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Today we publish online the cases from the forthcoming first print edition of Costs Law Reports for 2017. Two decisions are of particular importance. In Sharp v Leeds City Council [2017] 1 Costs LR 129, the Court of Appeal has upheld the decision of the circuit judge on appeal from the district judge that for applications for pre-action disclosure, in claims to which the fixed costs set out in Section IIIA of Part 45 applies, the tariff figure of £305 is payable and not the figure of £1,250 which had been originally allowed on summary assessment. An article prepared by Catherine Moran, a costs lawyer at your co-author’s firm at Partners in Costs Legal, explains all below.

The second case is Merrix v Heart of England NHS Foundation Trust [2017] 1 Costs LR 91. This has resolved for the time being a conundrum which has faced costs judges carrying out assessments ever since costs budgeting was introduced under CPR 3.15–3.18 in April 2013. The dilemma has been this: what weight is to be given to a costs budget when a bill between the parties is brought in for assessment? A receiving party would put its case on the basis that the costs should be allowed as claimed unless the paying party is able to satisfy an evidential burden that there is “good reason” to depart from the approved or agreed budget. A contrary review would be advanced by the paying party: its case would be based upon the proposition that no fetter exists to curb the powers or discretion of the court when carrying out an assessment: the budget is but one factor to be considered in determining reasonable and proportionate costs. Thus, on the paying party’s case, there can be no “ticking through” of the budgeted costs: notwithstanding the budget, those costs remain susceptible to a line by line assessment just as they would have been before the implementation of CPR 3.15.

In Merrix, the court had made a costs management order under CPR 3.15(2), approving the claimant’s costs budget in the sum of £128,256, of which £74,708 related to future costs. Before the district judge, the parties argued the following point for a preliminary determination:

“To what extent, if at all, does the costs budgeting regime under CPR 3 fetter the powers and discretion of the costs judge at a detailed assessment of costs under CPR 47.”

In the world in which those giving judgments now move, the answer took the district judge a mere 64 paragraphs to provide, with Carr J on appeal from his decision just missing her ton with 96 paragraphs. The latter left no stone unturned in her detailed analysis of all decisions at whatever level on the point in question, no doubt casting an eye over her shoulder and wondering what the Court of Appeal might say, were the case to go further (as she thought it would). However, in the end, she reversed the district judge, who had accepted the paying party’s arguments, and held at para 92 that:

“Where a costs management order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted.”

The consequence of this for the detailed assessment is now clear. The costs judge is bound by the agreed or approved budget unless there is good reason to depart from it. The words of CPR 3.18 cannot be squared with the suggestion that the costs judge is permitted to depart from the costs budget without good reason and to carry out a line by line assessment, merely using the budget as a guide or factor to be taken into account (judgment, para 67). With regard to proportionality, such an approach does not make it impossible to apply the proportionality test under CPR 44.3. Proportionality will have been taken into account at the time of fixing the costs budget, but if there is a good reason to depart from that decision, the costs judge can do so. This might arise once the pre-incurred costs have been assessed at which point the amount allowed can be added to the budgeted costs with the overall total then to be subjected to an overall assessment for proportionality ([82]).

What does all this mean in layman’s terms? It appears to be that where a case has been budgeted and is subject to a costs management order, the amount of the approved or agreed budget will be ticked through on assessment. Only if a party can raise a “good reason” for not following that approach, will any effective challenge be possible to those costs.

What is a “good reason”? Carr J was careful to provide a politician’s answer: “There is no need for present purposes to examine in any detail what might and might not be a ‘good reason’ for the purposes of CPR 3.18.” In fairness, she did go on to say that if the receiving party spends less than was agreed or approved in the budget, the need to comply with the indemnity principle would require a departure from the budget, but further than that she was unwilling to go. Thus it falls to the authors, in considering whether detailed assessment must “R.I.P following Merrix”, to undertake some “best guessing” to provide an answer.

