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New case updating!

This year new cases will be uploaded to the Costs Law Reports website as soon as they are ready, rather than in batches once a month, keeping you absolutely up to date on new developments in costs. We’ll send out an automatic email once a week whenever new cases are online, and you can sign up for this here. At first, cases will be free to view for everyone for one week, and after that for members only. You can also follow us on Twitter, where new cases are announced the very minute they go online.

Judgments below High Court level

From time to time, we are asked to publish judgments given by judges below High Court level and, with few exceptions, we have not done so. The reasons are threefold. First, they are not binding and are only of “persuasive” value, second, even if that were not the case, there are simply too many, but thirdly and perhaps most importantly, the soon to retire Leveson LJ told us in Heron v TNT [2013] 4 Costs LR 551 just what he thought about such judgments:

“On the wider issue, and in any event, I deprecate an ever-widening reference to judgments which have no authoritative value and may be no more than examples of the exercise of judicial discretion.” [32]

Nonetheless, where there is no body of case law at High Court level and above because there have been no appeals from first instance decisions in new areas of law, Costs Law Reports has occasionally published those cases, having given them a firm “Leveson” health warning (see for example our Lower Courts Supplement – [2016] 3 Costs LO 455). Whilst now is not the time for another supplement, we wish to draw subscribers to a decision by HHJ Dight in the Central London County Court on January 2019, which addresses a new aspect of “good reason” under CPR 3.18 to depart from a costs budget.

As an aide memoire, parties awarded costs on the standard basis are limited to the figures in their last approved or agreed budget in multitrack cases to which costs budgeting under Part II CPR 3 has applied. Accordingly, the theory is that that budget will be ticked through by the judge at detailed assessment unless the receiving party can show a “good reason” under the rule for exceeding the budget if he wants more and/or the paying party can show a different “good reason” if he wishes to contend that the figure should be less.

Unhelpfully, the higher courts have not gone out of their way to give guidance to those who have to make such decisions below, about what “good reason” means.

Take Merrix v Heart of England NHS Foundation Trust [2017] 1 Costs LR 91 for example. Carr J’s view was that:

“There is no need for present purposes to examine in any detail what might or might not be a ‘good reason’ for the purpose of CPR 3.18.”

In Harrison v University Hospitals Coventry and Warwickshire NHS Trust [2017] 3 Costs LR 425, the Court of Appeal not only approved Merrix but also declined to give any guidance about what might or might not be a “good reason”. Indeed, as Davis LJ said at [44]:

“As to what would constitute good reason in any given case, I think it much better not to seek to proffer any further, necessarily generalised, guidance or examples: the matter can safely be left to the individual appraisal and evaluation of costs judges by reference to the circumstances of each individual case.”

Unsurprising, therefore, that in Salmon v St Bartholomew’s Hospital Health NHS Trust (Central London County Court, 19 January 2019), HHJ Dight had to do the best he could when the claimant had claimed less than the last approved budget, because the case had been settled before all the budget had been spent on the phases approved for experts and alternative dispute resolution (ADR). To have done otherwise would have been to infringe the indemnity principle, whereby a receiving party cannot recover more in costs than the amount that he is liable to pay his own solicitor.

The issue then arose. Had the deduction been sufficient: an underspend for experts and ADR respectively of £9,745 and £5,041? Barts wished to argue that it had not, but the court at first instance had held that in the absence of good reason being shown, the reduced sums should be ticked through, which they were.

Wrong way round was HHJ Dight’s decision on appeal. The indemnity principle point advanced by Mrs Salmon in claiming less than the last approved budget had provided the good reason for departure and it was now open season for Barts on the two phases in question. As the judge put it:

“Once the court has a right to depart from the budget, neither the receiving party, nor the paying party needs to establish a further good reason within CPR 3.18 if they wish to persuade the costs judge to make a further or different adjustment to the bill. … In my judgment this consequence applies whether it is sought to depart from the budget upwards or, as in this case, further downwards, because the finding of a good reason opens the gateway for departure from the budget and the rules do not stipulate that the good reason must determine the nature of the route to be followed thereafter.”

Lucky paying party you might think. Had the full amount of the budget been claimed, the boot would have been on the other foot and Barts would have had to make the “good reason” running. By working efficiently and not spending the full amount because Mrs Salmon’s solicitors were successful in eliciting a Part 36 offer from Barts, the claiming of a lesser sum than the last approved budget had thus opened the way for Barts to embark upon a good old fashioned item-by-item assessment, just the thing that costs budgeting is supposed to avoid.

Worse was to follow. Mrs Salmon’s budget had been approved in the sum of £155,603 in a case with an overall value of between £10,000 to £15,000. The Part 36 offer made and accepted had been for £7,000. Having won on good reason, it was now time for Barts to bring out their Big Guns in the form of CPR 44.3(5), the proportionality rule. That rule, in common with CPR 3.18, and six years after both were implemented, still has no High Court guidance about how they should be applied.

