From costs management to disclosure: this month’s costs cases summaries

Bankruptcy case: wasted costs order against solicitors

Our monthly summary of key costs-related court decisions is provided by CaseCheck

Ali v Ali & Ors [2013] EWHC 1233 (QB)

Application by a defendant to revoke a direction that an assessment of costs proceed upon the basis that it was reasonable for insurers to be separately represented in a road traffic claim, on the ground that the information giving rise to the direction was inaccurate and did not properly reflect that one of the insurers was indemnified by the other on the condition of co-operation.

Held: It was in the interests of justice that the court exercise its power under CPR 3.1(7) to revoke the direction. The costs direction was made as a result of an inadvertent misunderstanding as to the true funding position between the insurers, which would have had a significant effect on the costs assessment. Insurers ordered to pay the costs of the application.

Full ruling here.

Gavin & Anor v Community Housing Association Ltd [2013] EWCA Civ 580

Appeal against, inter alia, an order to pay costs, including reserved costs of all interlocutory applications, on an indemnity basis.

Appeal dismissed. Held: The judge's power under CPR 44.4(3) to award costs on the indemnity basis is exceptional, justified where the circumstances take the case out of the norm.

Although it is not necessary to show misconduct on part of the paying party, in the present case an indemnity basis was justified due to a complete disregard of procedural rules and the making of unfounded and exaggerated claims. It was also within the trial judge's discretion to direct that costs of interlocutory applications follow the event where the costs of those applications were reserved, so that the ultimate burden would be decided by having regard to the outcome in the action.

Full ruling here.

R (Hemming & Ors) v Westminster City Council (Rev 1) [2013] EWCA Civ 591

Appeal concerning, inter alia, the operation of CPR 36.14(3) in cases where the party which has rejected a settlement offer is a public authority and the dispute is about a new and untested legal regime.

Held: When considering whether it would be just to make an order under CPR 36.14(3), the court must take into account all the circumstances of the case, including the terms of the part 36 offer, the stage in the proceedings when it was made, the information available to the parties at the time the offer was made, and the conduct of the parties with regard to giving or refusing to give information enabling the offer to be made or evaluated.

That the unsuccessful party is a public authority faced with the interpretation of new and untested legislation is arguable but not, prima facie, a relevant consideration.

Full ruling here.

Elvanite Full Circle Ltd v Amec Earth & Environmental (UK) Ltd [2013] EWHC 1643 (TCC)

A successful defendant sought twice the amount approved in a costs management order and covered by the claimant’s after-the-event (ATE) insurance.

Held: The starting point of an assessment of costs, on either a standard or indemnity basis, is the budget approved in a costs management order.  The primary function of an approved costs budget is to ensure that costs are reasonable and proportionate to what is at stake. As such, the court will be slow to revise or depart from an approved budget unless it is satisfied in all the circumstances that there is good reason to do so (per Henry v News Group Newspapers Ltd [2013] EWCA Civ 19).

Whether an award of indemnity costs is a good reason to depart from the order depends on the particular facts of the case. Although it is always open to a party to seek to depart from the original approved budget on the basis that there is good reason to do so, prima facie it is not possible to seek retrospective approval to amend.

Should a party wish to change its budget, it must seek formal approval as soon as it becomes apparent that the original costs have been significantly exceeded, so the court can consider whether there was good reason to depart from the budget. The mere making of a mistake in a budget, absent of any indication of error, does not, of itself, amount to a good reason.

Indemnity costs are only justified where the conduct of the paying party takes the case out of the norm and amounts to a forfeiture of the rights to the benefit of the doubt on reasonableness, such as in pursuing a hopeless or disproportionately wide claim.

In the present case, indemnity costs were not justified as the claim was arguable and it was reasonable and proportionate for the claimant to proceed to trial. Although the defendant had not demonstrated good reasons for not making an application to amend costs or for the court to depart from the costs management order in relation to expert's fees, it was for the costs judge to assess whether some of the increases constituted good reason.

Full ruling here and Litigation Futures story here.

Thames Chambers Solicitors v Miah (Rev 1) [2013] EWHC 1245 (QB)

Appeal against a wasted costs order against solicitors instructed by a bankrupt claimant granted on the ground that they conducted litigation in the absence of consent by the trustee in bankruptcy.

Held: A wasted costs order application may be made orally in the course of any hearing (CPD (CPR part 48) paragraph 53.3(2)), provided the scope of the application is narrow and clear (Regent Leisuretime Ltd v Skerrett [2006] EWCA Civ 1032). It is negligent for solicitors to commence an action for a bankrupt in relation to a cause of action which is vested in the bankrupt's trustee, unless the client has grossly misled them (Pickthall v Hill Dickinson LLP [2009] EWCA Civ 543; Nelson v Nelson [1997] 1 All ER 970f).

Appeal dismissed. In the present case, it was not necessary for the defendant to issue a part 23 application as there was a strong prima facie case that the solicitors acted improperly, unreasonably and negligently – any competent solicitor must know that proceedings to enforce a claim by a bankrupt can be pursued only with the consent of the trustee.

Full ruling here.

United Marine Aggregates Ltd v G M Welding & Engineering Ltd & Ors [2013] EWCA Civ 516

In an appeal against a finding that a fire was not caused by breaches of contractual and tortious duty, the public liability insurer of the successful defendants appealed an award of 50% of its costs.

Held: The judge erred in making an order substantially influenced by the view that the insurer incurred disproportionately high costs: pursuing some issues on which it lost or which proved peripheral were not matters which justified depriving it of any part of its costs. The order was therefore unsustainable and substituted for an order awarding the insurer all its costs.

Full ruling here.

Re Atrium Training Services Ltd & Connor Williams Ltd [2013] EWHC 1562 (Ch)

Application for an extension to comply with a disclosure order and cross-application to vary an order for costs of disclosure applications to an indemnity basis.

Held: Where applications are applied for in time and involve no significant fresh prejudice to the other parties, considerations of cost and proportionality are highly relevant: depending on the circumstances of the case and the stage in the proceedings when the order was made, there may be a need for reasonable extensions or other adjustments.

The wide power of the court to vary or revoke an order may be exercised only where there has been a material change of circumstances or where facts or arguments leading to the original decision were mis-stated or omitted (Tibbles v SIG Plc (t/a Asphaltic Roofing Supplies) [2012] EWCA Civ 518).

In the present case, extension was justified, while a variation of the costs order was not. The latter application was an expensive and unnecessary piece of satellite litigation.

Full ruling here and Litigation Futures story here.


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