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:

44.14

(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.

Filling the void

“And so, for these reasons the claim is dismissed.” is not a phrase that either a claimant or a solicitor acting for a claimant under the terms of a CFA will relish hearing at the end of a trial. In such circumstances, the next immediate questions are how any adverse costs Orders and own-client disbursements can be paid. Personal injury claimants will have the benefit of QUOCS, but even so may face a hefty bill for their own disbursements.

It is at this moment that any policy of BTE or ATE insurance effected by the claimant, the latter usually through the agency of his solicitors will come to the fore. But what if the BTE or ATE insurer refuses to pay out, relying on alleged breaches of policy conditions or warranties, or, even more dramatically, fraud by the losing claimant?

What remedies does a client have then? In context it may not just be the client who seeks a remedy. It is the case that many solicitors provide credit to their clients in the first instance by funding their clients’ disbursements, often by way of overdraft. An ATE insurance policy acts as effective re-insurance for the solicitors outlay, obtained at the behest of the solicitors’ bankers.

What follows is an analysis of the key issues that arise at this juncture and what route of challenge might be pursued against a defaulting insurer.

The starting point is that the insured will wish to raise a claim for an indemnity or an action for damages amounting to an indemnity against the insurer, which will be met with a reason or litany of reasons why the insurer is not obliged to pay out on the claim on the policy.

In summary the usual reasons for refusal of indemnity, include misrepresentation at the time of the inception of the policy, non compliance with terms and conditions, subsequent developments in the litigation which the insurer was not informed of, any finding of fraud against the insured made by a trial judge and possibly that the liability incurred is outside the scope of the policy.

Before consideration can be given to whether there is scope to challenge a refusal of indemnity, the first issue that falls to be addressed is whether the solicitor can represent the client in a fresh dispute with the ATE insurer. In many cases there will be a conflict of interests.

A client will usually have obtained their ATE insurance, through the agency of their solicitor, carrying out insurance mediation activities. The policy may be one which gives the solicitor, delegated authority to run the litigation without recourse to the ATE insurer, but often it will not and there will be terms requiring the insurer to give consent to the issue of proceedings, or be notified of material developments in the litigation, or the making of any part 36 offer.

The performance of these obligations will be entrusted to the solicitor: if the insurer’s allegation is that these obligations have been honoured in the breach and not the observance, so that it is contended to be the solicitor’s fault that the insurer has repudiated liability, a clear conflict of interest will arise. The client may well wish to sue the insurer on the contract of insurance, and the solicitor for professional negligence in the alternative.

Another issue that can arise concerns who can bring an action. If the principal sum at stake represents the disbursements which have been paid by the solicitor, and the client has little interest in pursuing the BTE or ATE insurer, perhaps because his liability for adverse costs is covered by QUOCS, the party with the greatest interest in pursuing an action may be the solicitor who is substantially out of pocket by his payment of disbursements.

In this scenario, the solicitor may be able to sue the insurer directly by taking an assignment of the client’s rights under the policy: subject to there being no clause against assignment or arguments of public policy arising from the case of Trendtex Trading Corp v Credit Suisse[1982] AC 679. Sometimes the facts can give rise to arguments that the solicitor may claim for a direct right to an indemnity as happened in Greene Wood McLean LLP (In administration) v Templeton Insurance Limited [2010] EWHC 2679 (Comm) though it should be noted that this arose, when solicitors had discharged clients adverse costs liabilities and could rely both on the principle in Brook’s Wharf & Bull Wharf Ltd v Goodman Bros [1937] 1 K.B. 534 and the Civil Liability (Contribution) Act 1978.

Assertions by insurers that they are entitled to void the policy and their reasons for doing so must be carefully scrutinised. When misrepresentation is alleged, the starting point is that it is trite law that a contract of insurance is a contract of utmost good faith and there is a duty on the insured to provide full disclosure of the facts which are material to the insurer’s risk.

Many ATE contracts will be with insured’s who aptly to be described as consumers, and duty of disclosure is found in sections 2 and 3 of the Consumer Insurance (Disclosure and Representations) Act 2012. If the insured is a business then section 3 of the Insurance Act 2015 imposes a similar obligation upon a business, described as a duty of fair presentation.

If a reason for voiding the policy is given as misrepresentation, it follows that the relevant duty must be identified, and the facts said to constitute a misrepresentation considered, to see whether the insurer can rely on the statutory provisions. A distinction will exist between innocent and fraudulent misrepresentation. In an innocent misrepresentation, the insurer must establish it was material to their decision to insure. No such requirement of materiality applies to a fraudulent misrepresentation. A further requirement is that either type of misrepresentation induced the insurer to make the contract. The key to this task will be to read carefully the written insurance proposal and any accompanying documents sent to the insurer, upon which document they will have based their decision to write a policy and see whether it is full and complete.

