The Court of Appeal has handed down judgment in the case of Hislop v Perde, which related to the Defendant's late acceptance of a Part 36 offer made by the Claimant.
The Claimant had made a Part 36 offer of £1500 which was rejected by the Defendant. However, 18 months later and only one week prior to trial, the Defendant decided to accept the offer.
The Claimant argued that the delay constituted "exceptional circumstances" and that the costs incurred after the expiry of the 21 day period should be awarded to the Claimant on the indemnity basis.
The Judgment of Lord Justice Coulson confirmed that the delay, even without any reasonable justification, could not be considered to be a trigger under the exceptional circumstances provision. The rules were the same for both the Claimant and the Defendant and there could be no presumption that accepting an offer out of time could be regarded as exceptional.
Comment: This decision was wholly expected. The rules are quite clear on this and work both ways for Claimants and Defendants. The outcome will not always seem to be fair on the reading of an individual case such as with this one, but all parties know where they stand.
It becomes important for all parties to be aware of the offers they have on the table. There is no suggestion here that the Claimant was no longer happy to accept the offer for damages, but if some considerable time has passed since a Part 36 offer was made then it is prudent to ensure that it still represents a reasonable or acceptable level of damages. The option is always open to withdraw historical offers.
The Court of Appeal in the case of Gempride Ltd v Bamrah & Anor  EWCA Civ 1367 has set down a marker in relation to misconduct in Detailed Assessment proceedings.
The Claimant had settled her case for personal injury in the sum of £50,000.00 and had instructed costing firm Lawlords to prepare a bill of costs. The Costs Draftsman who prepared the bill included hourly rates exceeding those that had been agreed in the retainer, thus breaching the indemnity principle.
Replies to Points of Dispute had also erroneously stated that Before the Event insurance was not available.
Master Leonard in the SCCO heard the matter at first instance where he decided that the Claimant should be limited in part of the bill to the litigant in person rate of £19 per hour.
On appeal, His Honour Judge Mitchell in Central London County Court reversed the decision because, amongst other things, Lawlords had failed to act upon the Claimant's instructions and actually acted contrary to those instructions.
The Defendant appealed and the Court of Appeal has upheld the appeal on numerous different grounds:
1. The Solicitor with conduct remained ultimately responsible for the bill of costs, whether the preparation was outsourced to an agent or not.
2. That the Judge on first appeal had failed to consider whether the Claimant's conduct was "unreasonable or improper". In signing the bill of costs to state that "the costs claimed do not exceed the the costs which the receiving party is required to pay me/my firm", the Claimant's conduct was improper.
3. The ruling on appeal relating to the BTE insurance was also wrong. HHJ Mitchell erred in finding that the Claimant was right to state that there was no cover available on the basis that the solicitor that the Claimant wished to instruct would not do so on the terms available.
The initial ruling of Master Leonard that the Claimant was not dishonest was followed, though the Court of Appeal expressed the opinion that the Claimant's conduct was serious even within the parameters of "unreasonable and improper" conduct.
The Court of Appeal considered that the original decision of Master Leonard to reduce the rate to the Litigant in Person rate was too harsh and it was decided that the Claimant's profit costs should be reduced by half.
Comment: Given the serious nature of the allegations and the breach of the indemnity principle, it could be argued that the Claimant was lucky to recover 50% of her profit costs in this matter. Indeed, if the initial decision had been that the conduct was dishonest, the sanction would undoubtedly have been far harsher.
This decision highlights the importance of ensuring that any agents instructed are acting in accordance with the rules and regulations. Responsibility rests with the Solicitor with conduct, so all bills of costs should be carefully checked before being signed to avoid any such pitfalls.
The long-awaited new format bill of costs will finally be introduced on 6 April 2018.
Its impact is unlikely to be too keenly felt for the initial few months, as it will only apply to work carried out on or after 6 April 2018.
It also only applies to Part 7 multi track cases, though the Court does have discretion to order that the bill must be in the new format even if the case does not fall into this category, so practitioners should make sure they carefully check the orders they receive from the Court where issuing Part 8 costs only proceedings.
J Codes are not mandatory, but it is wholly likely that they will be used as the rules provide that any alternative must be at least as detailed as the J Codes. In reality, there is little to be gained from seeking to use an alternative, unless your current time recording system includes a coding system that is detailed and accurate enough to comply with the rules.
