Legal professional privilege and detailed assessment

An issue that arises in virtually every detailed assessment, is the extent to which a paying party can pore over the file, attendance notes, advices, and other documents of the receiving party’s lawyers which may need to be produced to the court to justify the fees claimed on assessment.

Prima facie most (though by no means all) of the documents in a solicitors file will attract legal professional privilege: the maintenance of that privilege can be very important in practical terms where proceedings are not yet concluded, or there may be further proceedings.

Even if the parties are unlikely to encounter each other again, as in most personal injury claims, the maintenance of privilege concerns a client’s rights, not least to confidentiality in his or her affairs.

Legal professional privilege is a fundamental common law right upon which the whole administration of justice rests. It is not a rule of evidence or procedure. Per R v Derby Magistrates Court ex parte B [1996] 1 AC 487 the court has no power to order disclosure, of privileged material: in that case, the court observed that there was no balance of the parties interests to strike: the balance had been struck by the formulation of the doctrine of legal privilege centuries earlier.

Even where the CPR have assumed a power to order disclosure of privileged material (the former CPR 48.7(3)) that rule has been struck down as ultra vires per the case of General Mediterranean Holdings v Patel [2000] 1 WLR 272.

There has been no attempt to replace that rule and the position of disclosure of documents in the context of assessment proceedings remains that established at common law and embodied in the Practice Direction to part 47 at paragraph 13.13.

The Practice Direction applies where a claim for costs is being pursued and the court is actually being asked to make a decision on the recovery of costs but even then, the court has no power to compel a particular document to be shown to the paying party: the receiving party is free to decline to do so and seek to rely on alternative evidence to prove a claim for costs:

13.13 The court may direct the receiving party to produce any document which in the opinion of the court is necessary to enable it to reach its decision. These documents will in the first instance be produced to the court, but the court may ask the receiving party to elect whether to disclose the particular document to the paying party in order to rely on the contents of the document, or whether to decline disclosure and instead rely on other evidence.

The procedure embodied in this document, attempts to balance both the receiving party’s right to protection of his or her privilege and the paying party’s right not to pay more than reasonable and proportionate costs: the assessment of which is heavily bound up with consideration of the documentary material which would justify the claims for costs.

This paragraph of the Practice Direction reflects what has been termed the “Pamplin” procedure, as formulated by Hobhouse J as he then was in the case of Pamplin v Express Newspapers [1985] 1 WLR 689 :see in particular page 696H and 697A.

Thus even  assuming that a court put the receiving party to his election to disclose the entire file of papers, the receiving party can accordingly decline to produce them. Such a decision would not be likely in practice: the Practice Direction is predicated on disclosure of “particular” documents on a document by document basis. The costs judge would have to formulate reasons for his decision and they would be subject to a right of appeal. If, in a truly exceptional case, a party was put to his or her election in respect of an entire file, he or she would still not be obliged to disclose it.  But alternative evidence is unlikely to be judged trustworthy. The likely consequence would be that the Bill of Costs would be assessed at nil.

However even documents disclosed during the process of an assessment do not lose their inherently privileged nature. Longstanding authority running from the case of Goldman.v.Hesper [1988] 1 WLR 1238  to the recent decision of the Court of Appeal in the case of Dechert LLP v Eurasian Natural Resources Corporation Ltd [2016] EWCA Civ 375 confirms that in the case of documents from a solicitors file, provided as part of the election process, the waiver of privilege is partial, not complete and limited to the particular proceedings only.

This principle has real significance in respect of further proceedings between the same parties, or rather where there are recurrent proceedings between a particular firm of solicitors and paying parties.

Sometimes an attempt will be made to use documents disclosed in other cases, or findings in judgments obtained in other cases to seek to argue that that material is probative and relevant in the unrelated proceedings. Such an approach is wrong as it ignores the limited waiver that exists in relation to documents produced during an assessment and in respect of other decisions on particular facts which raise no issue of law, is wrong in principle.

Decisions in individual cases between different parties or even the same parties are generally irrelevant where no issues of res judicata or issue estoppel arise: see the general statements of principle on the admissibility of findings of fact in other litigation in the case of Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321 particularly paragraphs 15 to 27.

