"Manifest plainness, embrace simplicity."
Lao-tsu (c.5604-c. 531 BC)

February 2009

No. 33 of 2008 Fulham Leisure Holdings Ltd v Nicholson
Graham & Jones [2006] EWHC 2428 (Ch)
5 October 2006 Mann J

Expert’s fees: this is not a 2008 case but is included in order to highlight the guidance given by Judge in paragraphs 14 and 15 about the recoverability of expert’s fees on detailed assessment:

“14. The defendants instructed an expert … his reports were served. The claimant did not prepare or serve any equivalent evidence. At the trial the defendants decided not to call the expert and I was not invited to read the reports. In the circumstances the claimant maintains that the defendants should not be allowed any part of the costs of and relating to this expert evidence and indeed say it should have its own costs of dealing with it.

15. I do not accept that there mere fact that the evidence was not deployed is sufficient to justify my disallowing the costs of the experts. This is wrong in principle and likely to lead to witnesses being called merely so as to enable the calling party to be able to recover the costs relating to that witness. It is wrong in principle because the proper question seems to me to be whether the costs were reasonable. That question is not necessarily determined by whether the witness is called. There may be good reasons for having evidence available, and, the, because of the course that the trial takes, deciding for perfectly good reasons not to call that witness. Were it otherwise then there would be a risk of the relevant part calling someone who has become an unnecessary witness merely so as to be able to claim the costs of that witness at the end of the day (or to resist a submission that he/she should not have those costs).”

No. 34 of 2008 Dunn v Mici 25 June 2008
Master Campbell

Challenge to validity of CFA for want of compliance with Regulation 4(2)(c) Conditional Fee Regulations (2000) Legal Representative required to inform client whether the risk of incurring liability for costs in the proceedings to which the agreement relates is insured under an existing contract of insurance).

CFA signed by claimant’s mother as claimant’s “litigation friend”. It was common ground that the mother did not receive any advice under Regulation 4. On assessment, D contended that C’s mother was the client and that the CFA was unenforceable for want of Reg. 4 advice. That argument failed. The son was the client, not his mother. He had attained 18 years by the time the action was brought so the expression “litigation friend” in the CFA had no significance under CPR 21 (requirement to appoint a litigation friend on commencement of proceedings if part is under 18). Since the Mother was not “the client” there was no obligation on the legal representative to give her any advice under Regulation 4, nor had she assumed any liability to pay her son’s solicitor’s costs by reference to Regulation 1(3) CFA Regulations (a person who has instructed a legal representative to provide advocacy or litigation services to which a CFA relates or is liable to pay fees in respect of those services). CFA valid.

No. 35 of 2008 Dix v Frizzell Financial Services [2008]
EWHC 90117 (Costs) 30 June 2008
Deputy Master Williams

This judgment addressed two issues on the validity of the claimant’s retainer with his solicitors:

(1) Whether it was unlawful at common law to include a term in the Conditional Fee Agreement that the solicitors would indemnify their client against the opponent’s charges and disbursements were the case to be lost.

(2) Whether such a retainer was unenforceable by reason of Sections 23 and 26 Financial Services and Markets Act 2000 (“FSMA”) as an unauthorised “contract of insurance”.

On (1) the offending clause in the CFA said this:

“(e)(i) In all the circumstances, on the information currently available to use, we believe that a contract of insurance is not required.

(ii) In any event, we will indemnify you against your opponent’s charges and disbursements in case you lose.” [original emphasis] Held – CFA unenforceable (references to paras in Judgment).

“71. Although this agreement has some features which are in the interests of justice, the nature of this particular indemnity clause being a broad, uncapped, potentially large liability apparently unsupported by a fund or insurance policy, triggered upon the loss of the case whatever the cause, places the solicitor in the position of having too much at stake.

72. It would be unrealistic to expect a solicitor to keep a clear eye and unbiased judgment, and to maintain that proper distance from the client and the litigation which it is his duty to maintain, when the pressure mounts and ethical decisions are needed the consequences of which for the solicitor may be substantial personal liability under this clause.”