Before HHJ Dight, Barts contended that proportionate costs for a claim which settled for £7,000 should be no more than £25,000. The support for that argument can be found in Harrison at [52] per Davis LJ:

“I should add that where, as here, a costs judge on detailed assessment will be assessing incurred costs in the usual way and also will be considering budgeted costs (and not departing from such budgeted costs in the absence of ‘good reason’) the costs judge ordinarily will still, as I see it, ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3 (2)(a) and (5): a further potential safeguard, therefore, for the paying party.”

Below, the court had reduced Mrs Salmon’s assessed costs from £52,000 to £40,000, a decision which HHJ Dight held could not be “properly impugned”, so the further reduction to £25,000 got short shrift. Nonetheless, it followed that a mere eight years after Mrs Salmon had suffered personal injuries following a laparoscopic hemi-colectomy which had gone wrong, she faced the prospect of actually receiving no damages whatsoever. The reason? The proportionality ruling had wiped them out almost twice over, so unless, out of the goodness of their hearts, her solicitors are willing to waive their bill, she will end up out of pocket for her injuries.

Unfortunately, results of this type are far from unique in the county courts. Another case we featured in our Lower Courts supplement was May v Wavell Group plc [2016] 3 Costs LO (Lower Courts Supplement) 455. There, Dr May’s costs had been reduced on detailed assessment from £208,000 to £99,000 in an action in which he had obtained a permanent injunction against his neighbours plus £25,000 damages. Proportionality wig then put on, that sum had been reduced to £35,000. After the appellate roulette wheel had been spun, that figure had doubled to £70,000, a big increase, but still leaving him seriously out of pocket.

That had not been a budgeted case, but Reynolds v First Stop Stores was (Norwich County Court, 21 September 2019, HHJ Auerbach, unreported). There, Mrs Reynolds had accepted an offer at the door of the court of £50,000, being £15,000 more than First Stop’s Part 36 offer. Her schedule of special damages had sought £175,000, her budgeted costs had been revised at £117,000 and her costs had been assessed at £115,000. Don the proportionality wig and that figure was cut down by £40,000, which, with the costs of the assessment (Part 36 offer not beaten) and of the appeal, Mrs Reynolds, like Mrs Salmon, ended up with nothing save to crave the indulgence of her solicitors not to take the whole of her compensation in order to cover some of the shortfall in her costs.

Two points need to be taken from these outcomes. First, where, as appears to be happening, the costs budgeting court approves budgets which are out of all proportion to the value of the case, in doing so, trouble is simply being stored up for detailed assessment. In Harrison itself, the damages were limited to £50,000 but the costs budget had recorded figures of £197,000 for the incurred and post-budget costs in a case which had settled just before trial for £20,000. Little wonder that when the success fee and ATE insurance premiums were added, making the bill £467,000, the defendants jumped up and down banging the proportionality drum.

Second, regard should be had to what Sir Rupert Jackson actually said about proportionality in his Final Report in his Review of Civil Litigation Costs:

“The judge carrying out costs management will not only scrutinise the reasonableness of each party’s budget, but also stand back and consider whether the total sums on each side are proportionate in accordance with the new definition. If the total figures are not proportionate, then the judge will only approve the budgeted figures for each party which are proportionate. Thereafter, both parties, if they choose to press on, will be litigating in part at their own expense. … It would not be right for costs management to be carried out solely on the basis of reasonableness and then for the proportionality provision to come into play for the first time at the final assessment of costs.” – Chapter 40 – 7.23–7.24.

That extract makes it plain as a pike-staff that the costs budgeting court will have regard to the proportionality of the costs at the budgeting stage. However, the cases mentioned in this Bulletin indicate that even if judicial minds are being thus directed, budgets which outweigh the claimants’ best cases on damages several times over are doing them no favours, if the result is that the prize for which they fought subsequently disappears in costs due to CPR 44.3(5). Quite apart from such results being unjust, it is scarcely credible that these outcomes were what Sir Rupert had in mind when he wrote his Report a decade ago.

Another Costs Pilot Scheme

Whilst on the subject of the Jackson Report, what has happened to another of his recommendations, the electronic bill? One year on from implementation and still not one such bill has graced the Senior Courts Costs Office from start to finish, although one of your Editors is hoping to sit in the Gods early next month to witness an electronic baptism over five listed court days!

Whatever happens about the electronic bill, practitioners who like electronic working can use a pilot scheme which has just gone “live”.

A change in the Practice Direction made under CPR 51.2 entitled “Practice Direction 51X – New Statement of Costs for Summary Assessment Pilot”, provides for a pilot scheme to operate from 1 April 2019 until 31 March 2021. This will apply to all claims in which costs are to be assessed, whenever commenced. Parties who wish to participate in the Pilot have the option of using a new Form N260A at the conclusion of an Application or Form N260B when costs have been incurred “up to trial”.

The critical difference between these forms and their predecessor Form N260 is that, under paragraph 5 of the PD, the documents schedule can be:

“created from electronic time records by filtering the time that is recovered under the activity described in Schedule 2 to PD 47 as ‘10 – Plan, Prepare, Draft, Review’. This may then be sorted and presented first by grade of fee earner and then chronologically.”

