Good news for those that prepare an accurate costs budget

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.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

Mr Justice Hayden appointed as the new Vice-President for the Court of Protection – what does this mean for the Court of Protections future?

Further to the recent appointment of Sir Andrew McFarlane as President of the Family Division of the High Court comes the appointment of Mr Justice Hayden as the new Vice-President of the Court of Protection.

Who is Mr Justice Hayden?

Sir Anthony Paul Hayden was called to the bar at Middle Temple and was appointed as Queen’s Counsel in 2002. On 31 July 2013, he was appointed as a judge of the High Court of Justice in the Family Division.

Some of his most noteworthy cases that he has overseen include the legal challenge by the parents of Alfie Evans against Alder Hey Children’s Hospital.

What are the responsibilities of the President and Vice President?

The powers of the President and Vice President are to oversee the daily activities of the Court of Protection and to liaise with lower level judges to ensure effective performance in all aspects of the Court’s work. They require a good level of leadership, detailed knowledge of the Court’s jurisdiction and a comprehensive understanding of the Mental Capacity Act.

What does this appointment mean for the Court of Protection?

Considering the cases overseen by Mr Justice Hayden, his experience in matters relating to families and those who would be under the care of the Court of Protection is extensive, and will be invaluable in the future development of the Court.

Given the Mental Capacity Act (Amendment) Bill currently making its way through the legislative process, changes in the Court of Protection are on the horizon and Justice Hayden’s history in practice will be extremely useful in the implementation of these.

The team here at Clarion Solicitors wish to congratulate both Andrew McFarlane and Anthony Hayden.

When a CFA describes the claim rather than the work it covers

The recent Court of Appeal decision of Malone v Birmingham Community NHS Trust [2018] EWCA Civ 1376 reinforced the importance of a clearly drafted funding document.

The case involved a prisoner at HMP Birmingham who pursued a claim for failure to diagnose testicular cancer between August 2010 and January 2011. The prison was operated by the Ministry of Justice, and health care services were provided by Birmingham Community NHS Trust, and Birmingham and Solihull Mental Health Foundation Trust.

The Claimant initially instructed Ross Aldridge Solicitors, who had difficulty in identifying the correct Defendant, and in March 2012 the Claimant transferred instructions to New Law Solicitors. They, too, encountered uncertainty when trying to identify the correct negligent Defendant.

The Claimant entered into a CFA with New Law Solicitors on 16 January 2013, which stated that the agreement covered “All work conducted on your behalf following your instructions provided on [sic] regarding your claim against Home Office for damages for personal injury suffered in 2010.”

On 04 October 2013, after proceedings were issued but yet to be served, Birmingham Community NHS Trust admitted responsibility for the Claimant’s treatment, and on 20 March 2014 damages were agreed in the sum of £10,000 plus costs.

A detailed assessment of costs commenced, and the Defendant challenged the enforceability of the CFA on the basis that it was limited to a claim against the Home Office/Ministry of Justice only. DJ Phillips, regional costs judge for Walker, found on 27 April 2015 that the CFA excluded a claim against the Defendant and therefore costs were not recoverable under the agreement as the Claimant had no contractual liability to pay his Solicitor for the work done in suing the Defendant.

The Claimant applied for permission to appeal, which was initially dismissed by HHJ Curman QC in a judgment dated 25 September 2015, but was later granted by Brigg LJ by way of order dated 28 July 2017.

On appeal, Patten LJ and Hamblen LJ considered whether the critical wording of the CFA (highlighted in bold above) merely identified the claim to which it related, or whether it limited the scope of the CFA to a claim against the Home Office only. It was necessary to consider the principles established in paragraphs 11-13 of Wood v Capita Insurance Services [2017] UKSC 24 to ascertain whether a textual analysis of the agreement was required or whether greater emphasis should be given to the factual matrix (contextualism).

[A textual analysis is typically used for agreements that have been negotiated and prepared with the assistance of skilled professionals. Alternatively, consideration of a factual matrix can also lead to the correct interpretation of an agreement, particularly if a contract had been made without skilled input].

Hamblen LJ stated that the “insertions made to the CFA demonstrate it as poor quality drafting and little attention to detail. The critical wording consists of only one sentence and yet it contains three manifest mistakes: (i) the omission of the date of the instructions and (ii) the omission of the definite article before “Home Office” and (iii) the description of the claim being against “Home Office”. The Home Office had not been responsible for operating prisons for some years”. The poor drafting led to a greater emphasis being placed on the factual matrix of the agreement rather than a close textual analysis.