As to (2) the court held that the CFA looked as a whole had, as its primary objective, the supply of legal services on a CFA basis by a client to a solicitor. Accordingly the contract was not “a contract of insurance” and would not have been rendered unenforceable under Section 26 FSMA had issue (1) been decided in the claimant’s favour. (paragraph 118)

[Note: This is a brief summary; the judgment needs to be read to do justice to the submissions made and conclusions reached by the court].

No. 36 of 2008 Morris v John Dennis (Barnsley) Ltd (2008) EWHC 90112 (Costs) 17 July 2008
Master Gordon-Saker

Challenge to Conditional Fee Agreement for want of compliance with Section 58(4) Courts and Legal Servi9ces Act (1990).

D alleged that the “prescribed percentage” under S.58 (4)(b) (viz the success fee claimed at 100%) exceeded the “percentage specified” under sub-section (4)(c) by the Lord Chancellor (100% maximum) on the grounds that the agreement provided for: “In addition to our fees and disbursements, if your claim is successful, we will make a charge to you of £150 plus VAT and for our administrative work on your case.”

Accordingly, the success fee was not 100% but 100% plus the administrative fee of £150 plus VAT so the CFA did not comply with Section 58(4) and was unenforceable.

Held – The administrative charge was what it purported to be, an administrative charge for the administrative work done on the case. It was not an amount of other fees which are increased in specified circumstances but a stand alone fee payable in the event of success, in the same way that basic charges become payable only in the event of success. CFA enforceable.

No. 37 of 2008 Sihu v Sanhu & Anor [2008] EWHC 90108 (Costs) 24 July 2008 Master Simons

Conditional Fee Agreement; compliance with Regulation 3(1)(b) Conditional Fee Agreements Regulations (2000) (requirement to specify how much (if any) of the success fee relates to the cost to the legal representative of the postponement of payment of his fees and expenses).

Held – The CFA breached Regulation 3(1)(b) since the client did not know or, at the very least, would have been uncertain as to whether or not in view of contradictory statements made in the CFA he would have to bear any part of the success fee. Utting v McBain [2007] EWHC 3293 (QB) (No 19 of 2007) applied. Further, the breach was material since it had had an adverse affect on the protection afforded to the client and was contrary to the interests of the administration of justice.

No. 38 of 2008 Overton v Horder [2008] EWHC 90109 (Costs) 28 July 2008 Master Rogers

Compliance with Regulation 4(2)(3)(ii) Conditional Fee agreements Regulations (2000) (requirement for the legal representative to give information to the client about financing any or all of the costs and if a contract of insurance is considered appropriate or was recommended, the provision of the solicitors reasons for the recommendation and whether he has an interest in doing so).

C had been referred to her solicitors by Accident Advice Helpline (“AAH”)’ she entered into a CIFA with her solicitors and took out after the event insurance with NIG Skandia. Paragraph 5 of the CFA said this:

“Our [the solicitors] reasons for this [recommending the NIG policy] are: there are risks in any litigation and for your peace of mind it is important to ensure that your exposure to payment of fees and disbursements is insured. This policy not only indemnifies you against the risk of having to pay your opponent’s fees and disbursements. It also facilitates a funding arrangement with the bank specified in the Schedule under No. 7 of the Schedule (“the Bank”) to provide payment of some disbursements for which you are primarily liable as the case proceeds.”

D contended that the solicitors had failed to reveal to C that membership of AAH’s Panel required panel solicitors to recommend the NIG policy but that this had not been disclosed contrary to Regulation 4(2)(e)(ii). Accordingly the CFA was unenforceable.

Held – There was no evidence that the Solicitors would have lost panel membership if they had failed to recommend the NIG policy nor was it obligatory that they had to do so. No breach of Regulation 4(2)(e)(ii); CFA enforceable.

No. 39 of 2008 Lee v Birmingham City Council [2008]
EWCA Civ 891 30 July 2008
Thomas, Hughes & Rimer LJJ

Another round in the housing disrepair litigation between Birmingham City Council and its tenants. Where a tenant had served a pre-action protocol complaining about disrepair and the landlord had undertaken repairs within a month, thereby avoiding any need for court proceedings, the tenant (provided she was correct about liability) was entitled to fast track costs (the track to which the claim would have been allocated under CPR 27.14 had proceedings been issued) of advancing her claim by way of letter under the pre action protocol up to the date that the work was completed.

