Pre-proceedings costs

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The case of Citation plc v Ellis Whittam Ltd [2012] EWHC 764 (QB) raises an interesting issue as to pre-proceedings costs. Summarising the law, Tugendhat J held:

“In summary I take the law to be: (1) if no claim form is issued, then there is no litigation and so there are no costs of litigation, whatever costs may have been incurred in complying with a Pre-Action Protocol; but (2) if a claim form is issued, the costs incurred in complying with a Pre-Action Protocol may be recoverable as costs ‘incidental to’ any subsequent proceedings.”

So far, so uncontroversial.

Slightly more questionable is the view that:

“The CPR provides a strong incentive to parties to engage in pre-action communications, with the risk to those who do not do this that they may not recover their costs, even if they bring an action in which they are the successful party.”

(A successful claimant who has failed to comply with a Pre-Action Protocol may have some of their costs disallowed but I cannot immediately recall a case where their costs were disallowed in their entirety for this reason alone.)

In concluding that the Claimant should not have issued proceeding (the claim being struck out as an abuse of process), Tugendhat J ordered the Claimant to pay the Defendant’s costs from the date of service of the claim form. However:

“As to the costs up to the service of the claim form, I make no order. If the Claimant had not commenced the proceedings (and I have held that it ought not to have commenced the proceedings) then the Defendant could not have sought an order for its costs for that period to be paid by the Claimant. The fact that the Claimant did commence proceedings in this case ought not to lead to the result that it becomes liable to pay to the Defendant costs which it would not have been liable to pay if it had not commenced proceedings.”

This part of the judgment is more problematic. It is not unusual for both parties to incur legal costs pre-proceedings in their attempts to settle the matter without proceedings. It is well established that a successful claimant will be able to recover their pre-proceedings costs as being costs ‘incidental to’ the subsequent proceedings. Why should successful defendants not be in the same position?

Temporary exemption for mesothelioma claims

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In a surprise development the government is to exempt mesothelioma claims from the ending of recoverability of success fees and ATE premiums in April 2013. However, this is potentially only a temporary reprieve with Justice Minister Jonathan Djanogly announcing:

“On careful reflection about the special position of mesothelioma sufferers, I can now give the House the assurance that we will not commence the relevant provisions in clause 43, on success fees, and clause 45, on after-the-event insurance, in respect of mesothelioma claims in April next year. Rather, we will implement the clauses in respect of those claims at a later date, once we are satisfied on the way forward for those who are unable to trace their employer’s insurer. The amendment commits the Lord Chancellor to carrying out a review of the likely effect of the clauses in relation to mesothelioma proceedings and to publish a report before those clauses are implemented.”

Detailed assessments after costs budgeting?

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This year’s White Paper Conference Company costs conference on Costs, Funding, CFAs and Jackson was such a success it was repeated twice and sold out on both occasions almost immediately. (That’s what you get when you promote a costs event via the Legal Costs Blog.)

One of the speakers, Michael Kain from costs firm Kain Knight, talking about costs budgeting, warned the delegates to “Be afraid…Be very afraid”. This warning was in large part no doubt aimed at the costs professionals attending as he predicted that costs budgeting would largely mean an end to detailed assessments. Specialist costs counsel Jeremy Morgan QC has made similar predictions where costs management is applied, suggesting it is “hard to see any room for arguments on proportionality, hourly rates or the reasonableness of the work done”. With an end to recovery of additional liabilities around the corner, that doesn’t leave much left.

HH Judge Simon Brown QC, the judge responsible for one of the current costs budgeting pilots, writing in the New Law Journal, stated:

“if the budget of the receiving party is approved, then its costs are likely to be paid in full without delay or further later assessment at the end of the case.”

