A bridge too far

The text of this article first appeared in the December 2016 issue of Litigation Funding.

The recent decision of HH Judge Waksman QC in the Commercial Court in the case of Essar Oilfields Services Limited v Norscot Rig Management PVT Limited [2016] EWHC 2361 (Comm) repays careful reading, as it is the one of the few decisions of the High Court on the measure of recoverable costs in an international arbitration, albeit one conducted in London under the auspices of both the ICC Rules and the Arbitration Act 1996.

The case is notable chiefly for the endorsement by the court of the recovery of the charges made for the provision of third party funding to the winning party, as an item of “other costs” by the receiving party, under section 59 of the Arbitration Act 1996.

The background facts can be briefly stated.The case involved hard fought arbitral proceedings before Sir Philip Otton sitting as the arbitrator, concerning the commercial dispute arising out of the breach of an Operations Management Agreement relating to the sem-submersible offshore drilling platform “Wildcat”. Essar lost those proceedings. Essar had indemnity costs awarded against it. Norscot obtained from Woodsford, a third party funder, the sum of £647,086.49 on the basis that either 300% of the sum advanced would be paid by way of fee, or 35% of the total recovery, whichever was the higher.

The point which arose from the Fifth Partial Award and it’s Addendum, was whether the arbitrator’s award of this sum, the charge made for litigation funding, as part of the costs of the arbitration constituted a serious irregularity on the part of the arbitrator in that he had no power through a combination of sections 59 and 63 of the Arbitration Act 1996 to award this sum.

The parties had excluded a right of appeal on a question of fact or law, by their agreement to use ICC Rules.

Although issues of a time bar, waiver and whether the challenge was properly to be construed as an appeal on a point of law, rather than an irregularity challenge, the principal point of interest of the judgment, lies in whether the charge for litigation funding was a sum the arbitrator had power to award as an item of “other costs”.

Essar’s case was straightforward: the argument ran as follows. Properly construed neither the combination of section 59 nor 63 of the Arbitration Act 1996 or rule 31 of the 1998 ICC Rules gives an arbitrator the power to award the charges made for funding the costs of the arbitration. There is a clear distinction between “the costs of the arbitration” and the “cost of financing the costs of the arbitration”. The two are conceptually distinct and it is the former that are recoverable but not the latter.

The wording “other costs” in the relevant section. when considered in context, should not permit the recovery of the “cost of financing the costs of the arbitration”: rather its focus was narrower and directed at permitting for example, litigant in person costs, costs of managerial time, costs of employees acting as experts or other analogous categories of costs.

Rather, the “cost” of financing arbitration costs is properly to be considered in the context of an award of interest on costs under section 49 of the Arbitration Act 1996

Developing the argument, section 59 of the Arbitration Act 1996 states as follows:

1)References in this Part to the costs of the arbitration are to—

(a)the arbitrators’ fees and expenses,

(b)the fees and expenses of any arbitral institution concerned, and

(c)the legal or other costs of the parties.

(2)Any such reference includes the costs of or incidental to any proceedings to determine the amount of the recoverable costs of the arbitration (see section 63).

The starting point when considering this section is that it gives the arbitrator power to make an award of “the costs of the arbitration”.

Secondly that it specifies the type of costs that can be awarded by reference to subsections (1)(a) to (c) of which the words “other costs” are residual words.

Thirdly that it does not expressly provide for the charges for financing the “costs of the arbitration” to be recoverable.

Fourthly that the section as a whole and the particular words of the residual category of “other costs” which the Defendant has to rely on, to justify the award of the cost of litigation funding has to be interpreted according to the canons of statutory construction: in particular was it intended to include in 1(c) for example some “other costs” and also the cost of financing such “other costs”?

The better view, Essar contended is that “other costs” is to be construed narrowly to include categories of expenditure other than purely legal costs, with the cost of financing that expenditure dealt with under section 49 as an award of interest?

The award of costs was made in the context of an arbitration, not litigation, but the issue on is primarily concerned with the construction of an English statute made by Parliament: the statute does not stand in a vacuum, and the ultimate question is what did Parliament intend when enacting this statute in order to determine its construction.

The position in English law generally, is that the cost of financing litigation, has always been irrecoverable as an item of costs and is reflected instead in an award of interest. See Motto.v.Trafigura Ltd [2012] 1 WLR 657  at paragraphs 104 to 107 with its observations on the irrecoverable nature of the cost of funding and the case of Simcoe.v.Jacuzzi [2012] 1 WLR 2393 at paragraphs 39 to 42, which explains the purpose of an award of interest on costs is to compensate for the cost of financing the litigation.

The cost of litigation funding is a paradigm example of a cost of funding that has never been recoverable. Other examples are general or bridging loans, or less obviously, success fees and ATE premiums, which required statutory intervention through the Access to Justice Act 1999, to be recoverable as a cost inter partes.

The Access to Justice Act 1999, in force from 1st April 2000 to 1st April 2013, permitted the recovery of success fees and ATE premiums: costs which were otherwise irrecoverable at common law. The repeal of those provisions by the Legal Aid Sentencing and Punishment of Offenders Act 2012, means that the situation in the English courts, is as it always was prior to the 1999 statutory experiment: the cost of funding litigation costs is irrecoverable as a head of costs.

It is trite law that in litigation only legal costs can be recovered at common law: see London Scottish Benefit Society.v.Chorley [1884] XIII QB 872. Thus the time of a layman conducting litigation, loss of managerial time, the cost of employees acting as experts are not recoverable.

In respect of litigants in person, statutory intervention has occurred to ensure they can recover costs in respect of the time that they spend conducting their litigation: absent CPR rule 46.5 such costs would prove irrecoverable. This is the backdrop, to which it must be contended by the receiving party, that Parliament intended, to permit the charges for financing “the costs of the arbitration” to be recoverable.

An enactment by implication imports any principle or rule of law (whether statutory or non-statutory) which prevails in the territory to which the enactment extends and is relevant to its operation in that territory. As a general rule Parliament must have been taken to have legislated against the background of the general principles of the common-law (Bennion on Statutory Interpretation 6th edition at 929-937).

The Latin words ejusdem generis (of the same kind or nature) have been attached to a principle of construction whereby wide words associated in the text with more limited words are taken to be restricted by implication to matters of the same limited character. The principle may apply whatever the form of the association, but the most usual form is a list or string of genus describing terms followed by wider or residuary sweeping up words (Bennion on Statutory Interpretation 6th edition at 1105 to 1108)

The court seeks to avoid a construction that cures the mischief the enactment was designed to remedy only as the cost of setting up a disproportionate counter-mischief, since this is unlikely to have been intended by Parliament. Sometimes however, there are overriding reasons for applying such a construction, for example where it appears that Parliament really intended it or the literal meaning is too strong (Bennion on Statutory Interpretation 6th edition at 901 to 904).