Insurance contracts have a different terminology to other contracts and will contain terms that are either warranties or conditions, whereby warranties are the more important of the terms and conditions often, of a lesser significance. Many insurance policies will label the most important terms as warranties. Of the two categories, warranties are the more significant, because of the consequences of breach. A breach of a warranty will render the contract, voidable if it is breached with no liability to pay on the policy at all when voided. There is an obligation is on the insured to comply exactly with the provisions of the warranty.

Conversely, a breach of condition is different in its effect. If a breach of a condition does not result in the loss being sustained, which the policy insures against, then it will not be a breach giving rise to a right of avoidance. Moreover, a breach of condition will constitute a limiting event on an insurer’s liability, but not entitle them to avoid the policy entirely.

Even if an insured is in breach, this is not necessarily the end of the matter: if the insurer can be said to have waived or affirmed the breach, by having knowledge of it, but still continuing with cover and possibly accepting further tranches of premium the insurer will be estopped from being able to rely on the breach. However the courts tend to emphasise both the requirements of actual knowledge of breach on the part of the insurer and clear communication of waiver consequent to that knowledge.

Perhaps the clearest example of a situation where an insurer might wish to avoid the insurance policy, is where the insured has lost at trial due to findings of fraud or dishonesty being made against them. An interesting question arises as to whether these findings between the client and the third party, can be relied upon in themselves, as between the client and the insurer.

In other contexts, where there is a dispute between the third party and the insured and their insurer raises indemnity issues, it is common for the insurer to be joined to the action through a part 20 claim and findings will be made on both the main claim and part 20 claim in one trial.

In the context of a dispute with a BTE or ATE insurer that option will not be realistic as in virtually every case, the dispute only arises after an adverse judgment.

In what is perhaps the leading case on this point, Persimmon Homes Ltd v Great Lakes Reinsurance (UK) Plc [2010] EWHC 1705 Comm Mr Justice Steel had no difficulty in allowing the trial judge’s findings in the original action as evidence, despite the seeming inconsistency with decisions such as Secretary of State for Trade and Industry v Bairstow [2004] Ch 1 which re-emphasised the rule in Hollington v Hewthorn [1943] KB 857 that findings in one civil case are inadmissible in a later civil case.

The cases can perhaps be reconciled on the basis that the insurer and insured are privies and the doctrine of estoppel per rem judicatem precludes the re-opening of the point. In any event, the point may have little practical force if the evidence at the first trial is available, and supportive of a finding of fraud.

Not all circumstances where a client comes under an adverse costs liability will be insured events; it is common for policies to exclude cover for costs awarded when a claim has been struck out, or there has been other default which caused the incurrence of adverse costs. Some policies are barely worthy of the name, because they also exclude a liability to pay adverse costs, where for example a part 36 offer has not been beaten, until any damages or costs the insured may have been ordered to pay have been exhausted in discharging the adverse costs order.

Most policies of ATE insurance will have an arbitration clause: this can be quite a valuable route of redress as an alternative to litigation, not least since the decision in Essar Oilfields Services Limited v Norscot Rig Management PVT Limited [2016] EWHC 2361 (Comm) indicates, that in principle, the cost of litigation funding (and possibly other additional liabilities) might be recoverable. And the strait jacket of costs budgeting and costs management imposed by the courts under part 3 CPR, simply won’t arise.  A further alternative is a complaint to the Financial Ombudsman: http://www.financial-ombudsman.org.uk. As ever, with these forms of alternative redress the eas of making a complaint to the Ombudsman must be weighed against the nature of the dispute and the adequacy of the remedy the Ombudsman might provide.

A version of this article first appeared in the June edition of Litigation Funding magazine and can be found here: Filling the Void.

The quantum foam

Part 45 CPR is an interesting section of the rules, which could be viewed as a kind of parallel universe to the one most lawyers inhabit: analogous to the quantum realm, where universal constants simply do not apply.

In particular the scale of costs prescribed to apply to, for example road traffic accident claims does not depend on the time spent by a solicitor on a case but rather is fixed by reference to other criteria. This can have surprising consequences when considering what costs orders may be open to a judge dealing with a claim governed by fixed costs.

An area of practice which has a particularly high volume of litigation is that of road traffic accident claims involving a claim for credit hire. Many credit hire claims start off under the Portal as part of a larger claim frequently including claims for damages for personal injuries, vehicle repairs or value, loss of earnings and other heads of claim. When a case falls out of the Portal and assuming it is allocated to the Fast Track, it will be subject to the fixed costs provisions of part 45 CPR.

