claim was first notified to the First and Second Defendants on 9 June 2015 and the claim form was served on 3 July 2015. The amounts claimed amounted to £20 million. The claims were strenuously denied by the Defendants.  On 7 October 2016 there was a case management conference where directions were set and the case was transferred into the Mercantile Court.  Disclosure followed in January 2017, but on 22 February 2017 the Claimant discontinued its claim. 

Indemnity Basis Costs Order

The Judgment provides very useful information for any party considering an application for an indemnity basis costs order as it cites the leading authorities (paragraph 36 is very useful to read in this regard).

The Judge concluded that an order for indemnity costs was appropriate and determined that the way in which the case had been advanced by the Claimant (and conducted) carried the case out of the norm, which is of course an important consideration for any court when deciding whether to award indemnity costs.

The case also highlights the importance of the receiving party (Defendants in this case) making an application. Notice of Discontinuance creates a deemed order for costs on the standard basis. Should a receiving party feel that they are entitled to indemnity basis costs then they should seek agreement with the paying party (Claimant in this case) or make an application to Court. A receiving party should not leave the matter for detailed assessment – the detailed assessment hearing is a forum to determine the quantum of costs, not to determine the basis of assessment.

This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding team.  He can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com

 

Getting your orders right – Fixed Costs

The introduction of fixed costs was expected to create certainty in the amount which parties would recover at the conclusion of a claim. However the rules as drafted leave numerous lacunas and gaps which parties can exploit, which in turn has lead to satellite litigation. This is not what the drafters of the rules intended and is often not in the interest of the parties, as it leads to additional further cost which, in many cases and given the already low amount of costs recoverable, can be disproportionate.

In order to avoid this risk it is important that practitioners ensure that terms of settlement make proper provision for costs to avoid the risk of further litigation. This is a complex topic, and this is intended as a quick reference guide to help you to avoid the pitfalls so that you do not fall into the ‘fixed costs trap’.

  1. Claims which leave the portal

Pursuant to the Protocols, a claim will leave the portal if it is revalued in an amount higher than the protocol limit (currently £25,000). However, CPR 45.29A states that fixed costs apply where the claim was started in the protocol. Of critical importance is to note that the mere fact that the claim was revalued at more than the protocol limit does not mean that standard basis costs apply. Practitioners should be wary of this when settling such claims and should either:

  1. Settle only on terms that standard basis (not fixed) costs apply. Therefore CPR 36 should be avoided; or
  2. Refuse to settle until after allocation of the claim to the multi-track, as allocation to the multi-track causes fixed costs to cease to apply (see Qadar v Esure)

Whilst it may seem extreme to refuse settlement until allocation, this is at present the only way to ensure (so much as it is ever possible to ensure) that fixed costs will not apply. It should be borne in mind that such an approach is a calculated risk, as it is possible that a court would find that such conduct is ‘unreasonable’ should the matter proceed. That said, it should be possible to argue that without agreement fixed costs would apply and that the claimant is therefore better off and as such the conduct was not unreasonable.

  1. Settlement by CPR 36.20

Where fixed costs do apply and the claim is settled by part 36, there is no right to detailed assessment. If a dispute arises over fixed costs then one of the parties must apply.

  1. Non-Part 36 settlement

It is generally preferable to seek to agree the amount of fixed costs which apply. Failure to do so can lead to disputes (and costly applications) over the correct level of fixed costs and ‘reasonable’ disbursements. It is currently unclear whether the costs of such applications are recoverable. Including a provision in a settlement agreement should be straightforward, as the costs are fixed. If an opponent refuses to do so it may be that they intend to raise technical arguments about the costs which are recoverable.

Claimants should note that defendants are aware of these argument and therefore may try to catch out the unwary.

This is a very quick summary of the issues surrounding settlement in cases to which fixed costs apply, however with the imminent introduction of fixed costs in cases of noise induced hearing loss slated for 2019 at the latest and he likely introduction of fixed costs in all cases in around 2020, these issues will only become more relevant. On current information, the proposed rules for NIHL claims do not fix any of the existing issues with fixed costs and therefore we can expect these problems to persist for some time.

Matthew Rose is a Solicitor in the Costs and Litigation Funding department at Clarion Solicitors. You can contact him at matthew.rose@clarionsolicitors.com, or the Clarion Costs Team on 0113 2460622.

Make sure you prepare a Risk Assessment!

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) was a piece of legislation which introduced a number of very important changes to civil litigation costs and funding.

