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.

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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.

Sharp v Blank and Ors – What development in litigation is deemed significant enough to warrant a revision to the precedent H costs budget?

The case of Sharp v Blank and Ors addresses the difficult question – what development in litigation is deemed significant enough to warrant a revision to the precedent H costs budget?

The key points of the claim relate to the approach to be taken when applying to revise a budget and are as follows:

  • Future costs – The court found that the language used in paragraph 7.6 is of critical importance and that it is explicit – the revision is in respect of future costs.
  • Range of reasonable and proportionate costs – The court is only required to set figures that are within a range of reasonable and proportionate costs. A range suggests that the process is designed to produce figures for each budget phase in a way that is not a slave to arithmetical calculation. The court is approving, or the parties are agreeing, figures that are not ‘right’ as such, but rather figures that are within a range of acceptability.
  • Interim applications – The costs of interim applications may fall outside the budget, however the incidental costs are a significant development and a revision to the budget is required for those costs. However, interim applications may also be significant developments in addition to the consequences that flow from an interim application.
  •  Modest increases – A significant development must be understood in light of the claim – its size, complexity and the manner in which the litigation has unfolded – and also from the likely additional costs that have been, or are expected to be, incurred. The amount of the additional expense is not determinative, but it is difficult to conceive that a development leading to modest additional legal expenditure, that is modest in proportion to the amount in the relevant budget phase or phases, is likely to be significant development.
  • A development in litigation may not be immediately obvious – In some cases it may not be immediately obvious that a development in the litigation is significant development; a development which appeared at first sight not to be significant may change character.
  • Mistakes in the preparation of the budget – A mistake in the preparation of a budget, or a failure to appreciate what the litigation actually entailed, will not usually permit a party to claim later there has been a significant development because the word “development” connotes a change to the status quo that has happened since the budget was prepared. If the mistake could have been avoided, or the proper nature of the claim understood at the time the budget was prepared, there has been no change or development in the litigation. By contrast, if the claim develops into more complex and costly litigation than could reasonably have been envisaged, that may well be the result of one or more significant developments.
  • Retrospectivity – Some degree of retrospectivity is inevitable if the costs management regime is to be made to work – parties cannot be expected to down tools until a decision is made regarding the revision, however any request for a revision should be made asap.
  • Claiming additional costs at detailed assessment – If there have been significant developments, the budgets must be revised. A claim for additional costs should not be left until a detailed assessment because the parties need to know what is their exposure to costs and the costs of detailed assessment should be minimised.

Following application of the above the court found as follows:

Extension to the trial timetable – yes, it was found that the court had to ask itself at a relatively high level the essential question, namely is this a significant development. Costs management has to be, at least in part, an impressionistic exercise. It seems to me that is the right approach when considering whether there have been significant developments.

Change in number of documents for disclosure – yes under the circumstances of this case.

Application for permission to rely on additional expert and the incidental costs – yes.

Cs 3rd party disclosure application – no – The application was part of the claimants’ task in preparing the case of a trial and it did not lead to work that can properly be characterised as giving the court jurisdiction to revise the defendants’ budget

Questions to three of the Defendants’ experts – Allowance has to be made for future events and, as they unfold, there will be pluses and minuses; some items are more expensive and some lead to savings. It is not appropriate only to take work which has cost more than was originally anticipated and to say that there has been a significant development. There must be something more than merely a modest increase in the anticipated cost of the work to amount to a significant development.

Response to Mr Ellerton – Mr Ellerton sought to include additional evidence, consequently the Defendant had to produce additional witness evidence and supplemental notes form 2 experts. The court found that this was a development, but that in the context of the claim and the modest additional sums claimed that this was not a significant development.

A significant development will depend on the impact that change has on that case and will be case specific.

Sue Fox is a Senior Associate and the Head of Costs Budgeting in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

 

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

The Hospital Trust v V & Ors [2017] EWCOP 20 (20 October 2017)

The Protected Party is 21 and suffers from a severe learning disability. She has an ‘understanding‘ age of about 3-5 years. She conceived a child in late 2015, by means which in all probability amounted to rape. The perpetrator of the sexual assault remains unknown by neither the family or the Protected Party. In 2016, she gave birth to a child that was placed in foster care.

At 28 weeks pregnant, the Health Authority sought the authority of the Court of Protection to arrange the delivery of the baby by caesarean section; Newton J made the relevant order in August 2016, and the baby was born on the following day.

The father of the baby is unknown. The circumstances of the conception were undetermined although it is believed that the father may be a friend of one of the Protected Party’s brothers. There is professional agreement that the Protected Party did not have the capacity to consent to sexual intercourse.