Not infrequently a case will proceed to trial and although the claimant will recover some damages, a credit hire claim can fail in its entirety: perhaps on the issue of need for a replacement vehicle, problems with the enforceability of a credit hire agreement or some other reason.

Often the credit hire claim will be the single largest head of claim, and have identifiable items of costs related to it: disclosure of bank statements and other financial documentation, rates evidence, part 18 requests and reply and so on.

Even if the claimant is successful overall, the defendant may argue that either the costs of the claimant should be reduced, due to the failure of the credit hire element of the claim, or even to recover its own costs of the issue of credit hire. To what extent is this possible, if the case is a Fast Track case and fixed costs are prescribed by part 45 CPR? The answer may be: it isn’t.

Part 45 CPR contains no support for the notion that the court has a general power to make an issue based costs Order by reference to particular heads of loss: in fact it tightly prescribes the costs that can be awarded to either party, limiting a defendant’s potential to recover costs to the circumstances where the defendant has made a part 36 offer or pursued a counterclaim.

This is not to say that success or failure by the claimant on particular issues is not taken account of by the rules: it plainly is, but not in the context of making an order, but rather by the quantification of the costs recoverable by the claimant.

This is a logical approach, given the very modest sums recoverable, the context of QUOCS and the essentially arbitrary nature of the “bright lines” drawn in table 6B on the phases of the claim.

Pursuant to rule 45.29B when a costs order is made in the claimant’s favour, the costs are calculated as being the fixed costs recoverable under rule 45.29C and the reasonable disbursements permitted under rule 45.29I.

Table 6B indicates that where the claim is disposed of at trial, the relevant fixed costs are £2655 plus 20% of the damages awarded plus the trial advocacy fee with the addition of VAT on these amounts.

Rule 45.29I provides a further list of the categories of reasonable disbursements which will be recoverable, with VAT if appropriate.

It will be noted that because the claimant’s costs are calculated by reference to the judgment sum awarded, because the claimant will have been awarded no sums in respect of damages for credit hire, the claimant’s costs have already notionally been reduced by 20% of the damages that might have been awarded: in effect, the claimant has been deprived by the rules, of the costs of that issue.

For the defendant to be awarded a further sum of costs in respect of that issue, would accordingly constitute “double recovery”. Moreover the rules are prescriptive of the amount of costs that a defendant can be awarded: see in particular rule 45.29F.

The limitations are particularly striking: see 45.29F(2) any award of the defendant’s costs cannot exceed the amount that would have been awarded to the claimant at the same stage of the proceedings. The court’s jurisdiction to award any costs to the defendant at all, is prescribed, and predicated upon the notion that the defendant is successful at an identifiable stage of the proceedings.

Thus there is no scope for the defendant to be awarded “assessed costs” of a particular issue as the claimant will have succeeded at each stage of the proceedings, pre-issue, pre-trial and at trial.

In a scenario where there are substantial awards of damages for the claimant for eg: personal injuries and no effective part 36 offer by the defendant, there can be no doubt that the claimant was the winner at each stage of the proceedings.  The claimant will have had to go to trial to recover those damages and incurred the advocacy fee to do so.

See also 45.29G: even had the defendant brought a counterclaim, which succeeded, that would not have disentitled the claimant to his costs of the claim calculated in accordance with rules 45.29C and 45.29I and only nominal costs would have been attributed to the costs of the counterclaim, reflective of the Medway Oil principle.

In summary, as part of the “swings and roundabouts” of part 45 CPR, it can be argued that the court has no power to order the claimant to pay the costs of a failed claim for credit hire itself part of a larger claim: the rules in 45 CPR do not provide for it and the circumstances where the defendant might recover costs (success at an identifiable stage, a part 36 offer, or a counterclaim) do not arise in this case.

The above analysis is underpinned by the general principles which apply to awards of costs in personal injury actions, where a claimant’s claim is reduced at trial, or he fails on certain allegations, or certain heads of claim. Even if the court took the view that it had a wider discretion than is submitted to be the case, it would, not aid the defendant as binding authority indicates that the discretion should not in this context, be exercised in favour of the defendant.

In the case of Fox.v Foundation Piling [2011] EWCA Civ 790 Jackson LJ summarised the position as follows:

From this review of authority I draw the following conclusions. First, where one party makes a Part 36 offer and then achieves a more advantageous result than that proposed in his offer, the provisions of rule 36.14 modify the court’s general discretion in respect of costs. This is important because parties who choose to use the Part 36 mechanism in their settlement negotiations need to have a clear understanding of the legal effects of making, accepting and rejecting offers under Part 36.

