Interesting comments from the MXX v United Lincolnshire NHS Trust case

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.

  1. I do not accept that the statement of truth for Precedent H is intended to be a composite statement or one akin to signing an estimate. If that was so, in my Judgement, the Statement would simply say that the document was a fair and accurate estimate of the costs which it would be reasonable and proportionate for the client to incur in litigation. But that is not what it says. It specifically refers to incurred and estimated costs separately and it seems to me that a solicitor signing a Statement of Truth has to consider whether the incurred costs figure is fair and accurate separately from whether the figures for estimated costs are fair and accurate. There is absolutely no reason why the incurred costs figure should not be accurate. There are many reasons to understand that the estimated costs figure is no more than educated guesswork. The change in the hourly rates for future work identified by Irwin Mitchell is one of those reasons.

    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.

  1. It seems to me to be unrealistic to expect a party to vet the time recorded on a line by line basis in the manner suggested by the Defendant here. The bill of costs has taken nearly 100 hours to prepare and that involves a considerable greater sum than would be allowed by 1% of the budget. Whilst I accept Mr Bacon’s comment that the extent of the remuneration is not the touchstone for the effort that should be involved, it does seem to me to be a pointer as to the expectation of the time to be spent in preparing a budget. Most of the time will be spent in the estimation of future costs and much less will be spent in relation to incurred costs. Including items which are unlikely to be recoverable between the parties’ assessment runs a risk of the budgeting judge concluding that those costs are high and commenting about this in the CMO.

  2. I do not think that it can be said to be unreasonable for a solicitor to include in the budget, the time that the various fee earners have recorded on their system as being sums which the client is potentially liable to pay.

  3. Similarly, having considered that time to be vulnerable to challenge on a between the parties’ assessment, it can only be reasonable for the drafter of the bill of costs to exclude such time. Where, as here, the time is extensive, the incurred costs actually claimed between the parties will be significantly reduced. But that does not necessarily mean that something improper has occurred when the budget was prepared, in my view.

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:

  1. It is possible to prepare a budget as a bill of costs i.e. prepare a bill of costs which can be converted into a costs budget for the CCMC. Whilst this incurs greater cost, it effectively means that the costs are front-loaded so that the costs for drafting the bill at the conclusion of the matter are much lower.
  2. Lawyers have historically struggled with recording their time (and continue to struggle) in a way that reduces the time required to draft a bill of costs, not to mention time recording by using the phase, task and activity codes. It therefore surprises me that the Master seemed to accept an approach of calculating incurred costs by simply ‘lifting’ time from a time recording ledger. To my mind, time needs to be vetted correctly and incurred costs should not change significantly between those stated in the costs budget and those stated in the bill of costs.
  3. Where a costs management order has been made and the matter proceeds to a JSM or mediation, it can be possible for the parties to agree costs at the JSM or mediation based on the costs management order (Claimant providing some very basic updated figures). If the budget was not based on the accuracy expected within a bill of costs, then any breach of the indemnity principle would not be identified and there is a real risk that costs irrecoverable inter partes would potentially be recovered from the paying party.
  4. Furthermore, the Master’s approach is in real contradiction to the requirements of a document that contains a statement of truth, of which the budget is one of those documents.

    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.

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

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.

A PART 36 OFFER WHICH EXCLUDES INTEREST MAY BE VALID

A Part 36 offer in detailed assessment proceedings may be valid where it excludes interest under the Judgments Act 1838.

In Horne -v- Prescot (No.1) Ltd [2019] EWHC 1322 (QB) the Court held that a Part 36 offer on costs which excludes interest is a valid Part 36 offer, contrary to Ngassa -v- The Home Office [2018] EWHC B21.

CPR 36.5(4) states that a “part 36 offer… [for] a sum of money will be treated as inclusive of all interest…” In Ngassa it was held that therefore an offer which purported to exclude interest was not a valid Part 36 offer and therefore would not attract the consequences of Part 36.

However, in Horne the judge found that in detailed assessment proceedings, interest accruing under section 17 of the Judgments Act 1838 does not form part of the claim for costs, as it is a statutory entitlement in respect of which the Court is not required to make any finding. Therefore, unlike interest which may form a part of substantive proceedings (for example interest under the Late Payment of Commercial Debts (Interest) Act 1988) which forms part of the claim and must be Ordered by the Court, Judgments Act interest does not form a part of the “claim” for costs, and is not required to be ordered by the Court (though it may be disallowed).

