This month’s costs case summaries: from budgeting and wasted costs to third-party funders

Court of Appeal: Halsey extension

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

Scopema Sarl v Scot Seat Direct Ltd [2013] EWPCC 37

Unsuccessful claimants sought a general discount to reflect points lost by the defendants and challenged items claimed on the defendants’ cost schedule.

Held: A defendant, which has no choice but to defend itself, should not be penalised in costs when points aid the court in the overall meaning of the claim.

Any claim for additional expense incurred by issuing an application should be sought via a special costs order under CPR 63.26(2).

In the present case, the lost points were not improperly taken nor led to any significant additional expenditure. It was not possible for the defendants to claim a figure for the application for the CMC and an additional figure for attendance.

Full ruling here.

National Museums and Galleries on Merseyside (Trustees of) v AEW Architects and Designers Ltd [2013] EWHC 3025 (TCC)

Judgment concerning interest and costs in a construction dispute. Issues: (i) whether the Late Payment of Commercial Debts (Interest) Act 1998 applies to an award of common law damages arising for breach of a contract; (ii) whether costs be awarded on a standard or indemnity basis; (iii) whether an interim payment for costs should take account of a conditional fee agreement (CFA); and (iv) whether the court could depart from an approved, but no longer accurate, budget.

Held: (i) The sum claimed for breach of contract for (unliquidated) damages can only convert into a debt as a result of a judgment or arbitration award, at which stage it attracts the specified judgment rate of interest for late payment of a judgment sum;

(ii) Whether indemnity costs will be justified depends on the conduct of the action or the exceptional circumstances of the case;

(iii) The discounting of rates in the event of failure is simply a commercial arrangement as between client and solicitor, which is not inherently unlawful or wrong. If the basic rates are above what is fair, reasonable or realistic for solicitors in a particular area, it is open to the costs judge simply to reduce those rates.

Subject to that, and to the risk which it took in contesting the proceedings after becoming aware of the CFA, the defendant would then be liable for costs assessed on such reasonable and appropriate rates plus any mark-up (up to 50% thereon);

(iv) Although PD 51G requires parties to file and serve budget revisions when their previous budgets are no longer accurate, no formal application need be issued. The court may, of its own motion, approve or disapprove the revision, albeit giving the parties the opportunity to be heard. Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013) EWHC 1643 (TCC) affirmed but distinguished on the facts.

In the present case, the 1998 Act did not apply. Costs were awarded on the standard basis. Late admissions, failures to admit liability and reluctance to make concessions on quantum on the part of the defendant were balanced by the claimant’s late appointment of an expert and belated production of a witness statement. It was appropriate to depart from the original costs budget where failure to address a substantial increase was an oversight.

Full ruling here and Litigation Futures story here.

PGF II SA v OMFS Company 1 Ltd [2013] EWCA Civ 1288

A landlord and tenant dispute raising the issue of the costs consequence when a party declines to take part in alternative dispute resolution (ADR).

Held: The same threshold test for departing from automatic costs consequences of a part 36 offer applies under CPR 36.10 and 36.14, including the non-exclusive guidelines set out in CPR 36.14(4). Where that threshold is satisfied, the court has a wide discretion as to the form of costs order to be made in substitution for the prescribed consequences.

As a general rule silence in the face of an invitation to participate in ADR is unreasonable conduct. However, a finding of unreasonable conduct constituted by a refusal to accept an invitation to participate in ADR or, a refusal even to engage in discussion about ADR, produces no automatic results in terms of a costs penalty.

In the present case, to deprive the defendant of the whole of its costs during the relevant period was within the range of proper responses to their seriously unreasonable conduct.

Full ruling here and Litigation Futures story here.

Harcus Sinclair (a firm) v Buttonwood Legal Capital Ltd & Ors [2013] EWHC 2974 (Ch)

An application for costs against solicitors of unsuccessful defendants following a finding that a funding agreement had been validity terminated, raising the issue of whether the solicitors were a party to the action, and if not, whether the court should exercise its discretion to make an order against a non-party under sections 51(1) and (3) of the Senior Courts Act 1981.

