Matthew Rose gives an overview of key points for Part 36. Lockdown tip: remember Part 36 follows the rules of service, so make sure you get agreement to serve offers by email.
Matthew Rose is a Solicitor on the Costs team at Clarion Solicitors. Contact him at matthew.rose@clarionsolicitors.com or on 0113 222 3248.
The CPRC have released minutes of their latest meeting. The committee has provided further information regarding the proposals and options relating to revisions to CPR r3.15 and PD 3E, please follow this link to see our previous update.
CPR r3.15 will be re-drafted stating that revisions to budgets are made promptly rather than the initial suggestion that revisions are made without delay. There will be further amendments to practice direction 3E with the introduction of a precedent T and accompanying rules in relation to the completion of the same. The precedent T will provide much needed structure regarding the process of revising budgets and we are expecting that it will outline how to revise budgets. The intention is that these updates will feature in the October 2020 update to the rules.
Please do not hesitate to give me a call or email if you have any queries regarding revising your budget or any other cost management requirements. More detail regarding the importance of revising the budget can be found in our previous blog here. Remember that the rules provide for incurring 2% of your budget in respect to all cost management matters which includes monitoring and revising budgets.
Sue Fox is a Senior Associate and the Head of the Costs Management team in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.
HMCTS are consolidating the work of the courts and tribunals into fewer buildings. It has been announced that from Monday 30 March 2020 there will be a network of priority courts that will remain open during the coronavirus pandemic to make sure the justice system continues to operate effectively.
Fewer than half of all court and tribunal buildings will remain open for physical hearings, with 157 priority court and tribunal buildings remaining open for essential face-to-face hearings. This represents 42% of the 370 crown, magistrates, county and family courts and tribunals across England and Wales.
To help maintain a core justice system that is focused on the most essential cases there will be open courts, staffed courts and suspended courts.
The Judiciary recommend that you check which courts are open before you travel. For information regarding the category of each court please follow this link.
Lord Chancellor Robert Buckland has said that it is vital that we keep our courts running. and that:
“An extraordinary amount of hard work has gone into keeping our justice system functioning. Technology is being used creatively to ensure that many cases can continue. Not everything can be dealt with remotely and so we need to maintain functioning courts.
These temporary adjustments to how we use the court estate will help ensure that we can continue to deal with work appropriately in all jurisdictions whilst safeguarding the well-being of all those who work in and visit the courts”.
Staffed courts will support video and telephone hearings and progress cases without hearings and ensure continued access to justice.
The remaining courts and tribunals will close temporarily and these measures will be kept in place for as long as necessary.
Sue Fox is a Senior Associate and the Head of the Costs Management team in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.
The Court of Appeal determined that poor conduct and a failure to accept an earlier Part 36 offer were grounds on which to award indemnity costs in the case of Lejonvarn v Burgess & Anor [2020] EWCA Civ 114.
The appellant had provided some gratuitous help to her former neighbours in re-designing the landscape of their garden. They had a falling out and the respondent neighbours subsequently brought proceedings against the appellant on the basis that she had been negligent and owed them a duty of care. Three weeks after proceedings had commenced, the appellant made a Part 36 offer in the sum of £25,000, but this was not accepted. Although at trial it was found that the appellant had been negligent, the respondents had failed on the substantive issues and the £25,000 offer was not beaten. The respondents lodged an appeal which caused their costs to spiral as they pursued their case against the appellant. The respondents were unsuccessful at the appeal and the appellant was awarded costs on the standard basis.
The appellant then proceeded to challenge the standard costs award decision and appealed on the basis that this was incorrectly ordered and indemnity basis costs should instead have been applied. At the appeal hearing Coulson LJ considered the background and undertook a thorough review of authorities relating to indemnity costs, opining that:
“No later than one month after the handing down of the judgment by the Court of Appeal…the respondents, having had time to consider the implications of the Court of Appeal judgment, should have realised that the remaining claims were so speculative/weak that they were very likely to fail, and should not be pursued any further.”
Coulson LJ further explored the respondents’ unreasonable pursuit of the case to trial, considering it to be:
“An irrational desire for punishment unlinked to the merits of the claims” and “precisely the sort of conduct which the court is likely to conclude is out of the norm”.
