Tag: Civil Costs

Costs Consequences of the Claimant’s Late Acceptance of the Defendant’s Part 36 offer

angelanakoLeave a comment

A recent Court of Appeal decision provided important clarification on how legal costs were calculated when a Part 36 settlement offer was accepted late.

Background

The Claimant in Attersley v UK Insurance Ltd [2026] EWCA Civ 217 was injured in a road traffic accident in March 2018. Whilst the claim began under the Road Traffic Accident (RTA) Protocol, it exited the protocol and in February 2021, the Claimant issued Part 7 proceedings, valuing the claim up to £150,000 supported by several expert reports.

The Defendant admitted liability in March 2021 and made a Part 36 offer in the sum of £45,000. The Claimant did not accept this offer within the 21-day relevant period set by the rules. Consequently, the claim was allocated to the multi-track in January 2022, which typically allows lawyers to recover their costs based on what is considered reasonable rather than fixed amounts. The Part 36 offer was accepted in July 2022.

As the Claimant accepted the Part 36 offer outside the 21-day relevant period, and once the claim had been assigned to the multi-track, there was a dispute as to whether the costs could be recovered on a standard basis or were limited to fixed recoverable costs.

Outcome

The Court of Appeal considered the version of the civil procedure rules which applied at the time and held that the key date is when the 21-day period for accepting the Part 36 offer expires, rather than when the offer is eventually accepted, meaning that Claimants who accept an offer after the relevant period will generally be entitled to the amount of costs they would have received had they accepted the offer on the last day of the relevant period. As during that 21-day period the claim remained within the fixed costs regime, the Claimant was entitled to fixed costs which applied at that stage of the proceedings.

The court highlighted that the rules governing settlement offers are designed to encourage early settlement and clarity surrounding financial risk, therefore Defendants should be able to rely on the costs environment that existed when the offer’s relevant period expired. Allowing later events, such as the case being allocated to the multi-track, to change the cost consequences would create unnecessary uncertainty. The court outlined that:

“it is hard to see why a Claimant who [accepted the offer outside the relevant period]…should be in a better position than one who accepts the offer within time.”

Conclusion

The key point of this judgment is that if an offer is made and expires while the case is still within the fixed‑costs regime, the fixed‑costs rules apply to the consequences of accepting that offer, even if the case later evolves or moves outside the fixed‑costs regime.

Although this decision was made in the context of the pre-October 2023 fixed costs rules, it is expected that this is the same approach the Courts will apply under the new fixed‑costs rules introduced in October 2023. That is because those rules are also built around clear stages and predictable cost consequences.

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

Client not bound to consider solicitor’s interests under a CFA when settling – Candey -v- Bosheh

Joanne ChaseLeave a comment

In Candey Limited -v- Bosheh & Salfiti [2022] EWCA Civ 1103 the Court of Appeal held that a client is not bound to consider their solicitor’s interests when settling a claim.

Background

In summary, Bosheh (the client, “C”) entered into a CFA with Candey Limited (the solicitor, “Sol”). The relevant term of the CFA was “…if… we obtain an order or agreement that our hourly rate costs… be paid by your opponent then we shall be entitled to recover those costs from your opponent, and you are always liable to pay these costs to us to the extent that we recover them from your Opponent. You will always seek to recover costs by order or agreement”. During the course of the primary litigation Sol received an offer from their opponent by which C would receive up to £1m, and that neither party would pay the other’s costs.

Sol advised C that any money paid to C under the terms of that settlement would go to Sol in payment of its legal fees. C did not accept that this was a correct interpretation of the CFA terms. The claim was ultimately settled on a drop hands basis.

Following settlement, Sol terminated its retainer with C and commenced proceedings alleging inter alia breach of its duty of good faith in failing to seek a settlement on terms that Sol would be paid.

