Fixed Costs Determination Process: An overview and points of discussion

Daniel MurrayLeave a comment

The Fixed Costs Determination process (FCD), which was proposed within Lord Justice Jackson’s infamous review of civil litigation costs in 2017, is to be finally implemented on 1 October this year. 1 year on from the implementation of his other expansive recommendations and the extension of the Fixed Recoverable Costs regime.

There was initially some optimism within the legal costs world, that the process would not be implemented when it was omitted from the new rules. However, minutes from the CPRC meetings, released over the last 10 months or so, revealed an intention to implement the new streamlined process this year.

The procedure for the new process, which will be incorporated into CPR 45.63 to CPR 45.66 has been published in Civil Procedure (Amendment No.3) Rules 2024 and 171st update – Practice Directions amendments. The new Precedent U, which will be completed by receiving parties as part of the process has also been released for review.

How does the process operate?

Determination after a hearing

The new process will require any party who intends to claim any fixed costs or disbursements in a case captured by CPR 45, to file at court and serve on any party against whom an order for payment is intended to be sought a completed Precedent U. This new document must include, if applicable, the details of any claim under rule 45.9, rule 45.10 or rule 45.13, and is to be filed and served no later than 24 hours before the time fixed for the hearing. This is a slight variation on the current rules in relation to final hearings, where statements must be filed at Court 48 hours prior to the hearing commencing.

The Court may then summarily assess the costs, or if it is unable to make a summary determination at the hearing, then it may order a determination on paper, or a further hearing and make any directions it sees fit. The costs of that determination will be treated as an interim application and costs limited under CPR 45.8. Those costs currently amount to £250 plus VAT on cases which are assigned to bands 1-3 of the Fast Track, and £333 plus VAT on cases which are assigned to band 4 of the Fast Track or allocated to the Intermediate Track.

Determination where parties agree on all issues except costs

Where the parties have reached agreement on all issues except costs, then the receiving party may make an application for those costs to be determined under the new streamlined process. On an issued matter, this will be by way of a Part 23 application as is the current procedure when a fixed costs dispute arises.

On an unissued matter, the application will be made when Part 8 costs only proceedings are commenced pursuant to CPR 46.14.

Applications, whether on issued or unissued matters, should be supported by the written agreement or confirmation, together with a completed Precedent U containing details of the costs or disbursements to which the applicant claims to be entitled and, if applicable, the details of any claim under rule 45.9 (a claim for costs exceeding fixed costs as a result of exceptional circumstances), rule 45.10 (a claim for costs exceeding fixed costs as a result of vulnerability of the Claimant or a witness), or rule 45.13 a claim for costs exceeding fixed costs as a result of unreasonable behaviour).

Any evidence in response from the paying party must be filed within 21 days of service of the application on issued matters, and within 21 days of filing the acknowledgment of service where proceedings have not been started.

The determination may then take place on papers or at a final hearing, but regardless, the fees recoverable will be limited to £500 plus VAT as set out in Table 17 of the soon to be amended Practice Direction 45, plus any relevant application fees.

Appealing outcomes

The Court will record its decision by annotating the Precedent U document and the parties will have 21 days from service of the decision to appeal the outcome. If an application is made, then a hearing will be held to determine the issues, and the applicant must achieve an outcome at least 20% more favourable to them, otherwise they will be liable for the costs of and incidental to the hearing. These costs will, however, be limited again to those outlined in CPR 45.8.

Final key points

Where a party seeks an assessment of costs because of exceptional circumstances, vulnerability, or where the matter settles at S.1 on the Intermediate Track and is a non-PI matter, then the Court has the power to give directions that those costs can be assessed in conjunction with the fixed costs determination.

Part 36 consequences are disapplied from the process.

Discussion

Those of us involved in fixed costs dispute know that currently, the process can be a drawn out, expensive and disproportionate exercise. A streamlined process, designed specifically to deal with what is likely to be largely disbursement disputes is to be welcomed.

It is interesting that the base figure allowed for the process (a maximum of £500), has not been uplifted for inflation, in the same way that those costs tables were. When fees are broken down into hours, the process allows for less than 4 hours of Grade D band 2 time for preparing a statement and written submissions, as well as attempting to agree costs before an application is made. That is not withstanding the fact that submissions in relation to costs exceeding fixed costs can be technically complex and arguably justify the input of more experienced fee earners.

