The decision in Belsner v Cam Legal Services Ltd  EWHC 2755 (QB) will have sent a shiver down the spine of many claimant solicitors in the personal injury field, although the decision may well have wider implications.
The case concerned a solicitor/own client assessment.
The underlying matter concerned a low value RTA being pursued in the RTA portal. The costs recoverable from the opponent to the RTA claim were limited to fixed costs plus disbursements.
The client’s solicitors sought to charge their client the costs recovered from the opponent plus 25% of the damages recovered.
Section 74(3) of the Solicitors Act 1974 provides:
“The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in the county court shall not, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim.”
Although the claim itself settled prior to proceedings being issued, it was not disputed that this section applied to the case.
CPR 46.9(2) provides, in relation to the detailed assessment of solicitor and client costs:
“Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.”
The issue for the court was whether a solicitor seeking to rely on CPR 46.9(2) has to show that the client gave informed consent to the payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
The terms of the CFA, which governed the costs payable between the solicitors and the client, contained standard Law Society wording:
“Normally, you can claim part or all of our basic charges and our expenses and disbursements from your opponent. You provide us with your irrevocable agreement to pursue such a claim on your behalf. However, you cannot claim from your opponent the success fees or the premium of any insurance policy you take out.
If we and your opponent cannot agree the amount, the court will decide how much you can recover. If the amount agreed or allowed by the court does not cover all our basic charges and our expenses and disbursements, then you pay the difference.”
Elsewhere, the Client Care Letter advised the client she would be able to recover “some” of her costs from the opponent and she would have to bear “a proportion” of her costs herself.
It was clear that the solicitors disclosed to the client that the agreement between them permitted payment to the solicitors of an amount of costs greater than that which the client could have recovered from another party to the proceedings. In particular, the solicitors disclosed that:
(1) if she won her claim, the client would pay the success fee and could not recover it from her opponent; and
(2) the client would pay the difference between the solicitors’ basic charges, expenses and disbursements and the amount agreed or allowed by the Court in respect thereof.
The client had also been given an estimate of costs of £2,500 plus VAT and disbursements.
Crucially, the client was not informed that, based on the likely value of the claim and the point the matter would probably settle, the recoverable fixed costs from the other side would be limited to £500-£550 plus VAT plus disbursements.
The solicitors argued that the information provides to the client was sufficient to displace the requirement under CPR 46.9(2) because it “expressly permitted” them to charge more than could be recovered from the opponent.
The Court rejected this argument.
The Court concluded:
“A solicitor who wishes to rely on CPR 46.9(2) must not only point to a written agreement which meets the requirements of the rule, as the Defendant did, but must also show that his client gave informed consent to that agreement insofar as it permitted payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings. For this purpose, the solicitor must show that he made sufficient disclosure to the client.
It seems to me that I have to consider whether this is material information, in the sense that it may have affected the Claimant’s consent to the agreement between them insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from another party to the proceedings.
If it had been pointed out to the Claimant that, while the Defendant’s estimate of costs was £2,500 plus VAT, she might recover only £500 or £550 plus VAT from the Insurers, then that may have affected the Claimant’s consent to the agreement between them insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from the Insurers. It may, for instance, have led the Claimant to ask whether her liability could be capped, or to approach a different firm of solicitors, who would cap her liability. Prima facie, therefore, it ought to have been disclosed.
Each case has to be decided on its own facts. In this case, it is a very striking feature of the agreement being proposed to the Claimant by the Defendant that the Defendant’s estimated basic charges were five times the amount which the Claimant might be entitled to recover from the Insurers if her claim settled for less than £10,000 at Stage 2 in the Protocol and that, in that event, she might have to pay the first £3,200 of her damages to the Defendant. This was so striking that it ought, in my judgment, to have been brought specifically to the Claimant’s attention, if she was to give informed consent to the agreement insofar as it permitted payment to the Defendant of an amount of costs greater than that which the Claimant could have recovered from the Insurers, that, while the Defendant’s estimate of costs was £2,500 plus VAT, she might recover only £500 or £550 plus VAT from the Insurers.
I conclude that the Claimant did not give her informed consent to the agreement and the Defendant cannot rely on it for the purposes of CPR 49(2).”
