QOCs, Cost Budgeting and Proportionality
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1 QOCs, Cost Budgeting and Proportionality Peter Hurst Vikram Sachdeva QC Judith Ayling Nicola Greaney 23 rd November 2017
2 QOCS Judith Ayling
3 Reminder of the basics CPR Set off is within Section I of Part 44. Where a party entitled to costs is also liable to pay costs, the court may assess the costs which that party is liable to pay and either (a) set off the amount to be paid and direct that party to pay any balance; or (b) delay the issue of a certificate for the costs to which the party is entitled until that party has paid the amount which that party is liable to pay
4 Reminder of the basics Part 44 Section II is QOCS, CPR allows a costs order against a C to be enforced without court permission only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.
5 Reminder of the basics CPR Exceptions enforcement of costs orders to full extent without court permission where claim struck out no reasonable grounds or abuse or conduct likely to obstruct just disposal CPR Exceptions where permission required fundamentally dishonest or include a claim for the benefit of person other than C or claim made for benefit of C other than a claim to which this Section applies
6 Does CPR apply to QOCS cases? Old public funding cases R (Burkett) v LB Hammersmith [2004] EWCA Civ 1342 CPR does not apply: Darini and another v Markerstudy Group (unreported), 24 April 2017, (County Court at Central London, HHJ Dight): CPR 44 Section II is a self-contained code
7 But then Issue comes to CA following C s win in Howe v MIB [2017] EWCA 932 (decision that claim v MIB is claim for damages for personal injuries and C has QOCS protection) C had lost trial on substantive liability and unsuccessfully appealed
8 CPR Second judgment of CA on costs 6 th July 2017 (President, McFarlane LJ and Lewison LJ): Mr H gets his costs of appeal re QOCS and first-instance, but Q is what to do about costs of lost trial and appeal Set off is not enforcement Court has jurisdiction which it should exercise, and costs orders in favour of Mr H should be set off against costs orders in favour of MIB MIB also tried to enforce costs orders under CPR because appeal was struck out: no, Plevin v Paragon(No 2) [2017] UKSC 23 applied, appeal part of proceedings below
9 Two defendants Can a winning defendant set off costs against damages recovered from losing defendant? Bowman v (1) Norfran Aluminium Ltd (2) R M Easedale & Co Ltd (3) Norfran Limited (County Court at Newcastle, 11 August 2017, HHJ Freedman) C discontinues against D2 and ordered to pay its costs C settles with D1 and D3 who pay her 20,000 + costs
10 Bowman and 2 Ds - D2 seeks to set off its costs against C s damages - C says there can only be set-off in proceedings against D2, no payment so nothing to set off - QOCS is self-contained code and no discretion to make order different from that flowing from QOCS
11 Bowman and 2 Ds Set-off involves mutuality of liabilities with cross-claims between paying party and receiving party Whole idea in costs context is that C not required to pay anything but D pays less or nothing not so here where C would have to hand all her damages to D Word proceedings does not apply to damages paid by other Ds
12 CPR 44.16(2)(b) Mixed claims e.g. personal injury element but also false imprisonment Jeffreys v Commissioner of Police [2017] EWHC 1505 (QB) C seeks damages for assault, false imprisonment, misfeasance in public office and malicious prosecution. Claim dismissed with costs Non-PI element does not attract QOCS, and enforcement permitted to 70%
13 CPR 44.16(2)(b) Appeal to Morris J who finds as a matter of construction CPR 44.16(2)(b) applies in a case where in proceedings the claimant has brought a claim for personal injuries and has also brought a claim or claims other than a claim for damages for personal injuries
14 CPR 44.16(2)(b) Which brings us neatly back to Howe: MIB argued that claim for declaration MIB liable to compensate C brought the claim within CPR 44.16(2)(b); enforcement not restricted to proportion of costs linked to non-pi element; and J should grant permission to enforce costs order Stewart J rejects it would be wholly wrong of the court to take into account what is almost a technical pleading point so as to open the door to possible full recovery of the defendant s costs.
15 And finally Fundamental dishonesty: Howlett v Davies [2017] EWCA Civ A district judge had been entitled to find that a personal injury claim arising from a road traffic accident was fundamentally dishonest, and that the exception to qualified one-way costs shifting under CPR 44.16(1) applied, despite fraud not having been alleged in the insurer's defence, but where findings properly made by the trial judge warranted the conclusion that the substantive claim was fundamentally dishonest. But note that insurer had set out "the facts from which they would be inviting the judge to draw the inference that the plaintiff had not in fact suffered the injuries he asserted Shaw (as personal representative of the estates of Ewan (deceased)) v Medtronic Corevalve LLC and others [2017] EWHC 1397 (QB) (Lavender J) helpful working out of differences in QOCS between strike out/discontinue/set aside service of claim form Catalano v Espley-Tyas [2017] EWCA Civ 1132: If a party has ever had a pre April 2013 CFA, terminated or unterminated, the QOCS regime does not apply.