Further limitations on fees recoverable where the Court does not determine costs at the final hearing also seems a harsh added stipulation, with a maximum of £333 recoverable, to include a potential attendance at a hearing.

By disapplying the consequences of Part 36 from the process, there appears to be little by way of incentive for parties to reach agreement. This is exacerbated by the fact that the adverse costs exposure if decisions are unsuccessfully appealed, is limited to less than £400. The provisional assessment process, which currently captures most cases that will proceed through this process after its implementation, removes its cap on recoverable fees when initial outcomes are appealed. A mechanism that operates as a real deterrent for zealous challenges.

As things stand, this new process would not apply to cases to which the fixed costs implemented on 1 October 2023 apply. This seems something which could and perhaps should be rectified prior to the rules coming into effect and requires clarification.

Finally, the interplay between requests for assessment of fees above fixed costs and the new process remain unclear. Whilst it is noted that there is the possibility for both the new process and detailed assessment to run in conjunction, how this will operate is still uncertain.

For further information on the process, or assistance once it is implemented please contact Clarion’s Costs and Litigation Funding Department who can be contacted on any fixed costs issues, at our dedicated fixed costs email address at FRC@clarionsolicitors.com.

QOCS and Fundamental Dishonesty: where are we now?

Katie SpencerLeave a comment

The rules surrounding qualified one-way costs shifting (QOCS) were first introduced in April 2013, with the general rule being that a Claimant who has suffered a personal injury cannot be ordered to pay the costs of a Defendant, even if they lose their claim. QOCS applies in all personal injury claims, apart from when the Claimant is found to be fundamentally dishonest.

Fundamental dishonesty is an argument that can be raised by a Defendant when they believe the Claimant has not been truthful when bringing a claim.

Howlett v Davies [2017] was the first Court of Appeal case where the exception to QOCS was considered, supporting the procedure that should take place when a Claimant has been fundamentally dishonest. In this case, the Claimants alleged that they were passengers in the vehicle at the time of a road traffic accident. However, this was disproven factually as they were found to be lying regarding their presence. The Claimants were found to be fundamentally dishonest within the meaning of CPR 44.16(1) and costs were awarded against the Claimants as an exception.

Changes to the rules on QOCS were introduced on 6 April 2023, applying to any cases issued thereafter.

A main effect this has had relates to Part 36 offers; Part 36 offers now have the added incentive that costs after the 21-day period can be enforced against damages, without an Order from the Court.

It has been over 10 years since the rules on QOCS were introduced and more than a year since the changes were implemented, so where are we now?

In the recent personal injury case of Hamed v Ministry of Justice [2024], the Judge found the Claimant to be dishonest when exaggerating the injuries sustained. Therefore, no damages were awarded and QOCS were disapplied pursuant to the provision of CPR 44.16.

Practice Direction 44, Paragraph 12.4 states:

“In a case to which rule 44.16(1) applies (fundamentally dishonest claims) –

(a) the court will normally direct that issues arising out of an allegation that the claim is fundamentally dishonest be determined at the trial;

(b) where the proceedings have been settled, the court will not, save in exceptional circumstances, order that issues arising out of an allegation that the claim was fundamentally dishonest be determined in those proceedings;

(c) where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;

(d) the court may, as it thinks fair and just, determine the costs attributable to the claim having been found to be fundamentally dishonest.”

 

Different courts are therefore adopting a consistent approach to exceptions to QOCS, despite the rule change of April 2023. The same outcome was drawn in both Howlett v Davies [2017] and Hamed v Ministry of Justice [2024].

Similarly, in the case of Shaw v Wilde [2024], the Defendant raised the argument that the Claimant had been fundamentally dishonest where the Claimant had lied to experts and the Court about the extent of his injuries. It was found that the Claimant should pay the Defendant’s costs due to this dishonesty. Again, CPR 44.16(1) was used to support this decision.

In conclusion, despite the progression of time, the rules surrounding QOCS and Fundamental Dishonesty are applied consistently.

