Loathsome reptiles

One of the few intangible benefits of the Credit Crunch and subsequent recession, was to make the banking profession more unpopular with the public than the legal profession and to shine a spotlight on a lot of their more dubious activities, including some actions which were outright criminal.

Earlier this year a number of former bankers from HBOS were jailed in consequence of their activities relating to the impaired assets unit of that bank, unhappily inherited by Lloyds. A lurid account can be found here, in that most guilty of pleasures, the Daily Mail:


Where there is a crime of this nature, there is undoubtedly a civil action: and the Daily Mail dutifully reported on the multi-million claim instituted by that former staple of the BBC’s light entertainment division Mr Noel Edmonds.


That action has not reached its conclusion, and compensation claims from other victims are doubtless yet to come.

But this case is only a tip of one particular iceberg in a sea of financial mis-selling, shareholder’s rights action and civil fraud claims brought out of the wreckage of the Credit Crunch.

Many of these claims, which can be very substantial are backed by litigation funding: which is a necessary element in causing group action or large commercial claims to gain critical mass.

Litigation funding is used to pay for expensive expert evidence, to partly fund the fees of expert commercial counsel who typically work on a partial CFA basis, with base fees due in any event and above all to purchase ATE insurance, the existence of which buttresses arguments that the potential adverse costs liability of any individual claimant to group litigation should be several and not joint.

The role of a solicitor acting for claimants who bring large scale litigation backed by litigation funding, can assume elements of project management as financial implications, the operation of litigation management agreements, and problems of co-ordination of a cohort of many thousands of clients can consume large amounts of time.

Litigation funding is often central to points raised in interlocutory skirmishing, as lawyers acting for defendants will see that it’s existence both fuels the litigation brought against their clients, but also presents an opportunity to derail litigation if the benefit the claimants can draw from it can be curtailed.

The  litigation funder (whose identity may not be apparent) may also form a tempting target both for a security for costs application and a source of non-party costs, should any ATE policy prove inadequate.

Some of these considerations were seen at work, in the Royal Bank of Scotland Shareholder Rights Issue litigation, which reached it’s conclusion this year, in particular there were two lengthy judgments of Hildyard J, which dealt with issues such as the disclosure of an ATE policy, whether litigation funders should be identified, and whether security for costs should be ordered against a litigation funder.

In the first of these judgments The RBS Rights Issue Litigation [2017] EWHC 463 (Ch) the judge had little difficulty in determining both that there was jurisdiction to order disclosure of the identities of litigation funders, but also that there was a low threshold for making such an order:

33. As to (a) above, I am not persuaded that the Court should require to be satisfied, as a condition of making an order disclosing details as to the funder(s), that the applicants have unequivocally determined to bring an application for security for costs once the details are revealed.

34. Such a test would be inimical to the sensible application of the jurisdiction which not only serves to thwart any attempt by a defendant to obtain security against the claimant’s third party funder under CPR 25.14, simply by refusing to provide details of the funder’s identity, but also to enable an applicant properly to consider the merits of an application against the particular funder concerned having regard to its position, whereabouts and substance. Furthermore, such a test would be difficult to apply since it calls for what is likely to be speculation as to true and settled intent, whereas such issues are seldom black and white.

The more difficult part of the application dealt with whether the court should order the disclosure of an ATE insurance policy: English law, unlike federal law in the USA has often taken the view that insurance arrangements are irrelevant, and for example, liability insurance policies are not disclosable documents, as a claimant must “take his defendant as he finds him” including the risk, that that defendant might lapse into insolvency.

Nonetheless there are various cases in the law reports where disclosure of ATE policies has been ordered, under the general rubric that such disclosure is necessary for particular instances of “case management”, an approach that could be said to represent an unhappy fudge between the general rule of English law and a reluctant recognition, that perhaps (whisper it) the American rule is to be preferred.

Hildyard J refused to order disclosure of the ATE insurance policy, first noting:

109. Thus, I accept that generally an ATE policy, which does not impact on the issues in the case now that the premium can no longer be recovered as part of a costs award, will not be relevant. However, there may well be exceptions: for example, where the ATE policy has been deployed in the course of the proceedings whereby to influence or impact on a decision (procedural or otherwise) such as it has been in the present case (see below). That is especially likely, as it seems to me, in the context of group litigation where the considerable benefit to claimants of several liability has been obtained. More generally, I would add that, to my mind, the court will in such a context tend to be more amenable to such disclosure as the price of the other benefits, and to ensure that claimants themselves have transparency.

And then concluding:

122. In my judgment, there is some force in the Claimants’ contention that this limb of the application is to some extent in contrived clothing. It is said to be a matter of case management, rather than going to enforcement, because it would flush out a possible defence to an application, and assist the Defendants whether to bring it at all. But the case management characterisation and rationale is still ancillary to enforcement; and the true or at least primary objective is demonstrated by the form of order sought, which is premised not on the documents being needed for case management purposes, but only that there are efficiencies in making the Claimants determine now their defence to an uncertain application for security which may not be pursued anyway and further or alternatively may be demonstrated (by reference, for example, to the position of the funders) to be unwarranted. I do not think it would be right to exercise case management powers to put the Claimants to an election in respect of a potential application for security for costs to which there may well be other answers, and to which the ATE policy may not be a complete answer anyway.

Sometime thereafter the case returned to court before Hildyard J to deal with the further application pursued on behalf of the Bank, for security for costs against the litigation funders and reported in a judgment at In the Matter of the RBS Rights Issue Litigation Third Party Funders Security for Costs [2017] EWHC 1217 (Ch). He summarised the criteria by which such an application should be assessed in these terms:

19. The potential exposure of litigation funders to orders for costs against them at the end of the day does not, of course, of itself mean that an order for security for costs should be granted. At such an interlocutory stage the court must assess not only whether it is sufficiently clear that the criteria for the potential imposition of liability are fulfilled, but also whether there is a sufficient basis for interlocutory intervention. Of particular relevance in assessing whether an interlocutory order against a non-party under CPR 25.14(2)(b) to secure a contingent liability pursuant to section 51 is appropriate and just will be

(1) Whether it is sufficiently clear that the non-party is to be treated as having in effect become in all but name a real party motivated to participate by its commercial interest in the litigation;

(2) Whether there is a real risk of non-payment such that security against the contingent liability should be granted;

(3) Whether there is a sufficient link between the funding and the costs for which recovery is sought to make it just for an order to be made;

(4) Whether a risk of liability for costs has sufficiently been brought home to the nonparty, either by express warning, or by reference to what a person in its position should be taken to appreciate as to the inherent risks;

(5) Whether there are factors, including for example, delay in the making of an application for security or likely adverse effects such as to tip the overall balance against making an order.

The court then went on to order security for costs against one funder of the claim, but not another, applying the principles to the particular evidence of each funder’s position that was before it.

Perhaps the most interesting part of the judgment relates to the careful analysis of the ATE position, what this might mean for a shortfall in recovery of the defendant’s costs and the fact that delay (these applications were made in 2017), with a trial only months away was not treated as a showstopper, for the purposes of determining the application.


Non party costs and credit hire

One of the other areas of work that keeps me busy, is credit hire. The gift that never stops giving, as I have been arguing those claims both for and against insurance companies for 20 years. I have another webpage I devote to all matters to do with credit hire here: http://www.credithirebarrister.com.

An interesting point that is arising with increasing frequency are applications against credit hire companies for non party costs Orders, under parts 44 and 46 CPR and section 51 of the Senior Courts Act 1981.

At the moment the tide is flowing strongly against the insurance industry: perhaps the leading case is the decision of Mr Justice Turner in Select Car Rentals v Esure [2017] EWHC 1434 (QB). I am grateful to counsel in the case Mr Matthew Stockwell for forwarding to me a copy of the judgment and also confirming that the case is not going further to the Court of Appeal.

The significance of the case, is that it confirms that despite an unfortunately worded Practice Direction, the scope of the court’s discretion to make a non party costs order, is no wider than it would be in any other type of case, where a non party costs application might be considered. The judgment also considered the earlier case I argued before District Judge Avent last year, a copy of which can be found here: Nathanmana-v-Uk Insurance Judgment.

Mr Justice Turner within his judgment, also cites Cook on Costs with approval, a further example of that text’s revived authority with the higher judiciary, under the careful stewardship of its current authors.

In May I argued one of these applications whilst acting for a credit hire company, before District Judge Burn in the County Court at Lambeth, with judgment being reserved and handed down last month. A copy of that decision with her reasons for refusing to make a non party costs Order can be found here: Hussain v Bradford and Euronex Lambeth County Court 2nd August 2017 District Judge Burn.

Of course these applications can properly be made against credit hire companies and can succeed: last year, at the door of the court, when acting for an insurance company, I settled a case for a sum exceeding £30,000, the credit hire company accepting that it had to pay costs. But the insurers have to pick their fights carefully.

And so another branch of satellite litigation continues to flourish.

Winter has come

The clouds closed in today, the temperature plunged and the heavens opened. A sure sign that summer has effectively come to an end and autumn has begun.

I have returned from various trips to a mountain of work, and a hefty backlog of topics to write about in relation to matters of costs and litigation funding.

On the plus side, season 7 of Game of Thrones is now available to buy, and an artisan bake house has opened just round the corner from chambers, with a tempting array of sourdough creations (particularly the cinnamon whirls) which pair perfectly with 11am coffee. Here it is:

In the next few blog entries I shall be looking at a number of issues, including the ongoing war between the insurance industry and the credit hire companies over the scope of the non party costs jurisdiction, some recent group actions, successful and unsuccessful and the use of litigation funding made in them and also consider the new Jackson Report, not least because I am giving a seminar on it next month. In truth, it is a curious document, which repays careful attention.