On the protocol – per Hughes LJ at paragraph 36:

“… That means that if she wins, she will have fast-rack costs of making the claim up to that date. If she fails, she will have nothing. Any costs order, in favour of either side, relating to the period after 26 September [date when work was completed] will remain governed by the allocation to the small claims track. The certain knowledge that that order will stand if she succeeds can inform any efforts to settle. In future cases of a similar kind, the expectation of an order such as this should have a similar effect, and it is to be hoped, without the need for litigation beyond the protocol negotiations.”

On costs- (proportionality and the success fee) at paragraphs 37 to 38:

“37. It appears from the claimant’s allocation questionnaire that her costs as at 4 June 2007 were put at approximately £7100. Those are base costs, to which no doubt a claim will be made to add whatever success fee has been agreed between solicitor and client. We do not know whether there is some special reason for such a level of costs, but Mr Luba [counsel for the respondent] did not attempt to suggest that they were justified. We say no more than that, unless there is some special factor, costs at that level look prima facie vastly disproportionate, and that if costs ever fall to be assessed they will need to be scrutinised with some little care.

(38) We are not to be taken to express any view as to whether any particular level of success fee is a recoverable element of the fast-track costs of making the protocol claim. That is a matter for assessment if it is not agreed. It does not follow, as it seems to us on first impression at least, that the same level of success fee appropriate to litigation is necessarily appropriate to the making of the protocol claim. It might be, but that will depend on the realities of the position, and the risk undertaken, as at the time of the advancing the claim.”

No. 40 of 2008 Dadu Ltd v Barrowfen Properties Ltd
[2008] EWHC 90110 (Costs) 5 August 2008
Master Rogers

Was the paying part entitled on detailed assessment of the receiving party’s bill to refer to a document entitled “without prejudice [rough estimate]” provided to the paying party in pre-settlement negotiations? That document had estimated the receiving party’s costs of £38,250 to 1 May 2005, whereas the bill for assessment to that date later sought £70,393. The paying part submitted that this called for an explanation under CPR 43 PD 6.5A(1) since the difference between the two figures exceeded 20%, in the absence of which the receiving party should be held to the lower figure.

Having reviewed the authorities, the court held that as the document had been marked “without prejudice” it should not be referred to during the course of the assessment for any purpose.

No 41 of 2008 Woolley v Haden Building Services Ltd
(No. 2) [2008] EWHC 90111 (Costs) 11 August 2008
Master Rogers

This judgment addressed six preliminary issues which arose on the assessment of the claimant’s bill in a substantial asbestosis case funded under a Conditional Fee Agreement. These included whether the cost of advice given by the claimant’s solicitors to their client about funding was recoverable. For its part, the defendant drew an analogy with advice about legal aid which has never been allowed on assessment between the parties and contended that the practice should be followed in relation to work concerning the claimant’s CFA. The claimant’s contention was that since the introduce of CFAs and the implementation of the CPR, matters had moved on and some Costs Judges now allow funding costs, for example in dealing with compliance issues under the CFA Regulations (2000). The court held that such costs have never been recoverable and nothing had changed as a result of the introduction of the CFA Regulations and CPR. Accordingly all costs relating to advice about funding would be disallowed.

No. 42 of 2008 In Re: X and Y (Bundles) [2008] EWHC 205A (Fam) 22 August 2008 Munby J

This judgment addresses the continuing failure by the legal professions (Solicitors and Barristers) to comply with their obligations under the Practice Direct (Family Proceedings; Court Bundles) [2000] 1 FLR 536 and Practice Direction: Court Bundles (Universal Practice to be applied in All Courts other than the Family Proceedings Court) [2006] 2 FLR 199. At paragraph 7 Munby J said this:

“It is the professional obligation of practitioners making a visit to some unfamiliar court or tribunal to identify in good time whether there is some particular Guide or Practice Direction or other document regulating practice before the court or tribunal and, if there is, to familiarise themselves with its requirements and then to carry them into effect.”

Munby J then gave two examples of egregious failures to comply with the relevant Practice Direction in his court.

At paragraph 18 he continued:

“In paragraph 12 the Practice Direction warns of sanctions penalising those who fail to comply with this requirement. There is the sanction of costs, either orders for costs against the party in default or orders for costs to be paid by the defaulting solicitors …. In particularly egregious cases, defaulters may find themselves publicly identified in judgments delivered in open court.”