The starting point must be that the purpose of the section is to award the “costs of the arbitration”. A charge made for financing the “costs of the arbitration” is conceptually distinct from the “costs of the arbitration”. A clear analogy is to be drawn with the “costs of the litigation” and the cost of financing the “costs of the litigation”. On this point alone, it is clear that the ambit of sections 59 and 63 cannot stretch to anterior costs, or wide categories of economic loss arising from engaging in arbitral proceedings.

The residuary category “other costs” is readily capable of meaning, those costs which would be irrecoverable in litigation due to the general prohibition noted above: but which share the common quality of being “costs of the arbitration”. Otherwise, logically, on the arbitrator’s approach, “other costs” means all types of economic loss or cost, provided they can be quantified in pounds and pence that might be sustained in litigation. The statutory focus is narrower than that.

The statute does not say in subsection (1)(c) that recoverable under section 59 are legal costs, and the costs of financing those legal costs: instead “other costs” is a sweeping up, residual category. On a natural and ordinary interpretation, bearing in mind the statutory purpose is to provide for awards of costs in various different arbitral contexts such that it will encompass such elements as litigant in person costs, the costs of managerial time, the costs of employees acting as experts or other analogous categories of costs.

What it should not encompass, both as a matter of natural and ordinary interpretation and when considering the purposive construction to be provided to the statute, is categories of economic loss, such as the cost of funding litigation which have never been recoverable at common law.

Instead, it could be argued the solution adopted by Parliament, to compensate a successful party who has made expenditure on legal costs during the course of litigation is an award of interest, a structure mirrored by section 49 of the Arbitration Act 1996 (interest) and section 59 (costs).

In such a context, when enacting the scheme of the Arbitration Act 1996 it can be noted that Parliament extended the ambit of recoverable costs of the arbitration, to include costs under sections 59 and 63 which would otherwise be caught by the general prohibition “other costs” and also provided for an award of interest under section 49 which can be simple or compound interest, and the rate of which is discretionary.

In those circumstances Parliament has provided a broad definition of recoverable costs and also allowed for an award of interest, to compensate at least in part for the cost of financing arbitration costs. There is no requirement therefore for section 59(1)(c) to practically overlap with section 49 in dealing with the financing of costs. Indeed, the construction adopted by the arbitrator, conflicts with the statutory scheme, a point which will be developed below.

The ejusdem generis rule provides that ostensibly wide phrases, which in fact form a residuary category, are to be construed narrowly based on the same categorisation as applies to the limited words preceding it. Legal costs, represent a solicitors profit costs and disbursements, chargeable to the client. They represent an expenditure on work done which is progressive and falls within the scope of advice, preparation for and appearance at the arbitration. They do not include the cost of financing any part of the arbitration costs.

Similarly “other costs” should be read as limited to a fee or expense charged for work done which constitutes, advice preparation or appearance at the arbitration: something spent which can properly be said to be part of the “costs of the arbitration.” To construe “other costs” more widely, is to say that the costs of financing the costs properly falls within a residuary category, far wider than the limited words preceding it. Such a construction is impermissible on the ejusdem generis principle.

Perhaps the simplest point is this: the statutory scheme contemplates an award of costs and an award of interest meant to compensate the receiving, for, amongst other things the costs of financing its costs. The construction adopted by the arbitrator merges the two concepts reflected in two different statutory sections, in a way that it is submitted runs counter to the intention of Parliament, as to how the two issues are to be separately addressed.

These arguments were rejected by the court. The result is that by endorsing the decision of the arbitrator, the law has been changed, so that in arbitration proceedings, the award of charges for litigation funding is now lawful as an item of “other costs”. This is an immediate consequence. There are three further consequences.

The first, is that although funding was obtained in this case from a bespoke litigation funder, as a point of principle the receiving party was in no different position than any party who funds litigation through a loan, be it credit card, overdraft, family member or high street bank and has to pay interest or a fee for the financial accommodation they are granted. Presumably such charges are now also recoverable as “other costs”.

The second, is that arbitration is now a much more attractive option than litigation in the Commercial Court, given the limitations of recovery of litigation costs. Given the pronouncements in the last year or so of the Lord Chief Justice, bemoaning the lack of appeals from arbitration proceedings to the High Court, the irony is acute.

The third consequence, is that no further appeal was possible from this decision to the Court of Appeal, due to the bar in section 68(4) of the Arbitration Act 1996, once the High Court had refused permission. Accordingly, it will be years, before this issue is reconsidered, if it ever is, by the Court of Appeal in some other case.

Seminars and lectures

Each year, I give a number of seminars to the profession.

I speak at the Ropewalk Chambers Personal Injury conference in March of each year, dealing with matters particularly pertinent to my colleagues who practise in that field.

I also speak from time to time to the ACL, usually in London.

I also each year undertake a series of talks entitled “A conversation on costs”, where I come to solicitors/lawyers offices to undertake a discursive and interactive seminar on current issues in costs, or indeed any matters of concern in relation to costs and litigation funding.

Another series of talks entitled “A question time on costs” involves me assembling a panel of barristers with an interest in costs, to answer questions submitted in advance and on the day, on any issue pertinent to costs and litigation funding. In 2016, events were held both in Manchester and in chambers in Nottingham.

I have also drafted a number of seminars, which for a reasonable fee plus travelling expenses I can deliver to your firm.

Titles in the series so far include “Solicitors and retainers”, “Costs for commercial lawyers” and “Solicitor-own client assessments: a survival guide”.

My most recent lecture, delivered in London this month, was “Litigation funding in international arbitrations after Essar v Norscot“.

ATE and professional negligence

Part of the work that I undertake in the field of costs involves professional negligence claims in respect of solicitors, whose disappointed former clients contend that they have incurred loss after receipt of negligent advice on costs issues.

I have noticed recently an upsurge in claims against solicitors where the principal allegation is that they failed to incept adequate, or indeed any ATE insurance in the run up to the implementation of LASPO 2012 on 1st April 2013.

The timing is patently cyclical: the costs consequences of claims that were commenced in 2013 are now coming home to roost. Clients realise that due to the absence of adequate ATE insurance, after their original claim has fallen into ruin, for one reason or another,  they have been left exposed to adverse costs consequences, or a claim for incurred but unrecovered disbursements.

It is surprising how often a solicitor will incept some ATE, but fail to review or advise a client upon whether the level of indemnity remains adequate as a case progresses.

I suspect that most solicitors regard such matters, as they do costs budgeting, as something which once undertaken does not need to be looked at again, as there are far more important issues, like getting on with the case to concentrate on.

