Tag: orders for costs

Getting your orders right – Fixed Costs

Joanne ChaseLeave a comment

The introduction of fixed costs was expected to create certainty in the amount which parties would recover at the conclusion of a claim. However the rules as drafted leave numerous lacunas and gaps which parties can exploit, which in turn has lead to satellite litigation. This is not what the drafters of the rules intended and is often not in the interest of the parties, as it leads to additional further cost which, in many cases and given the already low amount of costs recoverable, can be disproportionate.

In order to avoid this risk it is important that practitioners ensure that terms of settlement make proper provision for costs to avoid the risk of further litigation. This is a complex topic, and this is intended as a quick reference guide to help you to avoid the pitfalls so that you do not fall into the ‘fixed costs trap’.

  1. Claims which leave the portal

Pursuant to the Protocols, a claim will leave the portal if it is revalued in an amount higher than the protocol limit (currently £25,000). However, CPR 45.29A states that fixed costs apply where the claim was started in the protocol. Of critical importance is to note that the mere fact that the claim was revalued at more than the protocol limit does not mean that standard basis costs apply. Practitioners should be wary of this when settling such claims and should either:

  1. Settle only on terms that standard basis (not fixed) costs apply. Therefore CPR 36 should be avoided; or
  2. Refuse to settle until after allocation of the claim to the multi-track, as allocation to the multi-track causes fixed costs to cease to apply (see Qadar v Esure)

Whilst it may seem extreme to refuse settlement until allocation, this is at present the only way to ensure (so much as it is ever possible to ensure) that fixed costs will not apply. It should be borne in mind that such an approach is a calculated risk, as it is possible that a court would find that such conduct is ‘unreasonable’ should the matter proceed. That said, it should be possible to argue that without agreement fixed costs would apply and that the claimant is therefore better off and as such the conduct was not unreasonable.

  1. Settlement by CPR 36.20

Where fixed costs do apply and the claim is settled by part 36, there is no right to detailed assessment. If a dispute arises over fixed costs then one of the parties must apply.

  1. Non-Part 36 settlement

It is generally preferable to seek to agree the amount of fixed costs which apply. Failure to do so can lead to disputes (and costly applications) over the correct level of fixed costs and ‘reasonable’ disbursements. It is currently unclear whether the costs of such applications are recoverable. Including a provision in a settlement agreement should be straightforward, as the costs are fixed. If an opponent refuses to do so it may be that they intend to raise technical arguments about the costs which are recoverable.

Claimants should note that defendants are aware of these argument and therefore may try to catch out the unwary.

This is a very quick summary of the issues surrounding settlement in cases to which fixed costs apply, however with the imminent introduction of fixed costs in cases of noise induced hearing loss slated for 2019 at the latest and he likely introduction of fixed costs in all cases in around 2020, these issues will only become more relevant. On current information, the proposed rules for NIHL claims do not fix any of the existing issues with fixed costs and therefore we can expect these problems to persist for some time.

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

GET YOUR ORDERS RIGHT!

Andrew McAulayLeave a comment

The case of Tibbles v SIG PLC [2012], dealt with issues of allocation and ‘prompt recourse’ which directly affected the Claimant’s costs recovery.

The Court originally allocated the matter to the small claims track, which the Claimant’s solicitor disputed and the matter was successfully reallocated to the fast track.  The Claimant was successful at Trial and was awarded costs ‘on the standard basis to be subject to detailed assessment, if not agreed’.  The Claimant subsequently prepared a bill of costs and commenced detailed assessment proceedings. The Defendant argued that the Claimant was only entitled to small claims track costs whilst the matter was within the remit of the small claims track and entitled to fast track costs post allocation to that track.

Within the detailed assessment proceedings, the Claimant made an application to seek an order under CPR 3.1(7) or CPR 40.12, to vary the order and reallocate the entire matter to the fast track.  The District Judge varied the order accordingly.  The Defendant successfully appealed that decision and the Claimant therefore appealed to the Court of Appeal.

The Court of Appeal upheld the decision.  In essence, it held that the Claimant should have applied more promptly to vary the order and amending the order would be unfair on the Defendant who had relied on it.