Both forms are available in paper/PDF form, and in electronic spreadsheet format, but, if the latter is used, the parties must still file and serve the paper/PD format at the same time as providing (note the use of the word “providing” rather than “serving”) the electronic spreadsheet.

There is a further requirement where Form N260B is being used at the end of the trial. Precedent Q (the form of breakdown of costs claimed in each phase of the proceedings, showing any departure over or under, from the last approved or agreed budget), must be filed and served at the same time. Both new forms are more complicated and contain additional detail to their predecessor, which poses the question, if summary assessment is supposed to be quick and proportionate, how will that be achieved where a new layer of detail has been added?

Lastly, as a bit of light relief, an anecdote about the late Lord Justice Neill (see our tribute Bulletin February 2018) which appeared in his obituary carried by Marylebone Cricket Club of which he was a member for 50 years.

“His time as a barrister was noted for a string of colourful libel cases, including a defence of Ossie Wheatley, Glamorgan’s captain, who had been accused by the Daily Sketch of playing in a match after an all-night party. Neill won damages, even though the fact that Wheatley had attended the toss in his dinner jacket formed a central plank of the newspaper’s case!”

Those were the days!

The Costs Law Conference 2019 (September 25)

Speakers at this year’s conference will include Nicholas Bacon QC, Dominic Regan, Simon Browne QC, Alexander Hutton QC, Roger Mallalieu, Shaman Kapoor, Matthew Waszak, Juliet Wells, Master Jennifer James, Master Colum Leonard and the Senior Costs Judge, Master Andrew Gordon-Saker. The latest update from the conference can be found here.

The headnotes and full texts of the cases below are available to online subscribers at Follow Costs Law Reports on Twitter to be notified of new cases as soon as they are published.

New cases this month

Tynan v J4K Sports Ltd [2019] 1 Costs LR 1: Appropriate costs order in the Business and Property Court following the striking out of the defence and counterclaim: whether the costs cap of £50,000 applicable in the IPEC should be raised on account of the conduct of a party.

Wilson v Commissioner of Police of the Metropolis and Another [2019] 1 Costs LR 11: Liability for costs applications in the Investigatory Powers Tribunal concerning the discharge of disclosure orders and the abandonment of a limitation defence.

E v The Commissioners for Her Majesty’s Revenue & Customs [2019] 1 Costs LR 15: Costs award following withdrawal of an information notice under Finance Act 2008: date from which costs order should run where the party withdrawing the notice had acted reasonably.

Optaglio Ltd v Tethal and Another [2019] 1 Costs LR 41: Security for costs under CPR Part 25: factors to apply on a late application for security in litigation ongoing for five years.

Koshigi Ltd and Another v Donna Union Foundation and Another [2019] 1 Costs LR 51: Costs incurred under the Arbitration Act 1996 following discontinuance: whether payable on the indemnity basis, the claimants’ conduct having taken them out of the norm.

Channel 4 Television Corporation v The Commissioner for Police for the Metropolis [2019] 1 Costs LR 67: Costs of production application in proceedings ongoing in the Central Criminal Court: jurisdiction, if any, to make a costs order under the Terrorism Act 2000 in respect of the costs incurred in opposing such an application. FREE THIS MONTH!

Other recent cases

Andrews and Others v Messer Beg Ltd; Messer Beg Ltd v Lowe [2019] 1 Costs LO 1: The extent of the duty on instructed counsel to advise on methods of funding litigation: whether actionable at law; duty, if any, on instructed leading counsel to delegate work to junior counsel.

ABX v SBX and Another [2019] 1 Costs LO 7: Costs in the Family Division: financial remedy order: appropriate order for costs where the costs of both parties had been out of proportion to the size of the matrimonial assets and both husband and wife had taken unreasonable positions during the litigation.

Griffith v Gourgey and Others [2019] 1 Costs LO 43: Indemnity basis costs: whether to order indemnity not standard basis costs on failure to comply with the Practice Direction Pre-Action Conduct and Protocols, para 6.

Griffith v Gourgey and Others; Mewslade Holdings Ltd v Gourgey and Others; Griffith v Gourgey and Others [2019] 1 Costs LO 53: Interest on costs under CPR 40.8(1): date from which interest should run on costs to be paid by one party to the other.

Various Claimants v Giambrone & Law (a Firm) and Others [2019] 1 Costs LO 63: Non-party costs orders: factors to apply when making a non-party costs order under s 51 Senior Courts Act 1981 against a professional indemnity insurer.

Airways Pension Scheme Trustee Ltd v Fielder and Another [2019] 1 Costs LO 121: Indemnity for costs from trust assets; factors to consider on a Beddoe application by trustees of a pension fund for an indemnity for costs of an appeal and for any adverse costs.

JSC VTB Bank v Skurikhin and Others [2019] 1 Costs LO 161: Staying execution of a judgment or order under CPR 83.7(4)(a): whether to stay until further order payment of costs awarded following a failed application for security for costs.

Arcadia Group Ltd and Others v Telegraph Media Group Ltd [2019] 1 Costs LO 169: Costs budgeting in privacy action where the proportionality of costs cannot be assessed by reference to damages or other financial yardstick: hourly expense rates for budgeted work.

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