Secondly, parties are quite entitled to make Calderbank offers outside the framework of Part 36. Where a party makes such an offer and then achieves a more advantageous result, the court’s discretion is wider. Nevertheless it may well be appropriate to order the party which has optimistically rejected the Calderbank offer to pay all costs since the date when that offer expired. This was what the court ordered in Stokes.

A not uncommon scenario is that both parties turn out to have been over-optimistic in their Part 36 offers. The claimant recovers more than the defendant has previously offered to pay, but less than the claimant has previously offered to accept. In such a case the claimant should normally be regarded as “the successful party” within rule 44.3 (2). The claimant has been forced to bring proceedings in order to recover the sum awarded. He has done so and his claim has been vindicated to that extent.

In that situation the starting point is that the successful party should recover its costs from the other side: see rule 44.3 (2) (a). The next stage is to consider whether any adjustment should be made to reflect issues on which the successful party has lost or other circumstances. An adjustment may be required to reflect the costs referable to a discrete issue which the successful party has lost. An adjustment may also be required to compensate the unsuccessful party for costs which it was caused to incur by reason of unreasonable conduct on the part of the successful party.

In a personal injury action the fact that the claimant has won on some issues and lost on other issues along the way is not normally a reason for depriving the claimant of part of his costs: see Goodwin v Bennett UK Limited [2008] EWCA Civ 1658. For example, the claimant may succeed on some of the pleaded particulars of negligence, but not on others. Indeed the fact that the claimant has deliberately exaggerated his claim may in certain instances not be a good reason for depriving him of part of his costs: see Morgan v UPS. A defendant who has obtained video surveillance evidence is perfectly well able to protect his position on costs by making a modest offer under Part 36.

Nevertheless in other cases (as stated above) the fact that the successful party has failed on certain issues may constitute a good reason for modifying the costs order in his favour. This is commonly achieved by awarding the successful party a specified proportion of its costs. In Widlake the facts were so extreme that the successful party was ordered to bear all of its own costs.(emphasis added)

There are of course, excellent arguments which could be mounted for a defendant but given the length of this post, I shall have to save those for another day.

And the weak suffer what they must

Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must.

-Thucydides

Long term readers of this blog, will know that I maintain a rigid policy of political neutrality, reserving the right to be even handedly offensive about the idiocies of both Conservative and Labour party policy on matters pertaining to access to justice and costs and litigation funding.

In recent years there has been much to be offensive about with the collapse of the absurdly expensive Access to Justice Act 1999 scheme with its recoverable success fees and ATE premiums, and the cheese paring myopic approach of the Legal Aid Sentencing and Punishment of Offenders Act 2012 which has deprived large swathes of the population from access to legal advice and an effective remedy for their wrongs.

One particular bugbear remains that after 1st April 2013 meritorious claims under the Equality Act 2010 for disability discrimination, as well as other claims in areas as diverse as sex discrimination, race discrimination and environmental nuisance have become increasingly difficult to pursue.

Reviewing my archives, I see that in October 2013, I wrote to Maria Miller, the then Minister for Women and Equalities in the Coalition Government in the following terms:

Dear Mrs Miller

Re: Access to Justice for disabled people

I am writing to you, to request that the Government Equalities Office engage with the Ministry of Justice, to ensure access to justice for disabled people.

Specifically, I would ask that you take up with the MOJ, the introduction of a scheme of Qualified One Way Costs Shifting by way of amendment to the Civil Procedure Rules, for disabled people, who wish to bring claims in the county court against organisations that have discriminated against them, in the provision of goods or services, education or the exercise of a public function.

Prior to the 1st April 2013, a disabled person could, under the scheme of the Access to Justice Act 1999, instruct a solicitor to represent them in a discrimination claim, under a conditional fee agreement and obtain protection from having to pay the costs of their opponent, through taking out a policy of After the Event (ATE) insurance.

Due to the Jackson reforms, introduced in the Legal Aid Sentencing and Punishment of Offenders Act 2012, it is no longer possible to recover the cost of this policy, from the losing side to litigation.

This means these policies are no longer available, as practically it is impossible for a disabled person to pay for them.

It means that a disabled person may well  be denied access to justice, as they dare not take proceedings, if there is a chance, however small, that they might not win and have to pay the other sides costs.

These might be substantial and cause the disabled person to lose their home.

A scheme of Qualified One Way Costs shifting has been brought in for personal injury claims and to protect victims of medical negligence.

A further scheme is contemplated for defamation claims.

Disability discrimination claimants are at least as deserving, as victims of defamation, engage in similarly asymmetric litigation and at the moment, unless reforms are undertaken, are at real risk of being denied justice, and the scheme of individual enforcement of rights, contemplated by the Equality Act 2010, will be rendered nugatory.

I await your reply. I am willing to travel to London, to explain matters directly to officials or ministers, as required.