Discontinuance and detailed assessment proceedings

From time to time, for a variety of reasons, it may become necessary to discontinue detailed assessment proceedings. This may be because they have misfired, or there are problems with a retainer, or a potential for embarrassment, or some other reason.

When they are discontinued, there is no obligation to give an explanation as to why they are being discontinued, a fact which may be of some comfort to the erstwhile receiving party and may vex the putative paying party.

The usual procedure for discontinuing proceedings under part 38 CPR is modified in certain respects.

The Practice Direction to part 47 CPR provides as follows at paragraph 9.4:

(1) The receiving party may discontinue the detailed assessment proceedings in accordance with Part 38 (Discontinuance).

(2) Where the receiving party discontinues the detailed assessment proceedings before a detailed assessment hearing has been requested, the paying party may apply to the appropriate office for an order about the costs of the detailed assessment proceedings.

(3) Where a detailed assessment hearing has been requested the receiving party may not discontinue unless the court gives permission.

(4) A bill of costs may be withdrawn by consent whether or not a detailed assessment hearing has been requested.                                 

Rule 38.2 provides as follows:

(1) A claimant may discontinue all or part of a claim at any time.

(2) However –

(a) a claimant must obtain the permission of the court if he wishes to discontinue all or part of a claim in relation to which –

(i) the court has granted an interim injunction(GL); or

(ii) any party has given an undertaking to the court;

(b) where the claimant has received an interim payment in relation to a claim (whether voluntarily or pursuant to an order under Part 25), he may discontinue that claim only if –

(i) the defendant who made the interim payment consents in writing; or

(ii) the court gives permission;

(c) where there is more than one claimant, a claimant may not discontinue unless –

(i) every other claimant consents in writing; or

(ii) the court gives permission.

(3) Where there is more than one defendant, the claimant may discontinue all or part of a claim against all or any of the defendants.

Rule 38.3 provides as follows:

(1) To discontinue a claim or part of a claim, a claimant must –

(a) file a notice of discontinuance; and

(b) serve a copy of it on every other party to the proceedings.

(2) The claimant must state in the notice of discontinuance which he files that he has served notice of discontinuance on every other party to the proceedings.

(3) Where the claimant needs the consent of some other party, a copy of the necessary consent must be attached to the notice of discontinuance.

(4) Where there is more than one defendant, the notice of discontinuance must specify against which defendants the claim is discontinued.

Rule 38.4 provides:

(1) Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside.

(2) The defendant may not make an application under this rule more than 28 days after the date when the notice of discontinuance was served on him.

Rule 38.7 provides:

A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if –

(a) he discontinued the claim after the defendant filed a defence; and

(b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.

It is noteworthy that the requirements of part 38 where permission is required, are primarily concerned with instances, where the claimant has received interim payments or an interim remedy, or given undertakings to the court, or might be contemplating a further set of proceedings.

This supports the conclusion that the requirement to obtain permission is to ensure that a claimant has to come to court to satisfy the court that such matters are “tidied up” and not left unaddressed when proceedings are concluded by way of discontinuance, or that a claimant has not obtained a collateral advantage by discontinuance or abused the process of the court by starting proceedings and discontinuing them by eg retaining interim payments.

The power to discontinue proceedings post dates the Judicature Acts of 1873-75 and replaced the common-law power of non-suiting a litigant. The root of modern authority lies in the case of Castanho.v.Brown & Root [1981] AC 557where the House of Lords per Lord Scarman at pages 571-572 considered when it might be appropriate to strike out a Notice of Discontinuance as an abuse of process (there being no requirement in the RSC as then formulated to seek the court’s permission) and the conclusion at page 577 that discontinuance would be permitted once the issues of costs, repayment of interim payments and future proceedings had been settled.

Similarly, in the case of Gilham.v.Browning and Another [1998] 1 WLR 682 a defendant was debarred from adducing evidence on his counterclaim, and sought to discontinue proceedings in order to circumvent the debarral, by fresh proceedings. The judge at first instance struck out the notice of discontinuance as an abuse of process. The defendant offered no evidence at the trial of the counterclaim and it was dismissed. The Court of Appeal upheld the judge’s reasoning (and the result). See in particular the discussion of the origins do discontinuance at pages 686 and 691 of May LJ’s judgment. The key to striking out the notice or by way of analogy, granting or refusing permission or applying terms, was the seeking of a collateral advantage.