Rahman v Hassan & Ors: guidance from the High Court on the effects of Part 36 offer in non-monetary claims and applications to vary costs budgets after Trial

Katie SpencerLeave a comment

The recent case of Rahman v Hassan & Ors (Re Consequential Matters) [2024] EWHC 2038 provides a useful insight into what constitutes a ‘significant development’ for the purposes of cost budget variation and the application of Part 36 offers in non-monetary matters

The case concerned the beneficial ownership of significant assets of a deceased relating to transactions alleged to have taken place between the Claimant and the late Mr Al-Hasib Mian Muhammad Abdullah Al Mahmood. It was held that these transactions amounted to donationes mortis causa, or “gifts in contemplation of death”.

Application to vary Costs Budget after Trial dismissed

The Claimant sought to vary his costs budget, which had previously been approved in the sum of £320,648.50 in accordance with the procedure under CPR 3.15A, after the trial had concluded and judgment had been handed down.

The matter was proceeding to a consequential hearing following written submissions which were ordered following the final hearing, when an increase of £134,931.55 was sought by the Claimant.

Five significant developments in the litigation were advanced by the Claimant in support of his request.

CPR Rule 3.15A Explained

Under CPR rule 3.15A, “a party must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.”

If revisions cannot be agreed between the parties, “the revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.” The effects of failing to submit variations promptly were considered at length in the decision in Persimmon Homes Ltd and Anor v Osborne Clarke LLP and Anor [2021] EWHC 831 (Ch) and are discussed here.

Claimant’s application

The Claimant contended that there were five significant developments which warranted the costs budget to be changed. These are summarised as:

(1) Involvement in a road accident after the close of evidence and before closing submissions in the trial. The latter were postponed by just under a week.

(2) The fact that the Claimant’s Particulars of Claim were amended during the trial and additional costs were incurred.

(3) Additional costs were incurred as a result of the order made for written submissions at the conclusion of the trial

(4) There was an interval of some 5 1/2 months between the end of the closing submissions of the circulation of the draft judgment, and additional costs were incurred by the Claimant once that draft judgment was circulated.

(5) Work on the judgment in the period 29 May 2024 to 14 June 2024 resulted in additional costs being incurred by the Claimant.

The Court’s decision

The Court refused the Claimant’s request to vary. It was acknowledged that each of the five grounds referenced by the Claimant could be considered a development, they were not significant.

HHJ Paul Matthews (sitting as a Judge of the High Court), confirmed, “I do not regard any of these five matters any of these five matters as a “significant” development in the litigation which should justify a variation of the budget. The use of the word “significant” in the rule is deliberate. It is not every development that requires variation in the budget. Otherwise large amounts of pre-trial preparation time would be taken up with making applications for budget variations.”

The application of CPR Part 36 in non-monetary claims

HHJ Matthews also considered the application of CPR 36.17 to non-monetary claims. Initially the Court had determined that the Claimant had been the successful party in view of him taking beneficial ownership of significant assets of a deceased.

The claimant had made a Part 36 offer in January 2023 Part 36, in respect of the whole claim and counterclaim. The offer was that the Claimant would receive furniture and personal chattels of a property, as well as some bank accounts. At trial, the Claimant was awarded two properties, which were deemed to be significantly more valuable than the contents of the offer. The 21-day period applicable to the offer expired on 13 February 2023. The offer was not accepted, but the defendants agreed that this offer was a claimant’s Part 36 offer within CPR rule 36.17.

CPR 36.17 explained

The rule provides that where a Claimant obtains judgment against the Defendant is at least as advantageous to the Claimant as the proposals contained in a Claimant’s Part 36 offer, then the Court must, unless it considers it unjust to do so, order that the claimant is entitled to:

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court Prescribed percentage
Up to £500,000 10% of the amount awarded
Above £500,000 10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

 

CPR 36.17(2) states that, “in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.”

The decision

The Defendant had disputed the application of CPR 36.17(4)(a), on the basis that no monetary award had been made and the provisions of (2) restricted the application of the rule to money claims only.

The Court disagreed with this approach, and that they did not “read rule 36.17(2) as so restricting the scope of rule 36.17. I read that rule saying that, in the application of this rule to money claims, ‘more advantageous’ and ‘at least as advantageous’ have a money-based meaning, and no other. That is a far cry from saying that no other kinds of claims are within the rule. On the contrary, it means that, in non-money-based claims (such as this one) the phrases ‘more advantageous’ and ‘at least as advantageous’ do not have a money-based meaning but are to be construed in the ordinary sense of the words. Any other reading would mean that the words “or money element of a claim” were redundant.”

