Tag: Matthew Rose

Raising the Bar: how guideline hourly rates limit access to justice

Joanne ChaseLeave a comment

In a statement dated 17 April 2015, Master of the Rolls the Rt Hon Lord Dyson said that the Guideline Hourly Rates (‘GHRs’) form ‘…an integral part of the process of… summary assessment… a starting reference point in the preparation of detailed assessments… [and] a yardstick for comparison purposes in costs budgeting’, something of a non sequitur following his previous statement that the GHRs are becoming ‘less and less relevant’. Nevertheless the GHRs remain, yet do they undermine the fundamental principles of access to justice?

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Part 36 – a Technical Guide

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A reflection on the proper construction of CPR 36 offers, changes to the rules, and service

Updates

Once you have read this article you may find further information relevant to preparing Part 36 offers here:-

Changes to Interest on CPR 36 offers effective from 1 April 2021

Part 36 and Offers to pay by instalments

What happens when the offeree doesn’t have the money to pay?

When will the court say it is “unjust” to award the consequences of CPR 36?

Does a Part 36 offer have to include interest?

How does a Payment on Account affect a Part 36 offer?

Constructing a Part 36 offer

Pursuant to the judgment in Gibbon v Manchester City Council[i]  and Carillion v PHI Group[ii], an offer which does not comply with the form requirements of CPR 36.5 will not have the automatic costs consequences of a CPR 36 offer. The court will, of course, be able to take into account the fact of the offer when determining the appropriate costs order to make, however the very purpose of making a CPR 36 offer is to obtain the benefit of the automatic costs consequences which it provides. Furthermore it is doubtful that, upon finding that an offer did not comply with CPR 36, the court could award the costs consequences of CPR 36 ‘in any event’ as there is no other statutory mechanism by which a court could award, for example, an uplift on damages or costs as prescribed by CPR 36.17.

It is therefore of critical importance that offers comply with the form requirements of CPR 36.5.

Changes to the Rules after April 2013

Under the old rules, an offer which was intended to have the costs consequences of CPR 36 needed to provide that the defendant (or paying party) would be liable to pay the claimant’s (or receiving party’s) costs pursuant to CPR 36.10.

It is important to note that this has now changed, and CPR 36.5(1)(c) states that the offer must state that the defendant will be liable for costs in accordance with rule 36.13 (or 36.20 in the case of claims which no longer continue under the RTA or EL/PL protocols).

It is therefore extremely important that firms check their precedent documents to ensure that they are updated to refer to the new rule. The consequence of failing to do so could be that the court will find that the offer is not a valid CPR 36 offer and therefore does not have the intended consequences.

The Relevant Period

CPR 36.5(1)(c) also states that a CPR 36 offer must specify a period of not less than 21 days (‘the Relevant Period’) within which the defendant would be liable to pay the claimant’s costs.

As the rules of service apply to CPR 36 offers[iii], the 21 day period can begin only on the date on which the offer is served. An offer which states that the Relevant Period will expire ’21 days from the date of this letter’, or ’21 days from your receipt of this letter’ [iv] will be held to be defective. Furthermore, when calculating the Relevant Period it is necessary to consider the ‘clear day’ rule[v], and thus the 21 day period cannot include the date of service of the offer itself.

For example, an offer letter sent by 1st class post on 1st June 2015 (a Monday) would be deemed served on 2nd June 2015 (a Tuesday)[vi], the first day of the Relevant Period will therefore be on 3rd June 2015 (a Wednesday) and the last day will be on 24th June 2015 (a Wednesday). The party in receipt of the CPR 36 offer will therefore be able to accept the offer within the Relevant Period so long as Notice of Acceptance is deemed served on or before 24th June 2015.

Methods of Service

Both a CPR 36 offer and Notice of Acceptance must be served by one of the methods set out in CPR 6.20. An important point to note, therefore, is that a CPR 36 offer cannot be made or accepted by email unless the party to whom the offer or acceptance is being sent has agreed to accept service by that method in accordance with CPR 6 PD 4.1(1), in other words that that party has given written notice that it will accept service by that method.

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

[i] [2010] EWCA Civ 726

[ii] [2011] EWHC 1581 (TCC)

[iii] CPR 36.7(2)

[iv] Thewlis v Groupama Insurance Co Ltd. [2012] EWHC 3 (TCC)

[v] CPR 2.8(3)

[vi] CPR 6.20

The date from which interest on costs runs

Joanne ChaseLeave a comment

The judgment in Involnert Management Inc v Aprilgrange Limited & Others[i] means that the date from which interest shall be calculated is 3 months after the date of the order for costs.

