piBlawg

the personal injury and clinical negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Assessing the cost of ATE Premiums

If anyone needs a reminded why the costs landscape for personal injury litigators has changed so dramatically they may not need look much further than the judgment of the Designated Civil Judge of the County Court at London, HHJ Walden-Smith, sitting with DJ Letham as assessor in the costs case of Banks v London Borough of Hillingdon, which has been commented upon in the legal press. The case concerned the correct assessment of an After-The-Event insurance policy, an issue which ranked high on the list of insurers' (and it seems the Government's) bugbears with the unreformed CFA system.   The underlying case was a straightforward, low-value, public liability tripper case. The successful claimant was awarded just under £7,000 in damages and costs were assessed/agreed save for a somewhat eye-watering £24,694 ATE premium. Master Gordon-Saker the costs judge cut this down to £9,375 on the basis that it was patently unreasonable for a premium to so extensively exceed the likely assured sum. This latter figure the Master considered would have been a maximum of £15,000, that is, the maximum amount such an insurer would have to pay out in costs should the claimant lose the case. He awarded half this sum, plus another 25 percent. Before the learned senior circuit judge it was argued that the costs master misdirected himself and should have considered the “basket of risk” for insurers, rather than applying some sort of common-sense approach on a case-by-case basis. The court overturned Master Gordon-Saker’s decision on the ground that he indeed erred and failed to consider the august guidance of the Court of Appeal in Rogers v Merthyr Tydfil CBC [2006] EWCA Civ 1134. The court held that it was for the paying party to adduce evidence that the premium was excessive and as this had not been available in the instant case, the costs master had no basis to conclude that the sum claimed was unreasonable (per, Kris Motor Spares Ltd v Fox Williams LLP [2010] EWHC 1008). This decision must be seen as victory for claimant litigators, given that it should serve as a persuasive reminder to trial judges to follow Rogers in the ever-diminishing rump of cases where such high ATE premiums are seen. The lesson for defendants is obvious: in cases where they are put on notice that, if successful, a claimant party will seek payment of what appears to be a very high ATE premium, it would be prudent to obtain evidence that lower premiums were available to support the conclusion that what is allowed should be assessed down. In the event that such information is not available until at or after trial, such a defendant would have little option other than to request that the matter be subject to detailed assessment, potentially at the expense of the claimant party.

Fixed Costs and Part 36 Offers

What is the effect of a claimant’s ‘beaten’ Part 36 Offer upon their costs in a low value personal injury case within the RTA or EL/PL Protocol where claimants' costs are fixed pursuant to CPR 45? This has been a vexed question since the introduction of the fixed costs regime , but one the Master of the Rolls giving the sole judgment of the Court of Appeal in Broadhurst & Anor v Tan & Anor [2016] EWCA Civ 94 has now answered with important and far-reaching consequences for litigators in this area. The Court of Appeal held that Parliament and the draftsmen of the amended Rules intended Part 36 offers to have costs consequences in cases where they were bettered at trial even where costs were usually fixed. This means that, per Rule 36.14(3), where a claimant makes a successful Part 36 offer, the court will, unless it considers it unjust to do so, order that the claimant is entitled to four enhanced benefits including "(b) his costs on the indemnity basis from the date on which the relevant period expired” and thus (as held) the “tension between rule 45.29B and rule 36.14A must, therefore, be resolved in favour of rule 36.14A”, the specific provision taking precedence over the general.    At paragraphs 30 and 31, the Court held that:    “...The starting point is that fixed costs and assessed costs are conceptually different. Fixed costs are awarded whether or not they were incurred, and whether or not they represent reasonable or proportionate compensation for the effort actually expended. On the other hand, assessed costs reflect the work actually done... ...Where a claimant makes a successful Part 36 offer in a section IIIA case, he will be awarded fixed costs to the last staging point provided by rule 45.29C and Table 6B. He will then be awarded costs to be assessed on the indemnity basis in addition from the date that the offer became effective. This does not require any apportionment. It will, however, lead to a generous outcome for the claimant. I do not regard this outcome as so surprising or so unfair to the defendant that it requires the court to equate fixed costs with costs assessed on the indemnity basis... a generous outcome in such circumstances is consistent with rule 36.14(3) as a whole and its policy of providing claimants with generous incentives to make offers, and defendants with countervailing incentives to accept them.” Whether this clarification will lead to an increase or decrease in litigation will remain to be seen. Certainly the current interpretation of this (formerly) knotty issue ought to remind all litigators, but particularly those acting for claimant parties, of the importance of early, well-pitched Part 36 Offers in both encouraging settlement and giving rise to another means of escaping the confines of the fixed costs regime.