Assessment of costs on the indemnity basis, and the other benefits outlined in CPR 36.17 were subsequently agreed by the Defendants, save for a dispute on the amount of interest.

Conclusion and discussion

This case underpins the importance of demonstrating not just ‘developments’, but significant developments when seeking to vary a costs budget under CPR rule 3.15A, and the Court’s decision highlights the high bar for such applications. The Court did comment in this matter that, whilst no formal application to vary was required, the lack of evidence in support of the variation was troubling and suggests that parties seeking to vary in future cases, could prepare short witness statements in support of requests.

Comments were also made obiter dicta regarding the fact that costs budgets are not limits on costs being incurred, and there was nothing to prevent additional sums being sought at an assessment is which takes place later. This would be on the grounds of there being ‘good reason to depart’ from budgeted sums, pursuant to CPR 3.18 (b). Albeit it can be argued that the bar for seeking such departure is a high one to overcome.

The fact that the costs which were subject of the request for variation were to be assessed on the indemnity basis, brings into question the benefit to Claimant in making requests pursuant to CPR 3.15A after Trial. It should be remembered that prima facie, cost budgeting is only relevant when costs are to be assessed on the standard basis, and reference is made to the decisions in Lejonvarn v Burgess & Anor [2020] EWCA Civ 114 and Denton and Others v TH White Limited [2014] EWCA Civ 906.

This blog was co-written by Daniel Murray.

We are regularly instructed to advise on costs budgets and variations. Please contact us if you have any questions.

Katie Spencer is a Paralegal in Clarion’s Costs and Litigation Team and can be contacted on 07741 988 925 or at katie.spencer@clarionsolicitors.com.

Daniel Murray is a Senior Associate and Costs Lawyer in Clarion’s Costs and Litigation Funding Team and can be contacted on 07918 271 397 or at daniel.murray@clarionsolicitors.com.

Prevention is better than cure

Andrew McAulayLeave a comment

The recent case of  Stella v Hodge Jones & Allen LLP demonstrates the importance (and benefit) of a law firm having a retainer in place with a client which clearly sets out the type (or types) of bills that will be raised.

Types of Bills

There are 4 types of invoices that can be raised:

  1. Statute Final.
  2. Payment on Account.
  3. Gross Sum.
  4. Chamberlain (a series of bills which are treated as payment on account bills, but which all become final bills upon delivery of the statute final bill)

Retainer

Law firms should clearly set out in client care letters and terms of business how a client will be billed i.e. will the bills raised be interim statute final bills or will they be payment on account bills.

Stella v Hodge Jones & Allen (HJA)

The Claimant requested an assessment of 34 bills raised to him by HJA.

There were a number of legal arguments in relation to the Claimant’s ability to challenge all the bills, but this blog only focuses on the arguments in relation to the type of bill raised.

HJA’s position was that only 8 of the 34 bills were capable of assessment, because the other 26 bills were outside the time limits for assessment i.e. the 26 bills (totalling £140,492.20) were interim statute final bills and, as a result, those bills were outside the period for challenge (s70 Solicitors Act 1974).

Judge Whalan determined that the bills were payment on account bills; therefore, the time limits under the Solicitors Act 1974 had not commenced. The primary reason being the wording in the HJA retainer in relation to billing arrangements. This meant that the Claimant was entitled to assess all the bills, despite some of them dating back to 2017.

Judge Whalan made an interesting comment (obiter dicta) in his Judgment:

“There is no real excuse for imprecision, uncertainty or ambiguity. If a solicitor wants to provide for the demand and payment of interim statute bills, then the retainer should express an unequivocal provision to this effect. The profession’s consistent failure to do so is, frankly, baffling.”

In reaching his decision, Judge Whalan relied on this test:

  1. The burden of proving that the retainer provides for the delivery of interim statute bills falls on the receiving party.
  2. When considering a retainer, it is necessary to refer to the relevant contractual provisions as a whole.
  3. When determining whether a retainer does allow the solicitor to render interim statute final bills, the court should resolve any fundamental ambiguity against that construction.

This is a common dispute on solicitor/own client assessments, and an argument which, more often than not, falls in favour of the client (because of the above test and, in particular, paragraph 3). The client is in a position of strength if there is ambiguity or doubt over the contractual terms because the burden of proof falls on the law firm.