It was determined overall that the first appeal trial judge had incorrectly applied the test to determine indemnity costs and indemnity costs were in fact appropriate in these circumstances from a specific point in time.
The judgment in this case may be of assistance should you need to consider conduct and indemnity costs in a situation where a party beats their own Part 36 offer. Bear in mind however that it is nuanced to the specific facts of the case and the CPR is clear that entitlement to indemnity costs in these circumstances is not automatic.
The outcome of this case was also interesting from a costs management angle as Coulson LJ found that costs assessed on an indemnity basis are not constrained by an approved budget. Please see my blog for further detail.
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
The precedent H guidance notes have never aligned with the precedent S guidance notes (Phases and Tasks Reference and Lookup table in Precedent S (bill of costs)) until the update to the precedent H guidance notes which was made last month, this update has addressed some of those discrepancies.
Please find below the amendments that have been made to the guidance notes:
Pre-action: The precedent H guidance notes states that settlement discussions, advising on settlement and Part 36 offers before proceedings were issued are to be included in the Preaction phase. However, in the Precedent S guidance these discussions are included in the ADR/Settlement phase (task “Other Settlement Matters”) . The precedent H guidance notes must be followed therefore any preaction settlement discussions should be included in the preaction phase.
Issue/statements of case: The precedent H guidance notes have been amended to include “amendments to statements of case” in this phase, the previous guidance stated that these should be excluded from this phase. This amendment has resulted in alignment with the Precedent S guidance.
CMC: The precedent H guidance notes have been amended to include any further CMCs that have been built into the proposed directions order whereas previously the notes stated that any additional CMCs were not to be included in this phase. The position remains regarding any estimated CMCs that have not been proposed in the directions order, these are to be included as a contingent cost. Any disclosure work, i.e. list of disclosure issues, EDQ should be included in the disclosure phase.
Budget – The costs in relation to this phase includes inconsistencies which present numerous difficulties. The Precedent H Guidance Notes includes “correspondence with opponent to agree directions and budgets, where possible”, and “preparation for, and attendance at, the CMC”. The same applies in relation to the PTR phase, which includes “preparation of updated costs budgets and reviewing opponent’s budget”, “correspondence with opponent to agree directions and costs budgets, if possible” and “preparation for and attendance at the PTR”. While the precedent H guidance note specifically excludes preparation of the costs budget for the first CMC, it doesn’t specifically exclude preparation of Precedent R. The Precedent S description of this task is “work on budgeting between the parties following initial completion of the first budget, including the monitoring of costs incurred against the budget and any applications for variation of the budget” – it doesn’t mention the drafting of Precedent R and seems to relate to work post CMC.
Furthermore, in para 7.2 of PD3E the 2% cap relates to all recoverable costs of the budgeting and costs management process other than the recoverable costs of initially completing the Precedent H. If some costs budgeting items are included in the CMC and PTR phases (i.e. following the Precedent H Guidance Note), practically how is the 2% figure on the front page of Precedent H calculated? Should it include the budgeting items which appear in the CMC and PTR phases of Precedent H, or is it exclusive of them? And, what exactly is meant by “budget process” in relation to this 2% cap?
Unfortunately there is no guidance regarding the budget process or “associated material” that is referred to in the guidance notes – does this include composite summaries, breakdowns of costs?
One solution for this phase is to time record in line with the precedent S guidance notes and then when it comes to preparing the budget assess what aspects of the % cap belongs in the CCMC stage. If the time is recorded as CCMC it is a more onerous task to ascertain what element of the CCMC phase is relevant to the % cap.
Trial: The guidance note has been amended to now include counsel’s brief fee in the trial preparation phase rather than the trial phase.
Settlement phase: The precedent H guidance note previously excluded mediation from this phase, this has now been amended to include mediation.
Definition of budgeted and incurred costs – CPR 3.15 and PD 3E para 7.4 Incurred costs are now all costs incurred up to and including the date of the first costs management order, unless otherwise ordered. Budgeted costs are all costs to be incurred after the date of the first costs management order.
Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.
I posted a blog at the end of June about the case of MXX v United Lincolnshire NHS Trust (2018) (please follow this link to read the blog https://clarionlegalcosts.com/2019/06/25/ensure-consistency-between-your-costs-budget-and-bill-of-costs/).