Yours sincerely

Andrew Hogan

I did not receive any reply.

So I sent that letter again.

Still, no reply.

It may be that the Minister had other things on her mind at the time, including the Parliamentary expenses scandal, wherein she had to make a repayment of public monies claimed by way of expenses, and then make a 32 second apology to the House of Commons later, in 2014.

Still in 2017 there is no sign that the shortcomings in the current costs regime, which is an access to justice concern, pertaining to disabled people are likely to be addressed any time soon.

Many people will wonder whether there is any point voting in the forthcoming General Election, given the current likelihood that the Conservatives will simply be re-elected to form a government with a substantial majority and in my case, I note that in the rural part of Nottinghamshire where I live, they tend to weigh, rather than count, the votes of the successful Tory candidate.

The short answer to that query is that before and after 1832 many people have gone to prison, and even died to ensure that we generally have a vote. That we can play some part in steering the course of our political fate.

That we do not have to “suffer what we must”.

For my part I shall study the election manifestoes of all the main parties to see what they have to say about the creaking justice system and what they are going to do about it. I shall cast my vote, when I have seen the evidence.

And after the 8th June, I shall redraft that letter and send it again, to whomsoever is government  and then send it again, and again, until, finally, broken under the strain of persistent correspondence, I do get a response.

The Seven Pillars of Wisdom

One of the emerging jurisdictions for lawyers from England and Wales which seems to generate an increasing amount of work is the Middle East and in particular the Dubai International Financial Centre.

As noted on its own website the DIFC was set up in accordance with the following vision:

The Dubai International Financial Centre (“DIFC”) was launched in accordance with United Arab Emirates (UAE) Federal Decree No. 35 of 2004 as a part of Dubai’s strategic vision to diversify its economic resources and attract capital and investments in the region. It is a Financial Free Zone defined in Federal Law No. 8 of 2004. An independent jurisdiction within the UAE, DIFC is empowered to create its own legal and regulatory framework for all civil and commercial matters. 

The following three independent bodies have been established at the DIFC to enable and support the growth and development of businesses in the Centre: the DIFC Authority, the Dubai Financial Services Authority (“DFSA”) and the Dispute Resolution Authority (“DRA”).

It is the Dispute Resolution Authority and in particular the courts applying the common law which sit in Dubai, which are of particular interest.

For an overview of the applicable procedures which apply, I can do no better than recommend the excellent guide produced by Rupert Reed QC and the team at Wilberforce Chambers, a copy of which can be found here: Rules-of-the-DIFC-Courts-2016, gratefully placed on this website with the permission of its author.

Now on its fourth edition, the guide may some day attract the authority of the White Book, when considering matters pertinent to disputes in the DIFC.

The pleasure with dipping into jurisdictions which are surprisingly similar but also very different, is to see how lawyers and judges overseas, have devised their own solutions to familiar problems.

Thus the guide has this comment to make on the possible introduction of costs budgeting:

DIFC practitioners will be relieved that they have as yet been spared the process by which English lawyers, under the Jackson processes of ‘costs management’, are now required to quantify their clients’ costs in advance and held to that ‘budget’, at least in terms of their clients’ ultimate recovery in costs.

There has, however, been a certain amount of discussion not least during the course of lectures in the DIFC Academy of Law lecture series of costs budgeting as a solution to the concern of general counsel that litigation costs require firmer control. In circumstances where most proceedings in the English Commercial Court are now subject to costs budgeting, it seems likely that the DIFC Court will give serious consideration to this and other prospective means of limiting costs.

Earlier this year the courts also consulted on the introduction of a new Practice Direction to provide some regulation of the practice of litigation funding. A copy of the Practice Direction can be found here: 16-Jan-2017-Practice-Direction-for-Third-Party-Funding-in-the-DIFC_NB.

The key provisions of the draft Practice Direction were as follows:

4. A Funded Party who enters into an LFA in respect of Proceedings must put every other party to the relevant dispute on notice, in accordance with subsection (5) and (6), of the fact that he has entered into an LFA in respect of the relevant dispute or Proceedings. For the avoidance of doubt, thus subsection (4) does not require disclosure of a copy of the LFA.

5. For Part 7 claims, notice under subsection (4) must be given:

A. In the Case Management Information Sheet to be submitted prior to the Case Management Conference (CMC), pursuant to RDC 26.3; or

B. When the Funded Party enters into an LFA after the CMC, within 7 days of the date of the LFA. Such notice shall be in writing and shall be served on every other party to the relevant Proceedings as well as the DIFC Courts Registry.