[Note: Although this judgment was given in the Family Division and in the context of breaches of the Practice Direction in Family Proceedings, the guidance in paragraph 7 would appear to be of general application. The sanctions mentioned in paragraph 18 would, accordingly, appear to be relevant in relation to the oft ignored sections of the Costs Practice Direction, in particular Section 35.2 to rule 47.9 (“points of dispute should be short and to the point”) and Section 40.12 to rule 47.14 (“the papers to be filed in support of the bill and their order”).

No. 43 of 2008 McLoughlin v Irwin Mitchell [2008] EWHC 90113 (Costs) 29 August 2008 Master Simons

In proceedings under the Solicitors Act 1974, the court held that 20 bills rendered to the claimant between 11 November 2004 and 14 September 2006 were interim bills on account of a final bill notwithstanding that the client had paid them without complaint (at least until 10 April 2006). The defendant’s terms and conditions had stated that a final account would be rendered on completion of the case and none of the bills complied with the provisions of the Solicitors Act sufficient to enable the client to obtain advice as to their assessment. Accordingly, the defendant would be ordered to deliver a final bill and a cash account.

No. 44 of 2008
Findlay v Cantor Index [2008] WCHC 90116 (Costs)
12 September 2008 Master Campbell

In this judgment the court refused the paying party’s request for disclosure of the claimant’s Conditional Fee Agreement, risk assessment and, on the grounds that privilege in it had been waived, an opinion of counsel. So far as the risk assessment was concerned, the CFA in question has been signed after 31 October 2005 and the CFA Regulations (2000) did not apply to it. Accordingly there was no obligation on the claimant to disclose the risk assessment under Costs Practice Direction Section 32.5(1)(b) as would have been the case had the CFA been signed before the revocation of the Regulations.

No. 45 of 2008 Cuthbert v Gair [2008] EWHC 90114
(Costs) 3 September 2008 Master Haworth

The issue which arose on appeal from a Costs Officer was whether costs claimed for work done by the Defendant’s loss adjusters were recoverable as a “disbursement”. Prior to instructing solicitors, the Defendant had utilised loss adjusters to deal with the case at an investigative stage during the pre-action protocol period. The receiving party contended that such costs were “of and incidental to” the proceedings and were recoverable under the court’s inherent jurisdiction (see Section 51(1) and (3) Supreme Court Act 1981). The paying party relied on Agassi v Robinson [2005] EWCA Civ 1507 (No 7 of 2006) – a person who acts without a solicitor cannot recover as a disbursement the fees and expenses paid to a third party for work of a kind which a solicitor could have done.

Having considered the nature of the work undertaken by the loss adjusters (investigating the circumstances surrounding the accident, obtaining witness statements, etc) the Master concluded that these were all items of work which would normally have been undertaken by solicitors. The principle in Agassi applied and the items were irrecoverable. The court was not satisfied, either, that further fees claimed for the loss adjusters after the solicitor’s appointment, had been incurred on an agency basis, no letters of instruction or terms of engagement having been produced to the court, only an invoice which had been addressed not to the defendant’s solicitor but to their insurers. It followed that no part of the loss adjuster’s fees fell to be paid by the claimant inter parties.

No. 46 of 2008 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC)
29 September 2008 Jackson J

At the conclusion of high value commercial litigation concerning the construction of the National Stadium at Wembley in which each side had met with success and failure, Jackson J undertook a comprehensive review (paragraphs 43-71) of the authorities which apply in deciding what costs order the court should make. The trial had lasted from 10 March until 28 May 2008 and the parties had spent £14 million on costs after 5 June 2006, the Judge having disposed of various preliminary issues on that date.

From his review of the authorities, Jackson J derived eight principles (72):

From his review of the authorities, Jackson J derived eight principles (72):

(i) The party which ends up receiving payment should generally be characterised as the overall winner of the entire action.

(ii) As a starting point the general rule is that the successful party is entitled to an order for costs.

(iii) The court should ask having regard to all the circumstances of the case, whether any departure is required from that starting point.