In the meantime, for those cake lovers amongst my readership, here are some of Tough Mary’s finest creations:


And the last enemy to be destroyed shall be Death

Capacity to make a contract arises as in issue in costs disputes, when a paying party wishes to dispute the validity of a retainer, on the basis that it is void or unenforceable because the client lacked capacity to enter into it.

The point has been thoroughly ventilated in the context of persons who lack mental capacity, and also minors, but there are other types of incapacity.

A particular point that arises from time to time, in costs claims made by the administrators of an estate or executors who pursue litigation on behalf of a deceased person’s estate or for the benefit of their dependents under the Fatal Accidents Act 1976, is whether the costs they incur under a conditional fee agreement will prove recoverable from a paying party, when the agreement is made before letters of administration are obtained or a grant of probate made. Do they lack capacity at that time?

The question then can be summarised as whether an eventual administrator can make a valid and binding contract, on behalf of a person’s estate before assuming that role through the completion of the appropriate formalities.

Section 21 of the Administration of Estates Act 1925 provides as follows:

Every person to whom administration of the real and personal estate of a deceased person is granted, shall, subject to the limitations contained in the grant, have the same rights and liabilities and be accountable in like manner as if he were the executor of the deceased.

The effect of section 21, if applied widely means that principles which apply to probate cases may also be the same principles which apply to administration cases. It should be noted that the concept of administration is very old, and originally descends from the ecclesiastical courts or Church courts, which in medieval times had jurisdiction over the estates of dead persons. It follows that much of the law on this subject, is antique.

The starting point as he notes, is that the law on nullity of actions, ie proceedings commenced by an administrator before the grant of letters of administration and exemplified by the case of Milburn-Snell v Evans [2011] EWCA Civ 577 has no application to this question, which is whether a contract of retainer can be made in anticipation of an eventual grant of letters of administration. Thus the lack of letters of administration were fatal to a case commenced without them:

16 I regard it as clear law, at least since Ingall’s case, that an action commenced by a claimant purportedly as an administrator, when the claimant does not have that capacity, is a nullity. That principle was recognised and applied by this court in Hilton v Sutton Steam Laundry [1946] KB 65 , 71 (per Lord Greene MR) and Burns v Campbell [1952] 1 KB 15 (per Denning LJ at p 17, and Hodson LJ at p 18). In Finnegan v Cementation Co Ltd [1953] 1 QB 688 , 700 Jenkins LJ said:

“As to the law, so far as this court is concerned it seems to me to be settled by Ingall v Moran and Hilton v Sutton Steam Laundry and, I may add, Burns v Campbell, that an action commenced by a plaintiff in a representative capacity which the plaintiff does not in fact possess is a nullity, and, further, that it makes no difference that the claim made in such an action is a claim under the Fatal Accidents Acts which the plaintiff could have supported in a personal capacity as being one of the dependants to whom the benefit of the Acts extends.”

But this is a rule of law, which applies to the issue of proceedings: it does not provide an answer to the contractual point as to whether a retainer can be lawfully incepted.

Instead one turns to the nineteenth century authorities to see the emergence of a principle of “relation back” which was devised by the courts really to meet the mischief that might arise, in the period between a person’s death intestate, and the issue of letters of administration which might take some time to obtain. This doctrine was expressed in the case of Foster v Bates (1843) 12 Meeson and Welsby 226 and expressly applied not only to actions in tort but also contracts:

[233] It is clear that the title of an administrator, though it does not exist until the grant of administration, relates back to the time of the death of the intestate; and that he may recover against a wrong doer who has seized or converted the goods of the intestate after his death, in an action of trespass or trover. All the authorities on this subject were considered by the Court of Common Pleas, in the case of  Tharpe  v.  Stallwood  , (12 Law J. N. S., 241. See also Brooke’s Abr., Relation, 15), where an action of trespass was held to be maintainable. The reason for this relation given by Rolle, C. J., in  Long  v.  Hebb  (Styles, 341), is, that otherwise there would be no remedy for the wrong done. The relation being established for the benefit of the intestate’s estate, against a wrong doer, we do not see why it should not be equally available to enable the administrator to obtain the benefit of a contract intermediately made by suing the contracting party; and cases might be put in which the right to sue on the contract would be more beneficial to the estate than the right to recover the value of the goods themselves. In the present case, there is no occasion to have recourse to the doctrine, that one may waive a tort and recover on a contract; for here the sale was made by a person who intended to act as agent for the person, whoever he might happen to be, who legally represented the intestate’s estate; and it was ratified by the plaintiff, after he became administrator: and, when anyone acting on behalf of the intestate’s estate, and not on his own account, means to act as agent for another, a subsequent ratification by the other is always equivalent to a prior command; nor is it any objection that the intended principal was unknown, at the time, to the person who intended to be the agent, the case of Hull  v.  Pickersgill  (1 Bro. & B. 282), cited by Mr. Greenwood, being an authority for that position. We are, therefore, of opinion, that the plaintiff is entitled to recover.

(emphasis added)

Indeed there is a chain of nineteenth century authority, which both established the doctrine of relation back, but also started to impose limits on its application. So, for example, the act validated by “relation back” had to be actually done in furtherance of the role as administrator or quasi administrator. Thus in the case of Morgan, Administrator of Thomas Morgan, Deceased v Thomas (1853) 8 Exchequer Reports (Welsby, Hurlstone and Gordon) 302 155 E.R. 1362 it was stated as followed:

Pollock , C. B. I am of opinion that this rule ought to be discharged. Unless the conduct of the party whose [306] act is relied upon as binding the estate of the intestate be done by him in the character of administrator, it can have no operation upon the estate, and, accordingly, the utmost effect that can be given to the defendant’s argument is, that where a party does an act professedly intending to take out letters of administration, and afterwards becomes administrator, the administration has relation back, and gives effect to what he had done by anticipation. But if that proposition be true in point of law, this case would entirely fail upon the facts, for there was no evidence whatever to warrant the jury in finding that the plaintiff had assented. Upon considering all the facts, there is no evidence bearing out the proposition of an assent, although it is true that the plaintiff was living at the time in the neighbourhood, and was probably aware of what the parties were doing, and did not choose to interfere; yet it does not follow that he was acting in the character, or even in the assumed character, of administrator. With respect to the legal consideration of the case, the only matter adduced by the defendant’s counsel, which is in the least in his favour, is what fell from the Court of King’s Bench in Kenrick  v.  Burges  , and which turns out to have been a mere dictum, although, no doubt, the Judges entertained that view of the question. But the modern authorities are opposed to the defendant’s arguments, and, amongst other cases, that of  Woolley  v.  Clark  may be cited.

An act done by a party who afterwards becomes administrator, to the prejudice of the estate, is not made good by the subsequent administration. It is only in those cases where the act is for the benefit of the estate that the relation back exists, by virtue of which relation the administrator is enabled to recover against such persons as have interfered with the estate, and thereby to prevent it from being prejudiced and despoiled. It was not the duty of the plaintiff, acting in the character of administrator, to assent to a legacy till he had seen all the just debts owing by the estate duly satisfied.

(emphasis added)

The doctrine of relationback has been of crucial importance in more recent times. In the case of Mills v Anderson [1984] Q.B. 704 a purported settlement was made by a person, in advance of the issue of letters of administration, which he then wished to resile from due to a change in the law. The issue was whether the settlement was binding on the estate, because the doctrine of relationback conferred a validity on it, notwithstanding the lack of letters at the time it was made. If it did not, the administrator could resile from the agreement. The decision is a High Court one, so binding:

These being the facts Mr. Potts, on behalf of the plaintiff, made a number of submissions of law based on statements in two textbooks, Williams Mortimer and Sunnicks, Executors, Administrators and Probate 16th ed. (1982) (to which I shall refer as Williams ) and Spencer Bower & Turner, The Law Relating to Estoppel by Representation, 3rd ed. (1977), (to which I shall refer as  Spencer Bower ). These textbook statements were supported by footnotes referring to old cases none of which was or could have been available to counsel and with the consent of both counsel I have subsequently read the cases concerned to ensure that they do indeed support the textbook statements.

In essence Mr. Potts submitted that letters of administration do not in general relate back to the date of death nor can estoppel operate against a party who has changed his legal personality but that letters may relate back where this would operate for the benefit of the estate. The agreement concluded between the parties in the instant case not being of benefit to the estate since the decision of the Court of Appeal in Gammell v. Wilson was indeed upheld by the House of Lords [1982] A.C. 27, the exceptions to the general rule do not apply and consequently the agreement between Mr. Dodgson and Mr. Peacock was not binding on a subsequent administrator.

Williams states, at pp. 91-92:

“Cases may, however, be found, where the letters of administration have been held to relate back to the death of the intestate, so as to give a validity to acts done before the letters were obtained” but *710 “Such relation back exists only in those cases where the act done is for the benefit of the estate.”

This statement is supported by a reference to Morgan, decd. v. Thomas (1853) 8 Exch. 302 and I am satisfied that this decision does indeed support that statement which appears to be taken almost verbatim from the judgment of Parke B., at p. 307:

“An act done by a party who afterwards becomes administrator, to the prejudice of the estate, is not made good by the subsequent administration. It is only in those cases where the act is for the benefit of the estate that the relation back exists, by virtue of which relation the administrator is enabled to recover against such persons as have interfered with the estate, and thereby to prevent it from being prejudiced and despoiled.”