The Statutory Background

Section 17 of the Judgments Act 1838 provides that interest shall run on judgment debts from the date of judgment, to the date of satisfaction.

CPR 40.8(1) provides that ‘Where interest is payable on a judgment pursuant… the interest shall begin to run from the date that judgment is given’, but gives the court the discretion to order otherwise.

Development of the law

Over the years since the introduction of the Judgments Act, there has been some debate over the correct date from which interest shall run. The two rules proposed have been the incipitur rule, which is that interest on costs runs from the date on which the order for costs was given, and the allocatur rule, that interest runs from the date on which the costs are quantified.

There are clearly good arguments for both positions, however in general the courts have adopted the incipitur principle, culminating in in Simcoe v Jacuzzi[ii] where it was held that interest on costs runs from the date of the order for costs, notwithstanding that those costs have not yet been quantified.

The case of Involnert

In judgment, Leggatt J held that, on the authorities, it is clear that… the date when an order for costs is made is the date judgment is given… even though the amount of costs payable has still to be assessed’[iii], however he confirmed that the court is not restricted in the date on which it can order costs to run and, importantly, found that it is not necessary to show any ‘exceptional’ circumstances in order to do so[iv]. In effect it was held that the date from which interest shall run is at the sole discretion of the court.

Importantly the judge held that it was, in his view, not just that interest on costs should begin to run until the paying party ‘… has been provided with a detailed statement of the costs claimed so that it can take an informed view of the amount its liability’[v] and therefore interest on costs at the rate prescribed by the Judgments Act until ‘a date three months after the orders for costs were made’[vi].

Analysis

The effect of this judgment is that the court has held that interest on costs should not run until 3 months after the order for costs. The date of 3 months was arrived at because CPR 47.7 states that detailed assessment must be commenced (and a bill of costs served) no less than 3 months after the date of the judgment or order.

It should be noted that the court did award interest from the date of judgment, but only at the Bank of England Base Rate (at the time of writing, 0.5%) plus 2%.

Also worthy of note that the court allowed interest from the date mandated as the last date for commencement under CPR 47.7, however this would appear to contradict the ratio of the judgment that interest should not run until a ‘detailed statement of costs’ has been provided. It is quite possible that a bill of costs could be served before the expiry of the 3 months, and it is therefore logical to assume that the date from which interest shall run at the Judgments Act rate is the date on which Notice of Commencement (and the bill of costs) is served.

A further question which may in future arise is whether an earlier date could be prescribed in the event that the receiving party serves a statement or other detailed breakdown, not in the form of a bill of costs or by way of formal commencement, in advance of this date. It would be quite possible to argue that an estimate (so long as it is sufficiently detailed) provided prior to the expiry of the 3 month period or, indeed, prior to the final order itself, is sufficient to satisfy the requirements of paragraph 27 of the judgment, and thus trigger the payment of interest at the Judgments Act rate from the date of that statement or from the date of the order itself.

A further issue which does not appear to have been considered is the effect of a costs management order or Precedent H costs budget in the case. It would certainly be possible to argue that where a costs management order has been made or a budget filed, the court should allow interest on costs in respect of the costs allowed from the date of the order, and interest on costs (if such costs are allowed) above this amount would be allowed for a different period or at a different rate.

Summary

It remains possible to argue that interest at the Judgments Act rate (8%) runs from the date of the order for costs, as the court has discretion to make such award as it considers just on the facts of each case. However in order to support a claim for interest earlier than the date on which notice of commencement is served, or 3 months from the date of the order, parties should seriously consider whether to provide a detailed breakdown of their costs in order to assist in negotiations.

A final word of caution: a party which chooses to serve a breakdown of costs before serving a bill must ensure that it is accurate. It is unlikely that a court will consider that a breakdown which bears no resemblance to the bill ultimately filed is sufficient to trigger the payment of interest, and furthermore may in fact draw an adverse inference. Accordingly receiving parties should ensure, so far as possible, that estimates or breakdowns are drafted properly and not simply ‘plucked from the air’, in order to achieve the best results.

