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From non-party orders against solicitors to caps: this month’s costs cases summaries


Equal apportionment of joint costs: principle not applied where it would cause injustice to a party

Litigation Futures is now publishing a monthly summary of key costs-related court decisions, and there is a bumper group for May. These are provided by CaseCheck

Heron v TNT (UK) Ltd & Ors [2013] EWCA Civ 469

Application by employers’ insurers for a non-party costs order against solicitors acting for an employee in a personal injury claim without after-the-event (ATE) insurance.

Held: A non-party costs order is exceptional and fact-sensitive. Such an order will be justified were the non-party becomes a real party to the litigation, has a principal interest in its outcome and is acting primarily for their own sake (Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] UKPC 39 [2]). It is not sufficient that an act of negligence by a solicitor in the conduct of litigation results in an opposing party incurring costs which might not otherwise have been incurred.

In the present case, although the solicitors were potentially liable to their client for any costs payable to the employers’ insurers, a failure to obtain ATE insurance in itself was not sufficient to demonstrate that the firm became a real party to the litigation.

Full ruling here [3] and the Litigation Futures story on the case here [4].

Khans Solicitors v Chifuntwe & Anor [2013] EWCA Civ 481

Appeal concerning a solicitor’s entitlement to recover costs from a paying party where settlement is paid directly to a client despite notice being given that there is an outstanding costs debt.

Held: Collusion and notice are parallel routes to an equitable interference with the disposal of damages and costs. Where the paying party has colluded with the opposing party to keep fees from that party’s lawyers or the paying party has been put on notice of the solicitor’s lien, payment to the opposing party is not a good discharge of the costs debt and the payment must be made again.

In the present case, the paying party was on clear notice not to pay the client and therefore required to pay the sums to the solicitors.

Full ruling here [5].

Henderson v All Around the World Recordings Ltd & Anor [2013] EWPCC 19

Costs judgment raising the issues of whether success fees and ATE premiums are covered by the Patents County Court costs cap and whether the court has a general discretion to disapply the cap.

Held: Success fees and ATE premiums are covered by the Patents County Court costs cap and scale limits. There exists a general discretion to disapply the cap, although it can only be exercised in a truly exceptional case so as not to undermine the certainty of the procedure. Westwood v Knight [2011] EWPCC 11 [6] affirmed.

The present case was not sufficiently exceptional to justify disapplying the cap. Although there was an imbalance between the claimant and the defendant, to exercise the discretion to disapply would create considerable uncertainty and weaken access to justice for other litigants. Further, a claimant who wishes to recover a reasonable proportion of the totality of their legal costs may litigate in the High Court.

Full ruling here [7].

Standard Bank Plc v Via Mat International Ltd & Anor [2013] EWCA Civ 490

Postscript to a judgment, setting aside an order refusing an application for summary judgment in a commercial dispute, concerning excessively long skeleton arguments and the impact on costs.

Held: The purpose of skeleton arguments is to inform the court of the essential elements of the submissions thereby enabling it to understand the issues and arguments arising on appeal. The court may disallow all or part of the costs of any unduly long and complex skeleton that fails to serve that essential purpose.

The court expects the requirements of Practice Directions 52A and 52C be rigorously observed. Failure to comply with them is likely to lead to strict adverse costs orders. Khader v Aziz [2010] EWCA Civ 716 [8] approved.

Full ruling here [9].

Mengiste v Endowment Fund for the Rehabilitation of Tigray & Ors [2013] EWHC 857 (Ch)

Application for a judge to recuse himself from an application for a wasted costs order against the claimants’ solicitors for leading inappropriate expert evidence.

Held: Recusal is necessary where the judge’s observations, manner and conduct of the case shows actual bias against the party seeking recusal or where a fair-minded and informed observer would conclude that there is a real possibility that the judge is not impartial and therefore, potentially biased. Criticism is not, of itself, a sufficient basis for requiring recusal. Oni v NHS Leicester City [2012] UKEAT 0144_12_1209 [10] affirmed. Nor is there a distinction between criticisms addressed to witnesses or parties.

On a wasted costs application, a judge who has heard the case should hear the application unless there is an exceptional reason justifying otherwise (Bahai v Rashidian [1985] 1WLR 1337). That criticisms contained in a judgment give rise to a basis for an application for a wasted costs order is insufficient to require recusal.

Application refused on the grounds that it was completely without merit. To a fair-minded observer, criticisms concerning the claimants’ solicitors failure to fulfil their obligations under the Expert Evidence Protocol were necessary where the expert was neither reckless nor grossly negligent.

(Subsequent judgment determining that the defendants established a prima facie case for a wasted costs application at [2013] EWHC 1087 (Ch) [11])

Full ruling here [12].

Harrison & Anor v Black Horse Ltd [2013] EWHC B5 (Costs)

Application for an order for payment on account of costs under CPR 44.3(8) based on a consent order made in the Supreme Court. Application opposed on the ground that the Senior Courts Costs Office had no jurisdiction: costs were ordered to be paid by the Supreme Court, to which the CPR do not apply.

Held: The CPR apply to orders where the Supreme Court is in effect exercising the jurisdiction of the courts below, such as by reversing the orders of those courts as to require the respondent to pay the appellants’ costs (as in the present case). As such, the CPR applied to the orders and to the detailed assessment of costs made under those orders, and the Senior Courts Costs Office had jurisdiction to make the order sought under CPR 44.3(8).

Obiter: That each stage of the proceedings, where the appellants lost, were governed by a separate conditional fee agreement did not mean that no costs could be recovered in respect of those proceedings. The effect of the consent order in the Supreme Court was that the appellants won at each stage because their claim for damages, relief and repayment of premiums paid was decided in their favour.

