Tag: costs and litigation funding

From Millions to Nil: The Stark Warning in Winros v Global Energy

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In a judgment handed down on 19 December 2025 in the case of The Winros Partnership v Global Energy Horizons Corporation [2025] EWHC 3362 (Ch) (19 December 2025), Mr Justice Marcus Smith upheld a decision of the Senior Costs Judge Gordon-Saker in an assessment under the Solicitors Act 1974 to assess bills totalling circa £6 million at nil. The decision focusses on the circumstances in which a solicitor can terminate a CFA and preserve the right to claim fees from a client.

 

Background

The dispute arose from a long-running dispute between The Winros Partnership (formerly Rosenblatt Solicitors) and their former client, Global Energy Horizons Corporation. Winros had acted for Global Energy under a series of CFAs, which typically provided that the solicitor was only paid only in the event case succeeded.

However, the relationship deteriorated before any success was achieved under the last CFA. Winros terminated the retainer by accepting Global Energy’s repudiatory breach rather than relying on an express termination clause in the CFA.

After the retainer was terminated, Winros delivered a bill for circa £6 million, arguing it should be paid for the work they had done up to the point of termination. Winros also issued a claim in the Chancery Division for damages in relation to the termination of the CFA. Global Energy subsequently asked the court to assess the bill under Section 70 of the Solicitors Act 1974and the claim in the Chancery division was stayed pending the outcome of the assessment.

What the High Court Decided

On appeal from the Senior Costs Judge’s decision in the Senior Courts Costs Office, Mr Justice Marcus Smith upheld the assessment that Winros was not entitled to any payment and that the bill was to be assessed at nil.

Winros chose to terminate the CFA by accepting Global Energy’s repudiatory breach rather than invoking the contractual mechanism in clause 14 (which would have entitled it to fees for work done). Choosing a common law termination meant the contractual protections for payment on termination did not apply.

Furthermore, Winros argued they should have been paid on a quantum meruit basis, which is a restitutionary claim for the value of work done. However, the Court agreed with the lower court that as the CFA had already clearly set out the consequences of early termination, there was no “total failure of basis” that would justify unjust enrichment. Simply put, the contract already articulated what was to happen, leaving no gap for restitution to fill.

The Judge also commented (albeit obiter) that the detailed assessment procedure under the Solicitors Act 1974 was a regulatory process for reviewing bills, not a forum to decide standalone restitutionary claims. Those should be pursued in separate proceedings if genuinely arguable. Therefore, a detailed assessment proceeding was not the appropriate course of action.

The decision highlights the fact that courts will strictly uphold the terms of a carefully drafted CFA, particularly clear provisions on termination and payment that allocate risk with certainty—even if that results in a solicitor going unpaid. It highlights the critical importance of how a solicitor terminates a retainer, as terminating under contract versus at common law can dramatically affect entitlement to fees, with the wrong approach potentially forfeiting enforceable payment rights.

Overall, the judgment serves as a reminder that in CFAs, both procedural compliance and substantive terms are decisive in determining financial outcomes.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Does a paying party have to pay VAT on costs if an insurer is no longer trading?

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The case of Shmuel Moller & Ors v One Touch Solution Limited & Anor [2026] was a routine summary assessment of costs arising from an interlocutory hearing where the Court was required to undertake a focused examination of VAT recoverability where the receiving party was in liquidation.

Background information

The proceedings arose out of a commercial claim brought by the Claimants against One Touch Solution Limited and its insurer, Hiscox Insurance Company Limited. During the litigation, the Claimants were granted permission to amend their statement of case.

The Court ordered that the Claimants should pay the Defendants’ reasonable costs of responding to the amendment, including the costs of preparing an amended defence, such costs to be assessed if not agreed.

By the time the costs issue arose, One Touch Solution Limited had entered creditors’ voluntary liquidation. This gave rise to a dispute as to whether VAT on the Defendants’ legal costs was recoverable as part of the costs order. The Claimants argued that VAT should not be included because it was recoverable by the Defendant (or its estate). The Defendants contended that liquidation meant VAT was irrecoverable and therefore payable by the Claimants.

The Court was therefore required to determine, in the context of a costs assessment, whether VAT on the relevant legal services was recoverable where the receiving party was a company in liquidation, and whether any additional costs should be awarded in relation to the VAT dispute itself.