One of those changes was the abolition of the recovery of additional liabilities inter partes for retainers created on or after 1 April 2013 (save for some limited exemptions). This meant that additional liabilities were to be paid by clients, and on personal injury matters, it was foreseen (and currently happens in practice) that they would be deducted from the client’s damages. Additional liabilities are therefore now a solicitor/own client expense.

The case of Herbert -v- HH Law Limited is a case that any law firm conducting personal injury litigation (and deducting additional liabilities from clients’ damages) should read. The case relates to an Appeal by the Defendant Solicitors (“HH”) of decisions made by District Judge Bellamy at Sheffield County Court in April and June 2017. The decisions on Appeal were:

  1. The reduction of a success fee from 100% to 15%;
  2. Approval of a cash account in terms which treated the payment of an ATE Insurance Premium as a solicitor’s disbursement; and
  3. Ordering HH to pay the costs of the assessment and refusing to inquire further into HH’s contention that the retainer of the Claimant’s new solicitors (JG Solicitors Limited) was illegal and/or unenforceable.

The appeal was heard on 21 March 2018 before Mr Justice Soole at Sheffield High Court, where he dismissed all 3 grounds.

Key Points

  1. A Risk Assessment should always be prepared in respect of any Conditional Fee Agreement. The LASPO reforms have not resulted in risk assessments no longer being required (a point unsuccessfully argued by HH). A Risk Assessment is a very important document that goes to the heart of the calculation of the success fee. It is a key document for the Court to consider in any solicitor/own client dispute over the level of a success fee charged. It is important that law firms do not take a ‘blanket’ approach to success fees. Law firms should calculate success fees individually on each case, taking into account the specific facts and risks.

    In this case, the success fee was claimed at 100%, but by virtue of the LASPO reforms was subject to a maximum cap of 25% of the total amount of general damages for pain, suffering, loss of amenity and damages for past financial loss. The Appeal Judge endorsed the success fee allowed by District Judge Bellamy, which was based on the findings that the facts of the case were straightforward, the nature of the injury was minor soft tissue damage and whiplash, there was no time off work and it was likely that the case would be settled for a modest amount in a short period of time.

    The Appeal Judge stated: 

    in the circumstances of this particular case, allowing for the fact that the modest disbursements were funded by the solicitors for a fairly short period, the appropriate success fee was 15%……”.

    This case therefore represents a useful guide as to what the success fee should be on straightforward and low value personal injury work.

  2. An ATE insurance premium should be treated as a solicitor’s disbursement and should therefore be included in any final invoice to a client and in any solicitor/own client bill/breakdown of costs.

    In this case, the Defendant did not treat the ATE premium accordingly and therefore failed to properly include it within the final invoice. The result of this was that when District Judge Bellamy considered and approved the cash account, it left a balance of £349.00, which was ordered to be refunded to the Claimant (despite the Defendant actually paying the sum to the insurer!).

The Appeal Judge said the following:

“if the solicitor fails to include the item in the delivered bill of costs, he has to bear the consequence; subject to an application for leave to withdraw the bill and deliver a fresh bill”.

Summary

It is therefore very important for any firms which conduct litigation work under Conditional Fee Agreements (with the support of ATE insurance) to ensure that Risk Assessments are properly prepared for each case and that ATE insurance premiums are included in final invoices to clients.

This blog was prepared by Andrew McAulay, who is a Partner and the Head of the Costs and Litigation Funding Team at Clarion. He can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com.

Evaluating Litigation Risk & Part 36 Offers

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

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.

GET YOUR ORDERS RIGHT!

The case of Tibbles v SIG PLC [2012], dealt with issues of allocation and ‘prompt recourse’ which directly affected the Claimant’s costs recovery.

The Court originally allocated the matter to the small claims track, which the Claimant’s solicitor disputed and the matter was successfully reallocated to the fast track.  The Claimant was successful at Trial and was awarded costs ‘on the standard basis to be subject to detailed assessment, if not agreed’.  The Claimant subsequently prepared a bill of costs and commenced detailed assessment proceedings. The Defendant argued that the Claimant was only entitled to small claims track costs whilst the matter was within the remit of the small claims track and entitled to fast track costs post allocation to that track.

Within the detailed assessment proceedings, the Claimant made an application to seek an order under CPR 3.1(7) or CPR 40.12, to vary the order and reallocate the entire matter to the fast track.  The District Judge varied the order accordingly.  The Defendant successfully appealed that decision and the Claimant therefore appealed to the Court of Appeal.