What was interesting in the Judgment was what Rix LJ said at paragraph 48:

“There is nothing in civil procedure about which solicitors can justifiably be expected to know as much, as matters of costs”.

Whilst the above case relates to a procedural issue, it does feed into a topic which we (as a legal costs team at Clarion) regularly encounter difficulties; orders not being prepared properly or failing to include basic, but salient points.

Here are some basic costs related points that litigators should always think about when preparing consent orders, tomlin orders or any costs settlement agreement:

  1. Pursuant to the above case, think about any track issues.  If you do have a case which flips between tracks, then deal with the matter immediately upon reallocation to the higher track. If you fail to do so then maybe not all is lost because you could word the order for costs as follows:
  2. “The Defendant do pay the Claimants costs (based on fast track costs for the entirety of the case) on the standard basis to be subject to detailed assessment, if not agreed”.
  3. Always use the words incidental or occasioned by.  For example, “the Defendant do pay the Claimant’s costs of and incidental to the Claimant’s application for specific disclosure to be subject to detailed assessment on the standard basis, if not agreed”.  The words incidental or occasioned by are very powerful and can in most circumstances broaden the remit of the costs agreement.
  4. Think about payments on account.  Most matters are now budgeted and in light of the decision in ‘Harrison’ payments on account should always be sought.  It is much better to receive money sooner, rather than later.
  5. When dealing with the payment of money always make the date for payment clear. Don’t just include a date, include a time i.e. by 4:00 pm on xxxx date.  Also include the words ‘clear funds’.  It is much better to receive money which is cleared and immediately accessible rather than a cheque which can take 3-5 days to clear.
  6. Always ensure that the agreement to pay costs makes clear whether the assessment is on the standard or indemnity basis.  If the order is silent, then standard basis is the default.  You might be entitled to indemnity costs for a specific period, make it clear in the order or agreement.
  7. Always include the words “to be assessed, if not agreed”.  We have ran successful arguments (acting for the paying party) that an order for costs has not provided for an assessment and the Court therefore did not have the power under the order to hear the detailed assessment.
  8. Where the matter is subject to fixed costs, you should quantify the amount and include it in the order. Failure to do this can result in paying parties challenging the amount of fixed costs i.e. premature issue of proceedings or certain disbursements are unreasonable. It would be wise to agree the amount of fixed costs and define it in the settlement agreement to prevent such disputes occurring.
  9. In respect of interlocutory matters, ensure that the order provides for an “immediate” assessment. Failure to do so can create a technical argument that you do not have authority to commence detailed assessment proceedings until the claim has concluded (allowing the paying party to delay payment of the costs). An immediate assessment can create a significant tactical advantage.
  10. Think about counterclaim costs. It may be that the claim and counterclaim are both successful and therefore the case of Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] needs to be considered.  However, it may be that you win your claim and successfully defend the counterclaim.  Make it very clear (in the order for costs) that the Claimant is entitled to both the costs of the claim and the costs of the counterclaim.  Again, lack of clarity could cause confusion and would result in arguments on detailed assessment.
  11. It is also worth making clear the position in relation to interest. The default position is 8% (see Judgments Act 1938).  However, we are increasingly seeing paying parties successfully reduce interest to a much lower rate given that the current Bank of England base rate is 0.5% (please see https://clarionlegalcosts.com/2017/06/20/interest-on-costs/). Therefore, it is advisable for the settlement agreement to state that interest is agreed and notably include a provision that interest is to be calculated at 8% from the date of the order for costs. This provides additional protection, therefore potentially preventing a paying party from attempting to argue a lower rate of interest (and a reduced time period) at a later stage.The inclusion of some of the points highlighted above will create a more robust order for costs and should result in a quicker and more economical compromise with the opponent.   What you do not want to do is work hard on a case, win it and then get bogged down in technical costs issues on detailed assessment which could have easily been avoided by a more clear and well drafted final order/agreement.
  12. The above are just some examples of difficulties that we have seen in the past.  There will probably be many more, and if you have any examples, then please feel free to share them through this blog.

This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding team.  Andrew can be contacted on 0113 336 3334 or 07764501252 or at andrew.mcaulay@clarionsolicitors.com