The Parties’ arguments

The Claimants argued that VAT was only recoverable if the receiving party cannot recover it as input tax from HMRC and that the First Defendant had been VAT-registered at the relevant time legal services were supplied. They also argued that the liquidation did not change the VAT position; insolvency and VAT deregistration on liquidation does not automatically render VAT irrecoverable.

Furthermore, they argued that in respect of the First Defendant’s costs that were funded by the insurer, the insurer was not the entity that incurred the legal services and had no independent right to recover VAT as costs.

The Defendants argued that VAT was irrecoverable and therefore recoverable from the Claimants as part of the costs order. They stated that the liquidation rendered VAT irrecoverable and that VAT could not be recovered in an ordinary way.

Conclusion

The Court held that the First Defendant’s liquidators can recover VAT by filing appropriate VAT returns, meaning neither Defendant has suffered a recoverable loss for VAT in their costs. The Court’s decision was based on the wording of the Regulation 111(5) of the Value Added Tax Regulations 1995. The wording clearly supported the Claimant’s position, and it was held that the Defendants’ position flew in the face of the regulation and was unexplained.

The Claimants sought £1,000 (excluding VAT) for the costs of preparing submissions on the VAT issue. The court noted that the issue had been fully argued in correspondence, the Claimants succeeded on the point, and the Defendants could have avoided further costs by addressing it clearly at the earlier hearing.

Although the Court did not hear submissions from the Defendants on these costs, it found that the Claimants were clearly successful, that the usual CPR Part 44 costs principles applied, and that the amount claimed was reasonable and proportionate.

Accordingly, the Court ordered the Defendants to pay the Claimants’ costs of £1,000, subject to the Defendants’ right to apply in writing to set aside or vary the order, with any such application to be determined on the papers and with modest further costs expected.

Key Takeaways

Although the decision in Moller is not groundbreaking, it is a timely reminder that insolvency does not simplify VAT issues—it often complicates them. VAT recoverability turns on tax entitlement, not litigation status and insurers cannot assume VAT will be recoverable from the opposing party.

VAT on costs remains a technical issue requiring proper analysis. Treating it as an afterthought can prove an expensive mistake.

The Court rejected the common assumption that where a company is in liquidation, VAT on its legal costs must be irrecoverable and therefore payable by the opponent as part of a costs order.

Therefore, the key principle remains unchanged: VAT is only recoverable as part of costs if the receiving party cannot recover it as input tax. Liquidation or VAT deregistration does not, without more, make VAT irrecoverable.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Actor ordered to pay Guardian News indemnity costs and a £3 million payment on account of costs

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Mrs Justice Steyn in Clarke v Guardian News & Media Ltd [2025] EWHC 2575 (KB) examined the issue of costs following the dismissal of actor, Noel Clarke’s, defamation and data protection claims against the Defendant newspaper. To determine the appropriate costs, the judgment addressed the Claimant’s conduct, the costs approved in the costs budget and the various “costs reserved” orders made during the proceedings. Whether the Claimant should make a payment on account of the costs pending detailed assessment and the amount of the payment is also considered in detail.

Background

The Defendant in this case had succeeded on the defences to defamation and the issue of serious harm in respect of 8 articles published about the Claimant actor. The Court determined that the Defendant had been wholly successful and therefore entitled to an order that the Claimant pays costs subject to detailed assessment.

Indemnity Basis Costs

With regards to the basis of assessment, the Judge referred to the legal principles in relation to exercising the court’s discretion to award costs on the indemnity basis summarised within the White Book at 44.3.8 to 44.3.10. The Judge cited the importance of the Court having regard to all the circumstances of the case and the conduct of the Claimant being a key element of this.

The Judge found that the Claimant’s pleaded case and the evidence at trial contained many statements that the Judge found to be untrue and dishonest. Mrs Justice Steyn referred to Esure Services Limited v Quarcoo [2009] EWCA Civ 595, which concluded that if a court finds a claim to have been brought or maintained dishonestly then “it will be normal for a court to seek to mark its disapproval” by making an order for indemnity costs.

Further, the Judge made reference to the Claimant making “wholly unfounded allegations of dishonesty against three professional journalists” and aired those publicly.