The fact that relation back does exist in certain cases as an exception to the general rule that it does not is supported by three further statements in Williams , at p. 428:

“It is clear that the title of an administrator, though it does not exist until the grant of administration, relates back to the time of the death of the intestate; and that he may recover against a wrongdoer who has seized or converted the goods of the intestate after his death in an action of trespass or trover”

And, at p. 429:

“It would also seem that whenever makes a contract with another before any grant of administration, the administration will have relation back, so that the benefit of the contract is not lost and the administrator may sue upon it, as made with himself.” (emphasis added)

The latter being supported by Bodger v. Arch (1854) 10 Exch. 333 which I am satisfied does justify it. I pause here to observe that it is clear from that statement that although letters may not have been granted a person may act “on behalf of the intestate’s estate” and it was therefore perfectly proper for Mr. Peacock to write the letter before action “on behalf of the estate” even though he knew that there was no administrator. The third statement in Williams  is at p. 430: “The doctrine of ‘relation back’ must be applied only to protect the estate from wrongful injury occurring in the interval before grant.” A statement said to be supported by Waring v. Dewberry (1718) 1 Str. 97 and again I am satisfied that it is a statement supported by the ratio in that case.

Subject to a submission by Mr. Fox to which I shall refer below and subject to one possible ambiguity these statements seem to me to support Mr. Potts’s submissions. I have however to consider whether an act done for the benefit of the estate means objectively an act which looking back is of benefit to the estate or whether it may include acts which were done subjectively for the benefit of the estate even though looking back they have not benefited the estate at all. It is perfectly clear that in arriving at his decision to conclude an agreement with Mr. Dodgson, Mr. Peacock believed that he was acting for the benefit of the estate. Indeed had the *711 House of Lords in Gammell v. Wilson [1982] A.C. 27 decided that damages for loss of expectation of life should be a token figure never intended to rise with inflation at all and consequently should have reverted to £250 the agreement would have been of considerable benefit to the estate.

I am satisfied, looking at all the cases as a whole, that relation back only occurs where it would be beneficial to the estate for the general doctrine not to operate. The exception applies to prevent injury to the estate, and in my judgment, the approach should be a purely objective one.

Before turning to the submission of Mr. Fox and for the sake of completeness I turn to consider whether the doctrine of estoppel can apply. Mr. Potts relied on Spencer Bower , ch. VI, para. 127:

“Just as, for the purposes of estoppel by representation, amongst other purposes, there may be a unity of persona (in the strict juridical sense of the word) between two physically distinct individuals, e.g. principal and agent, as has already been pointed out, so, conversely, one and the same person in the physical sense may in contemplation of law occupy two personae or characters, one private, and the other official, in which case, when litigating in the latter capacity, he is not estopped by any representation made by him in the former, and vice versa.”

Again the footnote case, Metters v. Brown (1863) 1 H. & C. 686, fully supports that statement. Channell B. said, at p. 693:

“In Doe d. Hornby v. Glenn (1834) 1 A. & E. 49 which was cited on the argument, it was held that an agreement entered into by an executor de son tort did not bind him after he had become rightful administrator. In our opinion the plaintiff, who sues as administrator of his mother, must be considered in the position of a stranger, and therefore the rule as to estoppel does not apply; for whenever a person sues, not in his own right, but in the right of another, he must for the purposes of estoppel be deemed a stranger.”

I am consequently quite satisfied that the plaintiff in this case cannot be estopped from denying the validity of an act done by him in relation to the estate before he became administrator.

This latter doctrine was not challenged in principle by Mr. Fox who nevertheless submitted that in the circumstances of this case the doctrine did not apply; nor did he challenge the general validity of the submissions made by Mr. Potts. In an ingenious argument however he submitted that where there was an agreement concluded between parties one of whom later became an administrator and where the agreement was such as would permit the administrator to sue upon it, the contract could then be used by the other party as a shield even though he could never use it as a sword.

There is no doubt in my mind that Mr. Fox’s first premise is justified. Let us suppose that before any act were done by the plaintiff, subsequent to letters of administration, to deny the validity of the contract, a witness had been discovered who wholly exonerated the defendant from all blame *712 for the death of the deceased. The plaintiff could successfully have sued upon the agreement. So, submits Mr. Fox, it would be wholly anomalous if in such circumstances the defendant could not, in answer to a claim, set up the same agreement as a defence.

This argument merits careful consideration but I can find nothing in the two textbooks or in the cases which supports it. In the light of the decision in Gammell v. Wilson [1982] A.C. 27 the agreement concluded by both parents purportedly on behalf of the estate was not of benefit to it. The judgment at first instance in Gammell v. Wilson which the House of Lords later affirmed as good law was given on 27 July 1979 which not only preceded the agreement but also the death itself. The judgments in the Court of Appeal were delivered on 1 April 1980 which also predated the agreement. It cannot be said therefore that even at the date of the agreement it was of benefit to the estate. I do not therefore have to consider the position which might arise if the act done was, at the time of its performance, of benefit to the estate but as a result of supervening events including decisions of the courts had later become injurious to the estate.

In these circumstances I have reached the conclusions first, that this agreement was not concluded on behalf of the estate by the administrator; second, that the doctrine of relation back does not operate to bind him as administrator; and third, that as administrator he is not estopped from denying the validity of an agreement entered into by him on behalf of himself and his wife; and I consequently hold on the preliminary issue that the defendant has not made out the averment of accord and satisfaction.

I regard this decision as most important: it indicates modern acceptance of the doctrine that relation back applies to contracts made by an administrator, who is not, in fact an administrator at the time they are made provided that the contract is for the benefit of the estate, as objectively assessed.

Accordingly, looking at the nineteenth century cases, and also the decision in Mills it can be convincingly argued that a conditional fee agreement  drafted to take effect between the solicitors, and the person who intended to become the administrator and did indeed become the administrator, will be valid, and not void for want of capacity.


Costs budgeting after Harrison II

The second issue that was debated in the case of Harrison v University Hospitals and Coventry and Warwickshire NHS Trust [2017] EWCA Civ 792 was described in these terms:

3. The second issue is whether, with regard to costs incurred prior to the budget (“incurred costs”), there is or is not a like requirement of good reason if a costs judge on a subsequent detailed assessment is to depart from the amount put forward at the relevant costs management hearing.

The origins of this issue can be found in what might now be termed “the Sarpd Oil” heresy: this was a belief that gained some traction after obiter remarks by Sales LJ in the case of that of that name, that unless incurred costs were challenged at the costs and case management hearing, they were to be taken as drawn. This in turn led to lengthy recitals in costs management orders that the issue of incurred costs had specifically not been considered at the costs and case management hearing, and in effect, the issue was shunted off to detailed assessment.

The Court of Appeal in Harrison was at pains to state that the issue was to be resolved again, according to the wording of the rules and Practice Direction, applying the conventional canons of construction.

45. Although the second issue to an extent is connected with the first issue it seems to me that the same process of interpretation – that is, giving the wording of the Rules their natural and ordinary meaning – again indicates a clear outcome: this time, in favour of the appellant.

46. The starting point is this. CPR 3.18 (b), in its then form, relates to a departure from “the approved or agreed budget”. But the costs incurred before the date of the budget were never agreed in this case. Nor were they ever “approved” by the CMO. On the contrary the focus of a judge making a CMO is on estimating the costs reasonably and proportionately to be incurred in the future: as the opening words of CPR 3.15 (1) make clear. In undertaking this exercise the court may have regard to costs stated already to have been incurred: and that may in turn impact on its assessment of what may be reasonable or proportionate for the future. But paragraph 7.4 of PD 3E is quite specific: as part of the costs management process the court may not approve costs incurred before the date of the budget costs management conference. What it can do is record in the CMO its comments (if any) on such costs: which are then be taken into account when considering reasonableness and proportionality: a direction now enshrined in the amended CPR 3.15 (4) and CPR 3.18 (c) with effect from 1 April 2017.

47. It follows, in my view, that incurred costs are not as such within the ambit of CPR 3.18 (in its unamended form) at all. Accordingly such incurred costs are to be the subject of detailed assessment in the usual way, without any added requirement of “good reason” for departure from the approved budget.

It should logically be conceptually clear then, that it follows that incurred costs are simply not up for consideration at a costs budgeting hearing, but rather to be dealt with at a detailed assessment.

However this is not the case. Instead incurred costs can be considered at the costs budgeting hearing in two potentially important regards. The first, is that the amount of incurred costs could logically form an important consideration in setting budgeted costs: if, for example disclosure has already been undertaken to all intents and purposes, by the time a costs budgeting hearing takes place, then a very limited amount of budgeted costs might be allowed for disclosure in the disclosure phase. Similar arguments might be raised in relation to other phases.

Secondly, the court can record comments on incurred costs. How useful this would be, is moot. If a district judge, simply records on the order that the incurred costs are “too high”, how does this translate into specific findings or rulings on a detailed assessment? Any comments which can reasonably be recorded on the face of an Order, are likely to be so vague or non-specific as to be meaningless, and not least because in the context of a costs budgeting hearing the court would have only limited material before it, to give any context to highly impressionistic comments.

The issue of proportionality also has to be considered, and the conceptual confusion this might create will be explored below.

