Costs Roundup – February 2015

Costs Roundup – February 2015


CategoryArticles Author Judith Ayling, Caroline Allen Date

This article was first published in the February edition of the Personal Injury Newsletter.

The first appeal cases from costs management decisions have begun to appear, and so too there are a handful of useful cases dealing with QOCS and Part 36-related matters.

QOCS

Gosling v (1) Hailo (2) Screwfix Direct (2014) LTL 29/04/2014  is  a  County Court decision, but  one of  some importance  as it  is thought  to be the first “fundamental dishonesty” decision in which a claimant who was found to have exaggerated the extent of his ongoing symptoms was denied  QOCS protection, following discontinuance of the claim upon the disclosure of damning surveillance evidence. It  was  held by Judge  Moloney QC, sitting at Cambridge County Court and determining the issues on a summary basis without witness and expert evidence, that the claimant’s dishonesty went to the root of a substantial part of his claims for general damages and future care (amounting to approximately half of the value of the claim), and that it was therefore sufficient to characterise the claim as fundamentally dishonest. “Fundamental dishonesty” was to be interpreted purposively and contextually, and determined whether the claimant was deserving of the protection extended, for reasons of social policy, by QOCS. In light of the findings made, the second defendant was held to be entitled to enforce a costs order in its favour under r.38.6 (following the discontinuance) to its full extent, QOCS notwithstanding.

Wagenaar v Weekend Travel Ltd t/a Ski Weekend (Defendant) & Serradj (Third Party) [2014] EWCA Civ 1105, [2014] 5 Costs L.O. 803, [2014] P.I.Q.R. P23 is a case well worth noting for any defendants contemplating bringing a third party into contested proceedings. The Court of Appeal held that CPR r.44.13 applies the QOCS rules to a single claim against a defendant, but not to the entire action in which a claim for damages for personal injury is made. Consequently – as was the case in Wagenaar – a defendant who succeeds in the substantive action but whose additional claim fails is at risk of being, in effect, penalised twice in costs: unable to enforce against the claimant by virtue of the QOCS rules, but liable to pay the third party’s costs in full, as the QOCS rules do not apply to additional claims brought within the compass of the main action.

In Landau v (1) Big Bus Co (2) Zeital Lawtel 20 November 2014 Master Haworth in the Senior Courts Costs Office determined that QOCS does not apply on appeal if it did not apply at first instance, regardless of the fact that a new CFA had been entered into between the hearing at first instance and the appeal, and regardless of whether the second CFA was entered into after 1 April 2013 when QOCS came into effect. The claimant brought a personal injury action against the defendants with the benefit of a CFA dated 16 August 2011. In the standard way that CFA did not cover any appeal he himself brought. He also took out an ATE policy on 10 November 2011. The ATE policy did not cover the costs of any appeal to the Court of Appeal. His claim was dismissed at first instance on 7 October 2013. Permission to appeal was granted and a second CFA was entered into on 23 November 2013. On 4 August 2014 the Court of Appeal dismissed the appeal and ordered the claimant to pay the defendants’ costs of the appeal, referring the question whether QOCS applies to the costs order for determination by the SCCO. The costs decision turned, primarily, on the definition of the word “proceedings” in the context of CPR r. 44.17, which stipulates that “This section does not apply to proceedings where the claimant has entered into a pre-commencement funding arrangement (as defined in Rule 48.2)”. The claimant  argued that  “proceedings” should be interpreted as referring separately to trial and appeal, but this interpretation was rejected comprehensively by Master Haworth. He held that the meaning of “proceedings” for the purposes of r.44.17 must be the same as in r.44.13(1) and that QOCS was plainly intended to apply to appeals, which are within the definition of “proceedings” in r.44.13(1). The proceedings in the instant case concerned the same claim. There was only ever one claim for damages arising out of one accident. On any true construction of the relevant provisions of the CPR in this case, QOCS did not apply.

Costs management

Two recent appeals against costs management decisions provide useful insights into the way in which the courts are approaching the process in practice.

In Redfern v Corby Borough Council  [EWHC] 2014 4526 (QB) the High Court heard one of the first, if not the first, appeals against a costs management order made by a Master. The claimant seeks damages against his employer for psychiatric injury caused by bullying, harassment and stress at work. The claim was issued after 1 April 2013 and so the new proportionality test applies. On the claimant’s own case the claim is worth a maximum of £700,000 and his budget was more than £740,000 net of VAT and any additional liabilities. In making a costs management order, Deputy Master Eyre expressed concern that  the claimant’s budget was so high, stated that the costs already incurred were excessive and unreasonable and took them into account when  considering  the  reasonableness and  proportionality of all subsequent costs. Having first proposed an overall budget of £220,000 for reasons of proportionality, he then adopted a phase-by-phase approach and approved a budget whose phases added up to just over £226,000. The claimant contended on appeal that the approach taken had been flawed and that the overall figures were too low. However Judge Seymour QC, sitting as a High Court deputy, found that the approach taken had been entirely in accordance with Practice Direction 3E and that the Master had not sought to approve or disapprove the costs already incurred. He had been bidden to take them into account by PD 3E 7.4 when determining the reasonableness and proportionality of all subsequent costs. He therefore dismissed the appeal. Judith Ayling acted for the defendant. The claimant is seeking permission for a second appeal to the Court of Appeal.