Yet, the duty of a solicitor to review his client’s vulnerability to adverse costs is clear.In this respect the starting point is the Solicitors Regulatory Authority Code of Conduct (2011 edition) which applied at the material time and required as outcomes: O(1.2) that the solicitor provide services to the client in a manner which protects their interests and their matter, subject to the proper administration of justice, O(1.6) that the solicitor only enters into fee agreements of the client better legal and which the solicitor considers are suitable for the clients needs and takes account of the client’s best interests, that O(1.12) the client is put in a position to make an informed decision about the services they need how the matter will be handled and the options available to them, that pursuant to O(1.13) clients receive the best possible information both at the time of engagement and when appropriate as the matter progresses, about the likely overall cost of their matter. Indicative behaviours include at IB(1.15) warning about any other payments for which the client may be responsible.

A failure either to consider with the client at the outset how the issue of adverse costs might be addressed, or to review the level of cover for potential adverse costs as the case proceeds, would constitute a breach of the Code of Conduct, and common law negligence.

Of course, the intriguing issue that then arises, is whether notwithstanding any failing on the part of the solicitor, it can be proved that it actually made a difference to the final result, the requirement of causation. But a client is in a fairly strong position: he does not have to prove on the balance of probabilities that he would have been granted an ATE policy, or an increase in the level of indemnity to an existing policy. Instead because the issue is whether a third party would have made a contract with the client, the normal rule in causation is modified.

The rule is well set out in Allied Maples.v.Simmons and Simmons [1995] 1 WLR 1602 where the Court of Appeal explained the principle as follows in the judgment of Stuart-Smith LJ:

In these circumstances, where the plaintiffs’ loss depends upon the actions of an independent third party, it is necessary to consider as a matter of law what it is necessary to establish as a matter of causation, and where causation ends and quantification of damage begins.

(1) What has to be proved to establish a causal link between the negligence of the defendants and the loss sustained by the plaintiffs depends in the first instance on whether the negligence consists of some *1610 positive act or misfeasance, or an omission or non-feasance. In the former case, the question of causation is one of historical fact. The court has to determine on the balance of probability whether the defendant’s act, for example the careless driving, caused the plaintiff’s loss consisting of his broken leg. Once established on balance of probability, that fact is taken as true and the plaintiff recovers his damage in full. There is no discount because the judge considers that the balance is only just tipped in favour of the plaintiff; and the plaintiff gets nothing if he fails to establish that it is more likely than not that the accident resulted in the injury.

Questions of quantification of the plaintiff’s loss, however, may depend upon future uncertain events. For example, whether and to what extent he will suffer osteoarthritis, whether he will continue to earn at the same rate until retirement, whether, but for the accident, he might have been promoted. It is trite law that these questions are not decided on a balance of probability, but rather on the court’s assessment, often expressed in percentage terms, of the risk eventuating or the prospect of promotion, which it should be noted depends in part at least on the hypothetical acts of a third party, namely the plaintiff’s employer.

(2) If the defendant’s negligence consists of an omission, for example to provide proper equipment, given proper instructions or advice, causation depends, not upon a question of historical fact, but on the answer to the hypothetical question, what would the plaintiff have done if the equipment had been provided or the instruction or advice given? This can only be a matter of inference to be determined from all the circumstances. The plaintiff’s own evidence that he would have acted to obtain the benefit or avoid the risk, while important, may not be believed by the judge, especially if there is compelling evidence that he would not. In the ordinary way, where the action required of the plaintiff is clearly for his benefit, the court has little difficulty in concluding that he would have taken it. But in many cases the risk is not obvious and the precaution may be tedious or uncomfortable, for example the need to use ear-defenders in noisy surroundings or breathing apparatus in dusty ones. It is unfortunately not unknown for workmen persistently not to wear them even if they are available and known to be so. A striking example of this is McWilliams v. Sir William Arrol & Co. Ltd. [1962] 1 W.L.R. 295 ; the employers failed in breach of their statutory duty to provide a safety belt for the deceased steel erector. But his widow failed in her claim under the Factories Act 1937 , because there was compelling evidence that, even if it had been provided, he would not have worn it.

Although the question is a hypothetical one, it is well established that the plaintiff must prove on balance of probability that he would have taken action to obtain the benefit or avoid the risk. But again, if he does establish that, there is no discount because the balance is only just tipped in his favour. In the present case the plaintiffs had to prove that if they had been given the right advice, they would have sought to negotiate with Gillow to obtain protection. The judge held that they would have done so. I accept Mr. Jackson’s submission that, since this is a matter of inference, this court will more readily interfere with a trial judge’s findings than if it was one of primary fact. But, even so, this finding depends to a considerable extent on the judge’s assessment of Mr. Harker and Mr. Moore, both of whom he saw and heard give evidence for a considerable time. Moreover, in my judgment there was ample evidence to support the judge’s conclusion. Mr. Jackson’s attack on this finding *1611 was, as I have explained, something of an afterthought and not, I think, undertaken with great enthusiasm. I am quite unable to accede to it.

(3) In many cases the plaintiff’s loss depends on the hypothetical action of a third party, either in addition to action by the plaintiff, as in this case, or independently of it. In such a case, does the plaintiff have to prove on balance of probability, as Mr. Jackson submits, that the third party would have acted so as to confer the benefit or avoid the risk to the plaintiff, or can the plaintiff succeed provided he shows that he had a substantial chance rather than a speculative one, the evaluation of the substantial chance being a question of quantification of damages?

Although there is not a great deal of authority, and none in the Court of Appeal, relating to solicitors failing to give advice which is directly in point, I have no doubt that Mr. Jackson’s submission is wrong and the second alternative is correct.

In short, all a client has to prove to establish causation is that if advised of the need for ATE insurance, on the balance of probability he would have instructed their solicitor to try to obtain ATE cover and that there was a real and substantial chance the solicitor would have obtained ATE cover. The actual measure of damages that might be recovered, is then a matter of quantum.

 

CFAs and the Cayman Islands

Many years ago, one of the more interesting cases that I dealt with concerned the recovery of success fees in costs litigation in the Cayman Islands.

Having been instructed, I suggested a conference would be required, but before I had even begun to pack, my client announced that he would fly to Birmingham and come and see me in chambers, destroying my hopes of costs litigation in the morning and tropical windsurfing in the afternoon.

Since then, I have kept an eye on developments in the Cayman Islands, and other Dependent Territories.

In the case of Quayum v Hexagon Trust Company (Cayman Islands) Limited [2002] CILR 161 the Chief Justice of the Cayman Islands, following the Thai Trading case announced the development of conditional fee agreements as a creature of common law and devised a system of court led supervision of such agreements. Jurisprudentially this led the Cayman Islands into uncharted territory, as within their domestic law, both maintenance and champerty remain as crimes and torts. The legislature had not intervened to permitt contingency fee arrangements. It did not help, that Thai Trading itself, was a flawed decision, made in ignorance of the statutory prohibition on contingency arrangements contained in the Solicitors Practice Rules 1990.