Judgment

Finding for C, the High Court found that a retainer between a solicitor and client is not subject to a duty of good faith (para 84). This finding was upheld by the Court of Appeal which added “There is no authority that supports the proposition that, when retaining a solicitor to act for him or her, the client owed that solicitor a duty of good faith. The absence of authority is perhaps unsurprising: it is a startling concept. Many would say that, if a duty of good faith was applicable at all, it would arise the other way round and be owed by the solicitor to the client” The Court continued at paragraphs 53 – 54 that:–

  1. First, Mr Bompas’ answers demonstrate the potential conflict of interest that can arise under a CFA between the client and the solicitor where the terms are drafted in such a way that the solicitor’s costs recovery is itself dependent on the client recovering something – anything – from the proceedings… Such conflicts cannot be resolved by an implied duty owed by the client to consider the solicitor’s financial interests rather than his own; it is for the solicitor to ensure that such conflicts do not arise in the first place.
  1. Secondly, it is self-evident that, irrespective of any duty of good faith, the client cannot be in breach because he or she chooses a settlement which they perceive to be as good as or better for them than the one that obviously suits the solicitor. Any other conclusion would fundamentally alter the solicitor/client relationship. In the present case, the Boshehs were quite entitled to conclude that a ‘drop hands’ settlement was certainly not a substantially less advantageous (and arguably a better) deal than the earlier proposal made by the Sheikh.”

Summary

The judgment highlights the risks to solicitors acting under a CFA. Solicitors should check their client retainers to ensure that they minimise the risk that a client may settle the proceedings on terms that prevent them being paid. Whilst it is difficult to imagine wording which would provide complete protection, a clause within the CFA to the effect that if the claim is settled on terms where there is no specific provision for costs, the solicitor will be entitled to be paid their costs capped at a percentage of the settlement sum agreed.

Should you have any questions, you can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Consultation on Guideline Hourly Rates now open

Andrew McAulay2 Comments

The current guideline hourly rates have not changed since 2010. A long awaited review was announced last year and a Civil Justice Council working group was established. For more details of the working group see https://www.judiciary.uk/related-offices-and-bodies/advisory-bodies/cjc/working-parties/guideline-hourly-rates/

The working group has now published their report and you can find it here.

The working group’s recommendations are set out below.

The consultation is open until 31st March 2021 at 4pm. You can respond online here

 

Helen Spalding is an Associate in the Costs and Litigation Funding Department at Clarion. You can contact her at helen.spalding@clarionsolicitors.com or on 0113 288 5639.

Solicitors Hourly Rates: Shulman -v- Bogolyubov

Joanne ChaseLeave a comment

In Shulman -v- Kolomoisky & Bogolyubov, Senior Courts Costs Office (24/06/20) the Second Defendant (Bogolyubov) had instructed solicitors in Canary Wharf (postcode E14), which would place it within London Band 3 of the Solicitors Guideline Rates. The Claimant, who was liable to pay the Second Defendant’s costs, argued that the court should allow rates falling between the guideline rates for London 1 and London 3, taking into account the nature of the work.

Referring to the judgment of Mrs Justice O’Farrell in Ophen -v- Invesco [2019] EWHC 2504 (TCC) that “the guideline rates are based on rates fixed in 2010 and reviewed in 2014… they are not helpful in determining reasonable rates in 2019”, Master Rowley of the Senior Courts Costs Office considered the Claimant’s proposed starting point to be “entirely opportunistic”. The Master went on to point out that “the Guideline Rates were originally provided to judges when the Civil Procedure Rules arrived in April 1999 and the concept of summary assessment of costs first came into being. Many judges had little or no experience of costs and the guideline rates were there to provide assistance on summary assessment. They were not intended to replace a more thorough consideration of appropriate hourly rates in detailed assessments… it is something of an indictment on the evidence usually provided at detailed assessment hearings that the Guideline Rates have often been used… without variation.“ Although Master Rowley did point out that the Second Defendant had provided no explanation as to how the level of the hourly rates had been arrived at, he commented that the guideline rates re “is really the roughest of rough guides as to what might be allowed”.

In light of these comments, Master Rowley considered that in the absence of any evidence, the Court is required to consider the “pillars of wisdom” at CPR 44.4(3) in order to arrive at a conclusion as to whether the rates claimed are reasonable.

One further comment of note is that Master Rowley pointed out that “there is a very fluid market in terms of what hourly rates can be obtained” and that there are many factors which affect this which fall outside the remit of CPR 44.4(3), such as the solicitor’s appetite for such work or the potential for future work to be obtained from the same client.

Based upon the above, Master Rowley allowed rates of £750 for Grade A, £400 for Grade C, and £200 for Grade D.