Hamblen LJ considered the most natural reading of the critical wording as being a CFA that covered “all work conducted” on the Claimant’s behalf following “instructions provided” in respect of his claim “against Home Office” and he concluded that the wording was descriptive of the instructions received rather than of the work to be done. Further, he suggested that if the CFA had meant to provide only a limited coverage, greater care and precision would have been expected, but that in any event it would have been in neither party’s interest to seek to impose a strict definitional limit on the agreement so early in the claim.

Therefore, taking into account both textualism and contextualism, it was found that the CFA was not limited to a claim against the Home Office/Ministry of Justice only and the Claimants appeal was allowed.

Whilst in this case the judgment goes in favour of the receiving party, it highlights the importance of giving careful consideration to exactly what a retainer provides for, both at the outset and during the life of a claim, to ensure there are no pitfalls on assessment. It is crucial that time is invested into the creation of a retainer at the outset of a matter, and that it is regularly reviewed throughout the life of a case.

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

Evaluating Litigation Risk & Part 36 Offers

In the clinical negligence matter between JMX (A child by his Mother and Litigation Friend, FMX) v Norfolk and Norwich Hospitals NHS Foundation Trust [2018] EWHC 185 (QB), Mr Justice Foskett found that a Part 36 liability offer of 90% was a genuine offer, which resulted in the Claimant securing the costs benefits listed in CPR 36.17(4).

These benefits included:

1) costs on the indemnity basis following expiry of the offer;

2) interest payable on those costs at a rate not exceeding 10% above base rate;

3) the recovery by the Claimant of an additional amount to be determined after the damages have been assessed pursuant to rule 36.17(4)(d).

The matter had been listed for a liability only trial on Monday 31 October 2017. On 06 October 2017, the Claimant had made a Part 36 offer to accept 90% of the damages to be agreed or assessed. The offer expired on Friday 27 October 2017 and was not accepted by the Defendant. The matter proceeded to trial and the Claimant achieved a result more advantageous than the offer.

CPR 36.17(5) provides that “In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the Court must take into account of the circumstances of the case including-

a) the terms of any Part 36 offer;

b) the stage in the proceedings when any Part 36 offer was made, including in particular how long before the trial started the offer was made;

c) the information available to the parties at the time when the Part 36 offer was made;

d) the conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or evaluated; and

e) whether the offer was a genuine attempt to settle the proceedings.”

The Defendant had tried to argue that the offer was not realistic and failed to reflect any realistic assessment of the litigation risks. They argued that the Claimant’s Part 36 offer letter did not explain why only a 10% reduction was being offered, which went against the Court of Appeal’s guidance in the case of Huck v Robson [2002] EWCA Civ 398.

This, however, was not accepted by Mr Justice Foskett, who found that “Whilst, of course, it is open to the offeror to explain this kind of thinking in the letter making the offer if it is thought helpful, I do wonder whether in most cases it would assist. I can see the letter prompting a reply (sometimes expressed in language that does not help the settlement process) and it may be thought better simply to leave it to the recipient of the offer to assess the offer as it stands”.

The judgment highlighted the power that Part 36 offers have, and whilst the judge did not criticise the Defendant for failing to accept the offer at the time it was made, he did stress that “Part 36 was drafted in a way that provides an incentive to a defendant to view seriously and, where appropriate, to accept a claimant’s Part 36 offer. The decision not to do so may be perfectly understandable and reasonable even if, in due course, it turns out to have been the wrong one. It is simply a reflection of the litigation risk that each party has to evaluate”.

The judge considered the appropriate interest rate to be awarded (CPR 36.17 (4)(c)), and confirmed that 5% above base rate from 28 October 2017 would do justice.

Whilst a 10% deduction may not, in some cases, amount to much in monetary terms, the judge recognised that in high value serious injury cases worth several million pounds, a 10% reduction would not be an insignificant amount of money, particularly when saved for the public benefit in matters against the NHS.

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

It’s all in the detail – the costly lesson of getting your retainer wrong: Radford & Anor v Frade & Ors [2018] EWCA Civ 119

In July 2017, the grounds on which the Appellants brought an appeal were considered in the blog CFAs, Counsel and Rectification – Permission to Appeal granted. This blog focused on the decision of Frade & Ors v Radford & Anor [2017] EQCA Civ 1010.

Fast forward to 07 February 2018, and the Court of Appeal have now considered, and subsequently dismissed, the appeal. Lord Justice McCombe ordered that work done outside the scope of a CFA was not recoverable inter partes, and that retrospective rectification of Counsel’s CFA did not permit costs to be recoverable when they would not have been recoverable save for the rectification.