Retrenchment had to come, and in the case of Latoya Barrett v The Attorney General [2012] 1 CILR 127 the Cayman Islands Court of Appeal both declared that success fees were irrecoverable under conditional fee agreements, but also called for the law to be reexamined by the Cayman Islands Law Reform Commission.

At the end of last year, an interesting paper was published which can be found here: cayman-islands-law-reform-commission and which contains a fascinating comparative study of the law in the Cayman Islands, Canada, the USA and South Africa, as well as the UK and attempts to synthesise a solution for the Cayman Islands, described as a developing society, with its own Legal Aid system under financial pressure. It is worth reading both for those intending to litigate in the Cayman Islands and for those who general readers interested in seeing how a society both like and unlike are own, is grappling with familiar issues in its own way.

A Question Time on Costs 10th November 2016

10th November 2016 5.00pm to 6.30pm

Ropewalk Chambers, Nottingham

Drinks and canapés to follow

This will be a panel led discussion on topical issues including: Fixed costs, costs budgeting, assignment of CFAs, digital billing and solicitor/own client disputes. With a panel from Ropewalk Chambers’ Costs Team: Andrew Hogan, Andrew Lyons, Shilpa Shah, Jonathan Owen, Tom Carter, Nikhil Arora and Gareth McAloon. Questions for the panel, submitted prior to the seminar, are welcomed. The seminar attracts one SRA continuing professional development point at advanced level. **Places are strictly limited, so early booking is recommended**

Please email: mailto:events@ropewalk.co.uk

Late acceptance of claimants’ part 36 offers II

The issue of late acceptance of a claimant’s part 36 offer in personal injury proceedings, by a defendant, and whether this in turn permits escape from the regime of fixed costs is continuing to attract interest, with the respective claimant and defendant interests, arguing the toss vigorously.

In this post, which I note with angst, is already far too long, I shall first of all look at the arguments from the defendant’s perspective, and leave the very respectable arguments that exist for those who represent claimants in abeyance, for a later blog post.

The starting point in the context of a modestly valued claim for damages for personal injuries sustained in a road traffic accident is rule 45.29:

45.29B

Subject to rules 45.29F, 45.29G, 45.29H and 45.29J, if, in a claim started under the RTA Protocol, the Claim Notification Form is submitted on or after 31st July 2013, the only costs allowed are—

(a) the fixed costs in rule 45.29C;

(b) disbursements in accordance with rule 45.29I.

There is an escape clause: rule 45.29J affords the court discretion to allow more than fixed costs, but the exercise of the discretion is tightly prescribed by the rules. There must be something “exceptional” to justify a departure from the fixed costs regime:

(1) If it considers that there are exceptional circumstances making it appropriate to do so, the court will consider a claim for an amount of costs (excluding disbursements) which is greater than the fixed recoverable costs referred to in rules 45.29B to 45.29H.

(2) If the court considers such a claim to be appropriate, it may—

(a) summarily assess the costs; or

(b) make an order for the costs to be subject to detailed assessment.

(3) If the court does not consider the claim to be appropriate, it will make an order—

(a) if the claim is made by the claimant, for the fixed recoverable costs; or

(b) if the claim is made by the defendant, for a sum which has regard to, but which does not exceed the fixed recoverable costs, and any permitted disbursements only.

This is a provision which repays careful consideration: there is very little law, on what constitutes “exceptional” at the current time.

Turning to consider part 36, rule 36.11 provides so far as is material:

(1) A Part 36 offer is accepted by serving written notice of acceptance on the offeror.

(2) Subject to paragraphs (3) and (4) and to rule 36.12, a Part 36 offer may be accepted at any time (whether or not the offeree has subsequently made a different offer), unless it has already been withdrawn.

Turning to rule 36.13 that states as far as is material:

(1) Subject to paragraphs (2) and (4) and to rule 36.20, where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings (including their recoverable pre-action costs) up to the date on which notice of acceptance was served on the offeror.

(Rule 36.20 makes provision for the costs consequences of accepting a Part 36 offer in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)

(2) Where—

(a) a defendant’s Part 36 offer relates to part only of the claim; and

(b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,

the claimant will only be entitled to the costs of such part of the claim unless the court orders otherwise.

(3) Except where the recoverable costs are fixed by these Rules, costs under paragraphs (1) and (2) are to be assessed on the standard basis if the amount of costs is not agreed.

(Rule 44.3(2) explains the standard basis for the assessment of costs.)

(Rule 44.9 contains provisions about when a costs order is deemed to have been made and applying for an order under section 194(3) of the Legal Services Act 20073.)

(Part 45 provides for fixed costs in certain classes of case.)

(4) Where—

(a) a Part 36 offer which was made less than 21 days before the start of a trial is accepted; or

(b) a Part 36 offer which relates to the whole of the claim is accepted after expiry of the relevant period; or

(c) subject to paragraph (2), a Part 36 offer which does not relate to the whole of the claim is accepted at any time,

the liability for costs must be determined by the court unless the parties have agreed the costs.

(5) Where paragraph (4)(b) applies but the parties cannot agree the liability for costs, the court must, unless it considers it unjust to do so, order that—

(a) the claimant be awarded costs up to the date on which the relevant period expired; and

(b) the offeree do pay the offeror’s costs for the period from the date of expiry of the relevant period to the date of acceptance.

(6) In considering whether it would be unjust to make the orders specified in paragraph (5), the court must take into account all the circumstances of the case including the matters listed in rule 36.17(5).

(7) The claimant’s costs include any costs incurred in dealing with the defendant’s counterclaim if the Part 36 offer states that it takes it into account.

It will be noted that rule 36.13(5) does not specify that the costs are to be awarded on the indemnity basis in contrast with rule 36.17 which expressly does prescribe when indemnity costs can be awarded under part 36: when a claimant’s part 36 offer is beaten at trial.

Rule 36.17 provides:

(1) Subject to rule 36.21, this rule applies where upon judgment being entered—

(a) a claimant fails to obtain a judgment more advantageous than a defendant’s Part 36 offer; or

(b) judgment against the defendant is at least as advantageous to the claimant as the proposals contained in a claimant’s Part 36 offer.

(Rule 36.21 makes provision for the costs consequences following judgment in certain personal injury claims where the claim no longer proceeds under the RTA or EL/PL Protocol.)

(2) For the purposes of paragraph (1), in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.