It is important to note that this case related to firms practicing in London, which paying parties (and some judges) in regional courts consider to be a “special case” with no application outside the M25. It therefore adds to a growing volume of case law that the Guideline Rates are no longer suitable as a starting point, but until there is guidance from a higher court this should be treated as supportive but not a guarantee for receiving parties outside London.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

INTEREST IS NOT PAYABLE ON AN ADDITIONAL AMOUNT AWARDED UNDER CPR 36.17(4)(d)

Joanne ChaseLeave a comment

Where the Court awards an “additional amount” under CPR 36.17(4)(d) as a claimant / receiving party beating its own Part 36 offer, the additional amount will not attract “enhanced” interest under CPR 36.17(4)(a).

In FZO -v- Adams & Anor [2019] EWHC 1286 (QB) the court allowed an additional amount under CPR 36.17(4)(d), but held that interest under CPR 36.17(4)(a) – enhanced interest at 10% above base rate – was not payable on that amount. Giving judgment, Mrs Justice Cutts found that the construction of CPR 36.17(4)(d) was that the “additional amount” was not a “sum awarded” and that the words “additional” and “amount” mean that the award is in addition to the enhanced interest at CPR 36.17(4)(a).

It should be noted that CPR 36.17(4) states that where the claimant has beaten their own offer the court “…must, unless it considers it unjust to do so, order that the claimant is entitled to…” and thereafter lists the consequences (enhanced interest, additional amount, etc). This does not appear to accord with the judge’s acceptance of the defendant’s submission that the additional amount is not a “sum awarded”. On the construction of CPR 36.17(4) it seems that those consequences are sums awarded by the court, albeit they are sums which the court is bound to award save where it considers it to be unjust.

Notwithstanding, the second strand of the judge’s reasoning appears wholly sound insofar as the “additional amount” is additional to the other consequences and therefore not itself subject to those consequences.

However, practitioners should be aware that this applies only to interest arising under CPR 36.17(4)(a). As the additional amount is a sum which a party is ordered to pay, and (as above) is a sum which the court orders that party to pay, it is a judgment debt and thus interest will, in the author’s opinion, arise under section 17 of the Judgments Act 1838 at the rate of 8% should payment not be made within the prescribed period (14 days pursuant to CPR 40.11 unless otherwise ordered)

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

Consequences of beating a Part 36 offer may be varied by the Court

Joanne ChaseLeave a comment

***THIS JUDGMENT HAS NOW BEEN SUPERSEDED***

Senior Courts Costs Office extends the principle in JLE v Warrington & Hamilton Hospitals NHS Foundation Trust [2018] EWHC B18 (Costs).

In JLE  Master McCLoud held that where a Part 36 offer is beaten at a hearing, the Court has the power to consider the justness of each of the consequences of CPR 36.17 individually. In that case, the Court held that whilst it would not be unjust to allow costs on the indemnity basis or interest at the rate of 10% over base rate, it would be unjust to allow the uplift of 10% (often known as the “penalty payment”) given the amount by which the offer was beaten.

Following judgment in Andrews & Anor -v- Retro Computers & Anor [2019] EWHC B2 (Costs), there was a hearing to determine consequential orders on 5th March 2019.

Prior to the Oral Assessment of the Claimants’ costs, the Claimants had made Part 36 offers in the sum of £40,000. The bill of costs was ultimately assessed in the sum of a little more that £43,000 (inclusive of interest). Accordingly the Claimants submitted that they were entitled to the full range of orders under CPR 36.17. After finding that the Claimants should be entitled to additional interest and costs on the indemnity basis, Maser Friston considered whether or not to allow the “penalty payment” of 10% of the amount of the bill as assessed.

The Deputy Master pointed out that the Claimants had beaten the amount of the assessed bill by “only” 7.5%, and therefore considered that the uplift of 10% would be too high and therefore was minded to disallow the uplift under CPR 36.17(4)(d) on the basis that to do so would be unjust.

The Claimants submitted that pursuant to JLE the court had the power to “deconstruct” CPR 36.17 and to consider the unjustness or otherwise of each consequence individually, and that Master McCloud had held that the consequences of CPR 36.17 were not “all or nothing”. Therefore, they argued, that the Court had a general discretion not only to allow or disallow the penalty uplift, but where it considers that an uplift of 10% would be unjust, the Court may reduce the amount of the penalty uplift to a just level. The Court is therefore not constrained to disallow the penalty uplift in full if it considers that 10% is too high.

Following these submissions, Deputy Master Friston allowed an uplift of 7.5%, commensurate with the proportion by which the Claimants had beaten their offer.