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

[i] [2015] EWHC 2834 (Comm)

[ii] [2012] EWCA Civ 137

[iii] Para 19, Involnert

[iv] Para 20 ibid

[v] Para 27 ibid

[vi] Para 28 ibid

The Changing Face of Costs

Joanne Chase1 Comment

The judgment in BP -v- Cardiff & Vale University Local Health Board[i] brings detailed assessment proceedings into the post-Jackson era

Every solicitor who has practiced litigation after 1 April 2013 will be aware of the introduction of costs management as an integral part of litigation. The judgment in BP -v- Cardiff & Vale is the first step in determining the process by which costs in this post-Jackson era will be assessed.

The case related to costs in a claim in which proceedings had been commenced prior to 1 April 2013, but which settled substantially after the new rules came into force.

The judgment made two extremely important observations in relation to the way in which bills of costs are drafted:-

1. Proportionality

In cases where work has been done before 1 April 2013, but which have concluded subsequently, two different tests for proportionality apply:-

a) Under the old rules, the court would disallow costs which were not reasonably and proportionately incurred. The case of Home Office –v- Lownds[ii] held that where costs were found to be globally disproportionate, the court would apply the test of ‘necessity’, which is to say that it would allow individual items only if they were reasonable, proportionate, and necessary.

b) Under the new CPR 44.3(2)(a), the court will only allow costs which are proportionate, and the court may reduce or disallow costs which are disproportionate in amount ‘even if they were reasonably or necessarily incurred’.

In BP -v- Cardiff & Vale Master Gordon-Saker stated that, as the tests to be applied to the costs are different ‘it must be convenient and necessary for the bill to be divided into parts so as to distinguish between costs claimed for work done before 1 April 2013 and costs claimed for work done after 1 April 2013’.[iii]

It has traditionally been open to parties to argue that there was no requirement to split the bill of costs into parts, as CPR 47 PD 5.8 stated that a bill ‘may be’ divided into parts. However, the judgment is unequivocal and clearly mandates that this must now be done.

At present there is no case law regarding the consequences if the receiving party does not split the bill in this way, however two possible options available to the court are (i) to order that the bill of costs be redrafted, on the basis that the court is unable to properly assess the costs, and in such circumstances it is likely that the court would order the costs of the entire detailed assessment thrown away as a sanction; or (ii) find that as it is unable to consider which test is to be applied to which item, the court will apply the new (more stringent) test to all of the costs within the bill.

2. Phased Bill of Costs 

The second, and more long-lasting, effect of the judgment is the introduction of a requirement that a bill of costs be drafted in such a way as to group work done into parts based upon which budget phase that work belongs to.[iv] The wording used is the same as that in relation to proportionality, that it is both ‘convenient and necessary’.

Again it is likely that failure to comply with the requirement to split the bill into budget phases will result in costs sanctions, which could include an order that the bill be redrafted at the receiving party’s expense.

Another, potentially more serious, consequence could be that the court applies broad brush reductions to the entirety of the bill. In the case of a phased bill, it will be clear which items have been incurred in phases where the budget has been exceeded. For example, in a case where a party has exceeded the witness statement phase, but was under budget in respect of disclosure. The court should, therefore, allow all of the costs within the disclosure phase (or take the view that those costs are in general proportionate) and therefore will simply consider whether items within that phase were reasonably incurred. The court would then look only apply the test of proportionality on an item by item basis to the costs incurred within the witness statement phase. Furthermore, it will be much easier for the receiving party to argue that there was a good reason that the costs exceeded the budget, and therefore a good reason for the court to depart from the budget.

Conversely in circumstances where the bill of costs has not been phased, the court may apply a more stringent test for proportionality[v] to every item within the bill of costs. Such an approach would undoubtedly result in a greater reduction to the amount awarded that where such test is applied only to items within a phase which has been exceeded.

Summary

A bill of costs must be drafted in such a way as to identify the costs which have been incurred pre- and post- 1 April 2013, and must also be separated into parts based upon the phases within the budget. The bill should also identify which costs were ‘incurred’ at the time of the budget, and which were ‘estimated’. Failure to draft bills in a manner which complies with this judgment is likely to result in significant repercussions in costs.

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

[i] [2015] EWHC B13 (Costs)

[ii] [2002] EWHC Civ 365

[iii] Master Gordon-Saker at para. 26

[iv] Para 30

[v] CPR 44.3(2)(a); the court may disallow any costs which it finds are disproportionate even if they have been reasonably and necessarily incurred