A hunters moon

One of the pleasures of growing old, is the realisation that time is circular and we return to moment after moment, thought to be past and gone. Why that is, I do not know. It may be that there is some balance that needs to be corrected. Some debt that must be repaid. And of course things are never exactly the same. Nonethless 2024 is starting to feel rather like 1997 did.

An exhausted, failing,  government bereft of ideas, is about to expire. The tree of liberty is about to be refreshed with the political blood of Tory martyrs. In that year, I remember reading Will Hutton’s book “The State We’re In” which looked forward to the years of New Labour.

Now I see that he has written another one provocatively entitled “This Time No Mistakes: How to remake Britain” and when the holidays are arrive, I intend to read both, and see how one has aged, and ponder whether the latter one contains new ideas, or merely old ones rehashed.

So it is with costs: the same problems roll around with every turn of the political or economic cycle, legislators painfully re-invent the wheel, or judges cut Gordian knots often of their own making. One such problem that I have been looking at recently concerns the vexed question of what costs a party is entitled to, when a claim pleaded at £50,000 promptly settles on service of a Defence and part 36 offer for £5000?

In particular, how does a court discern whether this means that the case was only ever really worth £5000 or whether it was indeed a case properly valued at £50,000 but was settled quickly as a claimant needed the money, had run out of funds, or simply could not bear to have the stresses and strains of litigation hanging over them?

Since the personal injury market contracted, over the last ten years, many firms have either moved into other areas of practice, or new firms have entered the market. The types of work they have undertaken have varied greatly, including data breach claims, cavity wall claims, and more promisingly, claims for various kinds of financial misselling: perhaps arising originally from PPI misselling, but now covering a spread of claims in respect of financial services.

Taking this latter type of claim as an example, it may involve claims in respect of half secret or full secret commissions, claims for unfair charges arising out of loan agreements, or claims based upon the unfair relationship provisions of the Consumer Credit Act 1974. As well as claims for compensation, such as equitable damages, claims may seek other relief, such as rescission and a claim for an account of sums paid. The pleaded value of the claim may be in excess of £25,000. But often such claims settle, for a variety of reasons, for much less than that at a point in time before a case is allocated.

When the settlement falls below £10,000, then there may be a real question as to whether the claim, is, properly was, only a small claim, attracting only the nominal costs attributed to a Small Claims Track case. For cases issued before October 2023, and the expansion of the Fast Track, and the introduction of the Intermediate track, even where a standard basis costs Order was made, it can be argued that the reasonable sum to allow on assessment, is only a sum equivalent to the Small Claims track.

Rule 44.4 CPR provides:

(1) The court will have regard to all the circumstances in deciding whether costs were –

(a) if it is assessing costs on the standard basis –

(i) proportionately and reasonably incurred; or

(ii) proportionate and reasonable in amount, or

(b) if it is assessing costs on the indemnity basis –

(i) unreasonably incurred; or

(ii) unreasonable in amount.

(2) In particular, the court will give effect to any orders which have already been made.

(3) The court will also have regard to –

(a) the conduct of all the parties, including in particular –

(i) conduct before, as well as during, the proceedings; and

(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;

(b) the amount or value of any money or property involved;

(c) the importance of the matter to all the parties;

(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;

(e) the skill, effort, specialised knowledge and responsibility involved;

(f) the time spent on the case;

(g) the place where and the circumstances in which work or any part of it was done; and

(h) the receiving party’s last approved or agreed budget.

This rule should be read in conjunction with rule 46.13(3) CPR

(3) Where the court is assessing costs on the standard basis of a claim which concluded without being allocated to a track, it may restrict those costs to costs that would have been allowed on the track to which the claim would have been allocated if allocation had taken place.

And the Practice Direction 46 paragraph 8.2 which reads:

Where a settlement is reached or a Part 36 offer accepted in a case which has not been allocated but would, if allocated, have been suitable for allocation to the small claims track, rule 46.13 enables the court to allow only small claims track costs in accordance with rule 27.14. This power is not exercisable if the costs are to be paid on the indemnity basis.

That is the jurisdiction: in the next post I shall consider some of the caselaw which led up to the formulation of rule 46.13(3) CPR, and consider what sorts of factors will lead a court to restrict costs to small claims track costs, and which in turn, will not. In the third post in this series, I shall consider to what extent such arguments will be available in cases issued after October 2023, where the new rules on fixed costs may apply.

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