The Solicitor’s retainers

The Appellants’ argued that a conventional retainer that was entered into before the CFA covered work which was not covered by the CFA. They argued that whilst the CFA superseded the original retainer, there was no basis to conclude that the CFA revoked this retainer. The Appellants relied on the fact that the original retainer letter was sent to their clients at the same time the draft CFA was sent. However, on appeal, the Judge found that there was no co-existing retainer to capture the work which was not covered by the CFA. He concluded on this point that “it only makes sense that the solicitors and clients understood that the CFA superseded the original conventional retainer which had been entered into in circumstances of urgency and before the viability of a CFA could be assessed”, and that “I simply can find no room, on the facts of this case, for the two types of express retainer to have subsisted side by side or for the original retainer to spring back into life, when, contrary to all expectations, the CFA did not cover all the steps taken”.

Therefore, it was a costly lesson to the Appellants that their failure to review the terms of their CFA resulted in work being undertaken that they would not receive payment for.

Counsel’s CFA and retrospective rectification

In terms of the retrospective rectification of Counsel’s CFA, the Appellant’s argued that the rectification of the CFA, which post-dated the order for costs, corrected an error of the omission of two corporate Defendants on the CFA, and that the rectification of the document rendered those Defendants’ liable for Counsel’s fees. And therefore, as a result of such, Counsel’s fees were recoverable on an inter partes basis.

However, the Respondents argued that there was no evidence that the corporate Defendants had ever agreed to retrospectively be responsible for Counsel’s fees, and that it was not open to the Appellants to add to the paying party’s liability for costs after the date the costs order was made. The Respondents relied upon Kellar v Williams [2004].

The Court of Appeal considered the argument and agreed with the original finding of Warby J on this point:

“The underlying rationale is in my judgment that the effect of a costs order is to create a liability to pay, subject to assessment, those costs which a party has paid or is liable to pay at the time the order is made. The liability to pay costs crystallises at that point and, although its quantum will remain to be worked out, that process must be governed by the liabilities of the receiving party as they stand at that time. To allow enforcement of a retrospective agreement which increases those liabilities would be to alter retrospectively the effect of the court’s order.”

The Judge followed the decision in Kellar v Williams [2004] and found that a retrospective rectification of Counsel’s CFA cannot be effective to increase the liability of the paying party after the making of the inter partes costs order.

The decision is therefore an important lesson to litigators. When working under CFAs, it is essential to consider and monitor the retainers to ensure two things; that the work being undertaken is covered by the scope of the retainer, and that for any CFA entered into with Counsel, the parties responsible for Counsel’s fees are documented within the CFA.

 

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.

Part 36 offers, the basis of assessment, and knowing your expert

It is well known within the costs profession that there is some tension in the provisions of CPR 36.17, which deals with the costs consequences following judgment.

When a Claimant beats their own Part 36 offer, CPR 36.17 (4) provides that the Claimant is entitled to: interest not exceeding 10% above base rate from the date of expiry of the offer on the whole or part of any sum of money awarded, their costs on the indemnity basis from the date of expiry of their offer, interest on those costs, again, at a rate not exceeding 10% above base rate, and a prescribed percentage uplift limited to a maximum of £75,000 (10% on awards less than £500,000, and for awards more than £500,000, 10% on the first £500,000 and 5% of any amount above that figure thereafter).

However, for the Defendant, the rules are not quite so generous. CPR 36.17 (3) provides that the Defendant is entitled to costs from the date on which the relevant period expired, and interest on those costs. There’s no mention of indemnity basis costs, and no mention of any enhanced interest.

The recent costs decision in the case The Governors and Company of the Bank of Ireland (1) and Bank of Ireland (UK) PLC (2) v Watts Group PLC [2017] looked at this point closely, with the Defendant trying to persuade the Hon. Mr Justice Coulson that they should be awarded their costs on the indemnity basis following expiry of their first Part 36 offer, which they beat at trial, and which expired on 23 October 2015 (the parties had previously agreed that the Defendant should recover interest at 2% above base rate for the relevant period).

The Defendant relied on three main arguments; that the claim was hopeless and should never have been brought, that the Defendant had beaten their own Part 36 offer, and that the Claimant’s expert was heavily criticised by the trial judge.

The Hon. Mr Justice Coulson considered the principles that he had set out in Elvanite Full Circle Limited v Amec Earth and Environmental (UK) Limited [2013] EWHC 1643 (TCC), and summarised that “indemnity costs are appropriate only where the conduct of a paying party is unreasonable “to a high degree”. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight”. He went on to say that “The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable”

In this case, he did not regard the case as being hopeless from the start, and he stated that the claim was, at least in part, supported by expert evidence and detailed witness statements.

