Tag: #civilcosts

Lack of care with cost estimates, retainers and time recording leads to reductions on a solicitor/own client assessment

Robert PattersonLeave a comment

Although the sums in issue in this detailed assessment under the Solicitors Act 1974 were not significant (the bill totalled £3,841 plus VAT), Costs Judge Nagalingham’s judgment in Jennifer Underhill v Thackray Williams Solicitors [2024] EWHC 3206, gives a useful insight into the consequences of some common failings by solicitors with regard to cost estimates, hourly rates and time recording.

The Facts

The Claimant instructed the Defendant to advise in relation to an employment matter. The Defendant received three instructions from the Claimant. The first was on a fixed fee basis of £250 plus VAT for a meeting and a written advice. The second instruction related to the preparation of a letter before action and conduct of an employment tribunal matter. The third instruction concerned the negotiation of a settlement agreement following a settlement with the Claimant’s employer. The costs associated with the first and third instruction formed no part of the detailed assessment, which focussed solely on the bill delivered by the Defendant in connection with the second instruction, in the sum of £3,841 plus VAT.

The Issues

Due to the modest size of the bill, a formal breakdown was not ordered. Instead, the parties had agreed that the Defendant’s time ledger provided sufficient detail for the costs claimed to be assessed. However, the time ledger was not accurate. It totalled £5,863 plus VAT, but there was no explanation that could be reconciled with a bill figure of £3,841 plus VAT. In addition, the front of the ledger reported time of 26 hours 11 minutes, but the final page totalled the time 27 hours 24 minutes; neither were correct because the individual items amounted to 23 hours 36 minutes.

All work done on that instruction was subject to a conventional private fee-paying agreement. In their engagement letters, the Defendant provided a cost estimate which indicated that their fees should not exceed £1,470 plus VAT for pre-action and without prejudice letters but that if the matter proceeded to a final hearing, costs were estimated at £15,000 to £20,000 plus VAT. The Claimant believed that the cost estimate meant that her total bill would not exceed £1,470 plus VAT as a settlement was agreed before proceedings were issued.

The hourly rates claimed by the Defendant were also in dispute. The claim was conducted by a Grade C solicitor and the Claimant had agreed rates of £195 per hour and £210 per hour for him. However, although the engagement letters indicated that the Grade C would be supervised by a Partner, there was a dispute as to whether the Claimant had been advised of her hourly rate.

The Decision

As with all detailed assessments under the Solicitors Act 1974, the costs were assessed pursuant to CPR Rule 46.9(3), which provides that:

“…costs are to be assessed on the indemnity basis but are to be presumed –

(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;

(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;”

In respect of the cost estimate, the Costs Judge found in the Defendant’s favour. He found that, correctly interpreted, the cost estimate related only to the preparation of the letter before action and that the wording of the engagement letters was sufficient to conclude that the Claimant had either expressly or impliedly approved costs to be incurred beyond the initial estimate. However, the Costs Judge could not conclude that the costs beyond the estimate were reasonable in amount, because the Defendant failed provide an updated cost estimate until the conclusion of the matter.

As regards hourly rates, the engagement letters all indicated that the Grade C would be supervised by a Partner. However, none of the engagement letters mentioned the Partner’s hourly rate or that the Claimant would be charged £350 per hour. In the circumstances, all Partner time was removed from the bill.

The inaccuracies in the time ledger did not result in any significant reductions, as there had been a significant write off in the sum of £1,772 plus VAT. However, it was beyond doubt that there had been errors and that was taken into account in respect of costs of the assessment.

The bill was assessed in the sum of £3,150 plus VAT, a reduction of circa 15%. Pursuant to section 70(9) of the Solicitors Act 1974, a reduction to the bill of less than 20% would normally have resulted in the Claimant paying the costs of the assessment. However, the Costs Judge held that the errors in the time recording and the fact that an updated cost estimate was not provided until all the costs had been incurred (thus depriving the Claimant of an opportunity to approve the costs) were special circumstances which justified a different order. Consequently, the Costs Judge made no order as the costs of the assessment.

Robert Patterson is a Senior Associate in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@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.

Underspend, not good reason to depart from budget, unless phase substantially incomplete

Anna LockyerLeave a comment

The Costs Budget remains essential to costs recovery and monitoring continues to play an all-important role. The courts have previously ruled that an underspend of any phase constitutes a good reason to depart from the budget, however during a recent detailed assessment of costs in Utting v City College Norwich [2020] EWHC B20 (Costs) Master Brown adopted a different approach, agreeing with DJ Lumb in the case of Chapman v Norfolk & Norwich University Hospitals NHSFT [2020], as he commented:

“if an underspend were to be a good reason for departing from a budget it would be liable to substantially undermine the effectiveness of cost budgeting. As the Judge effectively observed, solicitors who had acted efficiently and kept costs within budget would find their costs subject to detailed assessment, whereas less efficient solicitors who exceeded the budget would, absent any other “good reason”, receive the budgeted sum and avoid detailed assessment.”

Consequently, the opportunity to secure a full recovery of budgeted costs (i.e. those estimated costs that have been incurred), is increased if the costs incurred fall within the budget.

Master Brown largely sided with DJ Lumb’s approach in the case of Chapman when he determined that underspending in a phase was not a good reason to depart from the budget. A budgeted phase coming up short is limited to the sum spent because of the indemnity principle, but that does not open it up to scrutiny more generally in the absence of further “good reason”.