The draft Practice Direction thus proposed notification of the existence of litigation funding, in a way reminiscent of the provisions of the CPR which applied to notification of additional liabilities: but does not attempt to codify any principles or consequences applicable to a party having the benefit of litigation funding. As the draft Practice Direction noted:

This Practice Direction is without prejudice to any subsequent decisions of the DIFC Courts ruling on the legality of LFAs in general or any specific LFA in particular (or any part thereof).

It will be interesting to see over the next few years precisely how the law of litigation funding unfolds in the DIFC courts and to see to what extent it parallels that in the jurisdiction of England and Wales.

Through the Looking Glass

‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’

‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’

-Through the Looking Glass

As a society, we engage from time to time in collective delusions. A collective delusion is an idea, which works as along as enough people understand it and subscribe to it. When people stop believing in it, it disappears, sometimes overnight.

The collapse of democracy and the rule of law in Weimar Germany, the disappearance of the gods of the religion of Ancient Greece or republican Rome, are all examples of collective delusions coming to an abrupt end.

Although not in the same bracket, the current belief that proportionality is a meaningful concept that can be consistently deployed by the courts to enhance access to justice, is another such delusion. It is one that I detect is already starting to creak, hence the enthusiasm for fixed costs and the unstated desire to reduce the role of costs budgeting, as faith in an individually applied approach to proportionality in budgeting or on detailed assessment starts to fade.

More positively fixed costs could be viewed as the new incarnation of proportionality: instead of “fixing” proportionate costs on a case by case basis through assessment, a fixed costs regime constitutes the expression in the rules of an award of proportionate costs applied across the board to a range of cases.

Granted that there will be swings and roundabouts, but across an entire class of litigation, the theory is that proportionate costs will not only be awarded, but will be predictable in advance and the transactional or frictional costs of assessment and budgeting can be avoided altogether, representing a more efficient deployment of resources.

I regard proportionality as an essentially meaningless concept which adds nothing to the concept of reasonableness in theory or as formulated in the rules. The importance of proportionality is its existence as a concept, meant to encourage the judiciary that legal costs claimed between the parties to litigation are too high and that they should use the concept as a reason to reduce them, to make justice more affordable.

But a robust application of the principle of reasonableness would achieve the same result. In a detailed assessment hearing I argued in Hastings last summer where an RTA case settled for £50,000 the Bill of Costs claimed no less than £271,000 of costs and was assessed down on the basis of reasonableness to £73,000:comfortably below the paying party’s offer of £80,000.

The District Judge declined to reduce the sum further by reason of proportionality, noting that a significant part of the costs allowed related to experts fees and the solicitors costs/counsels fees of dealing with the expert evidence.

There have been a number of decisions in the last 9 months or so, where the principle of proportionality has been expressly applied and which have had the consequence of “setting the cat amongst the pigeons” and also precipitating satellite litigation.

The first of these, and due to be heard by the Court of Appeal in the autumn is that of BNM -v-MGN Limited [2016] EWHC B13 (Costs) a decision of Master Gordon-Saker:

8.The Claimant commenced proceedings against the Defendant on 31st July 2013, having obtained an anonymity order the day before. She claimed an injunction to restrain the Defendant from using or publishing confidential information taken from her phone, damages and an order for delivery up of any confidential information.

9.The Defendant made substantial admissions in the Defence and the claim was concluded by a consent order dated 14th July 2014, under the terms of which the Defendant undertook not to use or disclose the confidential information, agreed to pay damages of £20,000 and agreed to pay the Claimant’s costs of the action.

10.The costs claimed were in the sum of £241,817. That included a success fee in respect of the solicitors’ costs of 60 per cent, success fees in respect of the costs of both counsel of 75 per cent and an after the event insurance premium of £58,000 plus insurance premium tax of £3,480.

Such were the facts which underpinned the assessment of the winning claimant’s costs:

13.Following the hearing in November 2015 the parties agreed the figures resulting from the line by line assessment as:

Base profit costs £46,321
Base Counsel’s fees £14,687.50
Court fees £1,310
Base costs of drawing the bill £4,530
Atkins Thomson’s success fee £16,780.83
Counsel’s success fee £4,846.88
ATE premium £61,480
VAT £17,433.24
Total base costs £62,318.50
Total costs £167,389.45

14. At the hearing in April 2016 the Defendant argued that these sums were disproportionate and should be reduced further. I concluded that the sums which had been allowed as reasonable on the line by line assessment were disproportionate and were about twice the sum which would be proportionate. As I had been given the breakdown set out above I gave separate figures for the sums allowed:

Base profit costs £24,000
Base Counsel’s fees £7,300
Court fees £1,310
Base costs of drawing the bill £2,250
Atkins Thomson’s success fee £7,920
Counsel’s success fee £2,409
ATE premium £30,000
VAT £8,775.80
Total costs £83,964.80

15. At the hearing the parties calculated the total as £84,855.80, a difference of £891.

16. Apart from the court fee, each of the items was reduced by about one half. The success fees are 33 per cent of the respective base costs allowed.