The Protected Party was confused and distressed at the pregnancy and confinement, and immensely distressed when her baby was removed from her care, pursuant to emergency orders obtained under Part IV Children Act 1989. Professionals speak of an extreme reaction to these events: a “significant physical and psychological trauma“.

An Application was made to the Court of Protection in 2016 for best interests determinations relevant to ante-natal care, and the delivery of the baby. The issues before the Court now are:

  1. i) Whether the Protected Party has the capacity to consent to sexual relations:
  2. ii) Whether she has the capacity to agree to the administration of non-therapeutic contraception;

iii) Whether it is in the Protected Party’s best interests that she receives non-therapeutic contraception.

All parties shared a strong common objective to protect the Protected Party from further harm, and specifically from sexual exploitation and pregnancy. However, they differ as to the means by which this can, or should, be achieved.

The Applicant, The Hospital Trust (“the Health Authority“), supported by the community learning disabilities team of the relevant Local Authority (“the Local Authority”) contend that it is in the Protected Party’s best interests that she should be provided with contraception as part of a wider safeguarding package, that should be trialled for a number of months.

Any medical intervention she found traumatising and she was scared. Though physically she healed well after the baby, the removal of the baby had a devastating effect on her emotional and psychological welfare. She could not understand where the baby was and was constantly asking for her baby. She was physically lashing out at her mother, self-harming, not sleeping, not eating, throwing herself on the floor and the community care officer took her to the GP and she got anti-depressants.

Following the delivery of the baby, professional attention swiftly turned to the formulation of a plan to prevent a recurrence of the pregnancy. Attentions turned to educating the Protected Party about sexual health. The Official Solicitor acting on the Protected Party’s behalf indicated that contraception was not necessary, and that the safeguarding package is sufficient to protect her.

The safeguarding plan appears to have been broadly successful, however, there have been a number of lapses of the safeguarding plan over the last 12 months. These lapses are admitted by the parents. They included leaving the Protected Party alone with her male siblings, on a number of occasions, which was against the safeguarding policy that had been decided upon.

Best interests

There is disagreement between the advocates as to the correct approach to the best interests of the Protected Party and a number of questions were raised:

i) Is it in the Protected Party’s best interests that she receives contraceptive protection?

ii) If so, what form of contraception is in her best interests, as the less restrictive option?

iii) If contraception is in her best interests, is it in her interests that such contraception is first trialled?

iv) Would the benefits of the contraceptive outweigh the negatives with regards to the best interests of the Protected Party?

It was decided that the Health and Local Authorities say that the safeguarding plan has been robust, but that contraception offers an important additional level of safeguard in the event that the plan fails.

The authorities argue that contraception will materially reduce the risk of pregnancy yet further. The social worker summarised the position in her oral evidence thus:

Even though I believe that the plan is robust and the family are working with us, breaches are still happening, and the last two breaches, the parents did not even know of the Protected Party’s whereabouts.”

They continued, “this will give us an extra layer of protection, in the event that anything goes wrong, or not within the family’s control. However, it was agreed by all that the Protected Party would need assistance in administering the contraception and charts would be created monitoring the menstrual cycle of the Protected Party.”

In considering all the issues raised, the views of the Protected Party were taken into consideration. The Protected Party demonstrated a “clear ability to learn“, and had an understanding of certain forms of contraception, is able to identify these and is “able to demonstrate the part of the body where each contraceptive is used.” The following were considered:

i) She does not wish to become pregnant again, or to have further children;

ii) She wishes to avoid surgery;

iii) She does not want intrauterine contraception;

iv) She would favour the patch (the view formed by the community matron.)

Following a number of reviews, it was concluded that the Protected Party had limited understanding of the “patch” and the link to pregnancy.

Judgment

By noting that the Protected Party is not sexually active, had no boyfriend, and that the proposed administration of contraception is non-therapeutic. It was judged against making a decision that is unfavourable and is one that respects the Protected Party’s Article 8 rights, and maintains clear focus on what is best for the Protected Party’s, striking the balance between protection and empowerment.

I return to the point I made at the outset of this judgment: the combined objective of the parties to ensure that the Protected Party is protected from further harm. The Local Authority considers that the safeguarding plan is “as robust as it can be”. Although The Protected Party’s mother has deposed in her signed statement to the fact that her daughter “… is never alone, she comes everywhere with me”, this has been shown – even very recently – not to be true.