In his submissions to the Court on behalf of the solicitors, Nicholas Bacon QC argued: “Allowing the Claimant’s appeal would result in a wholesale change of the basis on which solicitors advise their clients in fixed costs cases. The Law Society’s Model CFA would be insufficient to meet the threshold proposed by the Claimant”. This is no doubt correct.
Robin Dunne, who acted with PJ Kirby QC for the client, commented in a briefing note on this case: “The implications of this judgment are very significant. There are huge numbers of cases where deductions have been made from damages where the cap in 46.9(2) would result in a repayment to the client. Indeed, the number of retainers signed where informed consent has been given is likely to be very small.”
Although this case was concerned with a fixed fee matter where the recoverable costs were likely to be relatively easy to predict, this may well lead to many more solicitor/own client disputes where there is a shortfall in costs recovery. It may not be sufficient to simply advise of the fact there is a likelihood of a shortfall.
Gibbs Wyatt Stone specialise in drafting CFAs and advising solicitors on retainer issues.
I have already written about the case of Marbrow v Sharpes Garden Services Ltd  EWHC B26 (Costs) (10 July 2020) where the Senior Costs Judge Master Gordon-Saker declined the Claimant’s invitation to award pre-judgment interest on costs.
He also declined my invitation, on behalf of the Defendant paying party, to only allow interest from 3 months after the date of the order for costs.
This was the approach adopted by Leggatt J. (as he then was) in the High Court decision of Involnert Management Inc v Aprilgrange Limited & Ors  EWHC 2834 (Comm) at paragraph 24:
“it seems to me that a reasonable objective benchmark to take is the period prescribed by the rules of court for commencing detailed assessment proceedings. Pursuant to CPR 47.7, where an order is made for payment of costs which are to be the subject of a detailed assessment if not agreed, the time by which detailed assessment proceedings must be commenced (unless otherwise agreed or ordered) is three months after the date of the costs order. In order to commence such proceedings, the receiving party must serve on the paying party a bill of costs giving particulars of the costs claimed. It is then for the paying party to decide which items in the bill of costs it wishes to dispute. Postponing the date from which Judgments Act interest begins to run by three months will therefore generally serve to ensure that the party liable for costs has received the information needed to make a realistic assessment of the amount of its liability before it begins to incur interest at the rate applicable to judgment debts for failing to pay that amount.”
It is clear from this passage that he was attempting to set out a general principle as to the date from which interest should run, as opposed to the decision being based on the particulars of the case. This decision is heavily criticised in Cook on Costs 2020 (at 32.5).
The Master summarised the law as being:
“The entitlement to interest on costs under section 17 of the 1838 Act is automatic. Generally the court will not order it expressly. Interest is therefore payable on costs at 8 per cent from the date of judgment (Hunt v R.M.Douglas (Roofing) Ltd  1 AC 398) without an order to that effect unless the court makes a different order under either CPR 40.8 or CPR 44.2(6)(g).”
Relying on Simcoe v Jacuzzi UK Group PLC  EWCA Civ 137 he commented:
“Accordingly the court should depart from the incipitur rule only where that is what justice requires in the particular case and should avoid awarding interest from different dates on different components of costs.”
He distinguished Involnert on the basis:
“However that was a commercial case in which the court had ordered the payment of interest at 2% over base rate from when the costs were incurred (ie pre-judgment interest) until the date 3 months after the date of the costs order when interest would become due at 8%.
As far as I am aware, most if not all of the cases in which the court has awarded Judgment Act interest only from a date after judgment have been commercial cases, in which orders for pre-judgment interest on costs at commercial rates are often made.”
He therefore found no reason to depart from, what he held to be, the default position and allowed interest from the date of judgment.
White Paper’s always excellent annual costs conference did not proceed as normal this year for obvious reasons.
However, the full conference with the full array of speakers proceeded as a pre-recorded webinar event.
This is still available to view online here (until 29 July 2020) for a very modest £204 plus VAT.
Last week in Marbrow v Sharpes Garden Services Ltd  EWHC B26 (Costs) (10 July 2020) the Senior Costs Judge Master Gordon-Saker handed down a reserved judgment in relation to three discreet issues where I acted for the Defendant paying party.