Counsel for the Defendant in Utting submitted that if the amount of a phase does not match the budgeted sum then the costs of that phase are subject to detailed assessment including where there has been an underspend. The claim had settled some 20 days before trial following an unsuccessful joint settlement meeting. The bill claimed costs slightly lower than those budgeted but Master Brown deemed all phases to be complete, save for the Trial Preparation phase and Trial phase. For the phases regarded as complete he opined:

“the fact that a party has spent less than its budget for a phase does not mean there is therefore in fact a good or appropriate reason for any further reduction and I was not satisfied that there was any additional “good reason” for any such reduction.”

The Defendant was however given permission to argue “good reason” for departure in the Trial Preparation and Trial phases on the grounds that these phases had not substantially been completed and described this as:

“a clear and obvious distinction between an ‘underspend’ and the situation that arose in respect to the Trial and Trial Preparation phases where plainly there was, at the very least, substantial non-completion”

This was the key difference to the approach taken by DJ Lumb in Chapman. The thrust of the ruling in Chapman seemed to be that once a budget was set, a party could spend a budgeted phase however it chose.

In Utting the Defendant sought to rely on the 2019 ruling in Barts Health NHS Trust v Salmon where not spending the totality of the budgeted figure for a particular phase, by virtue of the indemnity principle itself, did constitute “good reason”. The point of settlement of this case was pre-agreement of joint expert meeting agendas and before any JSM and so unsurprisingly the sums claimed in the Expert and ADR phases were less than the sum which had been budgeted for. Master Brown made reference to the fact he sat as an assessor in Barts Health NHS Trust v Salmon but justified taking a different tack in Utting on the basis that in Barts Health  “the assumptions upon which the budget had been prepared were not fulfilled”.

The approach taken in Barts health essentially incentivised a receiving party to overspend to avoid detailed assessment. DJ Lumb recognised this in Chapman and highlighted how it was problematic. Although Master Brown in Utting agreed with DJ Lumb as to the overall effect of the ruling in Barts Health, Master Brown went on to comment:

“There is however nothing per se unjust if a receiving party were to receive a sum by way of costs which is less than the budgeted sum. This is, of course, to be contrasted with the situation where a phase is not substantially completed, where it would, to my mind, be unjust for a receiving party to receive the full amount of a budgeted sum in circumstances where only a modest amount of the expected work had been done.”

As none of the cases referred to above are binding there remains an absence of clarity surrounding “good reason” to depart from a budget when the receiving party has underspent. The decision in Utting does however seem to have refined the approach in Chapman, causing Barts Health to appear to be more of an anomaly, further highlighting the importance of budgets and budget monitoring.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at anna.lockyer@clarionsolicitors.com and 0113 288 5619, or the Clarion Costs Team on 0113 246 0622

Filing a Costs Budget Late: High Court Decisions in 2020

Anna LockyerLeave a comment

Back in January of this year Lionel Persey QC, sitting as a Deputy Judge of the High Court, took a fairly lenient approach towards the defaulting party in the case of Manchester Shipping Ltd v Balfour Shipping Limited & Anor [2020] EWHC 164 (Comm) when he granted relief from sanctions to Defendants who filed a costs budget 13 days late.

The Judge took the stance that “The breach, although serious in terms of lateness, did not prevent the litigation from being conducted efficiently or at proportionate cost. No inconvenience was caused to the court or to other court users”. This ruling seemed to mark a shift from the strict application of CPR 3.14 which provides that: unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.

More recently however, His Honour Judge Simon Barker QC in Heathfield International LLC v (1) Axiom Stone (London) Ltd & (2) Medecall Limited [2020] EWHC 1075 (Ch) determined that the defaulting party, in this case the second Defendant, was to be treated as having filed a budget comprising only the applicable court fees.

The surrounding circumstances were that the defaulting party failed to file a Budget 21 days before the originally listed CCMC. This first CCMC was vacated 4 days before it was due to take place as a result of the parties making applications in respect of security for costs. The second Defendant attempted to excuse the fact it had not filed a budget on the basis that the parties had agreed for the CCMC to be relisted. The timing of this agreement was ambiguous and could not be substantiated. The second Defendant then failed to file and serve its budget 21 days before the relisted CCMC and did so late by at least 5 days. Furthermore, they did not file and serve a Precedent R or engage in budget discussions. Relief from sanctions was subsequently applied for 2 days before the re-listed CCMC.

Counsel for the second Defendant attempted to use Manchester Shipping in support but it was found to be incomparable on the facts.

HHJ Barker QC commented on the fact that the first Defendant’s response to the Claimant’s claim had been the cause of the second Defendant on a secondary alternative basis “but that does not entitle D2 to take a more relaxed or casual approach to participation as a party in this litigation”.

The sums of money in issue, at approximately £260k plus £100k for interest and statutory penalty, and the type of litigation as a claim for unpaid invoices were also referred to in the context that “costs may easily become disproportionate” thus “costs control and costs budgeting are all the more important”.

Reference was also made to the court’s discretion under CPR 3.14 being “entirely open”.

A form of hybrid relief was contemplated but ultimately it was decided that the defaulting party should be treated as having filed a budget comprising of court fees only.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at anna.lockyer@clarionsolicitors.com and 0113 288 5619, or the Clarion Costs Team on 0113 246 0622