Have we started yet? Commencement of contested hearing and CFA uplifts

When a trial begins is of obvious import to any litigant where one or more party is funded by a conditional fee agreement which provides for an uplift per CPR 45.16 and 45.17. Mrs Justice Slade in a recent appeal from Master Campbell held that a contested hearing on the issue of liability had yet to commence before a subsequent settlement.   The facts of James v Ireland [2015] EWHC 1259 (QB) are unusual but not exceptional.   On the first day of a three day trial of a personal injuries case, the claimant successfully applied for an adjournment of the issue of quantum, it being intended that the issue of liability would proceed. Unusually however, late evidence disclosed by the defendant that hitherto unidentified independent witness. To allow for a statement to be taken from the same by the claimant, the matter was adjourned to the following day. The judge asked counsel what to read overnight. The next day it was revealed that attempts to contact the elusive independent witness had been unsuccessful. Nevertheless, the case was adjourned to the afternoon so that attempts could continue. These attempts were also fruitless, however given the likely importance of the witness the case was stood out. The judge reserved the matter to himself for a hearing at a later date. This hearing never took place as the claim was settled.   Had the liability trial commenced? The master held that it had. Counsel had entered court. Reading had commenced. Submissions had been provided and considered as to the adjournments. Thus, it was held that the claimant was entitled to the 100 percent costs uplift.   The defendant appealed, arguing that the master erred by failing to hold that nothing in the heard proceedings constituted a core event, such as would indicate that the liability trial had begun (Cutler v Stephenson and Manchester City Council [2008] EWHC 3622 (QB); Gandy v King [2010] EWHC 90177 (Costs)). It was further submitted that the judge would have held that the case was part heard had he considered the trial to have begun, rather than ordered it to be relisted reserved to himself. The claimant argued that the trial had begun as the judge had done pre-reading and that the submissions on the quantum aspect of the case would not have required further elucidation to open as to liability.   The Defendant’s submissions found favour with Mrs Justice Slade who held that a final contested hearing of the liability issue was not triggered by the commencement of any hearing of any nature related to the same. The hearing which was commenced was akin to a case management hearing, as the same did not consider any aspect necessary to determine the question of liability. The reading undertaken by the judge was held to have been prudent use of court time rather than a substantive consideration of a core issue. She held further that the transcripts actually supported the contention that the judge was unaware of the scope of the main issues of the case as to liability when the matter was stood out.

Costs Budgets and Unallocated Part 8 Claims issued before 22 April 2014

Some further clarity as to when to file costs budgets can be gleaned from the decision of Mr Justice Hickenbottom in the case of Kershaw v Roberts & Anor  [2014] EWHC 1037 (Ch). Here it was argued on appeal from the county court that the first directions hearing in a Part 8 Claim should be treated as the “first CMC” for the purposes of CPR 3.12-14 and thus costs budgets must be filed in advance.   It was argued that whilst the claim had not been allocated to the multi-track, this was inevitable as it was commenced by way of Part 8.   The learned judge however dismissed this argument, holding that the claim was not allocated to the multi-track until the district judge specifically allocated it to that track during the course of the county court hearing. IT was held that “consequently, that hearing itself was not – indeed could not have been – a CMC… The notice of the hearing did not refer to it as a CMC; and it seems to me clear that the court, in sending out that notice, never intended the hearing to be a CMC.”   This guidance is however of somewhat limited scope in that it only really applied to unallocated Part 8 Claims. This is because, on 1 April 2014 (the same day as the hearing of Kershaw), the Civil Procedure Rules Committee made amendments to the CPR by the Civil Procedure (Amendment No 4) Rules 2014 (SI 2014 No 867). Which are due to come into force on 22 April 2014. From that date, the costs management provisions of CPR Rule 3 Section 2 and CPR PD 3E (including costs budgets) will not automatically apply to any Part 8 claim. Those provisions will only apply if the court makes a positive order that they should (as expressly confirmed by new Rule 3.12(1A)).