In the recent case of High Commissioner for Pakistan in the UK.v.National Westminster Bank and others [2015] EWHC 55 (Ch)the High Court set aside Notice of Discontinuance, because the claimant was attempting to obtain a collateral advantage by doing so, the resumption of sovereign immunity. See paragraph 78 of the judgment. See further the discussion at paragraphs 79 to 83 in which the court discussed what terms would have been imposed in order to grant a discontinuance.

It should be noted that due to rule 38.7 a second set of proceedings cannot be started as of right against the same parties: in such a scenario it may well be necessary to lift the cloak of privilege when applying for permission, in order to explain to the court why it would be just to give permission.

QUOCS, ATE insurance and non party costs Orders

QUOCS was introduced as part of the LASPO 2012 reforms on 1st April 2013 to provide that subject to a limited number of exceptions, a costs Order made against a losing claimant bringing a personal injury claim could not be enforced against the claimant.

The principal exceptions provided for QUOCS protection not to apply in circumstances where a claim was struck out, where it was found to be fundamentally dishonest and when it was brought for the financial benefit, in whole or in part of another party. This was the quid pro quo, for the abolition of recoverable liabilities namely success fees and ATE insurance premiums.

The result has been that the insurance industry and other serial litigants if they successfully defend a claim at trial on its merits, will be left with an irrecoverable bill for their own costs.

One of the more predictable results of the LASPO 2012 reforms, is that the last 3 1/2 years have seen an upsurge in wasted costs applications against solicitors representing the losing claimants in personal injury claims, numerous allegations of fundamental dishonesty being levied at claimants sometimes with, sometimes without a proper foundation and the development of some arguments, that could be regarded as risible, including the argument that a claim struck out, is synonymous with it being dismissed at trial.

A far more fruitful argument has long seemed to me, to be the potential for a non party costs application to be made under section 51 of the Senior Courts Costs Act 1981 against an ATE insurer who has written a policy providing an indemnity for adverse costs for the benefit of a claimant in a personal injury claim.

That few such applications have been made is surprising: I suspect the reason is that it has simply been assumed that the QUOCS scheme precludes any such applications being made.

The starting point to note is that QUOCS protection applies to claimants, not to insurance companies  that have agreed to provide them with an insurance indemnity for their own unrecovered costs and any adverse costs, they may be liable to pay.

Rule 44.14 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.

It will be noted that the express scope of the prohibition on enforcement of costs Orders is limited to those costs Orders made against the claimant: there is nothing in the prohibition which would preclude an application being made directly against an ATE insurer.

Moreover, the rules plainly contemplate that a claimant who has had a costs Order made against them, is liable to pay the costs of that Order: it remains due and owing but is simply unenforceable, meaning that court proceedings to recover the costs will fail. This seems clear from rule 44.14(3), which provides that an unsatisfied costs Order will not taint the claimant’s credit record by reason of its status on the court record. There is no wider development of a “hold harmless” provision, nor do the Rules provide, as they might that no costs Order at all should be made against a claimant, merely that such an Order is unenforceable.

The criteria upon which a non part costs Order might be made would be drawn from the leading case on non party costs Orders against legal expense insurers, that of Murphy and Another v Young & Co.’s Brewery and Another [1997] 1 W.L.R. 1591 which provided the following reasoning for making such an Order as follows drawing together a number of principles:

(1) In Giles v. Thompson [1994] 1 A.C. 142 , 164 Lord Mustill suggested that the current test of maintenance should ask the question whether: “there is wanton and officious intermeddling with the disputes of others in where the meddler has no interest whatever, and where the assistance he renders to one or the other party is without justification or excuse.” Where such a test is satisfied, I would expect the court to be receptive to an application under section 51 that the meddler pay any costs attributable to his intermeddling.

(2) Where a non-party has supported an unsuccessful party on terms that place the non-party under a clear contractual obligation to indemnify the unsuccessful party against his liability to pay the costs of the successful party, it may well be appropriate to make an order under section 51 that the non-party pay those costs directly to the successful party. Such an order may, for instance, save time and costs in short-circuiting the Third Parties (Rights against Insurers) Act 1930 . Bourne v. Colodense Ltd. [1985] I.C.R. 291 is a case where the court might well have thought fit to make such an order had it appreciated that it had jurisdiction to do so.