Whilst the judgment in Horne is both legally sound and eminently sensible, as CPR 36 was not drafted with detailed assessment proceedings in mind (indeed until 2013 it was not possible to make a Part 36 offer in costs proceedings and is only now applicable due to a modification to Part 47 specifically applying Part 36 to detailed assessment) practitioners should bear in mind that Horne is a first instance decision and a different court on a different day may find differently. It may be prudent for practitioners to continue to include interest in Part 36 offers on costs until further authority clarifies the position. It is however a useful judgment to deploy where there is any dispute as to the validity of an offer.

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.

CONSEQUENCES OF BEATING A PART 36 OFFER: INJUSTICE

There have been various cases recently on how the courts consider whether it would be “unjust” to apply the consequences of CPR 36.17.

In White -v- Wincott Galliford Limited [2019] EWHC B6 (Costs) it was held that it would be unjust to allow an additional amount (CPR 47.17(4)(d)) for the whole of a claim where the offer had only related to some of the issues.

In Invista Textiles & Anor -v- Adriana Botes & Ors (costs judgment unreported) it was held that there is a high bar to demonstrate injustice. The ratio of the judgment suggests that the amount by which an offer has been beaten is at least not the only criterion which the Court should consider. Where a defendant / paying party seeks to argue that it would be unjust to allow some of all of the consequences of CPR 36.17 claimants / receiving parties would do well to refer to this authority as an example of the threshold for “injustice” which must be met.

It should also be noted that the court has previously held that the amount of the additional amount itself cannot be taken into account when considering whether it would be “just” to award the consequences of Part 36.17 per Cashman -v- Mid Essex Hospital Services NHS Trust [2015] EWHC 1312 (QB). In that case, the court on appeal held that the assessing officer had erred in refusing to award the additional amount “not because he considered the making of such an award unjust, but because he thought it unjust to make an award of the required amount”.

There is currently some inconsistency in the judicial approach to the application of the test of injustice. In the opinion of the author, the test is a high bar (supported by White and Invista) and the mere fact that the additional amount of 10% may appear high does not of itself render the consequence “unjust”. The consequences of CPR 36.17 are intended to be punitive and the purpose of the exception for “injustice” is not to allow judges to “soften the blow” to a litigant which has failed to accept a Part 36 offer, but to avoid genuine injustice where there are “exceptional” circumstances.

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.

 What do Court of Protection Costs draftsmen actually do?

The legal world of costs is not the biggest or most well-known, and it’s often the case that many lawyers aren’t sure what Draftsmen actually do. This is especially true if the costs are related to the Court of Protection, as it’s another area that isn’t particularly familiar to many, with some potentially not even knowing which costs are assessed, or how.

The previous blog in this series focused on the Bill of Costs and the process of claiming your costs and ultimately getting paid. This blog will instead breakdown the process of what goes into a Bill of Costs within the Court of Protection world and how the Costs Draftsmen – and women – here at Clarion can help.

Process for creating a Bill of Costs

  1. Arranging the file

Once we receive a file from one of our clients, it’s opened within our case management system and we assess how long the Bill will take to draft and which one of the Draftsmen would be best suited to do it. We review various points including: the specific needs of the client, the amount of work in progress (WIP) on the file received, the complexities involved, and the workload of the Draftsmen involved to determine who in our team is best placed to prepare the Bill of Costs. There are 10 of us who deal with Court of Protection costs on a daily basis.

  1. Drafting the Bill

Thereafter, once the file is allocated, our job is to match up entries on the file and billing ledger and cost the file as appropriate. At Clarion, we review the file of papers on a page by page basis, for completeness. The costs are calculated electronically to ensure absolute accuracy and we will make note of any issues identified, to be raised with the client. We are fully aware of the restrictions and court requirements as to what is and is not recoverable in Court of Protection cases. As a result, we will use our experience and discretion to put the bill of costs together in a way that the Court will be happy with, which is fundamental for our clients’ reputations.

  1. Reviewing the file and the Bill of Costs

Once the whole file is efficiently costed, the Draftsman reviews the file and ledger once more and notes any missing entries on the ledger that are not evidenced in the file. We also check if there are things within the file that could be included in the Bill of Costs, that the fee earner didn’t know could be recovered. If there is anything missing from the file, the client is informed, giving them the opportunity to provide the documents required, to ensure that a complete log of evidence is submitted to the Court.