Although those involved in running the costs management/budgeting pilots have been keen to emphasise that it is not meant to be the equivalent of costs capping or performing a pre-emptive detailed assessment, it is difficult to see much scope for detailed assessment where the costs come in on budget. Where the budget is exceeded, the rules as currently drafted provide that any judge assessing costs will not depart from such approved budget unless satisfied that there is good reason to do so. And, as HH Judge Simon Brown QC notes, where detailed assessment is required because of inaccurate estimating: “the expense of that process [is] likely to be upon the defaulting receiving party”.

Perhaps most chillingly, he concluded:

“The days of putting in a bill at the end of a case based on a multiple of billable hours x £x per hour and expecting to be paid are over.”

Whichever way the issue is viewed, the importance of accurately setting budgets cannot be overstated.

Still nothing better to do?

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I mentioned the other day receiving an email from the other side’s costs draftsman on 30th March 2012 reading:

“Please can you provide an update on the current position of our clients cost cheque in relation to this matter? Costs were agreed on 23rd March in the amount of £7,000.00 on 14 day payment terms”.

I suggested the other side did not appear to have anything better to do other than sending premature chase-ups.

Much heated commentary on this post followed as to whether the chase-up was a reasonable step or not, with one wag noting that “the ‘issue’ has certainly prompted a lengthier debate than entity regulation of the costs profession did”.

I have a further postscript to add. On 4th April 2012 I received the following email on the same case:

“Please can you urgently provide the current position on our clients costs cheque.

Costs were agreed on 23rd March in the sum of £7,000.00.

Please note receipt of payment is strictly 14 days from when costs were agreed, on day 15 we would be in the position to issue enforcement proceedings to recover the agreed amount.”

Given there was no costs order, they presumably meant they would be in a position to issue proceedings for breach of contract on day 15.

At this stage I went away to review the papers:

8th March 2012 – Defendant makes offer of £7,000

23rd March 2012 – Claimant says they “confirm costs are now agreed in the sum of £7,000. Settlement in the agreed sum is strictly subject to receipt of the payment in satisfaction within 14 days from the sate of this letter”.

I will confess that I rather lost interest in contract law after week one of my law degree and therefore never really mastered much beyond offer, acceptance, rejection and counter-offer. However, my limited understanding of such matters is that if you purport to accept an offer but then seek to impose a fresh condition upon acceptance, such as:

• Payment is made within a certain timescale, or
• Payment is made in used £10 notes left in a paper bag under a park bench, or
• Payment is hand delivered by Pippa Middleton who will then proceed to smear the fee earner in chocolate sauce before licking it all off,

then you have not actually accepted the offer put forward. You have instead made a counter-offer, and thereby rejected the original offer. In this case, the Claimant’s counter-offer of £7,000 subject to payment being made within 14 days was not accepted. Therefore there was no agreement and no breach of any agreement such as to give rise to the right to “issue enforcement proceedings”.

No doubt an offer to settle costs comes with an implied term that payment will be within a reasonable period and failure to pay within a reasonable period would give rise a claim for breach of contact. Whether failure to pay within 14 days can be taken as amounting to a breach of such an implied term is a moot point however given the facts of this case.

The Defendant’s original offer of £7,000 was made “strictly subject to disclosure of an enforceable CFA covering the claims against the [Defendants]”. To date, there has been no such disclosure.

You couldn’t make it up.

LASPO amendments overturned

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The government has, unsurprisingly, overturned all of the House of Lords amendments to the Legal Aid, Sentencing and Punishment of Offenders Bill and, in particular, the one that sought to exempt all EL industrial disease cases from the end to recovery of success fees and ATE premiums.

It is a perfectly arguable position to adopt that all claimants should be allowed to litigate entirely risk free and keep 100% of their damages. It is also perfectly arguable that injuries of a certain level of seriousness should be exempt (eg those that will, or have, resulted in death). However, the position of the House of Lords’ amendment to exempt all EL disease claims (and why not non-EL disease claims?) was neither rational nor consistent with whatever it was that was trying to be achieved (unless it was simply pandering to the trade unions).

