Tag: Detailed Assessment

The Court of Appeal finds solicitors’ time attending rehabilitation case management meetings is recoverable in principle

Ellena HunterLeave a comment

The anticipated Court of Appeal judgment of Hadley v Przybylo [2024] EWCA Civ 250 has been handed down this morning. The panel, consisting of Lord Justice Coulson and Lord Justice Dingemans (‘Lord Justices’), considered whether the cost of a fee earner’s attendance at rehabilitation case management meetings was irrecoverable in principle as legal costs.

Background

The proceedings concerned a road-traffic accident that caused the Claimant to suffer catastrophic injuries including numerous broken bones, damage to his spleen, bladder, kidney and lungs, a traumatic brain injury, permanent brain damage and sub-arachnoid haemorrhaging. Following the accident, the Claimant underwent rehabilitation at numerous facilities and once a Court of Protection order was in place, the Claimant was discharged into the community with a team of carers that provided 24-hour care.

First Instance Judgment

The cost budget put forward on behalf of the Claimant sought £1.18 million in costs.

Master McCloud ordered that the parties engage in ADR in respect of the future costs. Following ADR, only the “Issues and Statements of Case” phase remained in issue, in which £68,400 was claimed for estimated costs.

The Defendant challenged the costs claimed in this phase on the basis that a solicitor’s attendance at case management meetings with medical and other professionals during management of the Claimant’s rehabilitation needs, and at meetings with professional deputies (said to be part of creating a Schedule of Loss) were not in principle recoverable as costs of the litigation.

Master McCloud considered whether such attendances were progressive. She determined that they were not and that the costs were not capable of being recovered inter-partes.

Master McCloud gave permission for a ‘leapfrog’ appeal to the Court of Appeal.

Court of Appeal Judgment

The Claimant appealed Master McCloud’s finding and the Court of Appeal were tasked with determining whether a solicitor’s time attending rehabilitation case management meetings and the like were recoverable in principle as inter-partes costs.

The Court of Appeal considered that there were two issues:

  1. Is attendance at rehabilitation case management meetings recoverable in principle?
  2. If it is, are there any limits that this court should place on its recoverability at this stage, or should those be addressed on assessment?

The Lord Justices held that this element of the costs was recoverable in principle and found that:

“the Serious Injury Guide and the Rehabilitation Code both envisage the possible involvement of a solicitor in ongoing rehabilitation meetings. Whilst the extent of them, and the amount of necessary attendance, is a matter for the assessment of the cost budget or detailed assessment, both of those guides would clearly indicate that, as a matter of principle, this was a recoverable category of costs.”

The Lord Justices stated that:

“It would be wrong to decide that the costs of the solicitors’ attendance at rehabilitation case management meetings are always irrecoverable. Equally, it would be wrong for the claimant’s solicitor to assume that routine attendance at such meetings will always be recoverable. It will always depend on the facts.”

Whilst finding that the costs of attending rehabilitation case management meetings are recoverable in principle, these costs are of course subject to reasonableness and proportionality. The Lord Justices warned that there was no blanket or default entitlement to attend rehabilitation case management meetings routinely.

Ellena Hunter is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Senior Court Costs Office Guide 2023: What has changed?

Ellena HunterLeave a comment

The Senior Court Costs Office Guide 2023 (the ‘Guide’) has now been released and can be found here. Although this guide is meant for proceedings in the Senior Court Costs Office (‘SCCO’), this is a very useful starting point to understanding detailed assessment proceedings generally.

As with the SCCO Guide 2021, the Guide is split into 4 parts:

  • Part A General Matters = covering matters such as entitlement to costs, costs management orders, costs capping orders and the electronic bill;
  • Part B Detailed Assessment Proceedings = covering the processes of, and time frames for, commencing detailed assessment, serving points of dispute, serving replies to the points of dispute, and requesting an assessment;
  • Part C Applications = covering the processes of obtaining and setting aside a default costs certificate, obtaining a payment on account and applications in detailed assessment proceedings; and
  • Part D Specific Proceedings = covering solicitor and client assessments, costs only proceedings, appeals and litigants in person.