(3) Subject to paragraphs (7) and (8), where paragraph (1)(a) applies, the court must, unless it considers it unjust to do so, order that the defendant is entitled to—

(a) costs (including any recoverable pre-action costs) from the date on which the relevant period expired; and

(b) interest on those costs.

(4) Subject to paragraph (7), where paragraph (1)(b) applies, the court must, unless it considers it unjust to do so, order that the claimant is entitled to—

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court

Prescribed percentage

Up to £500,000                                           10% of the amount awarded

Above £500,000                                         10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all 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 rules noted above cross refer to two further rules, which apply in the context of a case which started but did not continue under the RTA Protocol, in order to ensure that part 36 and the fixed costs rules in part 45 read seamlessly. Rule 36.20 specially deals with the costs consequences of acceptance of a part 36 offer:

(1) This rule applies where a claim no longer continues under the RTA or EL/PL Protocol pursuant to rule 45.29A(1).

(2) Where a Part 36 offer is accepted within the relevant period, the claimant is entitled to the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 for the stage applicable at the date on which notice of acceptance was served on the offeror.

(3) Where—

(a) a defendant’s Part 36 offer relates to part only of the claim; and

(b) at the time of serving notice of acceptance within the relevant period the claimant abandons the balance of the claim,

the claimant will be entitled to the fixed costs in paragraph (2).

(4) Subject to paragraphs (5), (6) and (7), where a defendant’s Part 36 offer is accepted after the relevant period—

(a) the claimant will be entitled to the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 for the stage applicable at the date on which the relevant period expired; and

(b) the claimant will be liable for the defendant’s costs for the period from the date of expiry of the relevant period to the date of acceptance.

(5) Subject to paragraphs (6) and (7), where the claimant accepts the defendant’s Protocol offer after the date on which the claim leaves the Protocol—

(a) the claimant will be entitled to the applicable Stage 1 and Stage 2 fixed costs in Table 6 or Table 6A in Section III of Part 45; and

(b) the claimant will be liable for the defendant’s costs from the date on which the Protocol offer is deemed to have been made to the date of acceptance.

(6) In a soft tissue injury claim, if the defendant makes a Part 36 offer before the defendant receives a fixed cost medical report, paragraphs (4) and (5) will only have effect if the claimant accepts the offer more than 21 days after the defendant received the report.

(7) In this rule, “fixed cost medical report” and “soft tissue injury claim” have the same meaning as in paragraph 1.1(10A) and (16A) respectively of the RTA Protocol.

(8) For the purposes of this rule a defendant’s Protocol offer is either—

(a) defined in accordance with rules 36.25 and 36.26; or

(b) if the claim leaves the Protocol before the Court Proceedings Pack Form is sent to the defendant—

(i) the last offer made by the defendant before the claim leaves the Protocol; and

(ii) deemed to be made on the first business day after the claim leaves the Protocol.

(9) A reference to—

(a) the “Court Proceedings Pack Form” is a reference to the form used in the Protocol; and

(b) “business day” is a reference to a business day as defined in rule 6.2.

(10) Fixed costs shall be calculated by reference to the amount of the offer which is accepted.

(11) Where the parties do not agree the liability for costs, the court must make an order as to costs.

(12) Where the court makes an order for costs in favour of the defendant—

(a) the court must have regard to; and

(b) the amount of costs ordered must not exceed,

the fixed costs in Table 6B, Table 6C or Table 6D in Section IIIA of Part 45 applicable at the date of acceptance, less the fixed costs to which the claimant is entitled under paragraph (4) or (5).

(13) The parties are entitled to disbursements allowed in accordance with rule 45.29I incurred in any period for which costs are payable to them.

This rule contains no provisions for the costs consequences of acceptance of a part 36 offer to the defendant made by the claimant outside the “relevant period” i.e the 21 days. The effect therefore is that the court is thrown back onto the general provision under rule 36.13(4)(b) and 36.13(5): it has a discretion as to whether to order costs or not.

However, there is an important pointer in the rules to what was contemplated to be the just result: where a claimant accepts a defendant’s part 36 offer out of time, so that the claimant is entitled to costs until 21 days after the date of the offer, and the defendant to its costs thereafter, pursuant to rule 36.20(12) the costs the claimant must pay, are not costs on the standard basis, but costs which cannot exceed an amount calculated by reference to the fixed costs in table 6B, 6C or 6D.

In effect, although the costs liability is split between the parties, both sets of costs are calculated by reference to the tables for fixed costs.

Rule 36.21 deals with the costs consequences after judgment is obtained in a case which started in the RTA Protocol. It has no application to a case that settles before trial and is stayed, pursuant to rule 36.14, without judgment being entered.

The origin of the rule in rule 36.13(5) is that it represents the codification of the approach and principles set out in Lumb v Hampsey [2011] EWHC2808. The origins of the rule are therefore grounded in the need in some cases, to adjust the normal “before and after” rule for the allocation of costs: eg where a claimant accepts a defendant’s part 36 offer late, because of belated disclosure by the defendant or other conduct justifying disapplication of the normal rule.

The rule gives the court jurisdiction to potentially make an award of indemnity costs or standard basis costs. The issue is what criteria would justify an award of other than fixed costs.

The leading case on when it is appropriate to award indemnity costs remains that of Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879 where Lord Woolf LCJ made a number of observations. As a statement of principle binding upon the lower courts, mere late acceptance of a settlement offer, without more is not conduct justifying an award of indemnity costs.

Similar considerations drove the decision in the case of  Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions [2009] EWHC 274: there has to be something more than late acceptance. The case is important for the very detailed and careful exposition of Coulson J, forming part of the ratio of the case, as to why mere late acceptance of a claimant’s part 36 offer did not generate a presumption in favour of indemnity costs.

19 First, I am bound to note that there is no reference at all within CPR 36.10(4) and (5) to a presumption that, unless it is unjust to do so, the court will order a late-accepting defendant to pay the claimant’s costs on an indemnity basis. The absence of such a provision is important. The usual basis for the assessment of costs is the standard basis; if there is an entitlement to seek indemnity costs, then it is expressly spelled out in the CPR , either as a rebuttable presumption (such as the presumption in r36.14 ) or by way of conduct ( r44.3 ). There is no rebuttable presumption expressed here.

20 Although it is always dangerous to speculate how and why the rules say what they do, it seems to me that there is a relatively straight forward explanation for why this part of the CPR is in its present form. A claimant’s entitlement to indemnity costs when it beats its own offer after a trial was first enshrined in the old r36.21 and was plainly designed to deal with the situation where a trial had taken place and costs had been wasted because the defendant should have accepted the Part 36 offer. For the reasons explained by Lord Woolf in Excelsior , this was more advantageous than the defendant’s position under r36.20 . On the words of the old r36.21 the situation argued for here could not have arisen, because r36.21 applied only where the defendant was held liable “for more” than the amount of the offer. Following the decision in Read v Edmed the rule was changed so that it expressly covered the situation where, after a trial, the claimant recovered the same as the amount of its unaccepted offer. But there is nothing on the face of any of the existing rules to suggest that this change was also designed to reward a claimant (whose offer under CPR 36.10 was accepted out of time and before there was any trial) with a rebuttable presumption in its favour in respect of indemnity costs.