  1. Collating and arranging the Bill of Costs and bundle

Once all the information is present and the Bill of Costs complete, Clarion prepares the Form N258B, which is a request for detailed assessment of the costs, if they are payable out of a fund. We also draft a comprehensive letter of advice, informing the client of possible reductions and guidance to improve costs recovery going forward. All documents are returned to the client, enabling them to easily submit them to the Court for assessment.

  1. The assessment

The matter is thereafter assessed by the SCCO on the Standard Basis, and Clarion will consider the outcome of the assessment, to determine if it is reasonable or not. Clarion can also assist with requests for reassessment if the outcome is not as expected.

If you would like further information about this process, then please do not hesitate to get in contact.

 

Joshua Sidding is a Paralegal in the Court of Protection Team of the Costs and Litigation Funding Department at Clarion Solicitors. You can contact him at Joshua.sidding@clarionsolicitors.com and 0113 222 3245, or the Clarion Costs Team on 0113 246 0622.

You can also take advantage of our free telephone advice service – available outside of office hours – by calling 07764 501252

The Local Authority seeks orders to restrict the Husband’s contact with the Protected Party.

The case of SR v A Local Authority & Anor (2018), involves the Protected Party (SR), who was an 83-year-old woman who suffered from late onset Alzheimer’s, which was of moderate to severe intensity.

The Protected Party resides at a care home and lacks capacity to decide who she has contact with and to decide on any arrangements for such contact. The Local Authority raised awareness that the Protected Party may be at risk of harm in her husband’s sole care, due to his expressed views on euthanasia, which involved reference to throwing himself and his wife into a river and supplying her with tablets. The Protected Party’s husband also had restrictions placed on the care that he could provide to the Protected Party, such as having to be accompanied if he took her out of the care home. The Protected Party’s family wished for her to return home and the Protected Party has allegedly stated her wishes to be with her husband as she becomes distressed when he leaves her.

In determining whether the Protected Party would be at risk, the court reached the conclusion that the restriction sought by the Local Authority was neither justifiable, proportionate or necessary. They therefore declined to make the Order sought. It was believed that the Protected Party’s husband would most likely not harm the Protected Party, as he had been previously been with her many times unaccompanied. The Protected Party’s daughter also stated that her mother and her father were a happy and loving couple with no allegations of domestic violence ever having been made between them.

Court holds that an application under CPR 44.11 to reduce a party’s costs on the basis of misconduct is not a vehicle to give paying parties a “second bite of the cherry”

In Paul Andrews & Anor -v- Retro Computers Ltd & Ors [2019] EWHC B2 (Costs), Master Friston held that an application that the receiving party’s costs should be reduced or disallowed under CPR 44.11 on the basis of that party’s conduct was not to be used as a vehicle to contest the order for costs made by the trial judge.

This update is a summary of a complex and lengthy judgment. A full analysis will follow in due course.

CPR 44.11

CPR 44.11 states (so far as relevant) that:-

(1) The court may make an order under this rule where –

(a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or

(b) it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.

(2) Where paragraph (1) applies, the court may –

(a) disallow all or part of the costs which are being assessed; or

(b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.

The Case

The Defendants applied under CPR 44.11(2)(b) on the basis that the Claimants’ conduct had been “unreasonable or improper”. There was no suggestion that the Claimants’ legal representatives had acted improperly or that there had been a failure to comply with a rule or practice direction.

Summary of Judgment

The court held that:-

  1. An application under CPR 44.11 is not a vehicle to allow the paying party to have a “second bite of the cherry”, and that issues which were before the trial judge (or which the parties were reasonably capable of bringing to the trial judge’s attention) could not be considered on such an application;

2. The conduct complained of must have been relevant to the proceedings;

3. There is a high bar for establishing that the conduct was unreasonable; and

4. The sanctions the court can impose are limited.

Conclusion

It is important that solicitors and advocates ensure that issues of conduct are raised at trial and are incorporated into the order for costs.

The issues which the court can consider are wide-ranging but should generally have some relevance to the proceedings.

There is a high bar to establishing that conduce was unreasonable, that “unreasonableness” is to be interpreted narrowly, and is conduct which is so bad as to “permit no reasonable explanation” or which “the consensus of professional opinion would regard as improper”.

The sanction which the court can impose will generally be restricted to disallowing the costs which have been incurred as a result of the unreasonable conduct.