Failure to file costs budgets: a recent example in practice

Pursuant to CPR 3.12 and 3.13, unless the Court orders otherwise all parties (unless they are litigants in person) in a multi-track case commenced after 1st April 2013 must file and exchange costs budgets. The date for doing so will either be prescribed by the Notice of Proposed Allocation served by the Court pursuant to CPR 23(1) or, in the absence of a specific date, they must be exchanged and filed 7 days before the first CMC. The sanction for not filing a budget is contained in CPR 3.14 and is extraordinarily draconian: "Unless the Court orders otherwise, any party which fails file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees". This sanction grabbed the headlines recently in the Andrew Mitchell MP case (Mitchell v  News Group (2013) EWHC 2355), since his solicitors failed to file a budget on time and Master McCloud applied CPR 3.14 to its full effect (albeit only by analogy since the claim was a defamation action not strictly governed by the new Part 3 regime). She also gave permission of her own motion for the Claimant to appeal to the Court of Appeal. In Maisuria v London Borough of Ealing (Uxbridge CC, 18th September 2013, unreported) the Defendant did not file a costs budget until the day before the first CMC. However, when the Court sent out the CPR 23(1) notice of proposed allocation, the Defendant  completed the attached directions questionnaire indicating that the appropriate track was in dispute. The Defendant's case was that, based upon the existing medical evidence, the time estimate for trial (1 day) and the pleaded claim for special damage, it was a fast track case. The directions questionnaire contained a box stating that parties should file a costs budget in precedent H if the claim was "likely to be allocated to  the multi-track". The Defendant did not think it was likely, or indeed that the evidence supported a claim in excess of £25,000, and therefore elected not to do so. Shortly before the CMC, the Claimant served additional expert evidence indicating that his injury had not recovered in accordance with the original prognosis and was more serious than had been anticipated. In light of this deterioration, the Defendant accepted that the case should now be allocated to the multi-track and filed a Costs Budget on the day before the CMC. The Claimant argued that, by analogy with the Andrew Mitchell MP case, the Defendant should be limited to a costs budget comprising its Court fees, pursuant to CPR 3.14. DDJ Sofaer concluded, however, that the Mitchell case was distinguishable on its facts. Whereas in that case the reasons for not filing a budget related to the solicitors being under pressure of work and experiencing unexpected delays, in this case there had been a genuine jurisdictional dispute as to whether this was a multi-track case at all, and the Defendant had been served with the relevant evidence late in the day. The Court had a discretion built in to CPR 3.14 ('Unless the Court orders otherwise') and it was not necessary for the Defendant to make a separate application for relief from sanction. Accordingly, the Court approved the Defendant's (and Claimant's) budget and did not apply the sanction.

Litigants in Person, the Judges and You!