The changes in the Guide are minimal but include:

  •  Amendment to the qualified one-way costs shifting (‘QOCS’) section in light of the change to CPR 44.14 in April of this year;
  • the inclusion of Precedent R and T in the schedule of precedents; and
  • the inclusion of standard orders for assessments under CPR 46.4(2) in the schedule of precedents.

See Ella Wilkinson’s blog here regarding the changes to the Guide in relation to COP cases.

Ellena Hunter is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Hourly rates: is a detailed assessment more beneficial to a receiving party than summary assessment?

Ellena HunterLeave a comment

In Harlow District Council v Powerrapid Limited [2023]EWHC 586 (KB), the Council (‘Appellant’) made a Compulsory Purchase Order (‘CPO’) in respect of land owned in Harlow by Powerrapid (‘Respondent’). The Respondent successfully resisted the CPO and was awarded their costs.

District Judge Leonard determined the categories of costs that fell within the scope of the costs order and made a preliminary assessment as to the applicable hourly rates, including an uplift on the guideline hourly rates of between 8% and 41%. The Appellant appealed District Judge Leonard’s judgments in relation to the scope of the costs order and the hourly rates awarded.

There are two interesting features of this judgement: firstly, the Court’s position on a party appealing a costs Judge’s determination of hourly rates and, secondly, the relationship between the guideline hourly rates and detailed assessment.

Appealing a costs Judge’s determination of hourly rates

In determining the appeal regarding the hourly rates, the Mr Justice Choudhury considered the judgment of Mealing McLeod v Common Professional Examination Board [2002] 2 Costs LR 223and noted that “Permission to appeal should not be granted simply to allow yet another trawl through the bill, in the absence of some sensible and significant complaint”. Mr Justice Choudhury stated that:

“…the role of the Appellate Court in this context is a limited one, that it should be slow to interfere with the exercise of judgment by a specialist costs judge, and that it should only do so where the conclusions of the judge below exceed the generous ambit within which reasonable disagreement is possible”

In response to the Respondent’s submissions that the Judge did not preside over the substantive matter giving rise to the costs application, Mr Justice Choudhury commented:

“In my view, it would be to usurp the role of the costs judge if the appellate court were to consider that it was in an equivalent position to the costs judge and/or had some greater right to interfere with a judgment merely because the judge below (like the appellate court) had not heard the substantive matter.”

The relationship between the Guideline Hourly Rates and detailed assessment

Upon considering the hourly rates awarded by District Judge Leonard and the applicability of the Guideline Hourly Rates (‘GHRs’) on detailed assessment, Mr Justice Choudhury stated that:

“The Master of the Rolls’ emphasis on the Guide being “no more than a guide and a starting point for judges carrying out summary assessment” is important to bear in mind. I note that the Judge in the present case was not conducting a summary assessment, for which the Guide is principally intended… ”

Mr Justice Choudhury further commented that the GHRs are not as central to a detailed assessment as they are to a summary assessment and highlighted the reference in the Guide to the Summary Assessment of Costs 2021 (‘Guide’) that GHRs are intended to provide a starting point in a summary assessment, and that they may also be a helpful starting point on detailed assessment. He added that whether or not the GHRs are a helpful starting point is a matter to be considered by the costs Judge having regard to all the circumstances of the case.

In dismissing the challenge to the hourly rates awarded, Mr Justice Choudhury stated:

“It was open to the Judge to conclude, as he did, that the GHRs were not particularly useful in this case”

Mr Justice Choudhury in dismissing the appeal stated that “there was no error of principle or law on the part of the Judge and no judgment that exceeded the generous ambit afforded to him. Accordingly, there is nothing that would entitle this Court to interfere with his conclusions.”

Is it more beneficial for a Receiving Party to seek detailed assessment of their costs rather than summary assessment?

Mr Justice Choudhury’s judgment on the relationship between the GHRs and the detailed assessment proceedings reiterates the passage in the Guide that GHRs may be a useful starting point for detailed assessment proceedings, but a Judge can utilise their discretion and find that the GHRs are not useful in light of the circumstances of the case.