Points to consider for good practice 

These are basic points, but if followed, will help a law firm to avoid such a dispute:

  • Harmony 

Ensure that what is said in your client care letter aligns with what is said in your terms of business. Also, ensure that someone who has expertise in costs law has the responsibility of drafting the relevant parts of your client care letter and terms of business.

  • Bill (invoice) template 

Ensure you have a bill template (or templates) which cover the 4 types of bills mentioned earlier. Also, ensure the communication sending the bill to the client (email or letter) provides the correct information.

Summary

A lack of consistency is usually the problem. Ensuring harmony between the client care letter, terms of business, bill and communication with the bill is key to avoid a dispute.

As a law firm, it is sensible to have a default type of bill that you want to raise for most of your matters. For example, your template client care letter and terms of business may cater for statute final bills, so that would be the default bill template. However, you should provide your lawyers with the knowledge and autonomy to modify template client care letters and terms of business to change the type of bill to be raised, where appropriate. For example, payment on account bills would be appropriate for a matter funded by way of a discounted Conditional Fee Agreement.

We are regularly instructed by law firms to review their retainers and provide advice to ensure compliance with the latest developments in costs law and litigation funding. Please contact Andrew McAulay (andrew.mcaulay@clarionsolicitors.com or 07764501252) if you have any questions.

SCCO – Note to Practitioners July 2024

Ellie Howard-Taylor1 Comment

Earlier this month the SCCO released a note to all Court of Protection (COP) practitioners and users of the SCCO. As the majority are aware, there are significant delays at the SCCO and unfortunately we have not seen any major change to this over the last year. However, during these delays there are a number of things you as COP practitioners can be doing to speed up the process.

E-Bills

In November 2022 the E-bill was introduced and launched for all COP assessments at the SCCO. You should now only be submitting an E-bill with the SCCO for assessment. The SCCO have asked that you check filings to ensure they are accurate  and contain the correct information before submitting for assessment. The E-bills must be completed and signed by the appropriate persons in tab 11, please note that it must be an electronic signature.

Bill title – This should clearly state the type of costs being claimed and the authority being cited.  For General Management bills, both start and end dates of the period must be provided.  If you are claiming more than one type of costs and have more than one court order giving authority for assessment, this should be clear from the title.

Further information on common errors which have been identified in the E-bill has been produced by the SCCO and is available from the SCCO directly. Please email scco@justice.gov.uk

Orders

In most cases, the Deputyship order will provide authority for a detailed assessment of costs for a standard general management period. However, where a Deputy is replying on an Order in addition to the Deputyship Order for the assessment of costs, for example an ACC Order of authority to purchase a property, it is necessary to ensure that Order is filed when filing the E-bill.

For instances where you have not received the Order, it is necessary to include a comment in the filing comments section and ensure that the Order is filed as soon as received.

CE File

When filing any type of bill, please ensure that the filing ‘sub-type’ selected is the correct one

– For COP-E Bills, choose ‘COP-E Bill (profit costs….)’
– For traditional paper bills, choose ‘Bill (profit costs….)’

– The costs band selected should be based on the profit costs alone (without disbursements or VAT) and not the grand total of the bill.

The filing of supporting papers

Where you have a physical paper file, a bill will only reach the Costs Officers’ queue once the supporting documentation has been received.

In addition, it is necessary to ensure the filing acceptance is included within the supporting papers and an address is clearly written for the return of the papers.

Where you have an electronic bundle of papers to upload via the Document Upload Centre (DUC) and if you are registered as a permanent user, the SCCO have indicated that they would assume supporting documentation would be uploaded to the DUC and the bill will be placed into the queue. If you are only a partial use of the DUC you must indicate in the filing comments whether you are filing papers for the bill on the DUC.

Absence of any comments for a partial user will presume a physical copy of papers will be submitted, which could result in a delay.

Supporting papers (electronic files)

The SCCO have provided guidance on how the electronic files should appear:

  • The SCCO reference should be included in the case reference field
  • There should be an index provided in which each item/page has a clear description and the date of the document.

They further advised that within the beginning of the bundle there should be:

  • OPG102 and OPG10
  • Client care letter/engagement letter
  • Counsel fee notes (where appropriate)
  • Invoices for any disbursements claimed by the Deputy

Following these documents:

  • The file of papers should be in chronological order from the oldest to newest
  • All emails should show the date clearly, time and who they were to and from
  • File notes and attendance notes should clearly state the date, fee earner and time claimed.