The Court of Appeal did firmly put to rest the spectre of Sarpd Oil, in so far as it lingered after the 1st April 2017 amendments to the costs budgeting rules:

50. In reaching his conclusion, the costs judge was clearly influenced by certain obiter remarks of Sales LJ delivering the judgment of the court in the case of Sarpd Oil (cited above) at paragraphs 41-44 of the judgment. That case did not in fact involve a detailed assessment as such but related to an issue on security of costs. I should also note that the budgeted costs in that case had been approved by the judge as part of an agreed CMO. At paragraph 43 Sales LJ indicated in general terms that, where positive comments were made in the CMO as to incurred costs, the receiving party would have the legitimate expectation of being likely to recover such costs if successful in the litigation. That having been said, at paragraph 44 of the court’s judgment it was then said: “Parties coming to the first CMC to debate their respective costs budgets therefore know that that is the appropriate occasion on which to contest the costs items in those budgets, both in relation to the incurred costs elements in their respective budgets and in relation to the estimated costs elements. The rubric at the foot of Precedent H also makes that clear, since it requires signed certification of the positive assertion that “This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation.” Similar points were made at paragraphs 47 and 50 of the judgment.

51. One can see that the wording used in Precedent H might tend to support such a view. But it does not accord with the language of paragraph 7.4 of PD 3E or CPR 3.15 or CPR 3.18: nor does it sit comfortably with the expressed entitlement (but not obligation) of the judge conducting the costs management hearing to record comments on incurred costs which, if made, will then be “taken into account” when considering reasonableness and proportionality.

 The Court of Appeal then went onto consider proportionality and indicated that the incurred costs will be considered as part of the round of an overall view on proportionality, to be formed at the end of a detailed assessment. However, if budgeted costs have been set on the basis of what is reasonable and proportionate, in the light of the incurred costs which have already been accrued, one can legitimately ask oneself, what scope might there be in the ordinary case, for a global proportionality deduction?

The answer will depend on the figures in an individual case: where incurred costs are very modest, there might be very little scope: for the budgeted costs forming the majority of the costs will have been expressly set on the basis they are reasonable and proportionate.

Conversely, where the incurred costs are very great, not only might this result in modest budgeted costs being allowed, the scope for a proportionality argument to succeed must be greater: as the reasonableness and proportionality of those costs would be very much up for argument. One can see in this case “good reason” and proportionality arguments being run together.

52. I add that where, as here, a costs judge on detailed assessment will be assessing incurred costs in the usual way and also will be considering budgeted costs (and not departing from such budgeted costs in the absence of “good reason”) the costs judge ordinarily will still, as I see it, ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3 (2)(a) and (5): a further potential safeguard, therefore, for the paying party.

The Court of Appeal concluded that incurred costs and budgeted costs are to be sharply distinguished for the purpose of a costs budgeting hearing, as provided for by the amended rules, and in relation to the former rules, when properly construed.

53. Costs budgeting, to be performed properly, undoubtedly places a real burden on the parties and court. It would potentially greatly extend that burden if incurred costs were to be subjected to the same degree of preparation and appraisal as budgeted costs. One can understand that there are principled arguments which nevertheless could favour such an approach: but there are also competing arguments. At all events, the then and current versions of the Rules and Practice Direction clearly sharply distinguish, for these purposes, incurred costs from estimated budgeted costs. I therefore think, with all respect, that those particular obiter comments of Sales LJ in Sarpd Oil may have gone too far in so far as they suggest otherwise in terms of how costs management hearings are to be approached in this respect.

54. I should add that it seems that those remarks of Sales LJ in Sarpd Oil with regard to incurred costs gave rise to a degree of disquiet. The matter came to the attention of the Civil Procedure Rule Committee. It considered that the consequences of those observations in Sarpd Oil were “unexpected”. It also considered that the effect of those observations would be to complicate, not simplify, costs management and might undermine desirable attempts to agree costs budgets. The outcome of the Report of the relevant sub-committee of 9 December 2016 was to recommend that incurred costs indeed should be “decoupled” from budgeted costs so that the court’s budgeting would only relate to the costs to be incurred (but retaining the court’s power to comment on previously incurred costs, which could provide a “steer” thereafter): thus restoring the position to the perceived status quo ante. This is designed to be made clear beyond argument for the future by the subsequent amendments to CPR 3.15 and CPR 3.18 with effect from 6 April 2017. As will be gathered, I in fact consider, and disagreeing with the obiter remarks of the court in Sarpd Oil, that the status quo ante was in any event to the same effect.

The third and final issue hinged on when a case was commenced for the purpose of rule 44.3(7)(a): the court had little difficulty in deciding that meant when proceedings were issued by the court.

Although the rules are clear, and indeed have been clear in my view since 2013, in their intended effect, the Harrison judgement clarifies the position and confirms the interpretation. To that extent the judgment is a valuable jurisprudential contribution.

What the judgment does not do, and does not purport to do, is address the philosophical contradictions at the heart of the current costs budgeting regime.

In particular, in a world where there is an ever greater impetus to fixed costs, with their settled, if not arbitrary amounts, it could be thought to be puzzling that the rules remain so tender of the notion of incurred costs and their inviolability to control or assessment at an early stage in a case.

Moreover, the provision in the rules for variation of a budget, cuts against the provision of certainty that a costs management order is meant to achieve: if a party’s potential liability for costs can be increased through the raising of a party’ budgeted costs, then a decision made to contest a case, will have been made on the basis of an invalidated premise.

Costs budgeting after Harrison I

The most significant decision in the last four years on costs budgeting was handed down by the Court of Appeal in the case of Harrison v University Hospitals and Coventry and Warwickshire NHS Trust [2017] EWCA Civ 792. This was an appeal from a decision of Master Whalan, made on a detailed assessment.

The only substantive judgment was given by Davis LJ with evident asperity as he plainly wondered why some of the points which were being run were being argued before him: I suspect he had forgotten that counsel do not choose the cases they take on, and often do not choose the points they are asked to argue.

Be that as it may, the issues were described in these terms:

1.This appeal raises issues of some general importance in the context of costs. In particular, the two principal issues are ones which concern the relationship between costs budgeting and detailed assessment and which appear to have attracted sharply divided views among those specialising in this area. Ultimately, they are to be resolved by a process of interpretation of the relevant Rules and related Practice Directions.

2. The first issue can be summarised in this way. Where a Costs Management Order (“CMO”) approving a costs budget has been made in the course of civil proceedings is a costs judge on a subsequent detailed assessment precluded from going below the budgeted amount unless satisfied that there is good reason for doing so? Or is there an entitlement to do so without any prior requirement of good reason for going below the budgeted amount?

3. The second issue is whether, with regard to costs incurred prior to the budget (“incurred costs”), there is or is not a like requirement of good reason if a costs judge on a subsequent detailed assessment is to depart from the amount put forward at the relevant costs management hearing.

4. A third, and entirely discrete, point is also raised. This is as to when, for the purposes of the transitional provisions relating to proportionality contained in CPR 44.3 (7), a case is to be treated as “commenced”.

The actual decision of Master Whalan was summarised as follows:

17. Master Whalan took the view that so far as budgeted costs were incurred CPR 3.18 precluded him from subjecting them to a “conventional” detailed assessment at the behest of the appellant as paying party unless good reason for doing so was shown. (At the same time, however, he indicated that he was receptive to arguments on individual items to the effect that good reason did exist.) As to incurred costs, Master Whalan – to an extent founding himself on some observations of Sales LJ giving the judgment of the court in Sarpd Oil International Limited v Addax Energy SA [2016] EWCA Civ 120, [2016] 2 Costs LR 227 – said that although incurred costs could not themselves have been approved as such at the case management conference nevertheless they would have featured in the overall budget put forward at the conference and thus had a “certain status”. Master Whalan indicated that, with regard to the incurred costs, it was “in practical terms” required that good reason likewise should be shown if there was to be a departure from what was set out in

Precedent H. As to the date when the case commenced, Master Whalan held that in the present case that was when the letter was sent (on 27 March 2013) by a prescribed method which would lead to next-day delivery and so was prior to 1 April 2013. In the result, Master Whalan assessed the recoverable costs at £420,168 (including success fee and ATE premium). He ordered the appellant to pay the costs of the assessment.

I therefore turn to consider the first issue.

The resolution of the first issue for anyone who actually reads the rules and Practice Direction would seem to be “bleeding obvious” as I observed in an earlier post http://costsbarrister.co.uk/uncategorized/the-bleeding-obvious/ in relation to the case of  Merrix but which was approached by the court in the following way:

25. So far as the first issue before us is concerned, that was precisely the point that fell for decision in the case of Merrix, decided on 24 February 2017 by Carr J. There is no room for distinction on the facts: either that case was rightly decided or it was wrongly decided. Mr Latham (of course) said that it was rightly decided. Mr Hutton (of course) said that it was wrongly decided. Certainly it is not a decision binding on this court.

26. Mr Hutton noted that by her decision Carr J had on appeal departed from the decision of a very experienced regional costs judge (A908M096): whose decision at first instance had itself in the interim been followed, albeit “with some hesitation”, by another very experienced regional costs judge in another case (A90LE252).