Full ruling here [13].

Jones & Ors v Secretary of State for Energy and Climate Change & Anor [2013] EWHC 1023 (QB)

Application for pre-judgment interest on disbursements paid by the claimants’ solicitors pursuant to a credit agreement raising the issue of the appropriate rate to be applied.

Held: CPR 44.3(6)(g) provides the court with the power to make an order for payment of pre-judgment interest on costs. The rate of interest on costs is not fixed and is in the discretion of the court, taking into account all the circumstances of the case and bearing in mind the requirement to do justice as between the parties. Credit charges specified in a credit agreement provide only prima facie evidence of the cost in obtaining necessary credit, which can be displaced by evidence that charges are excessive.

In the present case, the 4% above base rate was not excessive or unreasonable: it was unlikely that the claimants would have unsecured borrowing at a more advantageous rate, and as such, it was appropriate to apply it.

(Judgment determining individual and common costs in the litigation at [2012] EWHC 3647 (QB) [14]. Summary on CaseCheck here [15])

Full ruling here [16] and the Litigation Futures story on the case here [17].

Walker & Ors v Burton & Anor [2013] EWHC 811 (Ch)

Cross-appeals against an order made by an adjudicator in a fell title dispute apportioning the total of solicitors’ costs between parties contractually liable under a conditional fee agreement and those who were not.

Held, inter alia: The general principle of equal apportionment of joint costs will not be applied where it would cause injustice to the paying or receiving party. The court will not impose penal consequences on parties who are willing to take responsibility for the costs of pursuing a community interest.

In the present case, the apportionment was not necessary to identify the costs properly incurred by the successful party and resulted in injustice to the conditional fee agreement clients.

Full ruling here [18].

Edwards & Anor v Environment Agency & Ors [2013] EUECJ C-260/11

Preliminary ruling concerning the meaning of ‘not prohibitively expensive’ judicial proceedings and the correct approach to making a costs assessment in disputes relating to environmental matters under the Aarhus Convention.

Held: That judicial proceedings should not be ‘prohibitively expensive’ means that a member of the public not be prevented from seeking or pursuing a claim for review by the courts of an environmental matter by reason of the financial burden that might arise as a result. Where a national court makes a costs order or caps liability for costs, it must be satisfied that the above requirement has been complied with, taking into account both the interest of the party wishing to defend their rights and the public interest in the protection of the environment.

The prohibitive nature of costs must be assessed objectively and as a whole, taking into account the financial situation of the parties concerned, whether the claimant has a reasonable prospect of success, the importance of what is at stake for the claimant and for the protection of the environment, the complexity of the relevant law and procedure, the potentially frivolous nature of the claim at its various stages, and the existence of a national legal aid scheme or a costs protection regime.

The fact that a claimant has not been deterred, in practice, from asserting the claim is not of itself sufficient to establish that the proceedings are not prohibitively expensive. Further, the assessment cannot be conducted according to different criteria depending on whether it is carried out at the conclusion of first-instance proceedings, an appeal or a second appeal.

Full ruling here [19] and the Litigation Futures story here [20].

Webb Resolutions Ltd v JV Ltd (t/a Shepherd Chartered Surveyors) [2013] EWHC 509

Application for costs on the ground that the claimants’ solicitors acted unreasonably in refusing to agree to the terms of an order directed at a case management conference.

Held: If a party is charged with drawing up an order, it is the duty of its solicitors and counsel to produce a draft that fairly reflects what they think the judge decided or directed. They are to give effect to court orders and not to attempt to manipulate them to their own or their client’s perceived advantage.

In the present case, the claimants’ solicitors were trying to persuade the defendants to agree to an order in fundamental different terms than that directed, in the absence of permission to appeal or vary. Such conduct was wholly unacceptable. The defendants were entitled to recover the costs which were unreasonably incurred. Sum claimed for reduced to reflect the true amount.

Full ruling here [21].

Royal Bank of Scotland Plc v Highland Financial Partners LP & Ors [2013] EWCA Civ 472

Dispute as to costs incurred at first instance and on appeal, and the timing and rate of interest to be applied.

Held: The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, which is only departed from if the circumstances of the case require it. Relevant factors include the conduct of the parties and whether a party has succeeded in part of its claim.

The court has a wide discretion as to whether it orders costs on the standard or indemnity basis, the latter of which requires there to have been some type of conduct or circumstances which takes the case ‘out of the norm’. Typically, indemnity costs are reserved for cases where the court may particularly wish to indicate its disapproval of a party’s conduct.

In the present case, the general rule as to costs applied. Highland and Scott Law were the overall successful parties and there was nothing in their conduct which required the court to depart from the general rule. Costs were to be paid on an indemnity basis due to misconduct attributable to RBS. A commercial interest rate of 2.5% over base applied for the whole period. In the event of a failure to pay, the Judgment Act rate of 8% applied. Costs on account ordered at 70% of estimated total costs.

(Principal judgment at [2013] EWCA Civ 328 [22])

Full ruling here [23].

Hampshire Police v Taylor [2013] EWCA Civ 496

Appeal concerning costs awarded to a police officer in a successful claim for damages for a breach of duty to provide equipment on the ground that success was based on a late amendment to the claim.

Held: The normal order that the successful party is entitled to all his costs is not lightly displaced. The fact that a successful argument is based on a relatively late amendment is not material.

In the present case, the judge’s order was not outside the generous ambit given to judges in relation to costs and there was no injustice in applying the general rule.

(Summary of substantive appeal available on CaseCheck here [24])

Full ruling here [25].