In the Judgment of Master Rowley, there are some interesting points which I felt were appropriate to cite and share through this separate blog. Those points are as follows:
Master Rowley found that the inflated incurred costs amounted to improper conduct and said the following at paragraphs 57 and 58:
“57. The need to comply with the indemnity principle must be on page 1 of any introduction to the law of costs. It is fundamental throughout the issues regarding what sums can be claimed from one party by another. It is, or should be, engrained in everyone dealing with solicitor’s costs. Whether it is a detailed bill of costs that is being produced, a summary assessment schedule or even simply a breakdown in a letter being provided to the opponent, it is imperative that the costs set out as being payable by the opponent do not exceed the sums payable by the client to their solicitor. The case of Harold v Smith (1850) 5 H. & N. 381 is more than 150 years old but it remains correct that the sum claimed should not be a punishment to an opponent nor a bonus to the client (or solicitor) which is the effect of claiming more costs from the opponent than are payable by the client.
The importance of the indemnity principle (which I have blogged on previously and you can find here https://clarionlegalcosts.com/2019/02/12/the-indemnity-principle-what-is-it-is-it-important/) is clearly set out above at paragraph 57 of the Judgment.
At paragraph 58, it is clear that the signature of a Precedent H should not be taken lightly, it is a statement of truth and is not akin to signing an estimate, the signature on the Precedent H is not intended to be a composite statement. Paragraph 58 also indicates that the courts do not expect the incurred costs to be calculated incorrectly because of the inclusion of any incorrect hourly rate/s. However, the courts would be open to the use of composite rates for estimated costs given that hourly rates could clearly change (both upwards and downwards) over time. If you consider this applies to any budget that you are preparing, then make this clear in the assumptions to your budget, this will provide you with protection on detailed assessment and ensure transparency with the court and your opponent.
In the Judgment, Master Rowley did not find that the significant difference between the costs claimed in the bill and those in the costs budget (144-147 hours) amounted to improper conduct. Master Rowley said the following:
“61. Similarly, I do not think that the claimant’s approach to the amount of hours claimed in the budget and subsequently in the bill founds any significant criticism. My understanding of the limit of 1% of the total budget for the preparation of the precedent H was originally allowed for on the basis that clients would have been billed for the incurred costs by that point and so relatively little work would be needed to consider the incurred costs. If that is correct, it takes no account of matters dealt with under contingency arrangements such as a CFA when no bill will have been rendered by the time the Precedent H is prepared.
Personally, whilst I cannot say that the discrepancy in time was improper, I struggle to accept the Master’s decision that there can be such a large discrepancy on detailed assessment (because the bill drafter excludes time when drafting the bill of costs). It is important that incurred costs are broadly correct in terms of time incurred and absolutely correct in terms of hourly rates. If not, it creates an incorrect starting point on detailed assessment and questions the signature of the costs budget. Furthermore, 1% can be a generous amount when preparing a high value costs budget (A £10 million budget would potentially allow a charge of £100,000 to prepare the costs budget).
The decision of the Master also troubles me for the following reasons:
It is therefore imperative that the incurred costs figure is not only calculated correctly in terms of the hourly rate but is calculated correctly (with no significant errors) in relation to inter partes incurred costs. When litigating, each party should be able to proceed on the basis that the incurred costs included in the budget are correct and can be relied upon. Whilst the Claimant substantially reduced the incurred costs in the MXX case (which was to the benefit of the Defendant), it does raise a real question over the costs management process if a party can change their incurred costs figure, which in this instance was by nearly 150 hours.
The aim of this blog was to share some of the wider points which arise from the Judgment of Master Rowley. I would be interested to hear any other people’s views and opinions which can be shared through this blog.
Please note that the case was the subject of an Appeal and I will blog separately (and shortly) in relation to the outcome of the Appeal. The outcome does not impact the points raised in this blog.
This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs Litigation Funding Team. He can be contacted at andrew.mcaulay@clarionsolicitors.com or on 0113 336 3334.
Revising Precedent H Costs Budgets
Don’t delay in applying to revise your Costs Budget if a significant development has occurred in your litigation, and on those occasions where there may have been a delay don’t shy away from applying.
It is not left to a party to choose whether to revise its budget and to take its chances on a detailed assessment, parties must apply to revise their budget if there has been a significant development in the litigation – Sharp -v- Blank & Ors [2017] EWHC 3390 (Ch) (21 December 2017) (hereafter Sharp).