27. Since the decision of Carr J is reported and readily available to anyone interested in questions of costs I do not propose here to detail her reasoning. She set out fully the background of the proposals of Sir Rupert Jackson; the contents of the relevant Rules and Practice Directions; and the competing arguments of counsel (which in truth appear to have tracked the competing arguments advanced to us). She reviewed a number of authorities cited to her. The core of her conclusion perhaps finds its clearest summation in paragraphs 67 and 68 of her judgment. She considered it plain from the wording of CPR 3.18 that no distinction was made between the situations where it was claimed on detailed assessment that the budgeted figures were or were not to be exceeded. At a later stage, she indicated that she accepted that costs budgeting was not an advance detailed assessment; but, as she put it at paragraph 78, there was no suggestion that there should not be any detailed assessment: “on the contrary, the question is how that assessment should be conducted”.

The Court of Appeal then went on to approve the approach taken by Carr J in the Merrix decision:

28. I am in no real doubt that Master Whalan reached the right conclusion on this issue and that the conclusion of Carr J in Merrix was also correct, for the reasons which she gave.

Davis LJ deprecated the arguments advanced which were said to be supported by various extra-judicial sources:

29. I have to say that I was a bit bemused by some of the aspects of the arguments advanced before us. At times the citation not only of authorities but also of what were described as “extra-judicial documents” almost descended into a kind of arms race in collecting views or comments which might lend support to one point of view with regard to costs budgeting in preference to another. Indeed at one stage we were taken by counsel to a number of comments of Sir Rupert Jackson himself, writing extra – judicially, seemingly with an aim on the part of counsel to extracting some kind of clue as to what he had intended or what he would have intended or what he understood had been intended. This is, with respect, beside the point. What we have to do is construe the wording of CPR 3.18 (produced, no doubt, under the auspices of the Civil Procedure Rule Committee): thus on basic and ordinary principles the legislative intention is to be gathered from the words used. For this reason alone, therefore, I was not much moved by Mr Hutton’s courteous but firm insistence that to understand the rule one has to understand the “realities”; and for that purpose one had, he said, to be at the “coal-face” of costs management decision making (which virtually all appellate and many High Court judges are, I accept, not).

An interesting raised in the course of the appeal, but which the Court plainly thought was neither here nor there, was the whether the degree of scrutiny provided to costs budgets when a costs management order was made, was appropriate.

In years gone by, I recall undertaking detailed assessments lasting three days, where a bill of costs was no more than £150,000. Last year, I undertook a summary assessment of a schedule of costs claiming £140,000 in the Commercial Court, where the costs were assessed within 15 minutes. As is well known, on a provisional assessment of a bill of costs of up to £75,000, the court service allows a costs judge only 40 minutes.

The point is that, a philosophical shift has been adopted by the judges, that rather than spend days or even hours, agonising over a claim for costs they will administer “rough justice” when making decisions.

30. In many ways, Mr Hutton’s submissions in fact came close to an attack if not on the whole principle of costs budgeting then at all events on the efficacy in practice of costs budgeting. That of course has been the subject of extensive debate over recent years. But I do not need to go into the competing arguments – themselves discussed both in, for example, the Civil Courts Structure Review: Final Report of Lord Justice Briggs (2016) and in Sir Rupert Jackson’s own recent book on The Reform of Civil Litigation (2016) – simply because, put shortly, the system is now enshrined in the Civil Procedure Rules. At all events Mr Hutton asserted – and assertion is what it was – that the whole costs management system not only has been but still is “creaking”. He further said that if a CMO were to convey the notion that, for any subsequent detailed assessment, the matter was in effect to be regarded as already determined by the approval of budgets in the CMO then that would cause parties to devote even more time and resources and argument to costs management hearings, to the detriment of the prompt processing of the litigation and at the risk of overwhelming the courts: whereas if all were left to detailed assessment then matters could, he sought to say reassuringly, be assessed fully and fairly and properly by expert costs judges on an itemised basis , and with an informed view of issues such as proportionality.

31. The premise underpinning Mr Hutton’s argument thus was that CMOs in effect are but summary orders which at best give no more than a snapshot of the estimated range of reasonable and proportionate costs: often reached, as Mr Hutton would have it, on a broad brush or rough and ready judicial approach after a hearing which would have been limited in time, rushed in argument and incomplete in the information advanced.

Accordingly a “light touch” approach to costs management can be seen to be very much part of the zeitgeist when it comes to assessing costs and not something that the Court of Appeal regards as objectionable or even out of the norm.

This decision also marks the resurrection of Cook on Costs as an authoritative source of costs wisdom: under the new authorship of Master Rowley and District Judge Middleton, the text has regained its authority, that certainly I think had declined in recent years, as the following passage makes clear from the judgment in Harrison.

32. It is to be noted that this sceptical appraisal, although no doubt shared by some, is not shared by others who undoubtedly can be said to be at the “coal-face”. Indeed, it is roundly said in the latest edition of Cook on Costs (2017 ed, at pages 230-1) that to sanction, at detailed assessment, a departure from the budget in the absence of good reason would overlook (among other things) that budgeted costs are already required to have regard both to reasonableness and to proportionality; that the aims of costs budgeting include a reduction in detailed assessments and of issues raised in points of dispute; and that the element of certainty to clients (in the form of knowing what costs they are likely to face, in terms of payment or recovery) would be removed. As also posed by Master Gordon-Saker in the case of Collins v Devonport Royal Dockyard Limited (8th February, 2017: AGS/1602954), to which we were referred in the written arguments: “… what would be the point of costs budgeting (and the considerable resources it has required) if the resulting figures amount to nothing more than a factor, guidance or cap at detailed assessment?” He rejected in that particular case the argument of the defendant, in seeking on detailed assessment to reduce an agreed budget figure, that an agreed or approved budget was, for the purposes of detailed assessment, nothing more than guidance.

The court did however note that the requirement of proportionality should be specifically addressed, when setting a costs budget: and specifically mentioned the value of the claim.

This could be quite important: in my experience, decisions on costs budgeting in practice chiefly focus on what legal spend needs to be, to complete a phase: when the emphasis in the rules, that costs can be both reasonable and necessary, but still disproportionate might indicate that a better starting point is to look at the overall value of the case, consider what the overall level of costs should be, and then divide the total by phases. But this is not happening in practice.

33. These sentiments are also reinforced by, for example, the requirement that a costs budget has to be signed and certified as being a fair and accurate assessment of the costs which it would be reasonable and proportionate for the client to receive; and by the requirement under the Rules and Practice Directions for revised budgets, upwards or downwards, to be filed and approved where the estimates change. In this regard, it is also in my view particularly important overall to bear in mind that a judge who is being asked to approve a budget at a costs management hearing must take into account, in assessing each budgeted phase, considerations both of reasonableness and of proportionality. Proportionality may be, to give but one example, of particular potential relevance where the costs prospectively claimed are very large and the amount at stake in the claim relatively small.

The Court of Appeal also seems quite relaxed by the concept of a 30 minute detailed assessment: the effect of its ruling should be, to reduce large parts of a detailed assessment to arguments (if there are any) that there is a good reason to depart from an approved costs budget.

34. Moreover, if approval of a costs budget by a CMO has the more limited status which the appellant would ascribe to it then that would have a potentially adverse impact on parties thereafter attempting to agree matters without requiring a detailed assessment. Although Mr Hutton queried if that was one of the perceived prospective benefits of the costs budgeting scheme, it seems to me – as it did to the editors of Cook on Costs – wholly obvious that it was indeed designed to be one of the prospective benefits of cost budgeting that the need for, and scope of, detailed assessments would potentially be reduced.

The nub of the case was that the Court of Appeal decided, unsurprisingly, that on conventional principles of construction, the words of the rules and Practice Direction mean exactly what they say.

35. Against that context, I turn to the critical issue of the actual wording of CPR 3.18 (b). Mr Hutton’s arguments were to the effect that there is a degree of ambiguity in the language used, justifying a purposive approach to its interpretation. Since, for the reasons I have sought to give above, the purposive approach which he advocates rests on very shaky foundations that hardly assists him. But in any event I do not consider there to be any real ambiguity in the words at all.

36. The appellant’s argument has this initial, and unattractive, oddity. If it is right, it involves a most unappealing lack of reciprocity. It means that a receiving party may only seek to recover more than the approved or agreed budgeted amount if good reason is shown; whereas the paying party may seek to pay less than the approved or agreed budgeted amount without good reason being required to be shown. It is difficult to see the sense or fairness in that. Nor does this argument show much appreciation for the position of the actual parties to the litigation – not just the prospective paying party but also the prospective receiving party – who need at an early stage in the litigation to know, as best they can, where they stand: precisely one of the points validly made in Cook on Costs (cited above).

37. The appellant’s argument requires that the word “budget”, as used in the then version of the Rule, merely connotes an available fund. But given that “good reason” is, as conceded, required if the amount claimed on detailed assessment exceeds the approved budget that of itself surely carries with it the notion that the word “budget” comprehends a figure. Moreover, the words “depart from” are wide – or, to put it another way, open-ended. As Mr Latham pointed out, had the intention really been that good reason is required only in instances where the sum claimed exceeds the approved budget then the Rule could easily and explicitly have said so. Further, the Rules in any event provide elsewhere for costs capping cases: it seems odd indeed to include a further variant of costs capping by this route. Yet further, and as indicated above, the appellant’s argument bases itself almost entirely on the perceived advantages to the paying party with scant, if any, regard to the position of the receiving party: who no doubt will have placed a degree of reliance on the CMO. From the perspective of the receiving party it is all too easy to see that the paying party is indeed seeking to “depart from” the approved budget in endeavouring to pay less than the budgeted amount.