In Havenga v (1) Gateshead NHS Foundation Trust (2) South Tyneside Hospitals Foundation Trust [2014] EWHC B25 (QB),  a high-value cerebral palsy claim in which liability had already been agreed at 75/25, the claimant appealed against a decision to reduce his costs budget from £769,854 to £463,915, arguing that the District Judge had exceeded the wide ambit of his discretion. It was held on appeal that  he had not, HHJ Freedman reminding himself of the very high threshold to be crossed to show that a costs and case management decision is wrong. He held that the revised budget fell within the range of what was reasonable and proportionate, even if he might have been more generous himself. The matter turns on its own facts, but is interesting because of the level of scrutiny that the judges at first instance and on appeal applied to the costs budget, which arguably came close to detailed assessment: amongst other matters, on appeal the court was being asked to vary the time for fee- earners at various stages, and the level of experts’ fees. This appears to run contrary to PD 3E 7.3, which expressly prohibits such an approach.

In Tim Yeo v Times Newpapers Limited [2015] EWHC 209 (QB) (a libel case which has already been before the court on a rule 3.9 application in relation to a failure to give prescribed funding information29)  Warby J sought to give guidance for the future on costs budgeting, with particular reference to publication cases. He hoped that as the system becomes established parties will propose and agree to costs budgeting without a hearing (see r3.16(2), where practicable costs management conferences should be conducted by telephone or in writing). In respect of incurred costs it is likely to help the parties reach agreement later on without detailed assessment, that if a budget is reduced for reasons which apply equally to incurred costs or which have a bearing on what should be recoverable, that those reasons are briefly recorded at the time the budget is approved. He said that while the question of whether the totals are reasonable and proportionate will always be the overall criterion, the court may need to consider rates and estimated hours. It is appropriate to have regard to both hours and rates, and this is not the same as conducting a detailed assessment. Work should only be included as a contingency if it is foreseen that it is more likely than not to be required, and if the improbable occurs it can be added to the budget pursuant to PD 3E 7.9 unless the matter involves a significant development within para 7.4, in which case a revised budget should be prepared. Warby J also drew attention to the court’s power to give directions for the filing and exchange of budgets at an earlier stage than the CMC, and pointed out that such an early budget need not be for the entire litigation.

Is a Calderbank offer as effective as a Part 36 offer?

Though  a  commercial  case, Coward v (1) Phaestos Ltd & Others [2014] EWCA Civ 1256, [2015] C.P. Rep. 2 is worthy of note as the Court of Appeal addresses the fundamental differences between Part 36 and Part 44.2 and the correct approach to be taken by the courts in considering the impact of Calderbank offers on costs. The appellant appealed an order for costs made at the conclusion of an action he had begun against the respondent companies and in which he had been, broadly, unsuccessful. He sought to argue that a Calderbank offer he had made some time prior to trial had given the respondents substantially all that they had recovered at trial. This argument was rejected on the facts at first instance, and the decision upheld on appeal. However the respondents argued that the effect of a Calderbank offer was to be assessed by analogy with the terms of CPR r.36.14(1A), which defined a “more advantageous” judgment as one that was “better in money terms by any amount” than the relevant order. This approach was rejected by the Court of Appeal, which emphasised that Part 36 and Part 44 of the CPR are separate regimes with separate purposes; specifically that Part 36 is a self-contained code which specifies particular consequences which go far beyond that which might be ordered by way of costs under Part 44. Part 44 contains no rules as to the way in which the court is to have regard to offers. In particular, and most obviously, even in the case of a money claim, there is no provision equivalent to r.36.14(1A), and there is no warrant in the terms of Part 44 for applying, by analogy or otherwise, a similarly rigid test. It was accepted by the Court of Appeal that the very broad terms in which the discretion conferred by Part 44 is expressed come at the price of some uncertainty and some scope for argument as to costs, but it was also noted that the courts are well accustomed to dealing with those cases where it is arguable that the just result was not simply that the unsuccessful party paid the costs of the successful party in full.

Capacity and retainer

In Blankley v Central Manchester and Manchester Children’s University Hospitals NHS Trust [2015] EWCA Civ 18 the Court of Appeal held that the loss of capacity by a party to a legal action in the course of the proceedings did not automatically frustrate the CFA with the solicitor or terminate their solicitor’s retainer. Whilst the incapacity removed the solicitor’s authority to act, it only gave rise to a period of delay pending the appointment of a deputy. Richard Spearman QC and Vikram Sachdeva of  chambers acted for the claimant. This is a significant decision for those solicitors retained by claimants whose capacity looks likely to fluctuate.