21 Secondly, I consider that the court has to be very careful before inserting into a rule, which is silent on costs, a presumption of this kind, extracted from a different rule altogether. It seems to me that, on this point, Lord Woolf’s remarks in Excelsior are of some relevance (although I acknowledge that he was dealing there with a contrast between the old r36.21 and the old r36.20.) He concluded that, in the absence of any reference to the indemnity basis, an order for costs which the court was required to make under the old r36.20 was an order for costs on the standard basis. It seems to me that precisely the same general reasoning would apply here to CPR 36.10(4) and (5).

22 I accept Mr Thomas’s submission that the other cases relied on by Fitzpatrick, namely Petrotrade , Huck and Read do not offer very much assistance to the central question here, which is whether a rebuttable presumption in favour of indemnity costs, taken from a rule dealing with the situation following a trial where the offer has not been accepted, should be inferred into a rule dealing with the position prior to trial, where the offer has been accepted. I do not accept that the present situation is analogous to those cases. In all three of them, the courts were endeavouring to apply the words of the old r36.21 in a commonsense way, to achieve a just and sensible result, and to prevent injustice; they all arose after a trial on the merits (either on a summary or a full basis). In contrast, I conclude that the replacement of old r36.21 – the new CPR 36.14 – does not apply to the present case, because there has been a settlement, and it has occurred before the trial. The claimant has therefore been spared the costs, disruption and stress of the trial.

23 Thirdly, I note that r36.10(3) , which deals with the situation where the claimant’s offer is accepted within the relevant period, expressly provides that costs will be assessed on the standard basis. If, therefore, there was a presumption that indemnity costs would apply under r36.10(5) , when an offer was accepted outside the period, it seems to me that the rule would say so. It does not, and, in my judgment, that is not an oversight or an omission; it is because either standard or indemnity costs may  be applicable where an offer is accepted after the relevant period, depending on the analysis under CPR 44.3

24 Finally, I am not persuaded that, as a matter of policy, it would be appropriate to import an indemnity costs presumption into r36.10(4) and (5) . A defendant is entitled to accept an offer beyond the period of acceptance. In a complex case such as this, a defendant should be encouraged continuously to evaluate and re-evaluate the claim and its own response to that claim, so that even if the defendant had originally concluded that it was not going to accept the offer, it should always be prepared to change its mind. The CPR should be interpreted in a way that encourages such constant re-evaluation.

25 All those of us involved in civil litigation are conscious of the irony that a well-judged Part 36 offer by one party (whether claimant or defendant) at the outset of proceedings can often make a trial and a fight to the finish more, rather than less, likely, because there will often be instances where, by the time the offeree has belatedly realised that the offer was well-judged, he will have incurred considerable cost, and may feel that he has no option but to go on and fight the case through to the finish in the hope of bettering the offer. Such an outcome is not to be encouraged. There is a risk that, if a defendant belatedly changed its mind as to the acceptability of a claimant’s Part 36 offer, the defendant would be discouraged from formally accepting that offer if it thought that it would have to pay indemnity costs in consequence. It would not be appropriate to construe the CPR in such a way, because that would, in my view, actively discourage late settlements and instead give rise to another reason for the offeree to push on to a trial.

See further the summation by the court in paragraphs 31 and 32:

31 I am unable to accept that proposition. It seems to me that there is no basis for it. As I have said, a party can seek indemnity costs in one of two ways: either because there is a presumption that such costs will apply (such as under CPR 36.14) or because it can demonstrate the necessary evidence of conduct etc. pursuant to CPR 44.3. There is no basis under the CPR, or any authority of which I am aware, which would allow the court to order indemnity costs for any other reason or on any other basis.

 32 Accordingly, Fitzpatrick’s claim for indemnity costs on the basis of either a rebuttable presumption, or a watered-down conduct test, must fail as a matter of principle: in these circumstances, only a case by reference to conduct etc. pursuant to CPR 44.3 could justify such an order. Both parties made detailed submissions on questions of conduct and its relevance to the application for indemnity costs. Accordingly, if I am wrong in my rejection of either Mr Livesey’s primary case, or his secondary case, or if, despite its realistic understanding of the likely outcome, Fitzpatrick maintain an entitlement to indemnity costs by reference to CPR Part 44 , I now set out my views as to the parties’ conduct and the overall justice of the situation.

Heavy reliance is usually placed by claimants, on the County Court judgment in the case of Sutherland v Khan 21st April 2016. District Judge Besford felt able to distinguish the case of Fitzpatrick: he did not however identify any decision which had overruled this case, and was bound to apply it. If District Judge Besford doubted the correctness of Fitzpatrick, his proper course was to apply it and grant permission to appeal: see the decision of the Court of Appeal in the case of Sayce v TNT (UK) Limited [2011] EWCA Civ 1583 at paragraphs 22 and 23, on the application of the doctrine of stare decisis and precedent at common law. The Sutherland decision is both incorrect and was decided in a manner contrary to principle.

An alternative argument, is usually based upon the case of Broadhurst v Tan [2016] EWCA Civ 94 but that case is not in point: that concerns a judgment after trial and the application of rule 36.17, which does expressly provide for an award of indemnity costs.

It is anticipated that when the authorities of Excelsior and Fitzpatrick have been considered, as a fall back position, an award of standard basis costs will often be sought by those representing claimants.

Such an award could be said to be wrong in principle. Although the court retains a discretion, it must be exercised pursuant to the rules, in accordance with the statutory purpose and in a way that accords with the overriding objective.

First, and returning to the starting point, Rule 45.29B makes it clear that pursuant to rule 45.29J only in “exceptional” circumstances will an award in excess of fixed costs be made.

Secondly, the true ratios of both Excelsior and Fitzpatrick noted above, are that there is nothing culpable in a party re-evaluating its case and accepting a part 36 offer late, or out of time. Indeed to do so, runs with the grain of the CPR which requires parties to consider settlement as an alternative to a contested trial (see in particular paragraphs 24 and 25 of the judgment) noted above.

Thirdly, the internal construction of part 36, in particular the way a defendant’s costs are dealt with when a claimant accepts a defendant’s part 36 offer late and pursuant to rule 36.20(12) the claimant is only exposed to costs capped at the level of fixed costs. This is a powerful pointer, for a defendant only to be exposed to a greater quantum of fixed costs, for late settlement.