(3) Where a trade union funds unsuccessful litigation on behalf of a member the following factors, in addition to the funding itself, are likely to be present and, where they are, to make it appropriate to order the union to pay the successful party’s costs should such an order be necessary: (a) an implied obligation owed by the union to its member to do so—see (2) above; (b) an interest on the part of the union in supporting and being seen to support the member’s claim; (c) the conduct of the litigation; (d) expectation based on convention that the union will bear the costs of the successful party should the member lose.

(4) Where an unsuccessful defendant’s costs are funded by insurers who have provided cover against liability, which is not subject to any relevant limit, the same considerations that I have set out under (3) are likely to apply.

The analysis above is untested, as far as I can glean in any decided case post April 2013.

There are of course excellent arguments which ATE insurers could deploy to argue that they should not be made subject to non party costs Orders, but given the length of this post already, I shall have to save those for another day.

The top 5 ways your solicitor rips you off

What do you think of the title to this post? Does it catch your attention? Admittedly it is not blessed with the same power and venom possessed by the phrase “Enemies of the People” but it both catches the attention and has power to shock.

However the title was not  devised by me. Rather it reflects the a marketing wheeze devised by a company that had spotted a perceived gap in the market for advice  in relation to solicitor-own client assessments under the Solicitors Act 1974. The aggressive tone of the advertisement led to a complaint to the Advertising Standards Authority, which was upheld: you can read the report here: https://www.lawgazette.co.uk/practice/-your-solicitor-rips-you-off–cmc-told-to-pull-provocative-ad/5055869.article

The accompanying video to the advertisement still lingers palely (and amusingly) in cyberspace on Youtube, with an earnest presenter providing an explanation of what wicked creatures solicitors are.

In truth few professions are more regulated than the legal profession, and rightly so given the quasi-monopoly it has over litigation and the need to ensure that the public interest is protected.

The history of regulation and in particular constraints upon what lawyers may charge their clients is long and goes back centuries before the enactment of the Solicitors Act 1974.

A fairly basic safeguard, is a statutory requirement that when a solicitor levies a bill, upon which they may take legal action if it is not paid, that bill must contain a sufficient narrative of what work has been done, and what the client is being charged for, so that it constitutes a “proper” bill. Unless and until such a bill is served, no action can be brought.

As noted in the case of Ralph Hume Garry v Gwillim [2002] EWCA Civ 2002 the origins of the requirement that a solicitors bill should have a narrative, can be traced back to Georgian times and the Act for the better Regulation of Attorneys and Solicitors, 1729, 2 Geo. II. c 23, section 23

As early as that time there had been a bar on the solicitor commencing action until the expiration of one month from the delivery of his bill and there were provisions, slightly different provisions it has to be emphasised , for the taxation of that bill. Even then the bill had to be properly delivered and “subscribed with the proper hand of such attorney or solicitor”. The content of the bill received a little more clarification than has since appeared in that it was prescribed that the bill should be:−

“Written in a common legible Hand and in the English Tongue (except Law Terms and Names of Writs) and in Words at length (except Times and Sums) ×”

That may explain the practice of having a narrative account of the work done.

That Act was succeeded by the Solicitors Act 1843 which provided in section 37 as follows:

“No solicitor shall commence or maintain any action or suit for the recovery of any fees, charges, or disbursements for any business done by such × solicitor, until the expiration of one month after such × solicitor × shall have delivered unto the party to be charged therewith × a bill of such fees, charges, and disbursements, and which bill shall either be subscribed with the proper hand of such × solicitor, (or, in the case of a partnership, by any of the partners.

….