It was also highlighted that an order for indemnity costs does not require the Defendant to show that the Claimant’s unreasonable conduct increased its costs. Consequently, the Judge ordered the Claimant to pay the Defendant’s costs of the claim to be subject to detailed assessment on the indemnity basis, if not agreed.

Payment on Account of Costs

When addressing the issue regarding a payment on account of costs, the Judge referred to CPR 44.2(8) which states: “Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs unless there is good reason not to do so.”

The Judge had regard for the way the claim had been pursued by the Claimant and the fact that costs would be assessed on an indemnity basis. The Judge also took into account the Defendant’s Precedent H of July 2024 where the total of the Defendant’s budgeted costs and incurred costs were £3,184,519.98, not including the estimated costs of disclosure, which were left to be agreed or subject to detailed assessment. This figure also did not include costs in respect of the Trial Preparation and Trial phases.

The Judge concluded that it was reasonable for a payment in the sum of £3 million to be sought by the Defendant.

Additional Costs Points

“Costs reserved” orders were made during the proceedings, regarding the Defendant’s application for an interim non-disclosure order and an Amendment and Joinder Application. The Judge concluded that the Defendant was entitled to these costs.

The Claimant asked the Judge to stay the costs order pending a potential application for permission to appeal. This was rejected as the Claimant already had more than the usual time to consider any grounds to seek leave to appeal and the Judge was not prepared to provide an extension of time to seek permission to appeal.

Conclusion

At paragraph 39 of the judgment, Mrs Justice Steyn articulates the reasoning behind her decision as she states: “Bearing in mind that the sum claimed by the Defendant on detailed assessment will be in excess of £6 million and having regard to the nature of the claim and the way in which it has been pursued by the Claimant and his lawyers; bearing in mind also the Defendant’s rates as they appear on the Precedent H forms and what appears, on the face of it at least, to be a reasonable use of more junior solicitors where appropriate; and also bearing in mind that I have ordered that costs will be assessed on an indemnity basis; it seems to me that the sum of £3 million sought by the Defendant is appropriate and no more than ought reasonably to be ordered in this case. It is a “reasonable sum” to require the Claimant to pay on account. It is substantially lower than the Defendant’s likely level of recovery on detailed assessment and so, in my judgment, it does allow for a suitably wide margin of error. Accordingly, I shall order the Claimant to make a payment on account in the sum of £3 million within 28 days.”

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

Strike Out and Multiple Defendant Costs Entitlement: Clarifying the effects of both under Post-September 2023 Fixed Costs Rules

Daniel MurrayLeave a comment

District Judge Field, sitting in the County Court at Truro, has delivered perhaps the most interesting and seminal judgment of the new fixed costs era.

In MIL Collections Limited v My Shop 4 Ltd & Ors [2025] EWCC 38 (04 July 2025), the Court was asked to consider whether each of the 13 Defendants were entitled to fixed costs where the Claimant’s case was struck out for non-compliance with an Unless Order. The quantum of those costs was also considered, given events which meant determination of the award was not straightforward.

Case Facts

The Claimant was a company, whose business involved the purchase and recovery of debts. In late 2024, they had taken an assignment of debts owing by commercial entities to E.on Next Energy Ltd (‘Eon’). The debts varied in size.

Multiple claims were issued, which were transferred, piecemeal, to the County Court at Truro. In each case the Claimant had served a short template Particulars of Claim, and in many instances similar issues were being raised in Defence.. In the interests of the overriding objective, the decision was taken by the Court to manage the cases together, with the case allocated to the Fast Track and assigned to Band 1.

It later became apparent that multiple Defendants were co-ordinating their approach to the litigation and an identical Defence was being filed by each of them. All 13 Defendants in this case, had adopted this approach and thus an order was made on 28 April 2025 consolidating each of their cases and providing a tight timetable to trial.

Directions were subsequently given in several cases, which amongst other things, required the Claimant to file better Particulars of Claim, within 14 days of the order. In this case, this was to be by 13 May 2025, something the Claimant did adhere to. However, the Court took the preliminary view that the pleadings were still deficient and that unless order had not been complied with.