The contrast of this judgment to that of Samsung Electronics Co Ltd and others v LG Display Co Ltd and another (Costs) [2022] EWCA Civ 466, in which it was held that there must be ‘a clear and compelling justification’ to obtain hourly rates in excess of GHRs at summary assessment, clearly demonstrates that obtaining an uplift on the GHRs at summary assessment is a higher threshold to pass than at detailed assessment. Whilst the wording of the Guide requires that GHRs be a starting point on summary assessment, and leaves it open to the Judge to determine whether they are in fact helpful on detailed assessment, the case law has certainly widened the relationship between the two assessment processes. It would be preferable for a receiving party to have their costs assessed by way of detailed assessment than summary assessment.

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

Who can sign a Bill or Statement of Costs?

Joanne ChaseLeave a comment

A Bill or Statement of Costs must be signed. This requirement is contained at CPR 47 PD 5.21 in the case of a bill, or CPR 44 PD 9.5(3) for a statement. But one question which is often asked is who may sign a bill? The certificates on the precedents refer to a “Partner”, but is a partner in fact required to sign?

CPR 44 PD 1.1 states that“…in respect of any document which is required by Practice Directions 44 to 47 to be signed by a party or that party’s legal representative, the provisions of Practice Direction 22 relating to who may sign apply as if the document in question was a statement of truth. Statements of truth are not required in assessment proceedings unless a rule or Practice Direction so requires or the court so orders.”

Statements of Costs

CPR 22 PD 3.1 states “in a statement of case… the statement of truth must be signed by (1) the party or his litigation friend; or (2) the legal representative of the party…” A legal representative is defined at CPR 2.3 as “(a) a barrister; (b) solicitor; or (c) a solicitor’s employee”.

CPR 44 PD 9.5(3) states that “the statement of costs… must be signed by the party or the party’s legal representative”. This falls within CPR 44 PD 1.1 and CPR 22 PD 3.1 as above, and therefore a statement of costs may be signed by the party’s “legal representative” as defined above. A statement of costs therefore does not need to be signed by a Partner. Indeed, according to the Rules the statement of costs could in theory be a trainee or even a secretary.

Bills of Costs

The position is not so clear for a bill of costs: CPR 47 and the associated practice direction does not contain any rule that the bill of costs must be signed by the party or the party’s legal representative. Rather, CPR 47 PD 5.21 states that the bill must “…contain such of the certificates [annexed to the practice direction] as are appropriate”.

The certificates to be included can be found here and state “all certificates must be signed by the receiving party or by his solicitor”. However, it is not clear that a precedent document can, of itself, impose any obligation on a party as it is supplementary to but does not form a part of the rules.

In Bailey -v- IBC Vehicles [1998] EWCA Civ 566 it was held that “the signature on of the bill… is effectively the certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge…”

By analogy, CPR 3.13(5) states that a costs budget must be verified by a statement of truth “signed by a senior legal representative” of the party, and it was held in Americhem Europe Ltd -v- Rakem Ltd [2014] EWHC 1881 that a legal representative is someone who “is representing in a legal capacity” and that a costs draftsman, who simply prepares the bill, is not. This authority therefore suggests that the individual should be directly engaged in or at least have capacity to carry out a reserved activity (i.e. an activity which is reserved under the Legal Services Act 2007) rather than an activity ancillary to a reserved activity. In other words, the test is whether the individual is entitled to carry out the reserved activity to which the bill related, such as litigation.

Furthermore section 69(2A) of the Solicitors Act 1974 provides that a solicitor’s bill to his client must be signed “by the solicitor or on his behalf by an employee of the solicitor authorised by him to sign”. This raises the question as to whether a bill certificate may be signed by an employee of a solicitor but that the “buck stops” with the solicitor – i.e. any employee may sign but if it is wrong the solicitor is responsible. This was the finding in Gempride -v- Bambrah [2018] EWCA Civ 1367 in which the solicitor had signed a bill which was wrong. She subsequently argued that she had relied on the costs draftsman that it was accurate; the Court held that whilst it may have been drafted by others she was ultimately responsible for the content.