Provided also, that it shall not in any case be necessary in the first instance for such solicitor  in proving a compliance with this Act, to prove the contents of the bill he may have delivered, sent, or left, but it shall be sufficient to prove that a bill of fees, charges, or disbursements, subscribed in the manner aforesaid, or enclosed in or accompanied by such letter as aforesaid, was delivered, sent, or left in the manner aforesaid; but nevertheless it shall be competent for the other party to show that the bill so delivered, sent, or left was not such a bill as constituted a bona fide compliance with this Act “

Section 37 gave rise to some titanic battles in the Victorian courts about the taxation of solicitors bills. Keene v Ward (1849) 13 Q.B. 513. That was an action by the solicitors under a bill which contained charges in respect of nine actions in the Court of Exchequer and two in the Common Pleas. It also contained items in respect of two other actions as to one of which the parties were named and the bill was itemised to state, for example, “Instructions to sue 3s. 4d., writ of summons 12s. 6d”. The final charges in the bill did not identify at whose suit the defendant was the client and contained the fascinating description:−

“Attending you on your informing an action had been brought against you, and as to possibility of throwing it over the Long Vacation; and you were to bring me the writ and notice of declaration × 6s.8d.

The defendant objected to the bill submitting it did not satisfy the requisites of section 37. The argument was that because the bill did not state the court to which the business related, no−one could advise as to the taxation of those parts of the bill and if the bill could not be referred for taxation, it was insufficient. Patteson J. delivering the judgment of the court held:−

“In requiring the delivery of an attorney’s bill, the legislature intended that the client should have sufficient materials for obtaining advice as to taxation: and we think that we fulfil that intention by holding the present bill sufficient within that principle: whereas, if we required in respect of every item a precise exactness of form, we should go beyond the words and meaning of the statute, and should give facilities to dishonest clients to defeat just claims upon a pretence of a defect of form in respect of which they had no real interest.

The next case of interest was Cook v Gillard (1852) 1 E. & B. 26. Here the solicitor Mr Cook delivered a bill to his client divided into four parts. The first part was headed “Yourself and Ransom”. It consisted of a charge for attending the defendant and consulting as to slanderous reports; and then, under a fresh head, “Hilary Term 1846”, there were charges for “Letter before action”, “Instructions to sue”, “Writ of summons”, and “Attending settling”. The amount of the first part of the bill was £2. 19s. 8d. Except insofar as might be inferred from the items quoted there was nothing to show whether the suit of Gillard v Ransom had been pending in any, or which, of the superior courts. The second part of the bill related to conducting the defence of a case at the Middlesex Quarter Sessions and the third part for conducting a prosecution there. The fourth part of the bill was headed “Yourself and Mrs Heydeman”. It contained charges for taking the opinion of counsel on the construction of an agreement, various charges for collecting evidence and making enquiries at Hatton Garden, Tottenham Court Road, and other places well known to be in Middlesex, but which were not stated on the face of the bill to be there; for “Instructions to sue in an action on the case”; for “Writ” and “Service”; for attending in court when on motion by counsel “A rule was made to refer all matters in dispute”; and for attending the reference. The amount of this head of the bill was £122. 8s. 10d. Except insofar as might be inferred from the items quoted there was nothing to show whether the cause of Gillard v Heydeman had been pending in any, or which, of the superior courts. It was contended for the defendant that the first and last parts of the bill were insufficient, as they did not show in what courts the business there charged for was transacted; and therefore that the bill, being one entire bill, was not sufficient as to any part. For the plaintiff it was contended that the bill was sufficient for the whole; or, if not, that it was divisible and good pro tanto.

Lord Campbell C.J. delivered the judgment of the court. He referred to Ivimey v Marks (16 & W.) 843 in which the rule was laid down that a charge for an item in an action, without specifying in what court the action is brought, rendered the bill bad, the reason being that the client ought to be enabled by the bill to obtain advice as to taxation without the need of further question. The Lord Chief Justice pointed out section 37 of the 1843 Act and said:−