He continued:

18.The new test of proportionality was introduced because the old test did not promote access to justice at proportionate cost. In Willis v Nicolson [2007] EWCA Civ 199 Buxton LJ, delivering the judgment of the court, said:

When the Civil Procedure Rules replaced the Rules of the Supreme Court, and encouraged active intervention by the court and the application of public values and not merely those values with which the parties were comfortable, it was hoped that that practice might change; and that hope was reinforced when this court said, in [2] of its judgment in Lownds v Home Office [2002] 1 WLR 2450:

‘Proportionality played no part in the taxation of costs under the Rules of the Supreme Court. The only test was that of reasonableness. The problem with that test, standing on its own, was that it institutionalised, as reasonable, the level of costs which were generally charged by the profession at the time when professional services were rendered. If a rate of charges was commonly adopted it was taken to be reasonable and so allowed on taxation even though the result was far from reasonable.’

However, in the event nothing seems to have changed. That is because, as explained in [29] of the same judgment, ‘proportionality’ is achieved by determining whether it was necessary to incur any particular item of costs. And then ‘When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed’: and the reasonable amount per hour of the professional’s time continues to be determined by the market.

19.At a public seminar held in Cardiff on 19th June 2009 as part of Sir Rupert Jackson’s Review of Civil Litigation Costs, Sir Anthony May, then President of the Queen’s Bench Division, said:

In my experience, there is no doubt at all but that costs are assessed with nodding respect only to proportionality. An application of rule 44.5 of the Civil Procedure Rules and section 11 of the Costs Practice Direction can scarcely expect to do better than that.

20.It is clear that the new test of proportionality was intended to bring about a real change in the assessment of costs.

The Master then went on to note, after a review of such authority as there was:

36.Presently there is little guidance on how the new test of proportionality should be applied.

37.In the 15th implementation lecture Lord Neuberger said:

While the change in culture should reduce the scope of costs assessments at the conclusion of proceedings, it will not obviate the need for a robust approach to such assessments. Again the decision as to whether an item was proportionately incurred is case-sensitive, and there may be a period of slight uncertainty as the case law is developed.

That is why I have not dealt with what precisely constitutes proportionality and how it is to be assessed. It would be positively dangerous for me to seek to give any sort of specific or detailed guidance in a lecture before the new rule has come into force and been applied. Any question relating to proportionality and any question relating to costs is each very case-sensitive, and when the two questions come together, that is all the more true. The law on proportionate costs will have to be developed on a case by case basis. This may mean a degree of satellite litigation while the courts work out the law, but we should be ready for that, and I hope it will involve relatively few cases.

The Master then considered how the principle of proportionality was to be applied in this case:

40.Had it been intended that costs should never exceed the sums in issue the rule could easily have stated that. There will be cases in which the costs bear a reasonable relationship to the sums in issue even though they exceed those sums.

 41.This is such a case; and the Defendant did not seek to argue otherwise. Mr Carpenter, on behalf of the Defendant, contended that a proportionate figure for base costs to the stage that the claim reached would be £20,000.

 42.The sum in issue in these proceedings was always going to be modest. The claim settled for £20,000. The Claimant’s first offer was £40,000.

 43.The value of the non-monetary relief claimed is not easy to quantify, but in my judgment it was not substantial. The Claimant knew in March 2011 that the Defendant had access to the information on her phone. The phone was returned to her in May 2011. Yet it was not until March 2013 that the Claimant’s father approached Atkins Thomson “to sound out whether any civil action could be brought”. That enquiry was prompted by press reports of a similar case in which Atkins Thomson had acted.

 44.No information taken from the phone had been published in the intervening 2 years. When proceedings were issued no application was made for an interim injunction. The anonymity order was required only because of the issue of proceedings. While the undertakings and the apology given by the Defendant as part of the settlement will have been of comfort to the Claimant, this was not a claim for substantial non-monetary relief. But for the claim for damages, it is unlikely that a claim would have been pursued.

 45.Nor was it a particularly complex case. I accept that a privacy case is more complex than the run of the mill. In the course of the detailed assessment I accepted that this case was of importance to the Claimant, that it was specialist “Londoncentric” work, that the allegations against the Defendant were serious, that it was reasonable for the Claimant to issue proceedings without prior warning given that she did not know what use the Defendant had made or would make of the confidential information, and that it was reasonable for her to apply for an anonymity order. It is these factors which make this a case where the costs can bear a reasonable relationship to the value of the claim even though they exceed that value and even though the claim was concluded at an early stage.