(iv) An issue-based costs order should be made where the circumstances of the case required it but “the judge should hesitate before doing so, because of the practical difficulties which this causes and because of the steer given by rule 44.3(7)”.

(v) In many cases the judge can and should reflect the relative success of the parties on different issues by making a proportionate costs order. [via a proportion based order under CPR 44.3(6)(a)].

(vi) In considering the circumstances of the case the judge will have regard not only to any part 36 offers but also to each party’s approach to negotiations (insofar as admissible) and the general conduct of the litigation.

(vii) If one part makes a part 36 or an admissible offer that is not quite enough and the other part rejects it without negotiating, then it might be appropriate to penalise the second party in costs. [reflecting Carver v BAA Plc [2008] EWCA Civ 412].

(viii) In assessing a proportionate costs order the judge should consider what costs are referable to each issue and what costs are common to several issues. It will often be reasonable for the overall winner to recover not only the costs specific to the issues which he has won but also the common costs.

Having applied these principles to the litigation, Jackson J ordered the defendant to pay the claimant 20% of its costs and directed that each party should bear its own costs of a further preliminary issue that had been tried in January 2007.

No. 47 of 2008 Sibley & Co v Reachbyte & Anor [2008] EWHC 2665 (Ch) 4 November 2008
Peter Smith J

This judgment given in proceedings under the Solicitors Act (1974) principally concerned with counsels’ fees and the consequences arising from the failure (very expensive) of the appellant solicitors to warn their former clients that in view of their unusual nature and amount, it was unlikely that all the fees would be recovered from their opponents (see CPR 48.2(2)(c)).

The sums in issue were substantial, £151,070 reduced to £64,835; and £77,230 reduced to £1,625 for leading and junior counsel respectively. On appeal from the Deputy Master, Peter Smith J upheld the reductions without calling upon the respondent’s counsel on the grounds (principally) that:

(1) The Appellate Court should interfere only exceptionally where the first instance Judge had heard evidence (the position here) (paragraph 34).

(2) It is wrong to analyse transcripts and nit pick over judgments below as a vehicle to overturn that judgment, because that process fails to give true effect to the significant advantage the first instance Judge has in evaluating the witnesses (38).

(3) The Appellate Court should consider the judgment as a whole in the light of the material before the Judge and should not be tempted into a detailed analysis of each and every reasonable argument put forward by an appellant at first instance and allegedly not dealt with by the Judge at first instance. (39)

No. 48 of 2008 Bilkus v Stockler Brunton (2008) EWHC 90118 (Costs) 11 November Master
Gordon Saker

Detailed assessment of the Defendant Solicitor’s bill under the Solicitors Act 1974 against the Claimant (their former client). Was an uplift of £50,000 to reflect “a highly successful result” payable by the Claimant?

Having refused the Defendant’s application to amend the bill so that the uplift would cover earlier bills which the Solicitors had rendered (Polak v Marchioness of Winchester (1956) 1 WLR 818 applied), the court held that the terms of the Solicitor’s retainer did not permit the firm to charge an uplift over and above the agreed hourly rate. Moreover the bill was a final bill and the uplift could not relate to the earlier invoices which had all been interim statute bills. It followed that the claim for uplift would be disallowed.

No. 49 of 2008 Kutsi v North Middlesex University Hospital Trust (2008)
EWHC 90119 (Costs)
9 December 2008 Master Campbell

Relief from sanctions under CPR 3.9. The claimant did not serve notice of an additional liability (an after-the-event insurance premium for £84,262.50 taken out on 10 August 2007) until 20 June 2008, long after the case of the action were at an advanced stage. Having considered Supperstone v Hurst [2008] EWHC 735 (Ch) Floyd J (No. 18 of 2008) the court held that the mitigating factors advanced by the claimant fell short of a “good explanation” and refused to grant relief. It followed that the premium would not be recoverable as a cost of the action.

No. 50 of 2008 Tankard v John Fredricks Plastics Ltd
(The Accident Line Protect Cases) (2008) EWCA Civ 1375 11 December 2008
Sir Anthony Clark MR, Dyson, Jackson LJJ

Was the Conditional Fee Agreement (CFA) in each of the three test cases unenforceable for want of compliance with Regulation 4(2)(3)(ii) CFA Regulations 2000 (legal representative required to inform the client whether he had an interest in recommending a contract of insurance, here a policy with Accident Line Protect (ALP))? Each CFA included a declaration that the solicitors had no interest in recommending the ALP policy, although it was a term of their panel membership that all CFA cases had to be insured with ALP (unless for example the client had BTE insurance) and removal from the panel might result from non compliance.