In the opinion of the author, a bill of costs does not need to be signed by a partner but must be signed by a solicitor and not a “legal representative”. It is possible that a Fellow of the Chartered Institute of Legal Executives (being entitled to carry out reserved activities) might also be entitled to sign.

Summary

There is no requirement that a bill or statement of costs must be signed by a partner. Whilst it is theoretically arguable that any employee of a solicitor may sign a statement or bill of costs (1) the solicitor will ultimately be liable even if the document is signed on their behalf, and (2) it would in almost all cases be needlessly risky to do so as it could give rise to significant argument about whether the document had been properly certified. Therefore in general, bills and statements should be signed by a solicitor.

You can find out more about our services here or you can contact the Costs Team at CivilandCommercialCosts@clarionsolicitors.com

KKL Executor & Trustee Company Ltd v Harrison (2020) – Is it cynical for a professional Deputy to expect to be paid?

Stephanie KayeLeave a comment

The short answer is no. The above case concerned an elderly woman (OT, the Protected Party) in Leeds who lacks capacity to deal with her property and financial affairs. KKL is a trust corporation working closely with (both in terms of being the subsidiary of and working from the same office with) a charity called JNF Charitable Trust (“JNF UK”). Ms Harrison made an application to be appointed as property and affairs Deputy for the Protected Party and KKL lodged a competing application, on the basis that they were well known to the Protected Party and they felt that they were best placed to act as Deputy.

For the purposes of the proceedings, Ms Harrison acted as Respondent to KKL’s application to be appointed as Deputy. Ms Harrison’s objection to KKL’s application was based on three key issues. The first was KKL’s lack of independence from JNF UK and the potential for a conflict of interest to arise between the Protected Party’s interests and the interests of JNF UK as the main and residuary beneficiary of the Protected Party’s latest will.  The second was KKL’s lack of experience as a property and affairs Deputy and the third was KKL’s geographical distance from the Protected Party, and their apparent conflict with others with whom the Deputy would need to work in the Protected Party’s best interests pursuant to section 4(7) of the Mental Capacity Act 2005.

Within KKL’s arguments against Ms Harrison being appointed as Deputy, they raised the issue of costs. They said that the standard wording within the application for costs to be assessed on the standard basis was “a cosy arrangement regarding costs that is buried in the small print of her application”.  Judge Geddes responded to say that this was “(literally) factually wrong” and that the application “reflects standard wording within the templates produced by the Court of Protection”.

KKL also raised questions as to the fact that social services consulted a lawyer from the Lawdesk Panel of Private Client Lawyers about their concerns over the Protected Party’s mental capacity and her ability to manage her own finances. Judge Geddes responded to say the there is a risk to Clarion Solicitors of acting in such cases in that “if their application were rejected they might be left to bear their own costs of bringing the application which they do so purportedly in the Protected Party’s interests.” Judge Geddes quashed any notion that is was inappropriate and continued to say, “Of course, in this limited sense they have an interest in either the success of the application or at least in not being criticised for bringing the application to the point of disapplication of the general rule about costs contained in rule 19.2 of the Court of Protection Rules 2017 namely that “Where the proceedings concern P’s property and affairs the general rule is that the costs of the proceedings… shall be paid by P or charged to P’s estate”.

Further in respect of costs, Judge Geddes responded to KKL’s arguments, stating “It will be a matter for submissions on costs whether or not the conduct of either party has been unreasonable or should be marked with the court’s disapproval by disapplying the usual rule.  So long as the proposed deputy is acting in good faith, however, I would not consider their expectation of having their costs paid in accordance with the usual rule out of P’s estate could be considered “cynical”. It remains that the starting point for professionals is to expect to have their costs assessed and paid from the estate.”

Judge Geddes acknowledged that it would be cheaper to appoint KKL rather than Ms Harrison, but overall, found it to be in the Protected Party’s best interests for Lynsey Harrison to be appointed as Deputy. It was ordered that costs incurred by Clarion Solicitors could be assessed and paid from the estate.