16 Howe MIB tries again in CA and asks to enforce costs order in relation to claim for declaration. CA disagrees in Howe v MIB [2017] EWCA Civ 932 no basis to interfere with discretionary decision But MIB then succeeds under CPR albeit in relation to different costs 39 Essex Chambers LLP is a governance and holding entity and a limited liability partnership registered in England and Wales (registered number 0C360005) with its registered office at 81 Chancery Lane, London WC2A 1DD. 39 Essex Chambers members provide legal and advocacy services as independent, self-employed barristers and no entity connected with 39 Essex Chambers provides any legal services. 39 Essex Chambers (Services) Limited manages the administrative, operational and support functions of Chambers and is a company incorporated in England and Wales (company number ) with its registered office at 81 Chancery Lane, London WC2A 1DD.
17 CASE LAW UPDATE Nicola Greaney
18 QOCS AND DISCONTINUANCE CPR 38.4(1): Where the claimant discontinues under rule 38.2(1) the defendant may apply to have the notice of discontinuance set aside Application to be made no more than 28 days after notice served White book notes: Court may do so where there is an abuse of the process of the court
19 QOCS AND DISCONTINUANCE In QOCS context, Defendant may want to apply to set aside discontinuance to seek a strike out so as to bring CPR into play and enforce a costs order to its full extent If seeking finding of fundamental dishonesty under CPR 44.16, do not need to apply to set aside notice of discontinuance (PD 44.12(4)(c))
20 QOCS AND DISCONTINUANCE Case-law: setting aside discontinuance County court decisions Kite v Phoenix Pub Group (unrep. November 2015). Application to strike out and 2 days before it was heard, C discontinued. DJ set aside notice of discontinuance and claim struck out. Magon v Royal & Sun Alliance Insurance plc (unreported 26 February 2016). Central London CC. RTA claim brought against wrong insurer. Claim brought against driver and claim against RSA discontinued. Recorder allowed appeal to set aside notice of discontinuance. Claim had not been struck out, no abuse but genuine mistake
21 High Court QOCS AND DISCONTINUANCE Lavender in Gabriele Shaw v Medtronic Corevalve LLC & ors [2017] EWHC 1397 (QB). Damages claim against 5 defendants following death of C s father following an operation to install a heart valve. Struck out claims against D2 and D4 on basis disclosed no reasonable grounds for bringing the proceedings (CPR applied Claims against D1 and D3 disclosed no reasonable grounds but not struck out because served outside jurisdiction so set aside service. D5 claim not struck out because discontinued. Said CPRC might want to reconsider CPR 44.15(a).
22 Shaw cont.. Whether notice of discontinuance to be set aside Not appropriate. C has right to discontinue. Proper use of power and to be encouraged for C to recognise, in light of first judgment, that claim against 5D not sustainable Noted: High Commissioner for Pakistan and UK v Natwest Bank [2015]: abuse persuasive but reason for discontinuance key factor. C has maintained claims against D1, D3 and D4 despite first judgment So was real possibility that C had recognised claim against D5 would not stand in light of first judgment. No abuse of process or anything to justify setting aside the notice of discontinuance
23 What to do? Defendants need to act quickly to apply for strike out of weak claims in order to enforce a costs order under CPR before C discontinues Court will need to be satisfied discontinuance was purely tactical so as to avoid application of CPR or CPR 44.16
24 QOCS and PCFA CPR 44.17: This section does not apply to proceedings where the claimant has entered into a precommencement funding arrangement (as defined in rule 48.2) Catalano v Espley-Tyas [2017] EWCA Civ Longmore LJ. C entered into new CFA post said to replaced prior arrangement. In any case where litigation services in fact provided under CFA made before , QOCS will not apply even if CFA terminated and second CFA made.