In the event that there has been a significant development in the litigation, parties are not able to defer the determination of additional incurred costs to detailed assessment – those incurred costs form part of the request for additional costs:
Master Marsh “I do not consider the rules and practice direction intended that only certain elements of the costs relating to significant developments must be dealt with as revisions with the other elements, those pre-dating the hearing or, on another view those pre-dating the application, being dealt with on a detailed assessment. This approach would run contrary to the purposes of costs management and lead to unnecessary fragmentation of the costs dealt with at a detailed assessment.”
Master Marsh found that the costs incurred from the costs management order and up to the application to revise the Cost Budget were not incurred costs for the purpose of the revision, they were future costs. Master Marsh focussed on the language of the CPR referring to the choice of the use of “future” rather than “budgeted costs”, as follows:
“The language used in paragraph 7.6 is of critical importance because it provides the jurisdiction, on the defendants’ case to make the revisions they seek. It is notable that the language is at variance with the remainder of the rules and PD3E. It refers throughout to the revision of a “budget” (not, in accordance with the new wording, “budgeted costs”). It is explicit, however, that revision is in respect of future costs. The final sentence of this paragraph gives the court a discretion to approve, vary or disapprove the revisions “… having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed”. On one view, such language points towards the last approved or agreed budget being the jumping off point for a revision because it is the budget that is being revised”.
Master Marsh concluded that the “Costs which have been incurred since the date of the last agreed or approved budget (or the antecedent date) that relate to significant developments are, for the purposes of revision, placed in the estimated columns of the revised Precedent H in one or more phase. In some cases, it may not be obvious where they go (for example a late application for security for costs) but I can see no reason why Precedent H may not be adapted as necessary to accommodate work that does not easily fit in”.
He also considered that there would be a degree of retrospectivity if the costs management regime was to work.
It is essential that you apply to revise your Costs Budget if a significant development has occurred in your litigation, to not do so puts you at risk of not being able to recover any costs that are in excess of your budget.
Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.
There are many case authorities in relation to budgeting since the process was implemented, it is hard to keep track of them all. Here is a complete list of cases.
2014
Appeals
Havenga -v- Gateshead NHS Foundation Trust [2014] EWHC B25(QB)
General guidance
A & B (Court of Protection: Delay & Costs) [2014] EWCOP 8)
Hegglin -v- Persons Unknown & Google Inc [2014] EWHC 3793 (QB)
Thomas Pink Ltd -v-Victoria’s Secret UK Limited [2014]
Yeo-v-Times Newspapers Ltd [2014] EWHC 2853 (QB)
2015
General guidance
BP -v- Cardiff & Vale University Local Health Board [2015] EWHC B13 (Costs)
(GSK Project Management Ltd -v- QPR Holdings Ltd [2015] EWHC 2274 (TCC)
Stocker -v- Stocker [2015] EWHC 1634 (QB))
Tim Yeo MP -v- Times Newspapers Limited [2015] EWHC 209 (QB))
Various Claimants -v- Sir Robert McAlpine & others [2015] EWHC 3543 (QB)
Judicial guidance cases
GSK Project Management Ltd -v- QPR Holdings Ltd [2015] EWHC 2274 (TCC)
Tim Yeo MP -v- Times Newspapers Limited [2015] EWHC 209 (QB)
Late filing of a budget
Simpson -v- MGN Limited [2015] EWHC 126 (QB)
Overspending on the budget
CIP Properties (AIPT) Limited -v- Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC)
Excelerate Technology Ltd -v- Cumberbatch [2015] EWHC B1 Mercantile)
Parish -v- The Danwood Group Ltd [2015] EWHC 940(QB)
Simpson -v- MGN Limited [2015] EWHC 126 (QB)
Proportionality in budgeting
(BP -v- Cardiff & Vale University Local Health Board [2015] EWHC B13 (Costs)
Various Claimants -v- Sir Robert McAlpine & others [2015] EWHC 3543 (QB)