It is clear from this case that professional Deputies are not expected to be limited to fixed costs and the starting point is that they should be paid, subject to detailed assessment, for their hard work in managing property and affairs.

If you have any questions, please contact Stephanie Kaye at Stephanie.kaye@clarionsolicitors.com or call 0113 3363402.

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”

Joanne Chase1 Comment

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.

Good news for those that prepare an accurate costs budget

Joanne Chase1 Comment

Following on from the Court of Appeal decision in Jacqueline Dawn Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] WECA Civ 792 where the Court of Appeal found that:

  • The budgeted costs will not be departed from in the absence of a “good reason”;
  • Incurred costs do not form part of the budgeted costs;
  • The good reason test does not apply to those incurred costs;
  • The proportionality test can be applied to the final claim for costs, despite the proportionality test having been applied when the costs budget was approved.

As predicted, we have seen that in practical terms this is good news for those that prepare accurate budgets, but not so for those that don’t. The practical implications of this Court of Appeal decision has an impact on the recovery of your legal fees, as follows:

If the budget has not been exceeded:

  • The budgeted costs will be allowed in full unless a good reason is demonstrated to depart from the budget;
  • A detailed assessment of the budgeted costs can be avoided.

If the budget has been exceeded:

  • The budgeted costs will be restricted to the amount of the budgeted costs that were approved, unless good reason can be demonstrated to depart from the budget.

Win win for those with well prepared budgets. In addition, following approval of the budget, further consideration should be given to the budget throughout the lifetime of the claim. Examples of which are as follows:

Q1. Is it necessary to consider the budget in preparation for the trial?

Answer – yes.

If you win and your budget has not been exceeded:

  • Ask the court to order that the budgeted costs claimed are allowed in full;
  • Only incurred costs will be assessed by way of detailed assessment;
  • If the trial is less than one day, ask the court to summary assess the incurred costs. The court may assess the budgeted costs, however if the costs fall within budget, these should be allowed in full. Present your budgeted costs in phases to demonstrate to the court that the budget has not been exceed on a phase by phase basis;
  • Assess any potential good reasons that your opponent may raise to depart downwards from your budget and be ready to defend those arguments;
  • Ask for a payment on account of the incurred costs, these remaining costs being subject to assessment.

If you win and your budget has been exceeded:

  • If no good reason can be demonstrated to depart from your budget, the court should limit your claim for costs to the approved budget amounts;
  • Therefore establish a good reason to depart from the budget so that the costs can be assessed by way of detailed assessment rather than being restricted to the approved amount of the budget. This will provide you more of an opportunity to justify your costs and overspends;
  • Request a payment of the approved costs, payable within 14 days;
  • Request a payment on account of the remaining incurred costs, payable within 14 days.

If you lose and your opponent’s budget has been exceeded, their budgeted costs should be limited to the budget:

  • The winner can obtain costs in excess of the budget if they can show a good reason to depart from the budget, so be ready so defend any good reasons that the winner may raise to depart from the budget.

If you lose and your opponent’s budget has not been exceeded, their budgeted costs should be limited to the budget:

  • A good reason is required to depart from the budget, therefore if you can identify a good reason to depart from the winner’s budget you can secure a reduction to the winner’s budgeted costs.

Q2. What are examples of a good reason?

Answer – examples of a good reason to depart down are:

  • Did the winner undertake all the work that was provided for in the budget?
  • Were there any adverse costs orders, amount needs to be excluded from the budget?
  • Proportionality test – does the proportionality test that was applied at the CCMC require revisiting?

Q3. Why raise those good reasons at the trial?

Answer

  • Defers the assessment of costs to detailed assessment, if deemed beneficial;
  • Minimises the amount of the payment on account;
  • Minimise the amount of budgeted costs payable.

Remember, incurred costs are subject to detailed assessment in the normal way – ensure that the court is aware that this is only applicable to budgeted costs.