25 QOCS & PCFA Words clear: a funding arrangement, not an unterminated funding arrangement Obiter comments on other situations CFA made before but before work done second CFA made after rarely occur, work will be done Work done under pre CFA but retainer terminated before Casseldine case. If work was done, doubt Casseldine supported on true construction CPR and CPR 48.2 unless 2 nd CFA retrospectively discharged and extinguished first CFA Lord Sumption in Plevin v Paragon
26 LITIGANT IN PERSON COSTS Halborg v EMW Law LLP [2017] EWCA Civ 793 Sir Terence Etherton MR, Beatson LJ and Underhill LJ Solicitor LLP is not a litigant in person under CPR 46.5 CPR 46.5: a litigant in person includes.any of the following who act in person (except where any such person is represented by a firm in which that person is a partner).a solicitor Solicitors acting in person were entitled to recover the same costs as if they had employed a solicitor London Scottish Benefit Society v Chorley (1884)
27 LITIGANTS IN PERSON Malkinson v Trim [2003] 1 WLR 463, Chorley principle applied to solicitor defendant who was represented by firm of which he was a partner (following introduction of CPR) CoA: Absurd to treat litigant in sole practice as litigant in person based on wording on wording of CPR 46.5 Purposive interpretation to CPR 46.5 to be adopted No sensible policy reason for treating a solicitor in a LLP practice differently to a solicitor in a partnership for the purpose of CPR 46.5
28 LITIGANTS IN PERSON Spencer v Paul Jones Financial Services Limited (6 January 2017), Master James CPR 46.5(2): two- thirds rule cannot recover more than 2/3 of what allowed if legally represented CPR 46.5(4) proof of financial loss. If cannot, stuck with 19 per hour Former solicitor, set up legal services business Failed accounts showed turnover down during litigation C had given evidence with degree of specificity required to establish actual loss. Did not need to give chapter and verse of daily diary and jobs missed/turned down
29 MISCONDUCT CPR (1) The court may make an order under this rule where (a) a party or that party s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or (b) it appears to the court that the conduct of a party or that party s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper. (2) Where paragraph (1) applies, the court may (a) disallow all or part of the costs which are being assessed; or (b) order the party at fault or that party s legal representative to pay costs which that party or legal representative has caused any other party to incur.
30 MISCONDUCT Gempride v Jagjit Bamrah (HHJ Mitchell and DJ Langley (assessor), Central London CC, (unrep) Now on appeal to CoA JB a solicitor, represented herself in PI claim (until last few weeks) pursuant to CFA with her firm, Falcon Legal (common ground not enforceable). Action settled. Costs went to DA. Bill (signed by JB) claimed HR 280 in excess of 232 in CFA.
31 MISCONDUCT In replies to PoD stated that BTE cover was not available. In fact, BTE was available but not to fund her representing herself. Gempride became aware of HR discrepancy and BTE issue during DA proceedings and made application under CPR Costs Judge: Misconduct proved in both respects and sanction was to disallow profit costs in Part 1 of bill insofar exceeded LiP rates. No evidence from JB before court. JB represented by costs draftsman at hearing. JB appealed
32 MISCONDUCT ON APPEAL: JB not guilty of misconduct JB made no false representations about HR. Any representations made were by the costs draftsman and contrary to her instructions BTE funding was not available because they were not prepared to fund JB to represent herself Gempride had to prove that JB had an intention to deceive either the court or Gempride in order to make out a case of misconduct under CPR 44.11
33 MISCONDUCT BUT Is intention to deceive a necessary element of the misconduct test? No. Misconduct does not require finding of dishonesty. Misconduct can include unreasonable/reckless/negligent conduct. PD : Conduct which is unreasonable or improper includes steps which are calculated to prevent or inhibit the court from furthering the overriding objective. In context of wasted costs: conduct regarded as improper according to the consensus of professional (including judicial) opinion.whether or not it violates the letter of a professional code (Patel v India [2010] EWCA Civ 443) JB had certified a bill with a rate that she knew to be wrong CoA guidance on misconduct test to be welcomed
34 Proportionality and Costs Budgeting Vikram Sachdeva QC
35 Previous definition: Costs PD 11.1 In applying the test of proportionality the court will have regard to rule 1.1(2)(c). The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.
36 Home Office v Lownds [2002] EWCA Civ The reference in 11.2 to costs which are necessary is the key to how judges in assessing costs should give effect to the requirement of proportionality. If the appropriate conduct of the proceedings makes costs necessary then the requirement of proportionality does not prevent all the costs being recovered either on an item by item approach or on a global approach. The need to consider what costs are necessary is not a novel requirement. It was reflected by the former provisions of RSC order 62 which applied to the taxation of costs prior to Rule 28 (2) dealt with costs on a party and party basis and stated:... there shall be allowed all such costs as were necessary or proper for the attainment of justice...
37 Home Office v Lownds 30. In his advice the Senior Costs Judge drew attention to the problems that can arise from double jeopardy ; in other words from making a deduction when considering the bill item by item and then looking again at the situation as a whole and making a further global deduction. This danger will be avoided if a party receives at least a reasonable sum for the items of costs which were necessarily incurred. 31. In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable.
38 Home Office v Lownds 31. (cont) If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This is turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner.
39 Proportionality new definition Basis of assessment: CPR 44.3 (2) Where the amount of costs is to be assessed on the standard basis, the court will (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and (b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
40 New Overriding Objective 1.1 (1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost. (2) Dealing with a case justly and at proportionate cost includes, so far as is practicable (a) ensuring that the parties are on an equal footing; (b) saving expense; (c) dealing with the case in ways which are proportionate (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; and (iv) to the financial position of each party;
41 CPR 1.1 (cont) (d) ensuring that it is dealt with expeditiously and fairly; (e) allotting to it an appropriate share of the court s resources, while taking into account the need to allot resources to other cases; and (f) enforcing compliance with rules, practice directions and orders.