      According to the government's own figures, 623,000 of the 1,000,000 people who previously received public funding each year ceased to be eligible for such assistance when the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012 came into force on 1 April 2013.   On 5 July 2013 the Judicial Working Group on Litigants in Person (LIPs) published its report on how the judiciary proposes to deal with the massive increase in LIPs in courts and tribunals. It merits careful reading by all practitioners.    www.judiciary.gov.uk/Resources/JCO/Documents/Reports/lip_2013.pdf    The challenges are immense and will be further increased by the impending rise in the financial limit for the small claims track from £5,000 to £10,000. A doubling of this limit will inevitably mean more cases fall within the small claims track where public funding is not available. As for alternative sources of assistance, the Citizens Advice Bureau estimates that local advice and community based services will lose over 77% of their public funding.    In 2012, District Judge Richard Chapman, the immediate past president of the Association of Her Majesty’s District Judges observed that already:   “Judges like me are spending more and more of our time having to deal with litigants who simply do not know the law, have never heard of the Civil Procedure Rules 1998 or the Family Procedure Rules 2010 and have breached most of the case management directions”.    The report recommends that the Ministry of Justice and Her Majesty’s Court and Tribunal Service should devote the necessary time and resources to producing, with judicial involvement, appropriate materials, including audio-visual materials, to inform LIPs what is required of them and what they can expect when they go to court as well as reviewing the information that is currently publically accessible on the various judicial websites – see [2.8] and [3.49-3.52] of the report.   The Judicial College should also urgently assess the  feasibility of providing training on LIPs –  a sort of “Quick Lit” course for judges – together with developing a  “litigants in person toolkit” utilising the existing judicial guidance – see [2.9] and [4.9-4.19] of the report.   More far reaching proposals include:   1.      The inclusion in the CPR of a dedicated rule which makes specific modifications to other rules where one or more of the parties to proceedings is a litigant in person.  2.      The introduction of a power into Rule 3.1 CPR to permit the court to direct, where at least one party is an LIP, that proceedings should be conducted as a more inquisitorial form of process.  3.      The introduction of a specific general practice direction or new rule in the CPR to address, without creating a fully inquisitorial form of procedure, the needs of  LIPs in obtaining access to justice whilst enabling  courts to manage cases consistently – see [2.10] and [5.11] of the report.    The stark reality is that in some courts and tribunals LIPs will be the rule rather than the exception. This will inevitably slow down and drive up the cost of proceedings and take up valuable judicial time. Equally inevitably, the call will surely go out from the judges to practitioners at all levels for assistance in responding to the challenges that lie ahead.   Image – www.123rf.com

After pasties and caravans … CFAs and DBAs?

Is it just me or should we all be concerned about the way in which the legislation to implement Lord Justice Jackson’s recommendations is being introduced?   Why have there been so few announcements about what are, after all, radical and far reaching public policy changes? If we as legal professionals are unsure about the proposed changes, how can we properly advise the public after 1 April 2013?   Will legal professionals soon be joining bakers and caravanning enthusiasts in pointing out to the government the potential far reaching consequences of over hasty legislation?   In the foreword to his final report on costs in civil litigation dated 21 December 2009 Lord Justice Jackson wrote:   “ … I therefore propose a coherent package of interlocking reforms, designed to control costs and promote access to justice ...”   He went on to make a total of 109 separate recommendations some but not all of which have found their way into proposed new legislation. In particular the Conditional Fee Agreements Order 2013 (the CFA Order) and the Damages-based Agreements Regulations 2013 (the DBA Regulations) have now been laid before Parliament and were subject to a Motion to Approve debate in the House of Lords on 26 February 2013.   Both have been described by the General Council for the Bar (GCB) as “not fit for purpose”. The GCB also suggested that the proposed order and regulations “will deny access to justice, burden the courts’ time with unnecessary satellite litigation and limit the commercial use of DBAs”.    There are certainly grounds for concern. As we all know, the success fee under a CFA entered into after 1 April 2013 for proceedings at first instance will be capped at 25%. Article 5(2) of the proposed CFA Order provides that this will be 25% of “(a) general damages for pain, suffering, and loss of amenity; and (b) damages for pecuniary loss, other than future pecuniary loss” (my emphasis). However, in a lecture given on 29 February 2012, Lord Justice Jackson amended his view in response to submissions from a number of parties and proposed that the cap should be 25% of all damages. There must be a risk that in larger and more complicated cases which are difficult to cost budget and involve significant initial disbursements, limiting the cap to 25% of past losses will not promote “access to justice” as Lord Justice Jackson hoped but may in fact prove to be a disincentive to  taking on such cases in the first place.   Then there is VAT. As drafted, the proposed CFA Order provides that the “damages” to which the 25% cap applies are “net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions”. There is no exclusion for VAT. But if VAT is included in such damages there is not only scope for uncertainty (what happens, for example, if the VAT rate changes after the CFA has been entered into but before a bill of costs is rendered?) but in the larger and more complicated cases this may be a further reason why those contemplating taking on such cases may decline to do so on the grounds that the unpredictability of the risk will not be properly compensated by the level of the CFA.   The same objections apply to the proposed DBA Regulations. As presently drafted, the cap for DBAs is inclusive of VAT but exclusive of damages for future pecuniary loss. In addition, the DBA Regulations do not allow for “hybrid” agreements i.e. agreements under which some costs are recoverable if a “win” does not occur rather than no costs at all. This is again contrary to what Lord Justice Jackson recommended and may prove a disincentive to the use of DBAs particularly in commercial cases.   Access to justice may not be as newsworthy as Cornish pasties and static caravans but in resource-intensive cases, the government’s aim of protecting the damages recoverable by claimants may actually result in some claimants being unable to obtain legal representation and thus recovering no damages at all.       Image – cornishpasties.com