“No requisites for the bill are particularised: there is no requirement that the court should be specified: and the section further declares that the plaintiff is not bound in the first instance, in proving a compliance with the Act, to prove the contents of the bill delivered; but it is presumed sufficient unless the defendant proves that it is not such a bill as constitutes “a bona fide compliance with this Act.” The defendant here does not prove that any further information was practically wanted for taxation, or suggest that the name of the court in which the two writs of summons were issued would have been of any use to him: nor does he contend that the Act has not in this case been bona fide complied with, unless the arbitrary rule be deduced from the cases above mentioned, that the name of the court as to every item is indispensable, can be maintained. Now this rule, as applied to the existing statute, appears to have originated in a mistake: it was first introduced by judges applying the provisions of stat. 2 G. 2, c 23, s.23; and then there was good reason for it; for the jurisdiction to tax under that statute is given to the court in which the greater part of the business was done; and it was therefore indispensable for the parties and for the taxing officer to be able to assign each item to its appropriate court, before the taxation could be entered upon: moreover at that time the scale of charges in the different courts was different; so that the name of the court was also wanted in order to estimate the amount of charges. But, under the existing statute, if there is any item in any court of law, jurisdiction is given to all the superior courts indifferently; so that in respect of jurisdiction the name of the court is entirely immaterial: and so likewise it is for estimating the amount due, as the scale of charges in all the superior courts is now uniform. The judges, who instituted the rule in relation to the existing statute, adopted it from cases under the former statute, without adverting to the important changes in the law which the legislature had made; and thereby, as we think, contravened the intention of the legislature. If this reasoning is correct, it follows that the rule, which so originated, has been maintained without any useful purpose.”

He analysed a number of cases including Keene v Ward and then said:−

“This has been followed by a very salutary judgment in Cozens v Graham (16 Jurist, 952), where a bill was held valid although the court in which the business was done was not mentioned or described, it being clear that the defendant, knowing the court, did not want the information and only made the objection to evade payment of a debt.

Lord Campbell C.J. held:−

“I think the plaintiff has proved that he delivered such a bill as the statute requires. The statute, it is to be observed, requires the delivery of a bill of fees, charges and disbursements, but does not specify further what its contents shall be. I agree, however, that the bill must disclose on the face of it sufficient information as to the nature of the charges. I adopt the rule as to this, laid down in Keene v Ward  and in Cook v Gillard.The view taken by my brother Patteson in Keene v Ward seems very sensible.

He went on to say:−

“Complaints have sometimes been made that solicitors are not at liberty to recover the fair remuneration for their services as freely as any other person. It may be necessary to subject them to some regulation; but they have just ground for complaint if those regulations are vexatious, preventing the fair recovery of a just amount. I do not think that the legislature intended to throw on the solicitors the burthen of preparing a bill such that another solicitor on looking at it should, without any further statement, see on the face of the bill all the information requisite to enable him to say the charges were reasonable.

The principles to be derived from these cases were summarised by Ward LJ in his judgment in the Ralph Hume Garry case as follows:

Against that background the principles to be deduced from those cases appear to me to be these:−

i) the legislative intention was that the client should have sufficient material on the face of the bill as to the nature of the charges to enable him to obtain advice as to taxation. The need for advice was to be able to judge the reasonableness of the charges and the risks of having to pay the costs of taxation if less than one−sixth of the amount was taxed off.

ii) that rule was, however, subject to these caveats:−

a) precise exactness of form was not required and the rule was not that another solicitor should be able on looking at the bill, and without any further explanation from the client , see on the face of the bill all information requisite to enable him to say if the charges were reasonable;

b) thus the client must show that further information which he really and practically wanted in order to decide whether to insist on taxation had been withheld and that he was not already in possession of all the information that he could reasonably want for consulting on taxation.

iii) the test, it seems to me, is thus, not whether the bill on its face is objectively sufficient but whether the information in the bill supplemented by what is subjectively known to the client enables the client with advice to take an informed decision whether or not to exercise the only right then open to him, viz., to seek taxation reasonably free from the risk of having to pay the costs of that taxation.

iv) a balance has to be struck between the need, on the one hand, to protect the client and for the bill, together with what he knows, to give him sufficient information to judge whether he has been overcharged and, on the other hand, to protect the solicitor against late ambush being laid on a technical point by a client who seeks only to evade paying his debt.