The Court of Appeal upheld the decision.  In essence, it held that the Claimant should have applied more promptly to vary the order and amending the order would be unfair on the Defendant who had relied on it.

What was interesting in the Judgment was what Rix LJ said at paragraph 48:

“There is nothing in civil procedure about which solicitors can justifiably be expected to know as much, as matters of costs”.

Whilst the above case relates to a procedural issue, it does feed into a topic which we (as a legal costs team at Clarion) regularly encounter difficulties; orders not being prepared properly or failing to include basic, but salient points.

Here are some basic costs related points that litigators should always think about when preparing consent orders, tomlin orders or any costs settlement agreement:

  1. Pursuant to the above case, think about any track issues.  If you do have a case which flips between tracks, then deal with the matter immediately upon reallocation to the higher track. If you fail to do so then maybe not all is lost because you could word the order for costs as follows:
  2. “The Defendant do pay the Claimants costs (based on fast track costs for the entirety of the case) on the standard basis to be subject to detailed assessment, if not agreed”.
  3. Always use the words incidental or occasioned by.  For example, “the Defendant do pay the Claimant’s costs of and incidental to the Claimant’s application for specific disclosure to be subject to detailed assessment on the standard basis, if not agreed”.  The words incidental or occasioned by are very powerful and can in most circumstances broaden the remit of the costs agreement.
  4. Think about payments on account.  Most matters are now budgeted and in light of the decision in ‘Harrison’ payments on account should always be sought.  It is much better to receive money sooner, rather than later.
  5. When dealing with the payment of money always make the date for payment clear. Don’t just include a date, include a time i.e. by 4:00 pm on xxxx date.  Also include the words ‘clear funds’.  It is much better to receive money which is cleared and immediately accessible rather than a cheque which can take 3-5 days to clear.
  6. Always ensure that the agreement to pay costs makes clear whether the assessment is on the standard or indemnity basis.  If the order is silent, then standard basis is the default.  You might be entitled to indemnity costs for a specific period, make it clear in the order or agreement.
  7. Always include the words “to be assessed, if not agreed”.  We have ran successful arguments (acting for the paying party) that an order for costs has not provided for an assessment and the Court therefore did not have the power under the order to hear the detailed assessment.
  8. Where the matter is subject to fixed costs, you should quantify the amount and include it in the order. Failure to do this can result in paying parties challenging the amount of fixed costs i.e. premature issue of proceedings or certain disbursements are unreasonable. It would be wise to agree the amount of fixed costs and define it in the settlement agreement to prevent such disputes occurring.
  9. In respect of interlocutory matters, ensure that the order provides for an “immediate” assessment. Failure to do so can create a technical argument that you do not have authority to commence detailed assessment proceedings until the claim has concluded (allowing the paying party to delay payment of the costs). An immediate assessment can create a significant tactical advantage.
  10. Think about counterclaim costs. It may be that the claim and counterclaim are both successful and therefore the case of Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] needs to be considered.  However, it may be that you win your claim and successfully defend the counterclaim.  Make it very clear (in the order for costs) that the Claimant is entitled to both the costs of the claim and the costs of the counterclaim.  Again, lack of clarity could cause confusion and would result in arguments on detailed assessment.
  11. It is also worth making clear the position in relation to interest. The default position is 8% (see Judgments Act 1938).  However, we are increasingly seeing paying parties successfully reduce interest to a much lower rate given that the current Bank of England base rate is 0.5% (please see https://clarionlegalcosts.com/2017/06/20/interest-on-costs/). Therefore, it is advisable for the settlement agreement to state that interest is agreed and notably include a provision that interest is to be calculated at 8% from the date of the order for costs. This provides additional protection, therefore potentially preventing a paying party from attempting to argue a lower rate of interest (and a reduced time period) at a later stage.The inclusion of some of the points highlighted above will create a more robust order for costs and should result in a quicker and more economical compromise with the opponent.   What you do not want to do is work hard on a case, win it and then get bogged down in technical costs issues on detailed assessment which could have easily been avoided by a more clear and well drafted final order/agreement.
  12. The above are just some examples of difficulties that we have seen in the past.  There will probably be many more, and if you have any examples, then please feel free to share them through this blog.

This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding team.  Andrew can be contacted on 0113 336 3334 or 07764501252 or at andrew.mcaulay@clarionsolicitors.com