Here are some thoughts. Suppose the case has gone short due to a settlement and not all the money authorised in each phase has been spent; absent agreement, it will be for the court on detailed assessment to decide where the guillotine should drop: for example, if the case settles a month before trial, but by then the winner has already delivered counsel’s brief, what amount, if any, should be payable? What about an issue-based costs order – see for example Ashgar v Ahmad [2015] 4 Costs LR 617 – or where there has been a claim and counterclaim and each party has been successful (and unsuccessful) or there are multiple parties. How can the court possibly tick through the budgeted costs when those costs to which the receiving party is not entitled must be separated out? Then there are the pre-budget costs, that is to say, the costs that the parties have incurred for work done before the costs budget was fixed. None of that can be touched by the judge who approves the costs budget, and in many cases they can be in the hundreds of thousands of pounds. Those costs, when assessed, may then need to be aggregated with the budgeted costs in the way postulated by Carr J for proportionality purposes. And what about assumptions: if the budget was prepared on the assumption that three experts would be required but, in the event, the prognosis changed or an admission lessened the need for them, how is that factor to be reflected in the budgeted costs? “Ticking through” is not something for which insurance companies have a reputation for agreeing to with any willingness.

Dramatic though the decision in Merrix appears to be at first sight, the reality is that paying parties are unlikely to be reaching for their cheque books just yet. “Good reason” has the potential to generate much satellite litigation just as arguments did when Mitchell v NGN [2013] 6 Costs LR 1008 and the “good reason for the default” test was all the rage, and in the decade before that, when the “materially adverse affect” test in Hollins v Russell [2003] 3 Costs LR 423 was in vogue. Costs judges, paying parties, solicitors and costs lawyers do not need to queue up for their P45s quite yet!

Now fixed costs.

In Sharp v Leeds City Council [2017] 1 Costs LR 129 the Court of Appeal considered whether the regime for fixed costs provided by Section IIIA of Part 45 for claims which started, but no longer continue, under the EL/PL Protocol applies to the costs of an application for pre-action disclosure in connection with such a claim.

There has previously been inconsistency between judges on the determination of pre-action disclosure applications of this type, with some courts assuming the fixed costs regime applies, treating the pre-action disclosure application as an interim application within the meaning of Part 45.29H, and other courts treating the costs of pre-action disclosure applications as if they were governed by CPR 46.1, and generally summarily assessing costs on the standard basis.

In this claim the court had awarded the claimant’s costs of her application for pre-action disclosure as if governed by CPR 46.1 and summarily assessed them at £1,250.00. On appeal, the court concluded that the fixed costs regime applied to the pre-action disclosure application, resulting in costs being reduced to £305.00.

The Court of Appeal held that:

“the fixed costs regime plainly applies to the costs of a PAD application made by a claimant who is pursuing a claim for damages for personal injuries which began with the issue of a CNF in the Portal pursuant to the EL/PL Protocol but which, at the time of the PAD application, is no longer continuing under that Protocol.”

Although this judgment is perhaps not the most desired outcome for claimant solicitors, it provides clarity as to the position to enable practitioners to consider the cost/benefit of making pre-action disclosure applications in low value personal injury claims. Interestingly, the judgment highlights that there remains scope to make an application under CPR 45.29J, to claim for an amount exceeding fixed recoverable costs, if exceptional circumstances can be shown. It was further noted that a defendant’s deliberate disregard of protocol disclosure obligations would not be regarded as unexceptional merely because it was frequently encountered. All is therefore not lost. However, it must be remembered that, pursuant to CPR 45.29K, unless costs are assessed at more than 20% of the amount of the fixed recoverable costs, the court will in any event only allow the fixed recoverable costs.

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

NJ Rickard Ltd v Holloway and Another [2017] 1 Costs LR 1: CPR 36.5, validity of Part 36 offer; CPR 44.2, court’s discretion as to costs; failure to mediate.

Powles and Another v Reeves and Others [2017] 1 Costs LR 19: Appeal against costs order made by court after parties settled substantive issues; whether court can have regard to the schedules to Tomlin orders when determining the order for costs.