None of the issues were novel, but they are ones that have continued to trouble the lower courts, which was no doubt part of the reason for the reserved judgment.
The issue I will deal with today is the decision relating to whether the interest paid on a disbursement funding loan was recoverable as an item of cost or, alternatively, by way of allowing interest to run from an earlier period.
The Claimant claimed, as an item of costs, the interest payable under a loan agreement with his solicitors in relation to the funding of disbursements. The agreed interest rate was 5%.
The Claimant relied on the decision of the Court of Appeal in Secretary of State for Energy v Jones  EWCA Civ 363 as authority that such an item was recoverable as an item of costs. The Master rejected that on the basis the Court in that case was concerned with the rate of interest that could be allowed on costs from a date earlier than judgment where, as here, the claimants had incurred a liability to pay interest to their solicitors in respect of the funding of disbursements.
In Hunt v RM Douglas (Roofing) Ltd  11 WLUK 221 the claimant sought to recover on the taxation of his costs the interest that he had incurred under an overdraft to fund the disbursements required for his claim. The Court of Appeal held that funding costs had never been included in the categories of expense recoverable as costs and to include them would constitute an unwarranted extension.
The Master held that it was clear following Hunt that interest incurred under a disbursement funding loan cannot be recoverable as costs and so disallowed the item within the bill.
However, the Master then considered CPR 44.2(6)(g), which does allow the court to order the payment of interest on costs from a date before judgment. He distinguished Jones on the basis it was a different case to the present: a group action in which the disbursements came to a total in excess of £787,500. The present case was a straightforward personal injury claim. Although there was no evidence of the Claimant’s means, for present purposes he accepted that it was unlikely that the Claimant would have had the means to fund disbursements other than by a loan, as is almost certainly the case for the vast majority of claimants in personal injury actions. Nevertheless the incipitur rule remains the default position and parliament did not choose, when enacting the Legal Aid, Sentencing and Punishment of Offenders Act 2013, to make specific provision for the funding of disbursements whether by enabling the recovery of funding costs or by creating a default entitlement to pre-judgment interest.
He concluded that justice did not require a departure from the general rule in this case such as to aware interest from an earlier date.
This was the same conclusion that was recently reached by Master Brown in Nosworthy v Royal Bournemouth & Christchurch Hospitals NHS Foundation Trust  EWHC B19 (Costs) (30 April 2020).
Can a “Calderbank” offer made during the course of detailed assessment proceedings be accepted by a receiving party after the detailed assessment hearing has commenced and once it has become clear that the receiving party will ultimately recover less than the amount of the offer? Yes, ruled Mr Justice Morris in MEF v St George’s Healthcare NHS Trust  EWHC 1300 (QB).
Various offers and counter-offers had been made during the detailed assessment proceedings. These concluded with an offer on 19 August 2019 by the paying party to settle for £440,000 (the same amount as had previously been offered) with the following condition attached:
“The Defendant’s offer dated 27/09/18 is only capable of acceptance subject to the agreement of the Defendant’s costs of Detailed Assessment incurred since that date.”
It was not in dispute that this was not a Part 36 offer.
The matter was listed for a three day detailed assessment due to commence on 17 September 2019.
At the end of the second day of the hearing, the Bill of Costs had been reduced – as a consequence of concessions already made by the receiving party and by decisions made by the costs judge – to below £440,000. Just before the end of the second day, the receiving party sent an email purporting to accept the 19 August 2019 offer. The paying party argued it was too late for the offer to be accepted.
The matter initially came before Master Rowley for determination as to whether the detailed assessment proceedings had been compromised. He concluded that the matter was subject to common law principles of offer and acceptance. As there was no time limit placed on acceptance of the offer, he held that the offer had been properly accepted.
On appeal before Mr Justice Morris, it was decided that Master Rowley had not expressly applied the contractual principle of an offer being capable of lapsing after a reasonable time. However, applying that principle to the facts of the case, where none of the earlier offers had contained a time limit, he concluded that the offer had not lapsed and was therefore still capable of acceptance.