The fact that the protection plan would remain unaltered whether contraception is administered or not does not mean, that there are not real advantages to the Protected Party receiving contraception. The safeguarding plan is designed to reduce the risk of sexual exploitation particularly outside of the home; contraception is proposed to reduce the risk of pregnancy in the event that the plan fails. If this additional safeguard can be introduced without undue side effects, and is a safeguard which the Protected Party is not unwilling to accept, then the best interests balance tilts in favour of its use.”

The prospect of any medical intervention, even the simple task of being weighed and measured in a clinic, and of blood pressure being taken, has left the Protected Party “petrified” in the recent past. It is vital for the court to reduce the need for such medical interventions.

It was decided that it may be that the side-effects of the patch are uncomfortable to the Protected Party in that regard and that the disbenefits of the contraceptive patch outweigh the benefits. This will only be known after a trial of the patch. At the conclusion of the trial period, or at an earlier time, should it become clear that the contraceptive patch is not appropriate, a best interests’ meeting will be held, at which a decision will be taken as to whether it is right to continue with the patch or whether an alternative method of contraception should be attempted, or whether the likely disbenefits of continuation or of any other form of contraception outweigh the benefits.

It was declared that it was in the Protected Party’s best interests that a contraceptive patch be administered for a trial period of up to six months. I shall list the case for review to coincide with the end of the trial, when further decisions can be taken.

I wish to make clear that this decision is about the Protected Party, and her best interests; the decision is taken in the context of her unique situation. I wholly reject the submission on behalf of the Official Solicitor that by declaring contraception in the Protected Party’s best interests I would in one way or another be setting a precedent for all incapacitous and vulnerable women.”

If you have any queries, please do not hesitate to contact Georgia Clarke (georgia.clarke@clarionsolicitors.com) or the team at COPCosts@clarionsolicitors.com.

The Application for permission to Deprive the Protected Party (a minor) of his Liberty in circumstances where there was no secure accommodation available.

This was an application by a Local Authority in relation to a young boy; the Protected Party, who is now 13. He previously lived with his grandmother under a Special Guardianship Order, but became the subject of a full care Order in December 2015. The Protected Party had displayed a desperate history and a catalogue of very seriously uncontrolled behaviour, damaging to both himself and others. As a result, he had been placed in no less than six different residential settings. Each setting ultimately broke down, sometimes very rapidly, as the staff there were simply unable to manage his behaviour and keep him safe.

The Local Authority would have wished by June 2017 to place the Protected Party in an approved secure accommodation placement. Such placements are very scarce and they were unable to find one. So, they hoped to place him in a unit which was not an approved secure accommodation at X. Their plan was, however, that within X he should, if necessary, be subject to considerable restraint, including physical restraint, in order to keep him safe and prevent him from absconding, as he had done on occasions in the past.

Section 25 of the Children Act 1989 makes express and detailed provision for the making of what are known as Secure Accommodation Orders. Such Orders may be made and, indeed, frequently are made by Courts, including Courts composed of lay magistrates. It is not necessary to apply to the High Court for a Secure Accommodation Order, however, as no approved secure accommodation was available, the Local Authority required the authorisation of a Court for the inevitable Deprivation of Liberty of the Protected Party. Mr Justice Holman expressed his concern over the way in which Applications of this sort were handled, saying that “the device of resort to the inherent jurisdiction of the High Court is operating to by-pass the important safeguard under the regulations of approval by the Secretary of State of establishments used as secure accommodation. There is a grave risk that the safeguard of approval by the Secretary of State is being denied to some of the most damaged and vulnerable children. This is a situation which cannot go on, and I intend to draw it to the attention of the President of the Family Division.” The Judge Ordered that the child now be joined as a party to these proceedings and Cafcass must allocate a Guardian to act on his behalf. A further hearing was ordered to be fixed in one month. It was stated that the Guardian must file and serve an interim report shortly before that hearing. Further, in view of the gravity of the subject matter and the age of the child, the Judge Ordered that he must be enabled to attend the hearing if he expresses a wish to do so unless the Guardian thought it would be damaging to the health, wellbeing or emotional stability of the child to do so. In his view it was very important that in these situations, which in plain language involve a child being ‘locked up’, the child concerned should, if he wishes, have an opportunity to attend a court hearing. The exception to that is clearly if the child is so troubled that it would be damaging to his health, wellbeing or emotional stability to do so.

If you have any queries, please do not hesitate to contact Georgia Clarke (georgia.clarke@clarionsolicitors.com) or the team at COPCosts@clarionsolicitors.com.

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

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

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

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

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

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

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

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

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

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

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

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

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