Bill Details

On tab 2 of the E-bill, the OPG105 estimate should be included. Where this has been exceeded by more than 20%, an explanation should be given. Where there is no OPG105 estimate because it was an application or first general management period, this box should not be empty. Instead enter ‘N/A First Year’ or N/A Application’.

Directly underneath is the assets value box. Again here there should a value in this box, but there the value is unknown please include an explanation as to why.

If you have any questions regarding the information above, please get in touch with myself at ellie.howard-taylor@clarionsolicitors.com or contact the SCCO directly at scco@justice.gov.uk.

 

Costs Budgeting Reform Gains Momentum

Anna LockyerLeave a comment

Flexible budgeting recommendations made by the CJC’s report of May last year have been accepted by the Master of the Rolls and more recently discussed at last month’s CPRC meeting.

Key points:

  • A new Precedent H costs form has been proposed, modelled on the existing Precedent H
  • A draft new Practice Direction includes budgeting claims with a value of over £10m
  • A draft pilot Practice Direction provides for 5 categories of case, each limited in certain courts:

– Business & Property Courts (BPC) claims with a value of £1m or more;

– BPC claims with a value of less than £1m;

– Qualified One-Way Costs (QOCS) claims;

– Non-QOCS claims; and

– Certain other non-BPC claims.

It was agreed in principle that each case category may have its own Practice Direction and the implementation dates need not be the same.

Watch this space for further updates…

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

ujjainimistryLeave a comment

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

Guidance on interim payments within Court of Protection

Casey McGregorLeave a comment

Practice Direction 19B sets out the guidance on the deputy costs and the charging structure. The guidance states that a deputy can receive an interim payment in advance of the assessment for the year, which is proportionate and reasonable. It is noted that the overall level of interim payments received cannot exceed 75% of their estimated costs submitted to the Office of the Public Guardian or the WIP (whichever is lower) within a reporting year.

If you have a situation whereby, the interim payment taken exceeded your estimated costs or the WIP, you will need to credit note and refund this overpayment immediately.

Once the bill is assessed by the SCCO, and a final costs certificate has been issued, the Deputy will be entitled to receive the balance for that year, which would be the difference between the total of interim payments received during the year and the total assessed costs as set out in the final costs certificate.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at costs.support@clarionsolicitors.com

TG – 12 June 2024, before Master Whalan.

Ellie Howard-TaylorLeave a comment

On 12 June 2024, Stephanie Kaye, Partner at Clarion, represented Kingsley Napley, the Deputy of TG, before Master Whalan, in a hearing concerning three issues:

  1. Time spent authorising payments by the Grade A Deputy, claimed at 3 minutes per payment
  2. Time spent conducting financial reviews in accordance with the SRA, claimed at 6 minutes per task.
  3. Time spent reconciling bank statements and transactions, claimed at 6-12 minutes per statement

The case concerning TG, with Kingsley Napley acting as Deputy, was claimed at £15,834.10 and reduced to £11,413.33 on provisional assessment. By way of background, TG had an estate of over £2.7 million at the time of assessment, income of £325,000 during the period in question and 4 separate bank accounts managed by the named Deputy, Simon Hardy at Kingsley Napley.

Authorisation of payments

The first issue was in relation to authorisation of payments. In the case of TG, the Grade A fee earner claimed 3 minutes for authorising each payment that was made on behalf of TG, in addition to the 3 minutes claimed by the Grade D fee earner arranging the payment. Those payments concerned irregular payments covering TG’s care, therapy, education fees, OT fees etc and were of significant value. The time claimed for this was 5 hours 33 minutes at Grade A which was entirely disallowed on assessment by the Costs Officer and subsequently on re-assessment.

Each item claimed was described as follows in relation to the relevant payment:

Clarion argued that it was the named Deputy’s personal appointment and therefore personal responsibility to authorise these payments as the book stopped with them. In addition, the amounts claimed (6 minutes in total for the payment) were not unreasonable and the transaction itself had been delegated as far as possible, but it was not possible to delegate the authorisation due to the nature of the appointment.