Delays in the introduction of the new format bill have apparently been down to investment in dual screens at all Courts to allow the parties to be able to view the changes being made to the bill on any assessment of costs.
In any event, the time has come to get to grips with the new bill and J Codes. We are fully ready for the change here at Sextons Legal and can help and assist any Solicitors with the new requirements, so do not hesitate to get in touch if you need assistance.
In other news, the well known Boxing promotor Frank Warren has lost a case against his former Solicitor relating to two cases pursued against the Boxer Ricky Burns and his agent. The cases were successful but Mr Warren received no money due to the Bankruptcy of Mr Burns and his agent.
The terms of the CFAs agreed with his Solicitor were met in that a "win" had been achieved and payment of the Solicitors' fees were therefore due to be paid. Mr Warren argued that the Solicitor had agreed that payment would only fall due where there was a "net gain" to him.
Master Leonard refused to accept that explanation, as the contractual documentation referred on many occasions to Mr Warren's liability to pay those fees, whether recovered from his opponent or not. It was ordered that the Solicitor could enforce the CFAs against Mr Warren.
The recent judgment from the appeal in the case of May v Wavell group has given parties a little more to chew on in terms of guidance on the application of proportionality. However, it is not guidance from the Court of Appeal and can only be taken as a reasonable indicator of the approach to be taken.
The comment that seems to have gained the most coverage in the days following the judgment was His Honour Judge Dight's comment that proportionality was not a "blunt instrument" with which to arbitrarily reduce costs that have been assessed as reasonable on a line by line basis.
The judgment does give some reasonable insight to the thoughts of HHJ Dight on the process and much of what is said seems eminently sensible. I do believe that there must be good reason to make further reductions to costs that have already been deemed to be reasonably incurred and reasonable in amount. If the approach suggested is adopted around the country on detailed assessment, then one could reasonably expect that in many cases there would be no further reduction made and where there is a reduction made, it will not be substantial.
My concern is in the comments made with regard to the intention of the rules committee. HHJ Dight stated:
“I doubt that the rules committee intended that a costs judge could or should bypass an item-by-item assessment and simply impose what he or she believed to be a proportionate global figure."
The practical implementation of the test requires the judge to have made a line by line assessment of the figures before the new test is applied, but it seems to me that it certainly is open to the judge to impose whatever sanction is felt necessary to bring the recoverable costs down to a "reasonable and proportionate figure". On that basis, the comments of HHJ Dight make little sense from a practical implementation standpoint.
This judgment just serves to muddy the waters yet further on proportionality. There is a real requirement for the Court of Appeal to give some firm guidance to practitioners on this point or we will continue to struggle in the dark with this issue. It is a shame that the Court of Appeal did not take the opportunity when hearing the appeal in the matter of BNM v Newsgroup Newspapers to provide some meaningful guidance on proportionality.
Lets hope that this is to come at some stage and the sooner the better for all.
The Court of Appeal has ruled that a CFA was validly assigned from one law firm to another in a case that has wider implications for the recovery of success fees for many firms around the country.
The CFA had been assigned from Baker Rees Solicitors to Hudgell Solicitors shortly before the introduction of the Jackson reforms on 1 April 2013 but the Claimant did not consent to the assignment until after the introduction of the reforms.
On first instance, District Judge Besford found that the CFA had not been validly assigned as it had been terminated when Baker Rees closed their personal injury department.
On appeal, Lady Justice Gloster found that DJ Besford had misdirected himself on the basis that the Claimant had not treated the CFA as terminated.
It was found that there had been a novation rather than an assignment with LJ Gloster commenting:
"it is clear that, objectively construed, the intention of the parties was that Hudgell should simply be substituted in Baker Rees' place under and subject to the same terms of the existing and continuing retainer. It would be an over-technical application of the doctrine of novation so as to prevent any litigant, who had begun a claim under a CFA prior to 1 April 2013, from recovering costs in respect of a success fee, simply because a novation had occurred as a result of a change in the constitution of the firm of solicitors acting for her or as a result of the conduct of her claim being transferred for whatever reason to a new firm of Solicitors."
Reference was made to the previous lead authority relating to assignment of a CFA, Jenkins v Young Brothers Transport Ltd, which had confirmed that a CFA could be validly assigned between firms of Solicitors on the basis that the Solicitor with conduct had changed firms and had taken the case to the new firm.