A hearing was listed to take place on 21 May 2025, to consider whether the claim had been or should be struck out. In the intervening period, the court sent out a notice dated 19 May 2025, listing a two day trial to take place across 14 and 15 July 2025. This is one of the first notes of interest in this case, on the basis that traditionally, as per the factors considered for allocation, matters will not usually be allocated to the Fast Track when the trial is expected to last no longer than one day. Here the Court exercised the discretion available to it pursuant to CPR PD 26 16.3(c), to still determine the case was not suitable for the Intermediate or Multi Track.

Until 19 May 2025, the Defendants had all been Litigants in Person, however, the 12th and 13th Defendants sought representation shortly before the final hearing. At the hearing on 21 May 2025, the Claimant accepted that there had been a breach of the unless order and that, consequently, the claim had been automatically struck out on 13 May 2025. The Claimant made an application for relief from sanction on the evening of 20 May 2025. Most of the hearing on 21 May 2025 was therefore concerned with the application for relief, which was dismissed.

The Parties’ Positions

At the conclusion of the hearing, the 12th and 13th Defendants sought their costs of the hearing pursuant to CPR 45.8 in accordance with Table 1 of PD45. These were determined at the hearing on 21 May.

With regards to the substantive litigation, the 12th and 13th Defendants sought fixed costs pursuant to CPR 45.44 and Table 12 of PD45 following the strike out of the claim; and the 1st to 11th Defendants each sought two thirds of the fixed costs in Table 12, pursuant to CPR 45(2)(a).

Due to a shortage of time, written submissions were ordered on the issues in relation to costs which were:

  1. The extent to which the fixed costs provisions apply at all in relation to a claim which is struck out;
  2. The applicable amount of fixed costs and the appropriate stage in Table 12 of Practice Direction 45
  3. Whether, where there is more than one defendant, each defendant is entitled to recover fixed costs in their own respect.
  4. Any entitlement to fixed costs in respect of unrepresented parties.

A.) The extent to which the fixed costs provisions apply at all in relation to a claim which is struck out

There was no dispute between the parties in relation to the allocation or assignment of the matter, which is traditionally a battleground on the new fixed costs regime. The Claimant here did dispute however, that there was an entitlement to costs by the Defendants, based on the specific wording in Table 12 of PD 45, which stipulates costs are payable where a claim “settles or discontinues“. There are also provisions for costs where the matter is disposed of at trial, which did not apply here. It was asserted that none of these conditions had been triggered and therefore no costs should be awarded. It was suggested by the Claimant that any liability should extend only as far as the interim application costs outlined in Table 1 of PD 45.

The Defendants’ position was that the triggers in terms of when an award for costs can be made, was non-exhaustive in Table 12 and that it would be an “absurdity” if a party whose case is struck out would escape liability for costs which would have flowed from, for instance, a discontinuance.

The Court dismissed the Claimant’s approach, confirming that the Table 12(B) did not contain an exhaustive list of the circumstances in which it applied. The Court went further, confirming that “those drafting the rules have clearly gone to extensive efforts to ensure that the fixed costs rules and Practice Direction address most circumstances and permutations, it cannot have been expected or intended that they would expressly deal with every possible circumstance which might arise in such a wide range of cases. The rules must be construed widely and purposefully.”

The Defendants were therefore entitled to costs of the action on accordance with Table 12.

B.) The applicable amount of fixed costs and the appropriate stage in Table 12 of Practice Direction 45

Given the listing of the trial in the intervening period between the deemed automatic strike out and the hearing on 21 May 2025, there was a dispute as to which was the applicable stage in Table 12 of PD 45. This was namely whether the matter fell into stage 2 which applies to case ‘from allocation up to listing for trial’; or stage 3, which applies to case ‘after listing but before the trial.’

The 12th and 13th Defendant’s drew  a distinction between the “listing” of a trial and the “fixing” of a trial. They submitted that stage 3 costs should apply, on the basis that case are traditionally listed in a floating window, with a fixed start date listed afterwards. Reference was made to guidance in the Chancery guide.

The Court found difficulties in accepting this approach, given that in the vast majority of Fast Track cases, the first case management order will provide for both allocation and provision for the trial to be listed either within a window or on the first available date after a particular date.

It was therefore determined that stage 2 costs applied.

C.) Whether, where there is more than one defendant, each defendant is entitled to recover fixed costs in their own respect.

The arguments here arose because of the ambiguity in CPR 45 regarding the position. Where there are multiple Claimants, the position is much clearer and the rules provide for the recovery of 25% of costs where additional Claimants are represented by the same firm of Solicitors.