Q4. What role does the budget have in securing a Payment on Account?

Answer – the court will scrutinise the amount that was approved in the budget when determining the amount of the payment on account.

  • If the court refuses to order the payment of your budgeted costs in full, and opts to order a payment on account instead, request the following amounts:
    • Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch) (31 July 2014) – POA of 90% of budget;
    • Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC) – POA of 70% incurred costs and 90% estimated costs.
  • Be ready to defend any good reason to depart from the budget that your opponent may raise, this will assist in securing the maximum payment on account, conversely remember to raise any good reason arguments to depart down if you are payer rather than payee.

Q5. What role does the budget have at the mediation or settlement meeting?

Answer – the budget enables parties to be fully aware of their costs exposure, so an informed decision can be made when determining whether to settle. Update the budget for the ADR meeting so that costs may be agreed at the same time and be ready with the same arguments in terms of departure from the budget that would be applied at the trial.

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

Are you J Code ready?

Joanne ChaseLeave a comment

The J-Codes are a set of electronic codes proposed by Jackson LJ, where time is recorded in phase, task and activity. These codes were first published in July 2014 and over 3 years later the MOJ have now included guidance in their 92nd update to the CPR regarding phase, task and activity time recording. The MOJ have decided not to adopt the full J-Code structure proposed by Jackson LJ and have published an alternative and apparently simpler version of the Phase, Task, Activity (PTA) approach. That said, J-Codes can still be adopted or the Phase, Task, Activity (PTA) method can be used, it is down to choice.

The electronic bill of costs is mandatory for all Part 7 multi-track claims from 6 April 2018 and therefore Phase, Task and Activity codes (PTA codes) are crucial.  J Codes/ PTA codes however are not mandatory, although it is expected that any additional costs associated with the drafting of the electronic bill of costs due to PTA code time recording not being adopted, may not be recoverable on an inter-partes basis.

This only applies to work undertaken from 6 April 2018.
Recording time in line with phase, task and activity will at last enable budgets to be monitored with ease.

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

The Hourly Rate Debate: the effect of costs management on hourly rates

Joanne ChaseLeave a comment

There has recently been a flurry of case law in respect of the effect of costs management on hourly rates at detailed assessment.

With regard to costs management, there are two rules of central importance, both contained within Practice Direction 3E:-

Para 7.3 provides that “The court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.”

CPR PD 3E (7.10), which states that “It is not the role of the Court in the costs management hearing to fix or approve the hourly rates claimed… the underlying detail… is provided for reference purposes only”.

As to Detailed assessment, the relevant rule is Part 44.3(1), which provides that:-

Regardless of the basis upon which costs are assessed “…the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount”.

The starting point is the judgment in Harrison -v- University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792, which held that where there is an approved budget, the court is empowered to sanction a departure from the budget if it considers that there is good reason to do so. What the judgment did not say is that the figure allowed for a particular phase in a costs management order will be allowed unless there is good reason to depart from it. The distinction is subtle, but important.

Following a month later, the judgment in RNB -v- London Borough of Newham [2017] EWHC B15 (Costs) gave guidance on how the Court would approach hourly rates in the context of a costs management order. In RNB it was held that if hourly rates were reduced on assessment, that reduction would apply to all of the costs claimed, whether they were incurred pre- or post- the costs management order.

In Bains -v- Royal Wolverhampton NHS Trust, 18th August 2017, The County Court at Birmingham (Unreported), District Judge Lumb expressly disagreed with the position in RNB and found that “to reduce hourly rates for budgeted costs to the same levels as those allowed for the incurred costs… would be to second guess the thought process of Costs Managing Judge and would impute a risk of double jeopardy...”

In the absence of a report or transcript, we do not know what reasoning underpinned the judge’s finding in Bains. What is clear is that a central assumption to the finding in Bains was that the judge at costs management may have accounted for a reduction to hourly rates when making the costs management order. It could be said that such an assumption would be tantamount to a finding that the judge at costs management had breached CPR PD 3E (7.10), by in effect setting the hourly rates when making the costs management order. It might well be argued that such an assumption was unreasonable.