38. There is also nothing, in my view, in CPR 44.4 (3)(h) to tell against this interpretation. In fact, to read that sub-rule as requiring the approved or agreed budget to be considered only as a guide or factor and no more would involve a departure from the specific words of CPR 3.18. In this respect, it is in fact to be noted that the words of CPR 3.18 (a) positively mandate regard to the last approved or agreed budgeted cost for each phase of the proceedings. The two Rules are perfectly capable of being read together.

39. Consequently, since the meaning of the wording is clear and since it cannot be maintained that such a meaning gives rise to a senseless or purposeless result, effect should be given to the natural and ordinary meaning of the words used in CPR 3.18. In truth, that natural and ordinary meaning is wholly consistent with the perceived purposes behind, and importance attributed to, costs budgeting and CMOs.

40. Such a conclusion also accords with authority (albeit none binding on this court): not only in the form of the decisions in Merrix and Collins but also in the form of the remarks of Coulson J in McInnes v Gross [2017] EWHC 127 (QB). In that case, in the context of considering an interim payment on account of costs, Coulson J in terms said, at paragraph 25, that the significance of CPR 3.18 “cannot be understated” and meant that, where costs are assessed, the costs judge “will start with the figure in the approved costs budget.” He roundly rejected the argument of the paying party that detailed assessment “will start from scratch.” I agree with those observations of Coulson J.

43. I therefore consider that, overall, the costs judge was right in his conclusion on this particular point.

The Court of Appeal then declined to give guidance on what is a “good reason”, in the sense of listing even illustrative examples of what might be a good reason for a departure from the budget. This is to be welcomed. It now gives a blank canvass to costs lawyers upon which they can paint a masterpiece, to argue that any number of scenarios, constitute a “good reason” to depart from the budget.

Obvious ones, include the non-completion of a phase, the value of a case budgeted on certain assumptions, collapsing at trial, or something akin to an “unknown unknown” arising during the course of the litigation. However a practical constraint on these arguments, may well be the facility to have a budget varied, should unforeseen consequences arise. The facility to vary a budget, does generate a tension with the concept that the budget sets the parameters of costs incurred in a case from start to finish.

44. Further, Mr Hutton’s argument seemed to me to have two potential wider weaknesses. First, aspects of it seemed to be almost asserting that unless the Rules were interpreted as he argued a CMO approving a budget would operate in effect to replace the detailed assessment. That clearly is not right: as Carr J pointed out in Merrix. The effect, rather, is as to how the detailed assessment is conducted. Second, and linked to the first point, the whole argument, in my opinion, tends to downplay the significance of the “override” built into the wording of CPR 3.18 (b). Where there is a proposed departure from budget – be it upwards or downwards – the court on a detailed assessment is empowered to sanction such a departure if it is satisfied that there is good reason for doing so. That of course is a significant fetter on the court having an unrestricted discretion: it is deliberately designed to be so. Costs judges should therefore be expected not to adopt a lax or over-indulgent approach to the need to find “good reason”: if only because to do so would tend to subvert one of the principal purposes of costs budgeting and thence the overriding objective. Moreover, while the context and the wording of CPR 3.18 (b) is different from that of CPR 3.9 relating to relief from sanctions, the robustness and relative rigour of approach to be expected in that context (see Denton v TH White Limited [2014] EWCA Civ 906, [2014] 1 WLR 3926) can properly find at least some degree of reflection in the present context. Nevertheless, all that said, the existence of the “good reason” provision gives a valuable and important safeguard in order to prevent a real risk of injustice; and, as I see it, it goes a considerable way to meeting Mr Hutton’s doomladen predictions of detailed assessments becoming mere rubber stamps of CMOs and of injustice for paying parties if the approach is to be that adopted in this present case. As to what will constitute “good reason” in any given case I think it much better not to seek to proffer any further, necessarily generalised, guidance or examples. The matter can safely be left to the individual appraisal and evaluation of costs judges by reference to the circumstances of each individual case.

In short, detailed assessment has not been abolished: its utility remains, but what perhaps Harrison will do through the resolution of this first issue, is recast the arguments from ones of reasonableness of incurring a particular item of costs, to arguments as to “good reason” to depart from figures which were floated and set at the start of the case.

Summer’s lease

After several excellent weeks windsurfing in Croatia, I have returned to the usual mountain of “stuff to do”, coupled with the sense that summer is already waning and soon will slip into autumn.

In addition there have been a large number of interesting developments in the fields of costs and litigation funding over the last few months, some of which I will be exploring over the next couple of months.

My series of autumn lectures begins on 16th October, with a presentation at the Law Society on the vexed topic of costs budgeting as part of the Society’s Commercial Litigation Conference: full details of the event can be found here, together with the facility to book tickets:


A snip at £210.

One of the matters I shall be discussing in the lecture is the recent case of Harrison v University Hospitals and Coventry and Warwickshire NHS Trust [2017] EWCA Civ 792 which for the foreseeable future will set the course of costs budgeting.

My next few posts on this blog will therefore consider certain aspects of the judgment of the Court of Appeal and the ramifications for the practice of costs budgeting.

I am now also taking bookings for my autumn lecture tour to solicitors firms.

If you would like me to come to your firm to speak, I have two seminars which I deliver on “Retainers, clients and costs” and “A conversation on costs” and would be pleased to discuss matters further with you.


Inquest costs

An old chestnut that still leaps out of the flames from time to time, is the question of to what degree (if at all) can the cost of preparation for and attendance at an inquest be recoverable in subsequent civil proceedings for the negligently caused death of the deceased.

The question arises particularly frequently in claims against the NHS (for understandable reasons) but can arise as part of the costs in any claim under the Fatal Accidents Act 1976.

Some years ago when the principle of proportionality had been reformulated into its post 1st April 2013 wording, and the sheen had not worn off,  I persuaded a costs judge that no inquest costs at all were recoverable: as the existence of a pre-action protocol for clinical negligence, the provision of written evidence by the coroner and correspondence with the NHS made it both unreasonable and disproportionate for any inquest costs to be  recovered at all.

In truth when considering these arguments a wider principle is in play, namely to what extent can the costs of other proceedings be recovered under a costs order made in narrowly prescribed civil proceedings?

The point can arise when considering proceedings taking place extra-territorially, or subsequent to a public inquiry or given the wide scope of the word “proceedings” which varies according to the context in which it is used, post Plevin, when it might be capable of arguing that costs incurred against one Defendant, might be recoverable from another Defendant notwithstanding the absence of a Bullock or Sanderson order.

A costs Order or deemed costs Order  has its source in section 51 of the Senior Courts Act 1981. Section 51 provides as follows:

(1)       Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in—

(a) the civil division of the Court of Appeal;

(b) the High Court; and

(c) any county court,

shall be in the discretion of the court.

Accordingly when the court considers what are the costs of the proceedings it does so on the basis that it considers the costs “of and incidental” to the proceedings: see Roach and Matthews v The Home Office [2009] EWHC 312 (QB) at paragraph 21.

Per the decision in Roach the costs of separate proceedings (in that case an inquest) can be recoverable in the instant proceedings where there is a costs Order providing they meet the criteria set out in Re Gibson’s Settlement Trusts [1981] 2 WLR 1, of proving of use and service in the action; of being of relevance to an issue; or being attributable to the paying parties’ conduct. As Davis J noted in Roach:

The final reported case, on this aspect of the argument, to which I was referred was the decision of Clarke J (as he then was), sitting with assessors, in The Bowbelle [1997] 2 LL.Rep. 196: the report as placed before me containing neither headnote nor list of cases cited. That case involved a review of costs arising out of the tragic collision in the River Thames in 1989 between the Bowbelle and the Marchioness, in which 51 people died. One of the items claimed was the costs of attending the inquest. Clarke J at p.207 referred to re Gibson’s Settlement Trusts and to the three strands of reasoning (described as “three prongs”) there set out. Clarke J rejected an argument on behalf of the paying parties that no costs of the inquest were recoverable. Clarke J did hold that not all the costs of attending the full inquest could fairly be regarded as of and incidental to civil proceedings against the shipowners: because negligence had by then been conceded. Likewise, he said that no costs relating to the cause of the collision (which the claimants wished to be investigated with a view to possible criminal proceedings) could be regarded as costs of and incidental to the proceedings against the shipowners. Clarke J went on, however, to say this:-

“However, it does not follow that no costs of attending the inquest are recoverable. In the event, when the inquest was opened, the Director of Public Prosecutions delivered a notice of intention to prosecute the master of Bowbelle so that the coroner did not proceed with an inquiry into the causes of the collision. The inquest which took place at that time dealt with identification of the deceased, where they were found and the causes of death. The steering committee attended the inquest through Counsel, who was Mr Haddon-Cave. Master Hurst held that it was reasonable for the steering committee to take that step in order to help to establish what pre-death pain and suffering had been endured by those who lost their lives. A forensic pathologist was called in the case of each of the deceased and he was cross-examined by Mr Haddon-Cave on behalf of the steering committee. Master Hurst held that it was reasonable for the steering committee to co-ordinate the claimants, to instruct Counsel and to attend the inquest. I agree. That evidence was potentially relevant to the loss of life claims. It follows that, unless there are particular costs which are not fairly referable to the attendance at the inquest for that purpose, reasonable costs of attending the inquest are in my judgment recoverable. At present there is no basis for holding that Master Hurst’s approach to the figures was in any way wrong.”