After deliberation of several factors, including the position on cases allocated to the Multi Track, whereby Defendants are each entitled to their own costs, and the fact that had the  rule makers intended to deviate substantially from principles which would ordinarily apply in respect of costs, this would have been dealt with expressly in the rules, the Court determined that each Defendant was entitled to their fixed costs as set out in Table 12 of PD45. This was subject to the Court’s discretion to make an order under CPR 44.2(6)(a) that a party pay only a proportion of another party’s costs. The Court did not believe the fact that an award of two sets of fixed costs might produce a windfall for the Defendants was a relevant circumstance which should carry significant weight.

D.) Any entitlement to fixed costs in respect of unrepresented parties

Having determined that the individual Defendants were entitled to costs of the claim, the final issue to be determined by the Court was the position regarding the Defendants’ status as Litigants in Person and the level of entitlement.

CPR 45.4 deals with the position in relation to recoverable costs of Litigants in Person on the fixed costs regime, and confirms the application of CPR 46.5, which in turn confirms that Litigants in person are entitled to the same categories of costs and disbursements as represented parties, payments reasonably made by the litigant in person for legal services relating to the conduct of the proceedings; and the costs of obtaining expert assistance in assessing the costs claim. Where a party is a litigant in person throughout the entire claim, the costs allowed under this rule shall not exceed, except in the case of a disbursement. The amount to be claimed will be done so where the litigant can prove financial loss and is calculated at a rate of £19 p/h.

In the case of the 12th and 13th Defendants, the Court determined swiftly that, although they were acting as litigants in person as at the date of strike out, witness statement evidence of their representatives confirmed that prior to that, they had been acting for the Defendants by assisting in the drafting of the Defendant and working on an Amended Defence to the Amended Particulars of Claim.

The costs claimed by them were therefore deemed reasonable costs for legal services related to the conduct of the litigation and are therefore allowed under CPR 46.5(3)(b), subject to the two thirds cap referenced above.

The position in relation to the remaining Defendants was less clear. There was nothing to suggest that they were liable to representatives for fees and there was no evidence of financial losses. Invitations were made by those Defendants, for an award in line with that made in favour of the 12th and 13th Defendants.

However, the Court had difficulty in finding that the remaining Defendants had spent 91 hours engaging with the litigation, which was the number of hours that would have been required at the rate of £19 p/h to reach the level of costs awarded to the represented 12th and 13th Defendants. 7 hours was deemed reasonable and awarded to the 1st to 11th Defendants.

The Defendants sought an uplift of 50% on their costs in accordance with CPR 45.13 because of the Claimant’s conduct in the manner in which they pursued the claims.  The Court again refused this on the basis that the Claimant had already been penalised through the striking out of the claim and there was no evidence to support how the costs had been increased as a result of the Claimant’s conduct.

Summary

The decision is well thought out and provides useful guidance on numerous issues under the new extended fixed costs regime. It further exemplifies the Court’s discretion in terms of allocation and assignment of cases that may well have landed themselves on another track in view of the trial length and combined value. Further, the closing comments confirm a burden on receiving party’s to provide evidence in support of claims for additional sums pursuant to CPR 45.13 because of alleged poor conduct.

In conclusion, where a Claimant’s case is struck out against multiple defendants, each Defendant is entitled to recover their costs on an individual basis. It is essential that a specific trial date has been set, prior to the claim concluding to engage the fixed costs regime under stage 3 of Table 12 CPR PD 45, even if the trial itself does not take place. Furthermore, litigants in person are entitled to recover upto two-thirds of the costs awarded to legally represented parties, ensuring fair but proportionate remuneration for their time and effort in defending the claim. But this must be evidenced.

 Clarion’s Costs and Litigation Funding Department who can be contacted on any fixed costs issues, at our dedicated fixed costs email address at FRC@clarionsolicitors.com.

Uplifted Guideline Hourly Rates from 1 January 2025

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The Guideline Hourly Rates have increased with effect from 1 January 2025.

In December 2023, the Master of the Rolls accepted the recommendations of the Civil Justice Council Costs Review, which was published in May 2023. One of the recommendations was to annually review and increase the Guideline Hourly Rates in accordance with the Services Producer Price Index (SPPI).