Fourthly, the claimant’s position in an appropriate case is in any event protected by the rules: under rule 36.13(5) or rule 45.29J, misconduct on the part of the defendant or exceptional circumstances can ground an application for standard or indemnity basis costs.

The time of changes

I have always been a fan of autumn. The season of changes, it is pleasingly full of falling leaves, muddy boots, and crumpets with bramble jelly by the fire.

In keeping with the autumnal zeitgeist last month I moved rooms in chambers, vacating the room that I have had for 18 years and moving to new quarters on the first floor.

I also sadly said farewell to a chair that has been in my room for the same period of time. Never sat in by me, it has been a useful repository for books, umbrellas, papers and sundry pupils for nearly 2 decades. Here is a picture of it:

img_3525

It was one of a matching pair, but its twin vanished long ago, and only recently did I become aware of where the missing chair ended up:

chair

Yes, my chair was stolen, and it seems ended up as a prop in the torture scene in Casino Royale.

I was in turn tempted to keep the remaining chair, in case it came in useful in the future eg: to encourage defaulting solicitors to pay the fees that they owe me.

But life is too short for such indulgences, the chair has been thrown on the scrap heap and so will some certainties in the world of costs, as the pace of change is now accelerating as we move towards 2017.

The three big issues that I identify for the next year, are the imminent consultation on fixed fees for clinicial negligence cases likely to be limited to those cases with a value of up to £25,000, the impending Court of Appeal case(s) on the proportionality test and the introduction of the new Bill of Costs.

I have selected these three reforms because each of them has the potential to be systemic in their own right and in the wider consequences they have for the law and practice of costs.

Fixed costs in clinical negligence cases will undoubtedly affect the economics of practice in that area, but will also act as a template for further reform, both in terms of the upward expansion of fixed costs in clinical negligence, but also in other areas which at the moment have pleaded special privilege in terms of their complexity or the need for a bespoke award of standard basis costs.

The proportionality appeal(s) will crystallise the correct approach to proportionality for the lower courts, and determine the volume of costs litigation in the next few years: if the scope for a reduction is broad and sweeping, far more costs disputes will be litigated than at present. Conversely, if the scope is small, then the retention of the principle of proportionality at all, is thrown into question, because it can legitimately be asked what does it add to the criterion of reasonableness?

The digital bill has been slow in its evolution, greeted with a lack of enthusiasm by the profession, but has the potential to greatly erode one of the profit centres of the costs lawyers profession, the drawing of bills. Its arrival fits with the move to digitisation.

It would require enormous expenditure to implement the firm wide systems which must underpin it and its potential complexity, could in turn affect the volume of costs litigation as parties grapple with its introduction.

Interesting times ahead.

casino_royale_daniel-craig-mads-mikkelsen

“Do you expect me to talk, Le Chiffre?”

“No Mr Bond, I expect you to cry.”

Late acceptance of part 36 offers and indemnity costs

Costs litigation like no other area of practice is an exercise in bare knuckle savagery. Points are fought with the utmost ferocity, fire and vigour until finally determined and then after a momentary pause a new trend in satellite litigation will arise.

One such point doing the rounds at the moment is the costs position after a defendant in a personal injury claim accepts out of time a part 36 offer made some while earlier by a claimant. There are a growing number of applications made by claimants for orders for indemnity costs against defendants grounded on the mere fact of late acceptance.

The trend is traceable to the decision of the Court of Appeal in the case of Broadhurst v Tan [2016] EWCA Civ 94 and the curious case of Sutherland v Khan (County Court at Kingston upon Hull 21st April 2016) where District Judge Besford made an indemnity costs order against a defendant, for late acceptance of a part 36 offer.

The cases are now starting to go to appeal. Yesterday, in the case of Whiting v Carillionamey (Housing Prime) Limited (Claim No B80YM364) I argued the point on appeal before His Honour Judge Hughes QC in the County Court at Winchester, where he overturned a decision of a Deputy District Judge in the County Court at Portsmouth, to award indemnity costs against a defendant.

The facts of the case may be briefly stated. This was not a fixed costs case, with costs prescribed by part 45 CPR. The issue was whether the costs payable should be standard or indemnity basis costs.

On 6th September 2012, the claimant sustained an accident, when he fell over due to missing concrete slabs. He suffered soft tissue injuries to his left knee, ankle and hand. He took 4 weeks off work. On 27th November the claimant instructed his solicitors through a Conditional Fee Agreement. He also incepted an ATE policy. On 20th February 2013 a Letter of Claim was sent. On 23rd June 2015 a Part 36 offer was sent by the claimant to the defendant. It offered to settle the claim for £3000.

On 8th September 2015 proceedings were issued. On 14th January 2016 directions were made by the court. A trial window was set for 6th June to 24th June 2016. On 18th May 2016 the defendant wrote a letter and accepted the claimant’s Part 36 offer of 23rd June 2015, some 10 months late.

The claimant intimated that he wanted an award of indemnity costs from 15th July 2015. This was refused by the defendant.

The claimant refused to accept the claim was stayed and/or that an application with evidence in support needed to be put before the court to obtain an award of indemnity costs. The case remained in the list.

The claimant served a trial bundle, but no application or witness statement seeking indemnity costs. There was accordingly, no other material before the court than these documents.

On 7th June 2016 Deputy District Judge Haig-Haddow after submissions, ordered that the defendant pay the claimant’s costs, including the costs of the hearing, assessed on a standard basis up to 14th July 2015 and thereafter on an indemnity basis, such costs to be assessed by way of detailed assessment.

The difficulty with this decision was that there is long standing authority, that mere late acceptance of a part 36 offer, is not a basis for making an award of indemnity costs.

His Honour Judge Hughes QC accepted that he was bound by authority in the Court of Appeal and High Court, as was the Deputy District Judge and allowed the appeal.

The leading case on when it is appropriate to award indemnity costs remains that of Excelsior Industrial and Commercial Holdings v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879 where Lord Woolf made a number of observations.

First he contrasted the then rules 36.20 and 36.21, the predecessors to the current rules 36.13 and 36.17 noted above:

17. Part 36.20 deals with the situation which we have here. It provides:

“(1) This rule applies where at trial a claimant —

(a) fails to better a Part 36 payment; or (b) fails to obtain a judgment which is more advantageous than a defendant’s Part 36 offer.

(2) Unless it considers it unjust to do so, the court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court.”

18. The language of 36.20 has to be contrasted with the language of Part 36.21. Part 36.21 deals with the situation where a claimant has made a Part 36 offer. The significance of 36.21 is that, unlike 36.20, it refers specifically to the court being entitled to order costs on the indemnity basis from the latest date when the defendant could have accepted the offer which had been made. Equally, it refers to interest on a higher rate than normal in the case of situations where it applies. When Part 36.20 is compared with 36.21, light is thrown on the appropriate approach to the application of Part 36.20.