Furthermore, the judgment in Bains explicitly states that there is a risk of double jeopardy; in other words, that the judge on assessment may have considered a reduction to hourly rates when making the costs management order. At least on a standard basis assessment, CPR 44.3(2)(b), any doubt as to whether the court on costs management had done so should be resolved in favour of the paying party. Thus in the absence of an explicit finding that the judge on costs management had factored in a reduction to the hourly rates, the court on assessment should assume that they did not.

A little later, in Nash -v- Ministry of Defence [2018] EW Misc B4 (CC), Master Nagalingam of the Senior Courts Costs Office held that a reduction to hourly rates in respect of the incurred costs would not be a ‘good reason’ to depart from the budget for future costs. This has led to some litigants arguing that where there is a Costs Management Order, so long as the party is within budget for the given phase, a reduction to hourly rates will not ‘carry through’ to the future costs in the budget. It is important to recognise that, in Nash, the receiving party’s budget had been agreed.

The central question here is whether or not a reduction to hourly rates is a ‘departure’ from the costs management order. As stated above, hourly rates are not to be fixed or set by the court on costs management. Therefore, if the hourly rates do not form a part of the costs management order, a reduction to hourly rates for ‘future’ costs cannot be said to be a departure from it. By analogy, an additional liability (such as an ATE premium, which is recoverable in Clinical Negligence matters) does not form a part of the budget, and therefore a reduction to such a premium does not constitute a departure.

It is also important to note that CPR PD 3E 7.3 provides that the purpose of costs management is for the court to identify a range of costs which it considers to be reasonable and proportionate for the conduct of the claim. However, the fact that a costs management order has been made does not justify a party incurring costs which are individually unreasonable so long as they fall within budget. In the context of hourly rates, therefore, if it is found that an hourly rate of say £450 per hour is unreasonable, then that hourly rate is unreasonable regardless of whether the work was done before or after the costs management order was made.

Some commentators have argued that the judgments in Bains and Nash are an attempt by the Courts to implement the intention of Jackson LJ to remove the need for detailed assessment. Returning to Harrison, Davis LJ commented that the case had “descended into a kind of arms race in collecting views or comments… with an aim of… extracting some kind of clue as to what [had been] intended…” when the rules were drafted. Importantly he went on to comment “this is beside the point… what we have to do is construe the wording of [the CPR]”. It is quite clear that, in the judgment of the Court of Appeal, it is not the function of the Court to decide what the intention behind the rules was, but only to interpret what the Rules mean and how they apply to the facts.

The difficulty faced by litigators and judges at present is that the rules are unclear, and there is little guidance as to how they should be implemented. This results in a lack of clarity and certainty when proceeding to assessment of costs. In my opinion, there are two potential routes by which the rules might be improved:-

  1. The detailed approach

The Precedent H is amended to remove reference to hourly rates and time. There could then be no question of the assessing judge taking hourly rates into account. As the court cannot set the hourly rates in any event, this should have no practical impact upon the making of costs management orders; the judge on costs management will have a feel for the case and will be fully qualified to consider the work which needs to be done in each phase and make a judgment as to the amount of costs which it would be reasonable and proportionate to incur in doing it.

  1. The summary approach

The court is empowered to set rates at costs management, and also to make a judgment in relation to incurred costs. Under this system, the judge would summarily consider the costs already incurred in the litigation and include within the costs management order what each party will be allowed at the conclusion in respect of the costs already incurred. The court will set a limit for future costs, and the successful party is entitled at the conclusion of the litigation to the amount allowed by the court in respect of incurred costs, plus all amounts incurred after the costs management order so long as they are less than the budget.

The first approach would continue to provide for a detailed assessment at the conclusion of the proceedings, the second approach would not. Of course, the problem with the second approach is that it could give rise to unfairness as parties would not be able to deal with their opponents’ costs in detail.

What is clear is that under the current rules, there is significant doubt over how they should be interpreted, and we will have to wait and see whether this doubt will be rectified by the rules or by binding judgments in the courts.

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