42 Case law BNM v MGN Ltd [2017] EWCA Civ 1767: the old proportionality rules apply to a precommencement funding arrangement within CPR 48 No general guidance on new proportionality test remitted to Senior Costs Judge
43 Costs Management: CCMC Costs management orders 3.15 (1) In addition to exercising its other powers, the court may manage the costs to be incurred (the budgeted costs) by any party in any proceedings. (2) The court may at any time make a costs management order. Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made. By a costs management order the court will
44 CPR 3.15 (a) record the extent to which the budgeted costs are agreed between the parties; (b) in respect of the budgeted costs which are not agreed, record the court s approval after making appropriate revisions; (c) record the extent (if any) to which incurred costs are agreed. (3) If a costs management order has been made, the court will thereafter control the parties budgets in respect of recoverable costs. (4) Whether or not the court makes a costs management order, it may record on the face of any case management order any comments it has about the incurred costs which are to be taken into account in any subsequent assessment proceedings.
45 CPR PD 3E 7.3 If the budgeted costs or incurred costs are agreed between all parties, the court will record the extent of such agreement. In so far as the budgeted costs are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgeted costs. The court s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.
46 CPR 3.18 Assessing costs on the standard basis where a costs management order has been made 3.18 In any case where a costs management order has been made, when assessing costs on the standard basis, the court will (a) have regard to the receiving party s last approved or agreed budgeted costs for each phase of the proceedings; (b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so
47 What is the court deciding at Wording of rules: each stage? CCMC: whether the (prospective) budgeted costs fall within the range of reasonable and proportionate costs (ignoring hourly rates) Detailed Assessment: whether costs incurred are reasonable and proportionate
48 Merrix v Heart of England Foundation Trust [2017] EWHC 346 (QB) CCMC: court is deciding what prospective costs are reasonable and proportionate not just a reasonable/proportionate range
49 Merrix (cont) 68. [C]osts budgeting involves the determination of reasonableness and proportionality (see paragraph 7.3 of Practice Direction 3E and paragraph 3 of the Guidance Notes to Precedent H). It is important to remember at the outset (and also in the context of the debate as to the meaning of the word "budget" addressed below) precisely what a judge is doing at the cost-budgeting stage. He/she is not identifying what is the maximum amount by way of future costs considered to be reasonable and proportionate. He/she is identifying what future costs are reasonable and proportionate.
50 What room does that leave for Two views: Detailed Assessment? (1)Different approach in detailed assessment; all facts known, working papers before the court (2) A limited role only in practice, hourly rates and incurred costs, unless good reason not to be bound by costs budget
51 Merrix 67. The words [of CPR 3.18] are clear. The court will not the words are mandatory - depart from the budget, absent good reason. On a detailed assessment on a standard basis, the costs judge is bound by the agreed or approved costs budget, unless there is good reason to depart from it.
52 Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 Approved conclusion in Merrix An approved costs budget is binding on a costs judge at detailed assessment absent a good reason
53 When is proportionality decided? In reality: at the CCMC Implications for thorough preparation for CCMCs
54 Merrix: When is a budget not binding at detailed assessment? 74. There is no need for present purposes to examine in any detail what might and might not be a good reason for the purpose of CPR r
55 Harrison (cont) CA declined to provide specific guidance on what a good reason had to be: 44. As to what will 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.
56 Harrison (cont) However threshold will be high: 44. Costs judges should therefore be expected not to adopt a lax or overindulgent approach to the need to find "good reason": if only because to do so would tend to subvert one of the principal purposes of costs budgeting and thence the overriding objective.
57 When is proportionality a good reason to depart from a budget? Rarely Likely to be relevant in rendering costs disproportionate rather than proportionate Eg when significant aspects of the claim have been dropped after CCMC
58 Proportionality and departure from a costs budget It may breach A1P1/Art. 6/Art. 8 to deprive Claimants of accrued rights retrospectively: Flood v Times Newspapers Ltd (No. 2) [2017] UKSC 33 (in the context of entry into a CFA and ATE insurance under the 1999 Act regime)
59 The End 39 Essex Chambers LLP is a governance and holding entity and a limited liability partnership registered in England and Wales (registered number 0C360005) with its registered office at 81 Chancery Lane, London WC2A 1DD. 39 Essex Chambers members provide legal and advocacy services as independent, self-employed barristers and no entity connected with 39 Essex Chambers provides any legal services. 39 Essex Chambers (Services) Limited manages the administrative, operational and support functions of Chambers and is a company incorporated in England and Wales (company number ) with its registered office at 81 Chancery Lane, London WC2A 1DD.
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