Journal of the Whills

Having exterminated through treachery and deception the Jedi Knights, guardians of justice in the galaxy, the Imperial governors and bureaucrats prepared to institute a reign of terror among the disheartened worlds of the galaxy. Many used the Imperial forces and the name of the increasingly isolated Emperor to further their own personal ambitions.

But a small number of systems rebelled at these new outrages. Declaring themselves opposed to the New Order they began the great battle to restore the Old Republic.

From the beginning they were vastly outnumbered by the systems held in thrall by the Emperor. In those first dark days it seemed certain the bright flame of resistance would be extinguished before it could cast the light of new truth across a galaxy of oppressed and beaten peoples…

From the First Saga, Journal of the Whills

Another week, another series of outrages. Another Tory sex scandal. Another move to curtail human or constitutional rights, here and abroad. Ukraine continues to burn and the grain that feeds 400 million human beings rots in its warehouses.

And on a personal level, after maintaining a clean sheet for 2.5 years, I have at last been felled by Covid, and have spent the last few days and nights, gasping, coughing and feeling very unwell. I can assure you with the benefit of experience that it is quite a lot worse than ‘flu after all.

I hope that I am now on the mend and this will be a better week.

I therefore now turn seamlessly to the knotty problem of costs reform.

There are a number of jurisdictions around the world, including most notably the USA, where awards of costs are sufficiently rare that they can be regarded as “no costs” jurisdictions: the norm is that parties bear their own costs of litigation. There are tribunals and courts within England and Wales where rules restrict the recovery of costs to minimal costs, or no costs. But these are exceptions, to what may be regarded as the general rule in this jurisdiction, that in England and Wales, the loser pays the costs of the winner in litigation.

This general rule has a long pedigree: dating back to the Statue of Westminster of 1275 and the Statute of Gloucester of 1278: awards of costs to permit a party to pay for the costs of legal representation have been engrained in the common law courts since medieval times.

The rule mirrors the rise of a legal profession, which needed to be paid by clients, who benefited from their advice and representation. It also accords with a concept of justice that the party at fault, who has necessitated an innocent party coming to law, should make recompense for their loss and damage, including the costs they must expend on legal representation to obtain justice. This principle could be described in modern day parlance as “the polluter pays” and reflects common standards of fairness.

So far so good, but having established the principle that costs should be recoverable, this in turn begs the immediate questions, does that mean all the costs? And if not all the costs, what measure of costs should be recoverable and on what criteria? And how is that measure of costs to be determined?

 English and Welsh law has always firmly rejected the notion that an award of costs should be a complete indemnity, and instead uses concepts of reasonableness, necessity and latterly proportionality to limit the exposure of the paying party to an opponent who has spent liberally, or even profligately on retaining lawyers.

The law also has provided at various times in legal history that these criteria should be applied on a case by case basis, looking at a litigant’s bill by the process of taxation, latterly called since 1999 detailed assessment, or since 1999, by a more summary procedure called summary assessment, or through a scheme of fixed costs, where figures are applied to classes of cases, utilising statutory criteria for calculation of costs, without regard to what a receiving litigant has actually spent.

At the current time, determinations of costs are made using detailed assessment, summary assessment and fixed costs. In turn each of these procedures generates its own costs, of which the most significant will be detailed assessment, necessitating the drawing of Bills of Costs, Points of Dispute and Replies, and an oral hearing.

A recent (2013) innovation was the interposition of provisional assessment in the detailed assessment process, which is effectively the introduction of a summary assessment of costs, which the parties may accept, or challenge by way of an oral hearing.

But given the Bonfire of the Vanities, that the Covid Pandemic ignited, and the imminent expansion of fixed costs to cover all claims with a value of up to £100,000, the question that might reasonably be asked, is what is the point of detailed assessment?

Does it continue to serve the purpose of establishing the reasonable and proportionate costs that a receiving party should receive, or could it be abolished, without detracting from the fairness of the decision-making process on what award of costs a litigant should receive?

Lest this be thought to be heresy of the highest order, I would point to several factors which might inform the debate.

The first point is where after all the fire and blood of a detailed assessment, does the decision end up? Is it common for parties to recover 65% to 70% of their costs: if so, is it worth all the money and court time in a detailed assessment, to worry about whether a nuanced decision that in fact 64% or 71% of costs claimed on the bill should be recoverable is a more “just result”?

Secondly, are there not anomalies in the court process now which render detailed assessment logically precarious? I remember vividly, some years ago, when I appeared in the Commercial Court, dealing the summary assessment, of the other side’s schedule. It sought circa £140,000 of costs, and after a rigorous 10 minutes of argument, the High Court judge elected on a figure equivalent to 70% of the schedule. In the County Court a £140,000 bill of costs, might take two days of a District Judge’s time to assess: with a real prospect that at the end of the case, the recovery would be in the region of 70%.

Thirdly if fixed costs apply to claims worth up to £100,000 which take no heed of what has been incurred by way of costs in the individual case, then logically there can be little ideological objection to a more rough and ready process of summary assessment for that portion of claims, of up to £250,000 in value, which constitute the vast bulk of civil litigation. It is only exceptional claims which are worth more than £250,000 and which benefit from a more bespoke regime.

And finally, although I have spoken of the three methods of awarding costs at the end of the case, it should not be forgotten that at the beginning of the case, at least as far as the court process is concerned, there will be a process of costs budgeting and management, which was expressly meant to remove many cases from detailed assessment, by reducing the scope for arguments at the end of the case.