For the three firms of solicitors involved, ALP referrals (including rebates etc) had contributed between 0.15 and 4.57 to their annual turnover. The defendants contended that the solicitors had failed to disclose an interest within Regulation 4 and the decisions below had gone both ways. The issue for the Court of Appeal was whether the solicitor had an “interest” within the meaning of Regulation 4(2)(e)(iii).

The court held that these appeals were far removed from Garrett v Halton Borough Council [2006] EWCA Civ 1017 (No. 22 of 2006) where cases had been referred by “claims farmers” and the flow of referrals was on a considerable scale. Here the overriding consideration was the quality of the scheme (see paragraph 31); that was why the solicitors had recommended it.

It followed that all three CFAs were valid and enforceable. Had that not been the case, what would the solicitor need to have declared so as to satisfy Regulation 4(1)(a) (informing the client of “matters”) and Regulation 4(2)(e)(ii)? Per Clarke MR:-

“In approaching this issue, we bear in mind that the purpose of the Regulations is consumer protection. This means that in general terms they must be construed in a way which will promote, rather than detract from, such protection. It means in particular that Regulation 4(1)(a) and 4(2)(e)(ii) must be construed in a way which will ensure that the solicitor discloses to the client the true nature of his interest in recommending the insurance so that the client can make the necessary informed decision. This entails explaining to the client the nature of the benefits to the solicitor in remaining on the ALP panel with sufficient clarity for the client to understand what they are and to be able to assess their significance [paragraph 41] …

In our view, the Regulations require clear disclosure of the interest. Anything less would mean that they fail in their objective of providing consumer protection …[45]”

Note: Regulation 4 applied to the three CFAs because all had been entered into prior to the repeal of the CFA Regulations 2000 with effect from 1 November 2005.

No. 51 of 2008 J Murphy & Sons Ltd v Johnston Precast Ltd [2008] EWCH 3104 (TCC) 16 December 2008 Coulson J
Interest on costs [numbers in brackets refer to paragraph numbers in the judgment]

At the conclusion of high value building litigation, the Judge ordered the claimant to pay the defendant’s costs of the action on the standard basis. C sought interest on those costs at an enhanced rate. Coulson J noted that power exists under CPR 44.3(6)(g) to award interest on costs “from or until a certain date, including a date before judgment” and that the rule had been considered in Bim Kemi AB v Blackburn Chemicals Ltd [2003] EWCA Civ 880 and Nova Productions Ltd v Mazooma Gains Ltd [2006] EWHC 189 (Ch) (Kitchin J) [32]. Here the claimant had achieved a resounding victory and interest on costs would be payable from the date of commencement of the action until the date of judgment [34]. An award of base rate plus 1% represented a properly compensatory rate of interest [36]. The rate would not be enhanced in recognition of the fact that the defendant had made two separate offers which the claimant would have been well advised to accept. The express power to award such interest in relation to the claimant’s costs under CPR 36.14(3)(c) is not available under the CPR in respect of the costs of a defendant where the claimant has failed to bet the offer made [39].

No. 52 of 2008 Clarke v Waters [2008] EWCA Civ 1459
19 December 2008
Arden, Thomas and Moore-Bick LJJ

This appeal by the defendant addressed the appropriate success fee to allow where liability had been admitted before (rather than after) the claimant had entered into a Conditional Fee Agreement (CFA) with her solicitors. Against a claim for 98%, the District Judge had allowed 70% and the Circuit Judge 50%. Whilst in the courts below it had been recognised that the risk of failure was minimal, the real difficulty in assessing the success fee lay in the risk of the solicitors failing to recover part of their fees in the event that a subsequent Part 36 offer was not beaten. In the view of the Court of Appeal, a reasonable assessment in overall terms was 17%; using the “ready reckoner” that gave a success fee of 20% so the appeal succeeded. The court also expressed the view that consideration should be given about whether a new regime for CFAs could be devised for cases where liability is admitted.

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