LJ Gloster confirmed that the Solicitor with conduct was not relevant:
"the CFA between a client and his client in such a case lacks the features of a personal contract. What the client wants is representation by a competent practitioner and not necessarily representation by a specific individual."
Comment: This is described by Neil Hudgell of Hudgell Solicitors as "an eminently sensible decision". The alternative would have left thousands of clients without a valid retainer and without a right of recovery of their costs against the paying party. Against that backdrop, it is hardly a surprise that the Court of Appeal worked hard to find a resolution that favoured the Claimant.
Whether the decision is correct in law is open to debate, but there can be no doubt that the alternative would have led to many paying parties receiving an unmerited windfall.
The long-awaited judgment following the appeal hearing in the case of BNM v Mirror Group Newspapers Ltd  EWCA Civ 1764 was handed down this morning. Many cases around the country had been stayed pending the judgment in the case in the hope that some clear guidance would be given in relation to the application of the new proportionality test.
Simon Browne QC (who acted for the Claimant in the appeal) had warned that the judgment would not be the "sermon on the mount" and that proved to be the case as the guidance that many had hoped for failed to materialise, so practitioners are still left to grapple with the concept over 4 and a half years since the introduction of the new test.
One area that the Court of Appeal did provide some clarity on was the application of additional liabilities in relation to the new proportionality test. The Court of Appeal found that, where recoverable additional liabilities still apply, they are not to be taken into account when considering the application of proportionality under the new test.
Master Gordon-Saker had considered that the new test should include any recoverable additional liabilities and the Court of Appeal remitted the matter back to the Master to consider proportionality again in the light of this decision.
As we reported at the time of the appeal hearing, there are other cases in progress that relate to the application of the new proportionality test. It is to be hoped that the Court of Appeal will take the opportunity to provide some guidance to practitioners in the not too distant future, but for now the status quo remains.
The Court of appeal has ruled in the case of Howlett v Davies and Anr  EWCA Civ 1696 that a Defendant does not have to specifically plead fundamental dishonesty to apply for QOCS to be disapplied.
Lord Justice Newey confirmed that there was enough evidence within the pleadings of the Defendant's doubts over the Claimants' honesty to ensure that the Claimants' were not ambushed at trial.
It was found that it was not necessary for the Defendant to have alleged fundamental dishonesty in the pleadings for the judge to find that a witness was lying and to disapply QOCS.
This seems a sensible decision to me. It is important that each party has their cards on the table ahead of trial to avoid ambush, but the Defendant has to prepare a Defence at a point where not all the facts of the Claimant's case are known.
An allegation of fraud is a serious allegation to make and it must be open to a Defendant to raise issues over conduct without pleading fundamental dishonesty.
The Court can then consider the case pleaded by the Claimant against all the facts at trial and make a decision as to whether the Claimant has been fundamentally dishonest.
Interestingly, one of the issues raised by Counsel on behalf of the Defendant was that an allegation of fundamental dishonesty in the Defence would make it more likely that the matter would be allocated to the Multi Track. This shows just how much a Defendant insurer (in this case Ageas) will consider the costs liability when dealing with a matter.
Surely it is in the Defendants interests that a case they believe is potentially fraudulent be subjected to the greater scrutiny that an allocation to the Multi Track could bring. In my view, this is exactly what Defendant insurers should be doing, but it seems that they are content to attack the outcome rather than the cause of the problem.
In other news, the government are due to assess the progress of the Jackson reforms before the summer of 2018. The suggestion is that the exception on recoverability of additional liabilities afforded to mesothelioma cases is likely to be removed but that everything else is working well. Time will tell!
The long awaited decision in the case of BNM v Mirror Group Newspapers will be awaited a little while longer!
The hearing of the appeal took place on 11 October before Sir Terence Etherton (the Master of the Rolls), LJ Longmore and LJ Irwin.
Alexander Hutton QC and Jamie Carpenter represented MGN and Simon Browne QC and James Laughland represented BNM.
Reference was made during the hearing to a number of other appeal hearings that the Court of Appeal are due to hear.