Application dismissed. Held: The mere presence of a defendant in an action, although providing a technical basis of jurisdiction, is insufficient to justify the making of a costs order against them where they are not joined by a subsequent court order which is heard and determined as between other parties.

Costs orders against non-parties are exceptional but will be justified where the non-party is the real party to the litigation, to the extent that they fund, substantially control and would benefit from the proceedings (per Dymocks Franchise Systems v Todd [2004] UKPC 39).

Those three elements are examined in more detail where the non-party is the solicitor to an unsuccessful litigant. The existence of funding by a solicitor or a potential benefit if success enables a client to pay are, of themselves, insufficient grounds for concluding that the solicitor is a real party.

There must be an indication that the solicitor has acted in a way which is outside the proper discharge of their professional obligations in the conduct of the litigation. Lack of congruence between the interests and motivations of the solicitor and the client may be a relevant factor, depending on the facts of the case.

The present case was typical – it was not appropriate to make an order under the 1981 Act.

Full ruling here and Litigation Futures story here.

Single Homeless Project Ltd v Abu & Ors [2013] UKEAT 0519_12_2708 – 27/08/13

Appeal and cross-appeal of an order for wasted costs against an unsuccessful claimant’s solicitors broadly on the basis of procedural unfairness.

Appeal and cross-appeal allowed. Held: The minimum requirement applicable to the procedure for determining an application for wasted costs, which must be as simple and summary as fairness permits and depends on the particular circumstances of the case, is that the person against whom the order is sought has a fair and reasonable opportunity to be heard (per Godfrey Morgan Solicitors Ltd v Cobalt Systems Ltd [2011] UKEAT 0608_10_3108).

Where large sums are potentially at stake it may be essential, fair and proportionate to allow written submissions on both sides and even a hearing.

The tribunal must provide adequate reasons for making a wasted costs order. The ability to pay is one factor which may be taken into account, but it is not obliged to do so, nor is it obliged to restrict its order to one that the paying party can meet (per Arrowsmith v Nottingham Trent University [2011] EWCA Civ 797).

In the present case, the respondent should have been afforded an opportunity to see and comment on the claimant’s substantial written material. Further, the tribunal failed to provide adequate reasons for making the order. Case remitted to the same tribunal.

Full ruling here.

Ghosh v Nokia Siemens Network UK Ltd [2013] UKEAT 0125_12_2506

Appeal against a costs order made by the employment tribunal against a claimant on the basis of unreasonable conduct.

Held: The exercise of the costs jurisdiction is discretionary once the threshold of unreasonable conduct is crossed.

In the present case, the tribunal was entitled to find the claimant’s wholly unsubstantiated allegations and conduct in the proceedings unreasonable.

Full ruling here.

Jackson v Thompsons Solicitors (A Firm) & Ors [2013] EWHC 2578 (QB)

Appeal against the grant of a claimant’s application to amend and an order requiring the defendants pay the costs of that application.

Held: Section 32(1)(b) of the Limitation Act 1980 applies where a claimant can show active and intentional concealment by any or all of the defendants of any fact relevant to their right of action (per Cave v Robinson [2002] UKHL 18).

In the present case, the master’s decision was not outwith the ambit of reasonable disagreement. Non-disclosure was evidence of active concealment and the proposed amendments arose from the same or substantially same facts as those in issue. Appeal dismissed.

Full ruling here.

Mousa & Ors, R (on the application of) v Secretary of State for Defence [2013] EWHC 2941 (Admin)

Judgment concerning costs in judicial review proceedings where the claimant was funded by the Legal Aid Agency under a high costs case plan and both parties had won on two distinct issues. The costs of the issue the claimant lost were substantially greater than those of the issue it won, raising the issue of whether set off was appropriate.

Held: The discretion to order a set off of the costs to which the claimant is entitled against the costs to which the Secretary of State is entitled, where the issues are so closely connected and the claimant is legally aided, will ordinarily be exercised in favour of a set-off. That a party is legally aided should not affect the rights of any other party to the proceedings (section 22(4) of the Access to Justice Act 1999).

In the present case, it wasn’t equitable to depart from the ordinary rule. To do so would result in the Secretary of State paying a considerable amount of the claimant’s costs but recovering nothing of the costs he was entitled to.

Full ruling here.


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