The Guideline Hourly Rates are now as follows (the brackets reflecting the rates effective from 1 January 2024 to 31 December 2024):

Grade Fee Earner London 1 London 2 London 3 National 1 National 2
A Solicitors and legal executives with over 8 years’ experience £566

(£546)

 £413

(£398)

 £312

(£301)

 £288

(£278)

 £282

(£255)
B Solicitors and legal executives with over 4 years’ experience £385

(£371)

 £319

(£308)

 £256

(£247)

 £242

(£233)

 £242

(£233)
C Other solicitors or legal executives and fee earners of equivalent experience £299

(£288)

 £269

(£260)

 £204

(£197)

 £197

(£190)

 £196

(£189)
D Trainee solicitors, paralegals and other fee earners £205

(£198)

 £153

(£148)

 £143

(£138)

 £139

(£134)

 £139

(£134)

 

 

There has been an average of a 5%  increase to Grade A rates and 4% increase to Grade B, Grade C and Grade D rates.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Footballers’ wives and their extraordinary budgets

Bethany CollingsLeave a comment

In the much-publicised libel claim of Rebekah Vardy v Coleen Rooney, each party was required to file a costs budget that detailed the costs incurred to date and the amount of costs they estimated would be incurred to trial.

The budgets were considered by Master Eastman at a brief preliminary hearing on Tuesday. Mrs Rooney’s sought estimated costs in the sum of £402,312 whilst Mrs Vardy’s budget sought estimated costs in the sum of £465,842. In addition, Mrs Vardy had incurred circa £431,000 in costs pursuing the claim to date.

Defending the level of costs stated within Mrs Vardy’s budget, Ms Mansoori, who is the barrister representing the Claimant, said that the budget “reflects the complexity, scope and scale of the legal and factual issues”.

Master Eastman commented that both budgets were “extraordinarily large”, and he urged the parties to try and reach an amicable agreement in the matter. He also ordered that revised costs budgets be filed in June.

The latest Precedent H guidance notes

Anna LockyerLeave a comment

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.

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

Revising Precedent H Costs Budgets – Don’t delay

Joanne Chase2 Comments

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.

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

THIRD PARTY FUNDING – A VIABLE OPTION FOR 21ST CENTURY LITIGATION (Part 3)

Joanne ChaseLeave a comment

This series of blog articles will address the increasing viability of third party funding as an alternative to traditional litigation funding methods. It will look at how the law has developed historically and how the Court now approaches third party funding and the potential liability of third party funders.

The third part of this series will explore the liability of third party funders in the matter of Arkin v Borchard Lines Ltd (Nos 2 and 3) [2005] 1 WLR 3055.

Background

This matter related to an unsuccessful action in respect of anti-competitive practices which resulted in the collapse of the Claimant’s company, and which severely affected his finances. The Claimant entered into an agreement with a professional litigation funding company (MPC) to provide funding for the expert evidence and litigation support services for the expert. MPC did not agree to pay any of the Defendants’ costs or to provide finances for an ATE premium due to the significant amount of the premiums available.

The claim was unsuccessful at Trial and the Claimant was ordered to pay the Defendants’ costs. The Defendants’ then sought a non-party cost order against MPC for the entirety of the Defendants’ entitlement to costs. However, this was refused at first instance.

The Defendants subsequently appealed the decision.

Decision

The Court of Appeal considered the balance that needed to be struck between the access to justice provided by third party funding and the general rule that costs should follow the event. It was considered that a funder who purchased a stake in an action should then be protected from all liability of the opposing party’s costs in the event the claim fails.

The Court of Appeal commended the following approach:

‘a professional funder, who finances part of a Claimant’s costs of litigation, should be potentially liable for the costs of the opposing party to the extent of the funding provided’

This has become known as the Arkin cap. This approach has provided clarity and transparency to funders as they can now quantify their liability should the matter fail.

Whilst the cap has been readily adopted by the funding industry, it has also not been without criticism. The main criticism being that the cap creates an uneven playing field in favour of the third party funder as they will only ever be liable for the amount of their investment, whilst the opposing party would be liable for all of the costs of the funded party.

In the next part of the series…

The next blog in this series will take a look at the recent decision which has built upon the ‘Arkin cap’ in the matter of Davey v Money [2019] EWHC 997 (Ch).


This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team.  Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.