Costs Judge Whalan raised that the reductions made by the Costs Officer were on a matter of principle, but was satisfied that there was no rule preventing the recovery of this work. The work should not have been disallowed in its totally. Judge Whalan stressed that this was on a case-by-case basis and not every payment required a Grade A authorisation. It was for the Deputy to mitigate how often this happened.

He went on to advise that, for example, where the Deputy has agreed to a care plan concerning sessions of therapy at £100 per hour, the Deputy has already agreed to those costs and therefore authorisation was not required every time a payment was due. He was of the same view with payments such as utilities, in that the Deputy has already made a decision about which provider to go with, therefore authorising every payment was not a sustainable approach.

Judge Whalan said that it was not unreasonable to incur this time for irregular payments but was of the view that automatically charging time against every payment was not sustainable. He advised that there needed to be consideration of prior authorisation to payments.

Judge Whalan agreed to allow 3 hours at Grade A against the 5 hours 33 minutes claimed on assessment.

Monthly reviews of the bank accounts

The second issue was in relation to conducting monthly review of the Deputyship account. The time claimed for this was 2 hours 12 minutes undertaken by a Grade C fee earner, with all the time disallowed by the Costs Officer marked as “supervision/overheads” on assessment.

Each entry was claimed as follows:

Clarion argued that this work was not an overhead, but in fact a requirement of the SRA Account Rules and the OPG Deputyship Standards. It was also a fundamental part of the Deputy’s role to manage the finances, including reviewing the accounts.

Judge Whalan agreed and was of the view that this time should not have been disallowed as “overheads”, and commented that the work was a specifically required task. The charge of 1-2 units was prima facie reasonable for this case, however, Whalan made clear that time in excess of 2 units would be considered on a case-by-case basis.

Judge Whalan agreed to allowing the time as drawn in this instance.

Analysing the accounts and preparing reconciliations

The third issue, similarly to the monthly reviews of the Deputyship accounts, concerned TG’s bank accounts. The work however was different in nature as it was in relation to preparing reconciliation statements and analysing the accounts to assess the income and expenditure. This work claimed totalled 5 hours 24 minutes at Grade D.

Each entry was described as follows:

The SRA Account Rules 8.2 and 8.3 and the OPG Deputyship Standard 5a were referred to as requirements for the Deputy to carry out the work. On assessment, the time claimed by the Grade D was reduced by 2 hours 36 minutes.

Judge Whalan commented that it was for the Costs Officer to guard against excessive charges being claimed. Judge Whalan commented that the tasks undertaken were reasonable by the Grade D fee earner and were not unnecessarily high.

Judge Whalan agreed to allow a further 2 hours 27 minutes at Grade D, reinstating the time almost in full.

Judge Whalan would not make a written judgment on this case. Clarion agreed to write a note to share with PDF members on the outcome of the hearing, which has also been shared with Judge Whalan. This note may or may not be circulated to the Costs Officers, but Judge Whalan confirmed that the outcome would be communicated to them.

Allege fraud by all means….but do so at your own risk – the allegation must be tenable

Helen ApplebyLeave a comment

The recent case of Farol Holdings Limited and ors -v- Clysedale Bank PLC and ors has attracted significant press coverage and for good reason.

The case was heard by the Honourable Mr Justice Zacaroli. The substantive action concluded on 19 March 2024, where Judgment was handed down. By consent, the Claimants were ordered to pay the Defendant’s costs, and the hearing was adjourned to consider other consequential matters.

Amongst the matters to be addressed were:-

1) Whether the costs payable by the Claimants should be on the Standard or Indemnity basis;

2) What interim payment should be paid by the Claimants on account of costs;

In relation to Point 1, the Judge noted that “an award of costs on an Indemnity basis is different from a Standard basis costs order for three reasons: cost management orders are disapplied; there is no proportionality requirement and the burden of proof on the question of reasonableness is reversed”.

In relation to the question of reasonableness, the parties agreed on the test to be applied, taken from Three Rivers DC v The Governor and Company of the Bank of England [2006] EWHC 816 (Comm), per Tomlinson J:

“(1) The Court should have regard to all the circumstances of the case and the discretion to award Indemnity costs is extremely wide.

(2) The critical requirement before an Indemnity order can be made in the successful Defendant’s favour is that there must be some conduct or some circumstance which takes the case out of the norm.