Summary

The Court has the power to vary the percentage level of the uplift proscribed at CPR 36.17(4)(d). The proscribed rate is therefore a cap, not an entitlement, but if the Court finds that to allow the entirety of the 10% uplift would be unjust it is not bound to disallow the uplift entirely.

Every case will be decided on its own merits, but it seems reasonable that where a Claimant has beaten its own offer by less than 10%, the uplift should in principle be allowed in proportion to which the offer has been beaten.

The Claimants were represented by Richard Wilcock of Exchange Chambers, assisted by Matthew Rose of Clarion Solicitors.

The effect of Payments on Account on Part 36 and Judgment

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The case of Gamal -v- Synergy Lifestyle [2018] EWCA Civ 210 has reinforced the position that a payment on account does not “increase” the value of a paying party’s Part 36 offer when considering whether the offer has been “beaten” for the purpose of CPR 36.17.

Case Summary

The original action between Synergy Lifestyle (the Claimant / Respondent), and Ms Nivin Gamal (the Defendant / Appellant) related to a claim for unpaid invoices. For ease of reading, the parties are referred to throughout as the Claimant and Defendant respectively. There were various issues relating to the fraudulent nature of the invoices, applicability of VAT, payment or a carpet in October 2013, and the level of costs payable as a result, however these have been omitted for the sake of simplicity and ease of reading.

29 October 2013 – Defendant paid the Respondent £6,600

October 2014 – Claim issued for £151,000

24 August 2015 – Defendant’s CPR 36 offer of £15,000

8 February 2016 – Defendant pays £10,000 to the Claimant

10 May 2016 – Judgment for the Claimant in the sum of £14,275.49 (assessed at £30,275.49 less £16,600 already paid by the Defendant in respect of that work) and the Defendant pay the Claimant’s costs.

The Defendant appealed on the basis that she had beaten the CPR 36 offer of £15,000 and that the judge had failed to properly apply CPR 36.17.

Judgment on Appeal

Giving Judgment, Flaux LJ placed great reliance upon the earlier authority of MacLeish -v- Littlestone [2016] EWCA Civ 127. In that case, Briggs LJ had held that a Part 36 offer was made to settle the entirety of the claim, and that admissions made by a defendant do not have the effect of modifying the Part 36 offer such that it applied only to those parts of the claim which remained in dispute (i.e. a Part 36 offer made in respect of the whole of the claim relates to the whole of the claim, whether or not part of that claim is subsequently admitted).

In Gamal, the court extended this principle to apply not only where a payment had been made following admissions but to any payment on account whether or not an admission had been made. The effect of the payment on account was to reduce the amount which the Defendant could ultimately be ordered to pay, and therefore to a corresponding reduction to the Part 36 offer. As such, the Court dismissed the appeal, held that the Part 36 offer had not been beaten, and upheld the award of costs.

Summary

In summary, the judgment reinforces what many would consider to be the “common sense” position. A payment on account is just that; a payment in anticipation of a future liability. It therefore does not have the effect of making a defendant’s offer more attractive or a claimant’s offer less attractive.

The discussion regarding a “reduction” to the Part 36 offer in the judgment may be somewhat confusing, however this is simply because there are two ways of looking at the issue:-

1. The court gave judgment for £23,675.49[1], distinct from the balance of £14,275.49 payable once credit was given for the payments applicable payments on account (i.e. those made after the date of the offer). Looked at in this way,  the Defendant had obviously not beaten her own offer.

2. The court gave judgment for £14,275.49 (as a result of the payments on account), however just as the payment on account reduced the judgment sum, it also reduced the level of the Defendant’s Part 36 offer (i.e. the offer of £15,000 became £5,000 once the payment on account was applied). This is the approach the court adopted.

Both of the approaches above arrive at the same conclusion though by different methods.

All practitioners should note that whether a payment is “on account” is open to judicial interpretation however the general presumption is that payments made during the currency of a claim are payments on account unless specifically stated otherwise.

Should you have any questions, you can contact the team at CivilCosts@clarionsolicitors.com

[1] In fact, the court assessed the value of the work at £30,275.49, which was necessary as the Claimant admitted that the invoices it had submitted were part of a fraud between it and the Defendant. However, the Claimant had already paid £6,600 towards this work in satisfaction of invoices prior to the commencement of proceedings. Therefore, the total value of the work done was found to be £30,275.49 but the total value of the claim against the Defendant was £23,675.49.