The cases of Reynolds v Nottingham University Hospitals Foundation Trust, McMenemy v Peterborough & Stamford Hospitals NHS Foundation Trust, West v Stockport NHS Foundation Trust and Demouilpied v Stockport NHS Foundation Trust are all due to be heard in the Court of Appeal and the Master of the Rolls appeared keen that the facts of all these cases be considered before the judgment be handed down.
David Bowden, a journalist who attended the hearing, reported that the judgment was reserved and was unlikely to be handed down until after the hearings of Reynolds and McMenemy (both were listed to be heard on 17 or 18 October).
It is to be hoped that the judgment is handed down swiftly, as there are numerous cases around the country that have been stayed pending the decision in this case. It is farcical that it has taken this long for the issue to come before the Court of Appeal.
Hopefully practitioners will not have too much longer to wait!
After a long wait for some clarity from the Court of Appeal in relation to proportionality, the hearing of the appeal in the case of BNM v Mirror Group Newspapers is due on October 10 or 11.
It seems ridiculous that it has taken so long for some guidance to be given in relation to Proportionality, one of Lord Justice Jackson’s key reforms (introduced as long ago as April 2013!). Costs practitioners during that time have been negotiating with one hand tied behind their back, as nobody could predict with any kind of accuracy how the Courts might view Proportionality on a case by case basis.
Whatever the outcome might be, it will be good to finally have some meaningful guidance on this issue. Keep your eye out for our summary of the judgment once it is handed down. Hopefully, if it is reserved, we won’t be waiting too long to hear the outcome!
In other news, Lord Justice Jackson has confirmed that 10 of the 16 causes of excessive costs are “sorted or improving”.
The issues that remain are Court fees, guideline hourly rates, pre-issue costs, time consuming procedures and the “complexity of law”.
Lord Justice Jackson was critical of the government in not setting up a new body to consider the issue of guideline hourly rates, though he considered that was “receding in importance” as a result of the success of other reforms.
He also recommended primary legislation be passed to introduce costs management and a grid of costs to control pre-issue costs.
In good news for lawyers (particularly those in the costs profession!), Lord Justice Jackson was positive about the progress made in relation to costs budgeting stating that “solicitors and barristers are much better at budgeting cases and discussing costs at hearings”.
He did, however, state that fixed costs for cases up to £25,000.00 would be possible in medical negligence cases though he conceded that medical negligence was a “very difficult subject”. He did not consider that many cases would fall into the fast track or the proposed intermediate track.
Whatever the outcome of the hearing in BNM, October is set to be a busy month for the costs profession!
Why hourly rates should not be reduced for budgeted costs where rates reduced for incurred costs on assessment
In the recent case of RNB v London Borough of Newham, Deputy Master Campbell found that reducing the hourly rates for the incurred costs was a “good reason” for reductions to be made to the budgeted costs. Deputy Master Campbell stated that “to do otherwise would mean that the Claimant would recover an hourly rate at a level that significantly exceeds the figure I consider to be reasonable and proportionate for the pre-budget stage”.
That decision is now being appealed and I would be surprised if the Court of Appeal supported the Deputy Master in his decision.
To an extent, I can understand the Deputy Master’s reasoning but the decision to my mind misses the point of the costs budgeting process.
The CPR was changed in recent time to cover the reference to hourly rates in costs management and the CPR now states:
“The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget”
The Court therefore approves a budgeted figure for each phase, with the parties then at liberty to use that allowance however they see fit (ie a small amount of partner time with a lot of lower grade fee earner assistance may be the approach taken or a larger amount of partner time with a smaller amount of lower grade fee earner assistance may be preferred). Ultimately, it is for the parties to manage the costs they are incurring and attempt to ensure that they fall within the budgeted figure.
In Harrison v University Hospitals Coventry & Warwickshire NHS Trust  EWCA Civ 792, it was confirmed that there must be “good reason” for costs to be reduced below the level of the budget as well as increased above it. I don’t consider that this represents a “good reason”.
For costs management to be successful, the outcome must be that it reduces the volume, the complexity and the time spent on detailed assessment. If a judge has set a budget at the costs management stage, there will have been some consideration of the underlying detail of each phase and this would include the hourly rates.
To revisit the rates on detailed assessment for budgeted costs would lead to more detailed assessments and increased costs being incurred.
If the budgeted hourly rates are left untouched, it may well result in a less than ideal outcome on the odd occasion, but a fair and reasonable outcome will be achieved in most cases and the costs management process will be stronger for it.