 46.Little additional work was generated by the conduct of the Defendant. There was some correspondence between the parties following the service of the anonymity application with an unfortunate allegation that the court had been misled, but the amount of that correspondence was limited to a few letters. The same can be said of the Defendant’s requests for extensions of time to serve the Defence and the Defendant’s failure to respond to a Part 18 request. I do not think that the conduct of the Defendant added significantly to the costs.

 47.Nor do I think that there were any wider factors involved in these proceedings. There was no real threat of publication and the Claimant was not seeking in any real way to protect her reputation. While the Defendant’s conduct can fairly be categorised as reprehensible, so much of civil litigation is based on the bad behaviour of others. I cannot see that there was any wider public importance.

 48.This claim settled at a relatively early stage, a year after the issue of proceedings and 16 months after solicitors were first instructed, before the first case management hearing, before disclosure of documents or exchange of witness statements, before any hearing other than the application for an anonymity order. The scope of the evidence would be very limited and the case was neither factually nor legally complex.

 49.In these circumstances base profit costs of £46,000 and base counsel’s fees of £14,000 must be disproportionate under the new test, being over 3 times the amount of agreed damages, and covering work which fell far short of trial. In my judgment costs of about one half of those figures would be proportionate.

 50.The ATE premium of £58,000 excluding tax is also disproportionate. For the reasons that I gave in the course of the detailed assessment, I could not conclude that the premium was unreasonable. I also accept that it was necessary for the Claimant to purchase after the event insurance. But costs may be disproportionate even though they were necessary: CPR 44.3(2)(a).

 51.This was not the premium which would cover the whole claim. £58,000 was the premium payable at the fourth of seven stages. Had the claim proceeded to judgment, the premium would have risen to £112,500 plus tax.

 52.As is common, the policy insures the Claimant against her liability to pay the premium in the event that she does not succeed; and, if she does succeed, the premium is limited to the amount allowed by the court on assessment. However the court approaches the new test of proportionality, if the premium is reduced on the basis that it is disproportionate, it is important that the court should identify the figure allowed.

 53.The premium has added significantly to the costs that were reasonably incurred, broadly matching the aggregate of base profit costs and counsel’s fees. I concluded in the course of the detailed assessment that, at the outset, the Claimant’s prospects of success were “significantly in excess of 50/50”. Those prospects did not reduce. The Defendant made substantial admissions in its Defence. A premium of £58,000 at the stage that the claim settled, potentially doubling to £112,500, cannot be said to bear a reasonable relationship to a claim which settles for £20,000, where there was no substantial claim for non-monetary relief, which was not particularly complex, where no significant additional work was generated by the conduct of the paying party and where there were no wider factors involved.

 54.In my judgment no more than one half of that amount could be considered proportionate.

Since that decision there have been a number of other decisions which repay careful examination, and many of which turn on the application of particular aspects of the transitional provisions for pre-and post 1st April 2013, and also the provisions relating to those categories of cases, which involve recoverable success fees. Cases worth reading are Dr Brian May -v- Wavell Group Plc [2016] EWHC B16 (Costs) Master Rowley and Murrells -v- Cambridge University NHS Foundation Trust (SCCO 17th January 2017) Master Brown. The Brian May case is also on its way to the Court of Appeal, to be heard in the autumn along with BNM.

A lot of time, money and ink is being expended on debating what proportionality actually means. This is because the application of the rule is untested in the higher courts and a binding formulation of general application has not been made.

As I write this, I also note with interest that the 88th set of revisions to the Civil Procedure Rules which are getting longer and longer, every year, has recently been published. The single topic which absorbs the biggest number of pages in the Rules is the topic of costs.

Do all these amendments reduce the cost of litigation, enhance access to justice and contribute to the public good? I doubt it. There is no evidence to support such a conclusion.

Why not put a moratorium on any further amendments and expansions to the Rules? Just stop changing them. Recognise that no system will ever be perfect, but that it costs people a lot of money in frictional or transactional costs arising from uncertainty over what new provisions mean.

And instead of encouraging satellite litigation between privately funded parties to determine what the costs rules mean, why not invest in training for the judiciary on what the rules should mean and what they are intended to achieve through the Judicial College. So a common view emerges? Why not spend some time considering how reasonableness should be applied in a disciplined, predictable, meaningful sense?

In a sense the judges share the key quality of Humpty Dumpty: they can pronounce what they want a word to mean, and if by “reasonableness” they meant a tough detailed assessment which balances the interests of both parties, cutting out wasteful activity, making paying parties pay for the costs of work they have caused through misjudging the strength of their case, I suspect the principle of proportionality could be safely left in Wonderland.