Although it was held that the prior offers were “highly relevant context”, it is not obvious that the position would be materially different as against a different factual matrix. To the extent to which a “Calderbank” offer is made without a time limit, a court is likely to conclude it may be accepted at any point before the conclusion of the detailed assessment.
The Court expressly noted that it would have been open to the paying party to put a time limit on the offer or to have withdrawn the offer themselves during the hearing. The Court did not explore to what extent, if any, a time limited or withdrawn offer would reduce the costs protection afforded by the offer. To the extent to which the offer subject to Part 44.2(4)(c) (“In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including … any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply”), if it had not been accepted its existence would simply be one of the factors the Court could take into account when deciding what order to make in respect of the costs of assessment.
The clear lesson is that any “Calderbank” offers made in detailed assessment proceedings should be time limited.
Guidance on remote costs hearings has now been produced. This has apparently been produced by a group of costs professionals with the support of the regional costs bench. It has been met with approval by the costs judges at the Senior Courts Costs Office. The guidance can be found on the Association of Costs Lawyer’s website here.
The 2020-21 edition of the Costs & Fees Encyclopaedia has now been published. This edition includes changes to costs and fees in the last 24 months including:
- Court of Protection, Civil Proceedings and Magistrates’ Courts Fees (Amendment) Order 2018
- Immigration and Nationality (Fees) (Amendment) (EU Exit) Regulations 2018
- Legal Officers (Annual Fees) Order 2018
- Ecclesiastical Judges, Legal Officers and Others (Fees) Order 2018
- Immigration and Nationality (Fees) (Amendment) (EU Exit) (No. 2) Regulations 2018
- Criminal Legal Aid (Remuneration) (Amendment) (No. 2) Regulations 2018
- Public Record Office (Fees) Regulations 2018
- Public Guardian (Fees, etc) (Amendment) Regulations 2019
It can be purchased direct from the publishers for £85.
Congratulations to all the speakers and The Legal Training Consultancy for managing to proceed with the Solicitor and Client Costs Conference last week.
The event was live streamed over Zoom with the speakers giving their talks from their respective lockdowns.
There were some inevitable comic moments with technical issues but, to be fair, most of these came from the delegates rather than the speakers. (My tip for delegates at these conferences is to watch via a desktop computer with any microphone and webcam unplugged. Anything else is just asking for trouble.)
With much of the legal profession now in lockdown, attention has naturally started to focus on the use of telephone/video conferencing facilities to undertake court hearings, mediations, meetings, etc.
Gordon Exall’s Civil Litigation Brief blog has been providing a large number of useful links providing various guidance on how to make use of this technology. The natural danger with this is to believe this is largely a matter of acquiring the necessary technical know-how of Skype, Zoom, etc and understanding the appropriate etiquette (eg giving consideration to what will be seen in the background of your video call). However, I have one word of warning: Scraps.
For those of us already used to working from home, there is one thing that can be guaranteed to happen during a crucial telephone hearing, video conference with client, etc. The guaranteed event is that the dog that has been happily snoozing at your feet for the past hour will suddenly hear the postman 200 yards down the road and start hysterically barking as though his life depended on it.
Equally, you can also guarantee that the doorbell will go at a crucial moment. Even if the dog is not already awake and barking, it will be now. At normal times, and disregarding barking dogs, you might simply ignore the doorbell and continue. These are not normal times. If there is no one else in the house to answer the door at that moment, ignoring the doorbell is not an option. It may be a courier delivery of papers with urgent instructions. If you miss it, there is no way of knowing if, when or how you will be able to rearrange delivery. Or, it may be an emergency gin delivery. Either way, you will have to break-off to answer it.
Four-legged friends are not the only peril. Two-legged ones pose just as much of a danger. You can explain to little Tarquin until you are blue in the face that “Daddy has a very important telephone hearing to deal with an application for relief from sanctions in the Chancery Division and must not be disturbed for the next two hours”. But the moment Tarquin gets two crayons stuck up his nose, all bets are off.
Or, your valet pops his heard around the door to enquire as to whether he should put out your brown Harris Tweed suit for later.
The perils of working from home.
If costs management orders simply set a total figure for each phase, how are VAT and success fees to be determined? This problem is explored on our Costs Budgeting Blog.