The Victorian authorities formed a backdrop, to the very issue the Court of Appeal had to decided in the Ralph Hume Garry case: namely the sufficiency of a narrative for the purposes of section 69 of the Solicitors Act 1974 which provided:

(1) Subject to the provisions of this Act, no action shall be brought to recover any costs due to a solicitor before the expiration of one month from the date on which a bill of those costs is delivered in accordance with the requirements mentioned in subsection (2);

(2) The requirements referred to in subsection (1) are that the bill

(a) must be signed by the solicitor, or if the costs are due to a firm, by one of the partners of that firm, either in his own name or in the name of the firm, or be enclosed in, or accompanied by, a letter which is so signed and refers to the bill; and

(b) must be delivered to the party to be charged with the bill, either personally or by being sent to him by post to, or left for him at, his place of business, dwelling house, or last known place of abode;

and, where a bill is proved to have been delivered in compliance with those requirements, it shall not be necessary in the first instance for the solicitor to prove the contents of the bill and it shall be presumed, until the contrary is shown, to be a bill bona fide complying with this Act.

The Court of Appeal formulated the test as follows:

70.This review of the legislation and the case law leads me to conclude that the burden on the client under section 69(2) to establish that a bill for a gross sum in contentious business will not be a bill “bona fide complying with the Act” is satisfied if the client shows:−

i) that there is no sufficient narrative in the bill to identify what it is he is being charged for, and

ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be taxed.

The sufficiency of the narrative and the sufficiency of his knowledge will vary from case to case, and the more he knows, the less the bill may need to spell it out for him. The interests of justice require that the balance be struck between protection of the client’s right to seek taxation and of the solicitor’s right to recover not being defeated by opportunistic resort to technicality.

71. On the facts of this case each bill was obviously and latterly expressly for professional charges. Even though it may have been perfectly obvious, the bills did identify the matter. Crucially for a determination of what was being charged for, the bill identified the period over which the work was being done. These bills may not have said much, but they did say something.

72. Whether the client’s knowledge was sufficient to supplement the lack of full narrative is a matter of fact. The judge held upon a review of the evidence that it was inappropriate to strike out the claim since Mr Ralph had shown a real prospect of establishing at the trial that Mr Gwillim knew all he needed to know about the work and the basis of charging reasonably to be able to exercise his right to seek taxation. I could not possibly interfere with those conclusions which, if the law is as I have stated it to be, were inevitable in the particular circumstances of this case. I would, therefore, dismiss the appeal.

73. I add this postscript for the profession’s consideration so that an unseemly dispute of this kind does not happen again. Surely in 2002 every second of time spent, certainly on contentious business, is recorded on the Account Department’s computer with a description of the fee−earner, the rate of charging and some description of the work done. A copy of the print−out, adjusted as may be necessary to remove items recorded for administrative purposes but not chargeable to the client, could so easily be rendered and all the problems that have arisen here would be avoided. In these days where there seems to be a need for transparency in all things, is a print−out not the least a client is entitled to expect?

A full copy of the judgment can be found here: Ralph Hume Garry v Gwillim [2002] EWCA Civ 1500.

A bridge too far

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

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

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

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

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

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

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

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

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

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

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

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

(a)the arbitrators’ fees and expenses,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Seminars and lectures

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

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

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

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

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

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

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

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

ATE and professional negligence

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

CFAs and the Cayman Islands

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

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

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

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

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

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

A Question Time on Costs 10th November 2016

10th November 2016 5.00pm to 6.30pm

Ropewalk Chambers, Nottingham

Drinks and canapés to follow

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

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

Late acceptance of claimants’ part 36 offers II

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

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

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

45.29B

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

(a) the fixed costs in rule 45.29C;

(b) disbursements in accordance with rule 45.29I.

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

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

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

(a) summarily assess the costs; or

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

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

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

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

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

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

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

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

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

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

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

(2) Where—

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

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

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

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

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

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

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

(4) Where—

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

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

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

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

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

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

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

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

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

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

Rule 36.17 provides:

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

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

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

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

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

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

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

(b) interest on those costs.

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

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

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

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

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

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

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

Amount awarded by the court

Prescribed percentage

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

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

(5) In considering whether it would be unjust to make the orders referred to in paragraphs (3) and (4), the court must take into account all the circumstances of the case including—

(a) the terms of any Part 36 offer;

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

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

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

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

The rules noted above cross refer to two further rules, which apply in the context of a case which started but did not continue under the RTA Protocol, in order to ensure that part 36 and the fixed costs rules in part 45 read seamlessly. Rule 36.20 specially deals with the costs consequences of acceptance of a part 36 offer:

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

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

(3) Where—

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(9) A reference to—

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

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

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

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

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

(a) the court must have regard to; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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