A fascinating glimpse of how a costs regime without detailed assessment, might work was provided by the recent decision of Roman Pipia v BGEO Group Limited [2022] EHWC 846 (Comm) a decision of Mr Justice Henshaw sitting in the Commercial Court. This decision concerned the assessment of costs after the failure of the Claimant’s claim seeking $1 billion. As Henshaw J noted:

1.The defendant, to whom I shall refer as “BG”, applies to vary a costs order made in its favour following the dismissal of the claim against it by the claimant, Mr Pipia, and for summary assessment of its costs of the proceedings.

2. The existing order provides for a detailed assessment of BG’s costs with a payment on account of £7,567,265. Nothing has been paid by Mr Pipia, over and above money which was already in court by the date of that order. BG’s evidence is to the effect that enforcement of any order against Mr Pipia based on an order for payment on account may be difficult in practice in Georgia.

The Defendant wished to avoid the time and expense of a protracted detailed assessment, which might be of limited practical value. The trial would have lasted 8 weeks, but in fact the claim was struck out for failure to make security for costs. The Defendant’s costs were £17,028,242.

The Defendant sought to remove the provisions for detailed assessment and an interim payment and substitute them with an order for a summary assessment in the sum of the £7,567,265 ordered as a payment on account. Accordingly, the application proceeded under rule 3.1(7) CPR. The Defendant relied on three material changes in circumstance:

28. The first is that Mr Pipia has failed to comply with the existing order for a payment on account.

29. The second is that since the consequentials order was made, Mr Pipia has reinstructed lawyers and then become once again a litigant in person, and has shown no inclination to comply with the costs order made against him: despite legal advice presumably received during the four months when he was legally represented in that period, and despite the fact that he did actively participate in the proceedings by seeking permission to appeal the decision to strike out his claim.

30. The third point relied upon by BG is that the total amount of costs to which it contends it would be entitled on a detailed assessment has slightly increased, now that the calculations have been finalised and checked in a way that was not practicable at the time of the consequentials order

The judge thought that there was something in this:

31. I do not regard that third point as a particularly significant one in this context. However, I do agree with BG that the key point is that, notwithstanding repeated chasers from Freshfields, Mr Pipia has not made any payment at all of the sum ordered to be paid on account by the consequentials order, which was a very substantial sum of money due to BG. That strongly supports the view that to embark on a detailed assessment of the costs of the action would require BG to throw more good money after what may well be bad. That, in turn, significantly affects the balance of costs and benefits for the parties in having a detailed assessment, as well as the interests of court resources and other court users in avoiding a long and potentially entirely futile costs assessment process. (It is pertinent to note here that in National Crime Agency v Namli [2013] EWCA Civ 1876, a failure to make a payment on account of costs in breach of an order to do so was regarded as a particularly significant change of circumstances, entitling the Court of Appeal to order security for the costs of an appeal.)

He also noted the potential for detailed assessment proceedings to be lengthy and expensive: that the bill of costs might take 6 months to prepare and cost £400,000 to produce. The cost of a contested detailed assessment might be a further £800,000 on top. He concluded that there was a material change in circumstance: but did that mean a summary assessment should take place?

40. The court therefore does have the power to make a summary assessment in the present case. Counsel for BG informs me that significant costs bills have been summarily assessed in this way, in the Commercial Court, previously where appropriate: see the order of Robin Knowles J dated 2 October 2019 in Deutsche Bank v Unitech, albeit there appears to be no reasoned judgment available there. Another example is the order I made in Certain Underwriters at Lloyd’s v Syrian Arabic Republic [2018] EWHC 385 (see paragraphs 87-91), albeit that was a case where only one party was represented.

He then went onto decided he would summarily assess the costs:

42. It seems to me in principle that it would be unfair, given the circumstances which have arisen, to permit Mr Pipia to put BG to the further delay and expense of a detailed assessment, when he has failed to make any payment or offer in respect of the sum already ordered to be paid on account. Although Mr Pipia claims that his financial circumstances have arisen as a result of the actions of BG, that is a matter which would go, essentially, to the orders which have already been made and against which no permission to appeal has been granted, rather than being a matter which arises on the present application. I note, though, that Cockerill J concluded that there was no evidence of any interference by BG such as to prejudice Mr Pipia and (as I have already said) that there was no evidence that the security order she made would stifle the claim.

43. I do not consider there was material delay in the present application being made. Following the refusal of permission to appeal on 16 June 2021, the present application was intimated in October 2021 and then issued in December 2021.

44. In my view, a final order for costs now would avoid substantial unfairness to BG and it would not cause material prejudice to Mr Pipia, provided that the amount of the costs orders is one which I can feel confident would be ordered at a minimum on a detailed assessment.

Interestingly he made this comment:

45. As to the amount of costs Cockerill J, as I have indicated, said that the costs claimed by BG were very high indeed and that the assessed costs may very well fall below the usual range. Views as to what does the usual range differ, but on a standard costs assessment, 60-70 per cent of claimed costs are commonly recovered.

He then proceeded to award £7,250,000 to the receiving party as a final costs order after summary assessment. The point to take away from this case is that if a summary assessment can be conducted and a sum of £7,250,000 awarded, is there any limits to which summary assessment might be held?

Logically the answer is “no”, particularly if the judges are indeed in practice making awards within the bracket of 60% to 70%. Does this mean the end of the road is finally in sight for the costs draftsman or costs lawyer contemplating the truncation of detailed assessment and the removal of a lengthy bill? I think not.

But I think such lawyers should focus on the areas of costs budgeting, arguments about fixed costs, constructing arguments for exceptional circumstances, and working on the most attractive way to deal with arguments on summary assessment, whilst anticipating the likely rise yet further of solicitor-own client disputes. Provided the adversarial system endures and the costs shifting rules of England and Wales remain, there will be work for the profession.

 

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