Common costs

In Haynes v Department for Business Innovation & Skills [2014] EWHC 643 (QB), [2014] 3 Costs LR 475 Jay J, sitting with Senior Costs Judge Hurst as an assessor, considered the costs recoverable by a claimant who brought industrial disease proceedings against ten defendants on behalf of her late husband following his exposure to asbestos and subsequent death from lung cancer, and had abandoned her claims against nine of the defendants after one accepted her Part 36 offer of £18,000 plus costs. It should be noted that the claimant put the total value of her claim against all defendants at £195,000 and Jay J observed that liability could only be several, not joint and several. At first instance the defendant government department (BIS) contended that because liability was several, that should follow through into the proportion of costs payable. It won: the first-instance decision on the papers was that BIS was liable only for the costs attributable directly to it and for one-tenth of the non- specific common costs. On re-hearing before Master Simons the decision was upheld. On appeal Jay J dismissed an argument that the claimant had offered to settle all the costs rather than the costs against BIS, found that “the costs of proceedings” within the meaning of r.36.10(1) meant the costs of proceeding against the party against whom the deemed order had been made as any broader definition would achieve obvious injustice and violate the language of the rule as seen in its proper contextual setting. Accordingly the claimant was not entitled to receive from BIS the costs of her action against all ten defendants, but only the costs attributable directly to her action against BIS itself. However common costs fell into two categories: non-specific generic costs which would have been incurred in any event, regardless of the number of defendants, and to which the claimant was entitled on a 100% basis, and specific costs which were, in principle, capable of identification and division. As the claimant had failed to put papers before Master Simons which would have enabled him to carry out any fine analysis of how those specific common costs were to be identified and divided, the 1/10th finding was not disturbed in respect of them. The judgment contains a helpful review of the cases on the vexed question of generic or common costs.

Inquest costs

In an important decision on inquest costs, Master Rowley considered the extent of recovery of substantial costs of representation at an inquest (some £600-700,000) as part of the costs of and incidental to the successful claim in negligence and under Article 2, in Lynch v Chief Constable of Warwickshire & others [2014] EWHC 643 (QB), [2014] 3 Costs LR 475. See Roach v Home Office34 which lays down the principle that  inquest costs  are in principle recoverable as part of the costs of a civil claim but in which Davis J expressly said that the extent of the recoverable costs depends on the specific facts of each case. In Lynch there had been extensive disclosure before the inquest (35   See the Coroners (Inquest) Rules 2013 which now compel disclosure before an inquest). The claimants were represented at the inquest by a team comprising leading counsel, junior counsel, a partner and a trainee, not all of whom were there for each of the 38 days. The team was being funded by exceptional public funding because this  was an Article2 inquest. The defendants argued that there did not need to be attendance at the inquest for the claimants to plead their case but accepted some attendance on some days. Master Rowley held that gathering evidence at the inquest had been a disproportionately expensive way of doing so. His general approach was to extract from the overall inquest proceedings those aspects which were of and incidental to the civil claim and to allow the reasonable costs for those aspects. Having found that the costs overall were disproportionate he then went on to consider what aspects of the work had been necessary. There is not the space here to set out his findings on each of seven different categories of work, but the judgment on the detail bears careful reading.

Wasted costs

A warning to those looking to apply for their wasted costs in Nwoko v Oyo State Government of Nigeria & Another [2014] EWHC 4538 (QB)  where the court stressed the need for a party seeking to obtain a wasted costs order to provide proper evidence as to what costs had been incurred by the deficient conduct in question. Eder J held that it was “unacceptable” to expect the court to carry out a summary assessment on a broad-brush basis by awarding a percentage of the costs of the applicant’s overall costs schedule, and that it was impossible to deal with a large band of numbers and arrive at a conclusion.

Stage 2 portal

Finally, a useful decision at county court level concerning the costs consequences which flow from the compromise of individual elements of a claim within the Stage 2 portal process. In Berwicke-Copley v Ibeh LTL 26/06/2014 County Court at Oxford the claimant’s low-value claim had initially proceeded via the portal. The defendant admitted liability and accepted various elements of the claimant’s claim for damages, but challenged others. The claimant exited the portal and issued Part 7 proceedings for all items of loss, arguing that it was not open to a defendant to pick and choose which individual elements of a claim to settle, and that as there was no agreement in respect of the entire claim, there could not have been settlement of any of its elements. Accordingly, the claimant sought allocation to the fast track and recovery of fast track costs. The defendant argued that elements of the claim had been compromised pre-issue through the portal scheme and sought judgment in respect those elements, with the remainder of the claim to be allocated to the small claims track. It was held by DJ Vincent it was not only possible but intended by the provisions of the Protocol that parties might compromise individual elements of a claim within the Stage

2 portal process. Any part of a claimant’s offer accepted by a defendant was regarded as an item ‘not in dispute’ and parties were thereby provided with a mechanism by which issues were narrowed and progress made towards settlement. There was provision within the Protocol for interim payments to be made at this stage. If parties had not resolved matters by the end of Stage 2, Stage 3 proceedings were issued. There was no provision by which interim payments were returned and it would defy logic and the aims and intentions of the Protocol if, at this stage, all items that had previously been agreed were regarded as not agreed. With regard to the issue of costs, the rules clearly provided that any offer made within the portal was deemed to include portal costs. Accordingly there would be judgment for the claimant in respect of the sums already agreed, together with associated Protocol costs. The remaining items would be allocated to the small claims track.

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