Taylor v Honiton Town Council and Another [2017] 1 Costs LR 31: Costs in the Administrative Court; relevance of conduct before the issue of proceedings in deciding whether to depart from the general rule that the unsuccessful party pays the successful party’s costs.

Pollard v University Hospitals of North Midlands NHS Trust [2017] 1 Costs LR 45: Relief from sanctions following late service of an appellant’s notice: principles to apply when reducing an ATE premium on a summary assessment of costs at the conclusion of a fast track trial.

MR v SR and Another [2017] Costs LR 71: Rule 159 Court of Protection Rules 2007; court’s discretion to award costs in Court of Protection proceedings.

R v Patel (Hitendra) [2017] 1 Costs LR 77: Factors to apply on an application to revoke a defendant’s costs order; the payment of costs out of Central Funds under s 16(9)(b) Prosecution of Offenders Act 1985.

Merrix v Heart of England NHS Foundation Trust [2017] 1 Costs LR 91: Costs budgeting and detailed assessment: the costs judge is bound by the approved or agreed cost budget unless “good reason” under CPR 3.18(b) can be shown by the paying party to depart from it.

Sharp v Leeds City Council [2017] 1 Costs LR 129: Whether the regime for fixed costs provided by Section IIIA of Part 45 for claims which started, but no longer continue, under EL/PL Protocol applies to the costs of an application under s 52 of County Courts Act 1984 for pre-action disclosure in connection with such a claim.

Lord Chancellor v Edward Hayes LLP and Another [2017] 1 Costs LR 147: Claims for graduated fees under the Criminal Legal Aid (Remuneration) Regulations 2013 for reviewing evidence included on a disc but served by prosecution counsel rather than the CPS; whether payable as pages of prosecution evidence.

Thompson v Director of Legal Aid Casework [2017] 1 Costs LR 163: Judicial review of decision by Director of Legal Aid Casework refusing to grant exceptional funding under s 10 Legal Aid, Sentencing and Punishment of Offenders Act 2012.

R (Haigh) v City of Westminster Magistrates’ Court and Others [2017] 1 Costs LR 175: Costs payable under Prosecution of Offenders Act 1985 in a failed private prosecution; proportionality of such costs when assessed by summary assessment.

AZ and Others v Kirklees Council; Re CZ (Human Rights Claim: Costs) [2017] 1 Costs LR 201: Declarations and damages claimed for breach of the applicants’ human rights under Article 6 ECHR: whether the damages should be subject to the legal aid statutory charge and, if so, how the applicants could thereby achieve an effective remedy under Article 13.

Costs and Fees Encyclopaedia updating

The Civil Proceedings Fees (Amendment) Order 2016 (SI 2016/1191) amend the Civil Proceedings Fees Order 2008 (S.I. 2008/1053), with effect from 6 March 2017, amending the timescales in which fee 2.1 is payable and removes the availability of refunds for certain cases where they have been settled or discontinued. Updated pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 233, 236, 247

The Ecclesiastical Judges, Legal Officers and Others (Fees) Order 2016 (SI 2016/0814) replaced the 2015 order of that name with effect from 1 January 2017. Updated pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 267–274

The First-tier Tribunal (Immigration and Asylum Chamber) Fees Order 2011 (S.I. 2011/2841), as amended by the First-tier Tribunal (Immigration and Asylum Chamber) Fees (Amendment) Order 2016 (SI 2016/928) with effect from 10 October 2016, has been added to the Costs and Fees Encyclopaedia. New pages are now available for printing out and adding to your Costs and Fees Encyclopaedia: Page 287 onward

The Immigration and Nationality (Fees) (Amendment) Regulations 2016 (SI 2016/929) amended the Immigration and Nationality (Fees) Regulations 2016 (S.I. 2016/226), with effect from 6 October 2016. Updated versions of the pages affected are now available for printing out and adding to your Costs and Fees Encyclopaedia: Pages 323–324, 335, 337, 341–343

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