Should the solicitor pay up?

Can a solicitor be liable for costs if he or she takes on a case for an impecunious claimant under a CFA where there is no ATE insurance policy in place and where he or she funds the disbursements necessary to allow the case to proceed?   Neil Hamilton famously sued Mohammed Al-Fayed for defamation over ‘cash for questions’, lost and was ordered to pay £1.3m in costs. Mr Al-Fayed then pursued Mr Hamilton’s financial backers (not parties to the litigation) for costs, lost and was ordered to pay their costs. Unsurprisingly there has not been as much media attention and public interest in the case of Tinseltime v Eryl Roberts [2012] EWHC 2628 which was a case in the technology and construction court. There was no personal injury involved: the claimant claimed that the defendant had created dust whilst demolishing a building and the dust had damaged machinery and caused a loss of profit. The claim was unsuccessful and the claimant was ordered to pay the defendant’s costs. The defendants applied for an order under section 51(3) of the Senior Courts Act 1981 and/or CPR 48.2 that the claimant’s solicitor pay the costs as a non-party funder. The claimant’s solicitor had entered into a CFA. He had been unduly optimistic about how straightforward the issue of liability would be. It was clear that he was aware that if the claimant lost it would not be able to pay costs. He estimated the overall costs likely to be incurred to be £20,000 and disbursements, £10,000. In the event disbursements amounted to £22,270 and so burnt a sizeable hole in his pocket. He had expected to recover the disbursements from the defendant (if successful). The judge concluded that the following were the correct legal principles to apply. The first question was whether it just in all the circumstances to make an order. Secondly, when considering a solicitor, had he acted beyond or outside his role as a solicitor conducting litigation? Thirdly, the fact that a solicitor is acting under a CFA and stands to benefit financial from the outcome does not mean he has acted beyond or outside his role as a solicitor. Fourthly, the starting point is that the position of a solicitor funding disbursements is no different from one who is not as both positions are legitimate and meet a legitimate public policy aim. The judge was of the view that, in order to be successful in applying for a non-party costs order there would have to be present either some financial benefit to the solicitor over and above the benefit which he could expect to receive from the CFA or some exercise of control of the litigation over and above that which would be expected from a solicitor acting on behalf of a client (or a combination of both). By way of example the judge suggested that a solicitor’s desire to achieve a successful outcome might cause him to take over the running of the litigation for his own ends. Another example was of a case where the damages claimed were modest in comparison to costs incurred so that the client had lost interest in the proceedings but the solicitor was wedded to them in order to recover his costs. The circumstances of a case might justify the conclusion that a solicitor was making all the decisions for his own benefit. The defendants argued that the claimant’s solicitor had acted improperly, unreasonably or negligently in his conduct of the case. The judge said this was the province of wasted costs (which were not awarded - although pursued in the alternative). He said courts should be astute to keep wasted costs and non-party costs separate. The claimant’s solicitor may have misjudged the case but he came out of the judgment rather well. The judge commented that he was not motivated solely by financial self-interest but with the laudable aim of providing access to justice to the claimant. He thought the claim was genuine and had written a file note stating “the company has been crippled by the defendant tortfeasors and needs assistance.” The judgment draws to a close effectively with a warning against letting financial self-interest get the better of you and an encouragement from a judge to practitioners to be motivated not solely by financial self-interest but by a concern for justice and access to justice. Such a consideration (and file-note for the record!) might well prove worthwhile… Photograph courtesy of freefoto.com