He recognised that if the Claimant had beaten their own Part 36 offer then, in accordance with CPR 36.17(4)(b), they would have automatically been entitled to indemnity basis costs, however, he stated that whilst the rules were misaligned and considered unjustified by some, it remained the law that the same rules did not apply to successful Defendants.

He did, however, allow costs on the indemnity basis in relation to one discrete aspect of the case – the expert’s conduct, and he relied on the decisions of Balmoral v Borealis [2006] and Williams v Jervis [2009] in doing so. He considered that the expert’s conduct should be reflected in the costs order, but he did not consider that an order for indemnity basis costs in their entirety was appropriate. He recognised that the expert’s inadequacies had already been a factor in the Claimant losing at trial, and therefore “to order indemnity costs as well would be penalising the Bank twice over for the conduct of their independent expert”. He ordered that costs of the Defendant expert should be assessed on the indemnity basis, as well as costs of and occasioned by the oral evidence given by the Claimant’s expert at trial.

The Claimant paid a heavy price for relying on an expert who had never given oral evidence at a trial. However, the conduct of the expert did not persuade the Court to allow indemnity basis costs throughout. Nor did the fact that the Defendant had beaten their own Part 36 offer. And whilst the Claimant bank accepted that they lost the litigation “badly”, they denied that the claim was unreasonably brought and they warned about the dangers of applying hindsight to such decisions.

It, therefore, seems that there is a high bar to clear in persuading the judge to award indemnity basis costs in a claim where the Defendant has successfully beaten their own Part 36 offer. Like in this case, a paying party would need to consider and rely upon the factors listed in CPR 44.2 (4), in order to formulate a case that would persuade a judge to make such an award in the circumstances.

If you have any questions or queries in relation this blog or legal costs in general please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 246 0622.

Getting it Right – CPR 2.8 and calculating dates for service

So many times, we question ourselves over whether we have calculated the correct date for service or filing of an important Court document. Getting it wrong can be costly, and, in the extreme, fatal to the case.

CPR Part 6 is at the heart of the rules relating to service of documents, and Practice Direction 6A relates to service within the United Kingdom.

CPR 2.8 sets out how we go about calculating time, and parts 2.8 (2) and (3) specifically explains the clear day rule which often catches practitioners out:

“(2) A period of time expressed as a number of days shall be computed as clear days.

(3) In this rule ‘clear days’ means that in computing the number of days –

(a) the day on which the period begins; and

(b) if the end of the period is defined by reference to an event, the day on which that event occurs

are not included.”

For example, where a CMC is listed for March 30th and the Court orders bundles to be filed no later than 7 days before the CMC, the last date for filing is March 22nd.

CPR 2.8 (4) continues to explain that:

“Where the specified period –

(a) is 5 days or less; and

(b) includes –

(i) a Saturday or Sunday; or

(ii) a Bank Holiday, Christmas Day or Good Friday,

that day does not count”

Therefore, where a witness statement must be served 5 days before a hearing listed on Tuesday 14th March, the deadline for service is Monday 6th March.

Interestingly, CPR 44 practice direction 9.5 (4) provides different rules for the filing and service of a statement of costs before a fast track trial and other hearings;

The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought as soon as possible and in any event –

(a) for a fast track trial, not less than 2 days before the trial; and

(b) for all other hearings, not less than 24 hours before the time fixed for the hearing.

Where a fast track trial is listed for 1.30pm on the first Tuesday after Easter, taking into account the clear day rule and CPR 2.8 (4), the statement of costs must be filed and served no later than the Tuesday before. Wednesday and Thursday provide the 2 clear days, with Good Friday, Easter Saturday, Sunday and Monday not counting. Therefore, in this instance, 7 days before the hearing – suddenly the 2 days turn into 7 days.

However, if it were an interim application hearing listed for 1.30pm on the first Tuesday after Easter, the statement of costs must be filed and served no later than 1.30pm on Maundy Thursday.  What is crucial here is that this rule provides for hours and not clear days. Therefore, filing and serving at 1pm on Maundy Thursday would be perfectly acceptable despite it being within no clear days of the hearing. The clear day rule does not apply when the rules specify the deadline as a number of hours rather than a number of days.

Being aware of this subtle difference could prove to be a very useful tool for any practitioners who are under time constraints for the filing and service of Court documents. A note of advice –  if in doubt then check the rules. The rules regarding filing and service can easily catch you out, particularly bearing in mind that there are also rules surrounding the method of filing and service, i.e. service by email, fax etc., in addition to those relating to timing.

If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.