Recovering photocopying costs

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CPD 4.16(5) is well known:

“The cost of making copies of documents will not in general be allowed but the court may exceptionally in its discretion make an allowance for copying in unusual circumstances or where the documents copied are unusually numerous in relation to the nature of the case. Where this discretion is invoked the number of copies made, their purpose and the costs claimed for them must be set out in the bill.”

However, I am grateful to Friston’s Civil Costs – Law and Practice for reminding me of the views of Evans J in Johnson v Reed Corrugated Cases Ltd (1990) Costs LR, Core vol 180 at 185.

“[Counsel for the receiving party] submitted that the maximum number of pages which might require copying in a personal injury case of a normal kind would be 1,000, and that therefore this case did involve an unusual number. I sympathise with this submission, but I am troubled that neither the plaintiffs nor the registrar have made an allowance for the number which in the normal case would form part of the solicitor’s general overheads.”

Where the Court does invoke its discretion to allow photocopying it should allow only a reasonable amount for the costs in excess of those that would have been incurred under normal circumstances.

Article on CFA challenges

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Readers of Solicitors Journal will know I contribute a regular costs column. Somehow I usually manage to find something new to write about that hasn’t already appeared on the Legal Costs Blog. As part of our Costs Law Articles Archive project I will be uploading some of these old articles over the coming weeks. First up is a discussion of the Tankard v John Fredricks Plastics Ltd [2008] EWCA Civ 1375 judgment and whether it would kill off CFA challenges.

In the article I wrote:

“Although a collective sigh of relief will have gone up from panel members of the ALP scheme the decision has done little or nothing to limit the scope for challenges to other schemes or introduce any greater certainty. Hollins introduced the vague (and often shifting) concept of the ‘material’ breach and Tankard has introduced the even more unhelpful ‘reasonable person’ test. Although this appears to represent a common sense approach it actually produces nothing but uncertainty.

If you asked the ‘reasonable person’ whether he thought that a scheme that provided only 1% of a firm’s revenue might affect the advice it gave then the answer would probably be no. If you informed the same person that an interest amounted to £50,000 a year you would possibly get an entirely different answer. Of course, it is quite possible that 1% of a given firm’s revenue is indeed £50,000 a year. Would two judges give the same answer to this set of facts? Equally, £50,000 for some firms really would be irrelevant but for others would represent the difference between profit and loss. This new test will mean that there may have been a breach of the Regulations by one firm when advising a client but no breach by the firm next door giving exactly the same advice on the same scheme.”

Having recently had a CFA challenge upheld on appeal, and with one or two others still in the pipeline, I am sticking by the view that Tankard did not kill off CFA challenges but simply made the outcome more unpredictable.

Without prejudice to negligence

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Schedule of costs from claimant law costs draftsmen with the added proviso:

“Any error/omissions herein of any nature are excluded from any Agreement reached pursuant to this schedule”.

Strangely, I’m not prepared to negotiate on that basis.

Costs Lawyer swear box

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Costs lawyer writing in Costs Lawyer magazine on the approach the Legal Services Commission takes to allowances for preparing claims for costs:

“Ridiculous, unrealistic, appalling and downright insulting. These are just some of the expletives that came to mind…”


I guess some costs lawyers have led more sheltered lives than others.

Relief from sanctions

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Costs Practice Direction 10.1 states:

“In a case to which rule 44.3B(1)(c) or (d) applies the party in default may apply for relief from the sanction. He should do so as quickly as possible after he becomes aware of the default. An application, supported by evidence, should be made under Part 23 to a costs judge or district judge of the court which is dealing with the case. (Attention is drawn to rules 3.8 and 3.9 which deal with sanctions and relief from sanctions).”

Why no mention of CPR 44.3B(1)(e) concerning notification of ATE premiums? Something else for the next CPR update given this seems to have been overlooked when CPR 44.3B(1)(e) was introduced?