19. The clear inference from the absence of any reference to an indemnity basis in 36.20 is that, in normal circumstances, an order for costs which the court is required under that Part to make, unless it considers it unjust to do so, is an order for costs on the standard basis. That means that if the court is going to make an order for indemnity costs, as it can in a case where Part 36.20 applies, it should do so on the assumption that there must be some circumstance which justifies such an order being made. If I may here adopt the way it was put in argument by Waller LJ, there must be some conduct or (I add) some circumstance which takes the case out of the norm. Mr Davidson’s argument on this part of the appeal is that there was here not found by the judge any such circumstance.

(emphasis added)

Secondly Lord Woolf went on to explain why, mere non acceptance of a part 36 payment or offer, without more did not justify an award of indemnity costs:

30. In Kiam v MGN Ltd (No 2) [2002] 2 All ER 242, this court was concerned about a possible assumption that if an offer of payment into court was not accepted by a claimant, then automatically the claimant would be liable for costs on an indemnity basis as opposed to a standard basis. This court made it clear that such an approach is wrong. In the course of his judgment, with which the other members of the court agreed, Simon Brown LJ in paragraphs12 and 13 said as follows:

“12. I for my part, understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight. An indemnity costs order made under Pt 44 (unlike one made under Pt 36) does, I think, carry at least some stigma. It is of its nature penal rather than exhortatory. The indemnity costs order made on the principal appeal in McPhilemy’s case was certainly of that character. We held ([2001] 4 All ER 361 at [29]) that the appeal involved an abuse of process on the footing that

‘to have permitted the defendants to argue their case on perversity must inevitably have brought the administration of justice into disrepute among right-thinking people’.

31. It follows from all this that in my judgment it will be a rare case indeed where the refusal of a settlement offer will attract under Pt 44 not merely an adverse order for costs, but an order on an indemnity rather than standard basis. Take this very case. No encouragement in the way of an expectation of indemnity costs was required for him to make his offer to accept £75,000; its object was to reduce the damages to that level. Where, as here, one member of the court considered the jury’s award ‘wholly excessive’, and thought that £60,000 would have been the highest sustainable award, it seems to me quite impossible to regard the appellant’s refusal to accept the £75,000 offer as unreasonable, let alone unreasonable to so pronounced a degree as to mention an award of indemnity costs. It is very important that the Reid Minty case should not be understood and applied for all the world as if under the CPR it is now generally appropriate to condemn in indemnity costs those who decline reasonable settlement offers.”

32. In the context of that case I see that those paragraphs set out the need for there to be something more than merely a non-acceptance of a payment into court, or an offer of payment, by a defendant before it is appropriate to make an indemnity order for costs. Insofar as that is the intent of those paragraphs, I have no difficulty with them. However, I would point out the obvious fact that the circumstances with which the courts may be concerned where there is a payment into court may vary considerably. An indemnity order may be justified not only because of the conduct of the parties, but also because of other particular circumstances of the litigation. I give as an example a situation where a party is involved in proceedings as a test case although, so far as that party is concerned, he has no other interest than the issue that arises in that case, but is drawn into expensive litigation. If he is successful, a court may well say that an indemnity order was appropriate, although it could not be suggested that anyone’s conduct in the case had been unreasonable. Equally there may be situations where the nature of the litigation means that the parties could not be expected to conduct the litigation in a proportionate manner. Again the conduct would not be unreasonable and it seems to me that the court would be entitled to take into account that sort of situation in deciding that an indemnity order was appropriate.

Similar considerations drove the decision in the case of  Fitzpatrick Contractors Ltd v Tyco Fire and Integrated Solutions [2009] EWHC 274: there has to be something more than mere late acceptance, for an order for indemnity costs to be appropriate.

The Deputy District Judge had no material before him, to suggest there was anything other than late acceptance: no material at all to suggest any misconduct on the part of the defendant, still less misconduct which justified an award of indemnity costs. His decision was contrary to principle and flawed by a misdirection of law.

Accordingly the appeal was allowed

Litigation Funding

The arrival of October means the “coalbiter” months have begun.  From now until just before Christmas, the days will be growing shorter, and the long nights will give plenty of opportunity to read and write on topics of interest when my children have gone to bed and to update this blog accordingly.

For a more detailed exposition of the term “coalbiting” and the origins of the modern usage of the word the following link may be of interest:

http://oxfordinklings.blogspot.co.uk/2008/08/coalbiters.html

A copy of my most recent article in the journal Litigation Funding can be found here: cause-for-complaint and my last article in that publication this year will be on litigation funding in the context of international arbitrations.

In the meantime I note that the recent case I appeared in, of Essar Oilfields Services Limited v Norscot Rig Mangement PVT Limited [2016] EWHC 2361 (Comm)  has attracted a fair bit of interest on the web and some of the links to the more interesting articles can be found below:

http://www.clydeco.com/insight/article/essar-v-norscot

https://www.dlapiper.com/en/uk/insights/publications/2016/09/english-court-allows-recovery/

http://www.litigationfutures.com/news/high-court-allows-recovery-costs-arranging-third-party-funding

http://www.lawgazette.co.uk/law/2m-litigation-funding-costs-can-be-recovered/5058066.fullarticle

http://hsfnotes.com/arbitration/2016/10/03/english-court-upholds-arbitrators-decision-to-award-claimant-the-costs-of-third-party-funding/

http://www.qlp.ltd.uk/news/recovery-third-party-funding-costs-arbitration-proceedings/

https://harbourlitigationfunding.com/sea-change-arbitration-funding/

http://timberexec.co.uk/landmark-decision-on-third-party-funding-in-arbitration-essar-v-norscot/

https://acerislaw.com/new-english-court-decision-regarding-third-party-funding-cost-recovery-arbitration/

 

St Michael and All Angels

Today is the Feast of St Michael and All Angels, which has given its name to Michaelmas term, always the busiest of the legal year, in the run up to Christmas.

To mark the start of the new legal year, I have decided to offer two separate seminars to my professional clients, each of 90 minutes in duration.

“Retainers, costs and clients” looks at the common issues, which arise in solicitor-own client costs disputes, and considers what can be done to contain the fallout and ensure that a solicitors firm receives the fees that it is entitled to.

“Costs for commercial lawyers” looks at the key issues which can arise in commercial cases, including funding, security for costs, budgeting, settlement including part 36 and the recovery of costs in inter partes detailed assessments.

If your firm would be interested in my delivery of either of these seminars, then please feel free to get in touch at andrewhogan@ropewalk.co.uk