COSTS AFTER A SPLIT TRIAL-THE BLACK HOLE

1.      Just over five years ago, there was an unfathomable change to the Part 36 rules on split trials which, it turns out, gives a huge incentive to defendants to make a monetary Part 36 offer before any split trial that is ordered.   2.      Prior to 6th April 2007, the matter was dealt with by Part 36.19.  Part 36.19, entitled Restriction on disclosure of a Part 36 offer or a Part 36 payment, stated (2)   The fact that a Part 36 payment has been made shall not be communicated to the trial judge until all questions of liability and the amount of money to be awarded have been decided. (3)   Paragraph (2) does not apply-….. (c) where-(i) the issue of liability has been determined before any assessment of the money claimed and (ii) the fact that there has or has not been a Part 36 payment may be relevant to the question of the costs of the issue of liability   3.      That rule was interpreted in HSS Group plc v BMB Limited [2005] 1 WLR 3158.  In that case the First Defendant had made a Part 36 payment after the start of proceedings but before an order for a split trial.  At the split trial, the First Defendant was found liable and the trial judge ordered it to pay the costs on the issue of liability. Held: The trial judge should have reserved costs. The First Defendant’s Part 36 payment might affect the final costs order.   4.       On 6th April 2007 the old Part 36.19 became the present Part 36.13.  In the present rule, there is no reference whatsoever to split trials.  It is difficult to know why the draughtsmen of the new rule thought it fitting to drop the clear and helpful sub-rule in the old Part 36.19(3) dealing with split trials.  There is now a blanket ban on telling a trial judge about the fact of Part 36 offer except where the parties agree or in two other exceptional cases.   5.      It is not hard to agree with the thoughts of Henderson J in AB v CD [2011] EWHC 602 at paragraphs 16 to 20 who did not have to decide the matter but found the wording of Part 36.13(2) unsatisfactory and who observed that the party against whom a costs order was otherwise likely to be made would simply withhold their agreement to disclosure of the fact of a Part 36 offer.  He concluded: “ I will merely hazard the suggestion…that a possible solution might be to focus on the words “until the case has been decided” in rule 36.13(2), which are much less specific than the wording of the old rule 36.19(2)…It may be that in appropriate circumstances the new wording should be construed as referring to the conclusion of the first part of a split trial. But even then the difficulty would remain that the court may only be told about the existence of the Part 36 offer [and not its terms], so the question of the costs would in practice still have to be reserved for the reasons given by the Court of Appeal in the HSS Group case”.   6.      The learned judge may be right about the need to construe the rule, although construing it in that manner appears to be re-writing it to include that which the rules committee thought fit to leave out.   7.      Accordingly where a defendant has made no monetary Part 36 offer (or one that is plainly hopeless and could not conceivably be engaged), the Court will be able to make a costs order after a split trial on liability.  In all other cases, it should reserve costs.   8.      But why shouldn’t the Claimant have his costs on issues of liability up to the date of the Part 36 offer?   9.      This question was posed in The Jean Scene Limited v Tesco Stores Limited [2012] EWHC 1275.  The Court held that the default position is that costs should be reserved and since in this case the Part 36 offer had been made early and there were potential arguments about pre-action protocol matters, the default position ought to apply. Costs were reserved and no payment on account of costs was made.   10.  So the position after the date of Part 36 offer is clear.  Costs must be reserved.  I have my doubts whether defendants will be able to smother the claimant’s right to the costs on liability pre-dating the Part 36 offer simply by making a Part 36 offer a week or two before the split trial.  It needs to be made early.   11.  In the latest case on this subject, Ted Baker PLC v Axa Insurance & ors [2012] EWHC 1779, the court declined to make any immediate costs orders but ordered the defendants to pay the costs of the preliminary issues subject to any settlement issues that might arise at the end of the case. A contingent order like that is scarcely the solution.  One can but agree with Mr Justice Eder that there is an urgent need for Part 36.13 to be reviewed and reformulated to deal with the matter of split trials.