The same approach, in effect, was, as I see it, taken in the Contractreal case and explains why Arden LJ stated that, if the costs of the proceedings in respect of the service charge were recoverable as costs of and incidental to the proceedings for recovery of the rent arrears, it would be a case of “the tail wagging the dog” (paragraph 36): the costs were not “subordinate” to the costs of the action (paragraph 41). I appreciate that in some passages Arden LJ possibly refers to the quantum of costs so claimed as indicative of whether or not such costs might or might not be “incidental”. But I do not think Arden LJ was seeking to set out any general rule to the effect that where costs of prior proceedings are very great compared to the sum of money claimed in or costs of subsequent proceedings to which they are said to be incidental, then such costs, or part of them, can never be recovered as “incidental” costs purely on quantum grounds alone. Moreover, it may be repeated that in that case one of counsel’s arguments was that costs in one set of proceedings could never be “incidental to” costs of other proceedings (relying in particular on the Court of Appeal’s decision in Aiden Shipping). If that proposition – which in essentials is that now of Mr Morgan – was correct, it would have been a short route to the Court of Appeal’s conclusion. But self-evidently, by its reasoning, the Court of Appeal did not adopt that proposition. Thus Contractreal was, as was Envoy Farmers, a decision by reference to its own facts.

Accordingly, I am not bound by authority to accept the proposition for which Mr Morgan argued; and I do not think the general principle for which he argued can be extracted from the cases. Since I can see no other convincing rationale for such a proposition, I can see no other basis for restricting the operation of the wide language of section 51 itself and the extent of the Court’s jurisdiction. Nor does this leave a paying party without protection in such a case. On the contrary, the paying party has the protection of the evaluative assessment powers conferred by the statute and subordinate rules on the Costs Judge.

In many cases involving clinical negligence each of the three disjunctive prongs can often be said to be satisfied. A claimant has to investigate a claim. The same exercise of obtaining and considering this evidence, would have been relevant and necessary as it would be  relevant to the issue of negligence on the part of the and ultimately the incurrence of the inquest costs could be said be due to the conduct of the defendant.

However, although some inquest costs are usually recoverable, that does not mean that the costs judge will allow the costs of Leading Counsel, junior and solicitor in attendance at an inquest under full sail, or substantial amounts for preparation time. Often awards can be quite modest, not least because the modern inquest has moved on considerably in procedural terms over the last 15 years: for a good example of the arguments in action see the decision of Master Rowley in the case of Lynch v Chief Constable of Warwickshire Police 14th November 2014 SCCO Master Rowley.

American Gods

You’d have hope. Rebellions are built on hope.

-Jynn Urso.

Like the rest of the country, over the last two weeks I have watched with fascination as yet another Conservative Prime Minister commits political suicide with an ill timed election staged mid term, when a sitting government can expect to be at its most unpopular. Although Mrs May may not quite be a “dead woman walking” in Mr Osborne’s charmless and unchivalrous phrase, her political days are plainly numbered.

At the time of writing, she is being slowly crucified by the Tory Press, anxious now to see her gone, and for the Clown Prince, Mr Johnson, to inherit her Iron Throne. Perhaps of most significance to the readers of this blog, the Lord Chancellor of 11 months standing has been demoted, and the Ministry of Justice must now endure with baited breath the appointment of yet another non-lawyer to deal with an overflowing intray of initiatives, including the modernization of the courts, a huge IT initiative, prison reform and last but not least the vexed question of costs reform.

In a sense, the recent political ructions were profoundly predictable. This country has endured nearly a decade of austerity and is now a much more unequal nation, patently not at ease with itself.

Mrs May with her dementia tax, her talk of grammar schools (for the few, not the many) and a free vote for fox hunting, massively misjudged the political mood.

Mr Corbyn in contrast offered to end university tuition fees: the electorate did not blanch.

He offered to nationalise our shambolic railways: the electorate did not flinch.

He offered to pay for social care in old age, by amongst other measures increasing corporation tax.

And the electorate grew thoughtful.

But I digress from the subject of costs.

It is to the latter, that this blog in its determinedly apolitical stance now turns.

It seems to me that of the various costs initiatives and reforms currently underway, those which are deemed necessary by the Civil Service and which do not require primary legislation are likely to survive, those which are seen as superfluous or which require primary legislation, will like the grammar school initiative and a return to fox hunting with hounds be quietly placed in the circular filing cabinet to await kinder days.

Accordingly, I would predict that the issue of fixed costs in clinical negligence cases is likely to proceed, just as reform of the discount rate is likely to proceed because the government or rather HM Treasury is intimately concerned with these reforms as a compensating body.  Moreover no primary legislation is likely to be required for clinical negligence fixed costs.

Further and equally, the Jackson review into fixed costs is likely to bear fruit next month: no primary legislation is likely to be required as the statutory powers are contained in the Senior Courts Act 1981 to make rules on costs.

But the whiplash reforms, I would tentatively suggest are in trouble. Any primary legislation in this field is likely to prove contentious, and I suspect that the embattled Tory minority government has more important and bigger fish to fry. So it may yet be that the reforms which would decimate the road traffic market, simply will not come to pass, in the foreseeable future.

The Small Claims Track limit may yet rise, as that does not require primary legislation: but without the cuts in levels of damages, contemplated by statutory prescription of awards for whiplash injuries, I predict solicitors will simply move to a contingency based arrangement taking 25% of damages in road traffic personal injury claims, in the Small Claims Track, and in a sense it will be business as normal.

If only.

QUOCS and NIHL claims

One of the points yet to be argued in relation to the QUOCS regime, is its application to a  scenario involving multiple Defendants. It is commonly  in NIHL claims that a Claimant will start proceedings against half a dozen Defendants and recover damages against some of them and either discontinue or lose against the remaining Defendants who will then become entitled to their costs.

In particular, the question that then arises is to what extent is it open to a winning Defendant to recover its costs out of the Claimant’s pot of damages obtained from the losing Defendants? The answer may be that the winning Defendant can’t and simply has to stand its own costs.

The starting point is that the purpose of the QUOCS scheme is to hold a losing Claimant  “harmless” from the enforcement of a costs Order made in a winning Defendant’s favour, save for certain limited exceptions, of which the only material one in a case uncomplicated by fundamental dishonesty is likely to be that of set off against a Claimant’s damages.

The QUOCS scheme has its conception in the former Legal Aid Acts and the Access to Justice Act 1999. A detailed exposition of its origins lies in the Review of Civil Litigation Costs: Final Report (December 2009): see chapters 9 and 19. The availability of set off of a Defendant’s costs against a Claimant’s damages where the Claimant had a Legal Aid certificate was canvassed in cases such Lockley.v.National Blood Transfusion Service [1992] 1 WLR 492.

In that case Scott LJ observed:

In my judgment, the following propositions can be stated.

(1) A direction for the set-off of costs against damages or costs to which a legally aided person has become or becomes entitled in the action may be permissible.

(2) The set-off is no different from and no more extensive than the set-off available to or against parties who are not legally aided.

(3) The broad criterion for the application of set-off is that the plaintiff’s claim and the defendant’s claim are so closely connected that it would be inequitable to allow the plaintiff’s claim without taking into account the defendant’s claim. As it has sometimes been put, the defendant’s claim must, in equity, impeach the plaintiff’s claim. *497

(4) Set-off of costs or damages to which one party is entitled against costs or damages to which another party is entitled depends upon the application of the equitable criterion I have endeavoured to express. It was treated by May J. in Currie & Co. v. The Law Society [1977] Q.B. 990 , 1000, as a “question for the court’s discretion.” It is possible to regard all questions regarding costs as being subject to the statutory discretion conferred on the court by section 51 of the Supreme Court Act 1981 . But I would not have thought that a set-off of damages against damages could properly be described as a discretionary matter, nor that a set-off of costs against damages could be so described.

(5) If and to the extent that a set-off of costs awarded against a legally aided party against costs or damages to which the legally aided party is entitled, cannot be justified as a set off (i) the liability of the legally aided party to pay the costs awarded against him will be subject to section 17(1) of the Act of 1988 and regulation 124(1) of the Regulations of 1989; and (ii) the section 16(6) charge will apply to the costs or damages to which the legally aided party is entitled.

Applying these principles to the respective orders made by the district registrar and by Mars-Jones J., I conclude that neither can be criticised. In general, in my opinion, interlocutory costs incurred in the progress of an action to trial and ordered to be paid by a plaintiff to a defendant would in equity impeach the right of the plaintiff to recover from the defendant costs of the action ordered to be paid by the defendant. A set-off of costs against costs, when all are incurred in the prosecution or defence of the same action, seems so natural and equitable as not to need any special justification. I would expect a party objecting to the set-off to give some special reason for the objection. It is, in my opinion, less obvious that a set-off of costs against damages would always be justified.

It will be noted that the essence of a set off is that that there are cross claims between the Claimant and the same Defendant, which predicate a netting off of liability: the notion that a Claimant’s entitlement in damages from one Defendant should be credited to another Defendant’s entitlement to costs is wholly alien to the concept of set off, which is based on a mutuality of liabilities.

It follows that the argument that a winning Defendant should be able to attach a pot of damages obtained from another party altogether, involves a counter intuitive argument that the statutory scheme of set off permitted by the QUOCS provisions in part 44 CPR has created a wholly new legal principle, which is not properly described as set off at all.

Various terms are used in the rules whose meaning must be carefully considered in this context. Rule 2.3 defines a claimant as a person who makes a claim. It defines claim for personal injuries as meaning proceedings in which there is a claim for damages in respect of personal injuries to the claimant or any other person or in respect of a person’s death.