2016
General guidance
Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Campbell -v- Campbell [2016] EWHC 2237 (Ch)
Group Seven Limited -v- Nasir [2016] EWHC 629 (Ch)
Merrix -v- Heart of England NHS Foundation Trust [2016] EWHC B28 (QB)
Signia Wealth Limited -v- Marlborough Trust Company Limited [2016] EWHC 2141 (Ch) –
Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Late filing of a budget
Jamadar -v- Bradford Teaching Hospitals NHS Trust [2016] EWCA Civ 1001
Murray -v-BAE Systems PLC (Liverpool County Court, 1st April 2016)
Outcome of budgets and costs of assessment
Sony Communications International AB -v- SSH Communications Security Corporation [2016] EWHC 2985 (Pat)
Proportionality in budgeting
(Considers Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Group Seven Limited -v- Nasir [2016] EWHC 629 (Ch)
Revising the budget
Warner -v- The Pennine Acute Hospital NHS Trust (Manchester County Court 23rd September 2016)
The budgeting procedure
Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Merrix -v- Heart of England NHS Foundation Trust [2016] EWHC B28 (QB)
2017
Departing from the budget on detailed assessment
RNB v London Borough of Newham [2017] EWHC B15 (Costs)
General guidance
Harrison -v- University Hospitals Coventry & Warwickshire Hospital NHS Trust [2017] EWCA Civ 792
MacInnes -v- Gross [2017] EWHC 127 (QB)
Napp Pharmaceutical Holdings Ltd v Dr Reddy’s Laboratories (UK) Ltd & Ors [2017] EWHC 1433 (Pat)
Judicial Guidance cases
Findcharm Ltd -v- Churchill Group Ltd [2017] EWHC 1109 (TCC)
Woodburn v Thomas (Costs budgeting) [2017] EWHC B16 (Costs)
Late filing of a budget
Asghar -v- Bhatti [ 2017] EWHC 1702 (QB)
Mott & Anor v Long & Anor [2017] EWHC 2130 (TCC)
Outcome of budgets and costs of assessment
Harrison -v- University Hospitals Coventry & Warwickshire Hospital NHS Trust [2017] EWCA Civ 792)
Merrix -v- Heart of England NHS Foundation Trust [2017] EWHC 346 (QB)
Part 36 in budgeting
Car Giant Limited -v- the Mayor and Burgesses of the London Borough of Hammersmith [2017] EWHC 197 (TCC)
Proportionality in budgeting
Rezek-Clarke -v- Moorfields Eye Hospital NHS Foundation Trust [2017] EWHC B5 (Costs)
Revising the budget
Asghar -v- Bhatti [2017] EWHC 1702 (QB)
Sharp v Blank & Ors [2017] EWHC 3390 (Ch)
Sir Cliff Richard OBE -v- The BBC & Chief Constable of South Yorkshire Police [2017] EWHC 1666
2018
Departing from the budget on detailed assessment
Jallow v Ministry of Defence [2018] EWHC B7 (Costs)
Nash v Ministry of Defence [2018] EWHC B4 (Costs)
General guidance
Yirenki v Ministry of Defence, [2018] 5 Costs LR 1177
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)
Matthew Rose is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact him at matthew.rose@clarionsolicitors.com and 0113 222 3248. You can contact the Clarion Costs Team on 0113 246 0622.
In order to have a bill of costs assessed, it is necessary to pay a Court Fee to the Senior Courts Costs Office (SCCO). Depending on the type of the bill, the fee amount varies. Currently, within the Court of Protection, the cost to have a bill assessed is £225 for a detailed bill and £115 for a short form bill of costs. A short form bill is a bill with profit costs up to £3,000 and a detailed bill of costs is a bill with profit costs above £3,000.
From the 22nd July 2019, these fees are due to change. By way of The Court Fees (Miscellaneous Amendments) Order 2019 there is due to be a reduction to the Court Fees due to have a bill of costs assessed. S4 (3)(a) of the Act states that the fee for filing a bill of costs to be assessed will be £85.00. This is dramatic change within the rules and something that will affect all professional Deputies who wish to have their bill of costs assessed, making it cheaper to do so.
The most significant aspect of the Act is that going forward, there will be no distinction between fees for filing short form and detailed bills of costs. As stated, this will be taking place from the 22nd July 2019 and so all professional Deputies should be aware of this when sending any bills to the SCCO to be assessed on or after this date.
There will also be changes made to application, appeal and hearing fees for all Court of Protection matters. These can be found in s3 The Court Fees (Miscellaneous Amendments) Order 2019.