(3) Insofar as the conduct of the unsuccessful Claimant is relied on as a ground for ordering Indemnity costs, the test is not conduct attracting moral condemnation, which is an a fortiori ground, but rather unreasonableness.

(4) The Court can and should have regard to the conduct of an unsuccessful Claimant during the proceedings, both before and during the trial, as well as whether it was reasonable for the Claimant to raise and pursue particular allegations and the manner in which the Claimant pursued its case and its allegations.

(5) Where a claim is speculative, weak, opportunistic or thin, a Claimant who chooses to pursue it is taking a high risk and can expect to pay Indemnity costs if it fails.

(6) A fortiori, where the claim includes allegations of dishonesty, let alone allegations of conduct meriting an award to the Claimant of exemplary damages, and those allegations are pursued aggressively inter alia by hostile cross examination.

(7) Where the unsuccessful allegations are the subject of extensive publicity, especially where it has been Courted by the unsuccessful Claimant, that is a further ground.

(8) The following circumstances take a case out of the norm and justify an order for Indemnity costs, particularly when taken in combination with the fact that a Defendant has discontinued only at a very late stage in proceedings;

(a) Where the Claimant advances and aggressively pursues serious and wide ranging allegations of dishonesty or impropriety over an extended period of time;

(b) Where the Claimant advances and aggressively pursues such allegations, despite the lack of any foundation in the documentary evidence for those allegations, and maintains the allegations, without apology, to the bitter end;

(c) Where the Claimant actively seeks to Court publicity for its serious allegations both before and during the trial in the international, national and local media;

(d) Where the Claimant, by its conduct, turns a case into an unprecedented factual enquiry by the pursuit of an unjustified case;

(e) Where the Claimant pursues a claim which is, to put it most charitably, thin and, in some respects, far-fetched;

(f) Where the Claimant pursues a claim which is irreconcilable with the contemporaneous documents;

(g) Where a Claimant commences and pursues large-scale and expensive litigation in circumstances calculated to exert commercial pressure on a Defendant, and during the course of the trial of the action, the Claimant resorts to advancing a constantly changing case in order to justify the allegations which it has made, only then to suffer a resounding defeat.”

In this case, the Judge found that the Claimants had put fraud at the front and centre of their case. Depite the Claimant’s strong resistance to an award of Indemnity Costs, the Judge found nothing improper in the Claimant’s legal representatives’ behaviour in pleading and pursuing the fraud claims, however, this did not satisfy a claim for Indemnity Costs. The Judge went on to state that the “allegations of deceit were weak and subject to inherent flaws, but were nevertheless pursued to the bitter end. The allegation of fraud at the heart of the break costs claims was one which I described in the Judgment as facing insurmountable hurdles, requiring inherently improbable conclusions to be made against four senior executives with otherwise good reputations and no obvious (or suggested) motive for deceiving customers”

An additional factor the Judge found to support an award of Indemnity costs was where large-scale and expensive litigation is pursued in circumstances to impose commercial pressure on the Defendants. The claims were managed by a claims management group – RGL Management Limited (“RGL”). The Judge noted that RGL had conducted a large publicity effort, with its own dedicated website (sueclydesdale.com) and extensive use of social media posts and press releases and whilst there was nothing intrinsically wrong with this, the manner in which it had done so, undoubtedly raised the stakes and,  was something which supported an award of Indemnity costs.

Taking the above into consideration, the Judge determined that the Claimant’s actions took the case “out of the norm” and justified an Indemnity Costs award.

In relation to the Interim payment on account, whilst cost management had been dispensed with, the Defendants had filed a Cost Budget. The Judge considered the parties Budgets and determined this to be the starting point when considering the issue of a payment on account of costs.

The Defendants costs were noted to be £33.46 million (more than double those of the Claimants). Despite which, the Judge acknowledged that the Claimants had chosen to sue each Defendant individually and therefore each Defendant was entitled to defend itself from such serious allegations. The Judge also accepted that the Defendants had the greater burden of disclosure and witness evidence work.

Taking both parties submissions into account, the Judge awarded an interim payment on account of costs in the sum of £19.1 million.

This is a costly lesson for the Claimants to learn and one which should be at the forefront of litigators minds when the issue of fraud/misrepresentation is raised. If the allegations made against your client are so substantial that it takes the case out of the norm, an award of costs on the Indemnity basis is a possibility.

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