The rule further defines a statement of case to mean a claim form, particulars of claim where these are not included in a claim form, defence, Part 20 claim or reply to a defence. A “claim” is not the claim form, nor even the proceedings before the court, but rather the individual demand by a particular person for damages which is included in proceedings.

Each claim will generate its own costs liability: eg in  proceedings where there are six defendants there will be six claims, contained in a single claim form. There could equally have been six claim forms, each containing one claim against a specific Defendant. The liability for costs as between the Claimant and each Defendant would be determined as separate exercises of the discretion and separate costs Orders would be made in respect of each claim.

The word “proceedings” has an elasticity of meaning. A recent restatement of authority and the correct approach to determining what parts of an involved piece of litigation are separate proceedings for the purposes of costs is to be found in the case of Plevin v Paragon Personal Finance Limited [2017] UKSC 23.

In that case Lord Sumption observed at paragraphs 18 to 20:

18. It is clear that for some purposes the trial and successive appeals do constitute distinct proceedings. In particular they are distinct proceedings for the purpose of awarding and assessing costs: see Masson, Templier & Co v De Fries [1910] 1 KB 535, 538-539 (Vaughan Williams LJ); Wright v Bennett [1948] 1 KB 601; Goldstein v Conley [2002] 1 WLR 281, at paras 79 (Clarke LJ), 107 (Sir Anthony Evans). The authorities were helpfully reviewed by Rix LJ in Hawksford Trustees Jersey Ltd v Stella Global UK Ltd (No 2) [2012] 1 WLR 3581. In that case, the Court of Appeal held that for the purpose of section 29 of the Access to Justice Act 1999, the costs incurred in respect of an ATE premium were recoverable only in the proceedings to which the policy related, ie as part of the costs of the trial if the policy related only to the trial, and not as part of the costs of the appeal. In Gabriel v BPE Solicitors [2015] AC 1663, para 16, this court applied the same principle when holding that a trustee in bankruptcy, by prosecuting an appeal to the Supreme Court, did not expose himself to liability for the costs of the distinct proceedings conducted by the bankrupt at trial or on appeal to the Court of Appeal.

19. However, “proceedings” is not a defined term in the legislation, nor is it a term of art under the general law. Its meaning must depend on its statutory context and on the underlying purpose of the provision in which it appears, so far as that can be discerned. The context in which the word appears in section 46(3) of LASPO is different and so, in my judgment, is the result.

20. The starting point is that as a matter of ordinary language one would say that the proceedings were brought in support of a claim, and were not over until the courts had disposed of that claim one way or the other at whatever level of the judicial hierarchy. The word is synonymous with an action. In the cases cited above, relating to the awarding or assessment of costs, the ordinary meaning is displaced because a distinct order for costs must be made in respect of the trial and each subsequent appeal, and a separate assessment made of the costs specifically relating to each stage. They therefore fall to be treated for those purposes as separate proceedings. The present issue, however, turns on a different point. The question posed by section 46(3) of LASPO is whether the fact of having had an ATE policy relating to the trial before the commencement date is enough to entitle the insured to continue to use the 1999 costs regime for subsequent stages of the proceedings under top-up amendments made after that date. The fact that costs are separately awarded and assessed in relation to each stage does not assist in answering that question.(emphasis added)

It follows that for the purposes of costs, the making of a costs Order divides the stages of litigation into separate proceedings: it defines the scope of what are the relevant proceedings.

Where a costs Order is made in favour of a Defendant and the costs liabilities in the other claims in the proceedings were determined by other Orders it can be seen that the relevant proceedings for application of the QUOCS rules, are the claim against the  Defendant which led to the costs Order in its favour which for the purposes of costs is to be treated as separate proceedings.

Section II of part 44 CPR applies the scheme of QUOCS. Rule 44.1

(1) This Section applies to proceedings which include a claim for damages

(a) for personal injuries;

(b) under the Fatal Accidents Act 19767; or

(c) which arises out of death or personal injury and survives for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 19348,

but does not apply to applications pursuant to section 33 of the Senior Courts Act 19819or section 52 of the County Courts Act 198410 (applications for pre-action disclosure), or where rule 44.17 applies.

(2) In this Section, ‘claimant’ means a person bringing a claim to which this Section applies or an estate on behalf of which such a claim is brought, and includes a person making a counterclaim or an additional claim.

Rule 44.14 CPR provides as follows:


(1) Subject to rules 44.15 and 44.16, orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.

(2) Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.

(3) An order for costs which is enforced only to the extent permitted by paragraph (1) shall not be treated as an unsatisfied or outstanding judgment for the purposes of any court record.

The effect of this rule is to permit the Defendant to set off a costs Order (once the costs have been agreed or assessed) made in its favour as against any order for damages and interest made in favour of the Claimant. See rule 44.12 CPR for a like provision which permits set off in respect of costs.

Rule 44.15 provides:

Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that –

(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;

(b) the proceedings are an abuse of the court’s process; or

(c) the conduct of –

(i) the claimant; or

(ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct, is likely to obstruct the just disposal of the proceedings.

Rule 44.16 provides:

 (1) Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.

(2) Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where –

(a) the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976 (other than a claim in respect of the gratuitous provision of care, earnings paid by an employer or medical expenses); or

(b) a claim is made for the benefit of the claimant other than a claim to which this Section applies.

(3) Where paragraph (2)(a) applies, the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made.

The detail of the QUOCS rules was refined when the Civil Procedure Rules Committee drafted the provisions, consequent to further work undertaken by the Civil Justice Council. In its Response To Ministry of Justice Commissioning Note entitled “Implementation Of Part 2 Of The Legal Aid, Sentencing And Punishment Of Offenders Act 2012: Civil Litigation Funding And Costs – Issues For Further Consideration By The Civil Justice Council” June 2012 it had this to say about QUOCS and discontinuance in paragraphs 90 to 94:

90. Again, we start with the position as stated in the MoJ’s Commissioning Note, which is that QOCS protection will be allowed in claims that are discontinued during proceedings and for appeal proceedings. This is straightforward and was generally agreed by the group when it first considered the points.

91. The policy as set out by the MoJ would amount to a substantial change to the provisions of Part 38.6(1) in respect of personal injury claims. At present, this rule provides that:

Unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant.

92. Following initial discussions a difference of views emerged which, in essence, amounted to those representing defendants and insurers arguing that they would face significant risks if QOCS protection were to be allowed as a matter of course in the manner set out in the CN.

93. Those arguments are probably beyond the narrow remit which we were given in the CN and, in any event, were not favoured by a majority. It is nevertheless worth examining the main points which were put forward in support.

94. First, that allowing QOCS protection in claims which are discontinued after proceedings would disadvantage defendants since they would have been put to irrecoverable cost as a result of the now-discontinued claim. That is indeed the case, but the outcome is consistent with the general policy aim of QOCS protecting claimants who are not, in broad terms, successful

The argument that a Claimant might put forward in a scenario where he has won and lost against various Defendants to try to preserve his damages from the losing Defendants is simple.

So far as costs issues are concerned, the claim against a winning Defendant is a separate and distinct set of proceedings. A  costs Order may have been  made in the  Defendant’s favour but the Claimant to the proceedings against the winning Defendant has the benefit of QUOCS, and because within those proceedings no Orders for damages and interest were made in favour of the Claimant against the winning Defendant, there is nothing which can be set off against the Claimant’s costs liability.

The structure of section II of part 44 CPR is sequential. The starting point is to determine what are the proceedings to which rule 44.13 applies. In this context, at the time the deemed costs Order was made in favour of theDefendant, the relevant proceedings for the purposes of costs were the proceedings against the  Defendant per the approach in Plevin.

Rule 44.14 then follows sequentially on from 44.13 CPR. It can be argued that the scope of the enforcement permitted by the rule must be limited to an order for damages or interest made in the same proceedings within which the deemed costs Order is made.

Such a construction is to be preferred to any alternative suggestion put forward by the  Defendant because of the following factors:

(i) The sequential placing of the rule just after 44.13, which defines the scope of QUOCS protection according to the particular proceedings in which there is a claim for personal injuries.

(ii)The express wording of rule 44.14(2) which provides that enforcement can only take place after “the proceedings” have concluded and the costs have been quantified

(iii)The wording of the further exceptions in rule 44.15 where enforcement is only permissible where “the proceedings” have been struck out

(iv) The wording of the further exceptions in rule 44.16 where enforcement is only permissible where “the claim” is tainted by fundamental dishonesty, or there is a mix of claims.

Moreover such a construction accords with the statutory purpose behind QUOCS that (i) absent clear, well defined and limited exceptions a winning Defendant will stand their own costs and (ii) a losing Claimant is able to litigate, being held harmless from costs Orders obtained by a winning Defendant.

Conversely it would be inconsistent to interpret rule 44.14 to allow enforcement where in any proceedings the Claimant recovers a fund of damages and interest from another Defendant that the Claimant is liable to make a payment to a Defendant in separate proceedings.

Such a construction would also avoid a number of absurd and inconsistent results, where for example a Claimant reaches a settlement with some Defendants pre the issue of proceedings, so no Order for damages or interest is ever made, or where the three Defendants are sued in a separate action to three other Defendants possibly some years apart.

It is hard to see why such a hypothetical Claimant should be better off than a Claimant who has chosen to join all the Defendants in one action and hence is a powerful pointer to the construction submitted above.

QUOCS remains one of the more opaque areas of the Civil Procedure Rules and even now, some 4 years on since the implementation of the scheme there are many aspects of the rules which require clarification.