A CAVALCADE OF COSTS CASES: HOLIDAY READING: SOMETHING TO CHEER UP COST LAWYERS OVER THE BANK HOLIDAY WEEKEND…
A number of costs cases have arrived on BAILLI all are decisions of Master Rowley relating to costs.
EXCLUDING INTEREST ON COSTS MEANS THAT THIS IS NOT A PART 36 OFFER
This is a decision which comes to a contrary conclusion to the judgment in Horne -v- Prescot (No 1) Ltd 2019 1322 (QB) which appeared on this blog earlier today.
13. The submission of the claimant is that his intention was to seek to agree a costs figure leaving the interest figure to be resolved at a later date. On this basis, the offer was in fact for only part of the claim and not the whole of it. Where the claim is divided between costs and interest, it cannot be the case that the claimant’s Part 36 offer could say anything other than that it was an offer to accept a sum for costs which was exclusive of all interest.
14. I do not think that this is an attractive argument. First, it runs flat against the express wording of rule 36.5(4). That says that an offer “will” be treated as including interest up to the last date for acceptance of the offer as of right. To describe the rule as not expressly prohibiting an offer being made which is exclusive of interest seems to me to ignore the plain words of the rule.
15. Secondly, it runs against the intention of the rule to provide clarity as to what is being accepted. It ought to be possible for a party to accept a single sum of money in the knowledge that it incorporates all the damages and interest that is outstanding. It brings matters to a head. If the interest is excluded in the manner the claimant has attempted here, it simply leads to further litigation as to the extent of that interest.
16. If it was the claimant’s intention to seek to argue for some unusual order in respect of interest i.e. something other than interest up to the end of the 21 days for acceptance of his offer, then the claimant’s option was to make an offer outside the strict provisions of Part 36. It is analogous to the situation where a defendant, who wishes to argue about the extent of the claimant’s costs, has to make a Calderbank type offer to avoid the automatic consequences of Part 36 i.e. paying the claimant’s costs on the standard basis. Here, the claimant wished to seek to improve upon the entitlement under Part 36 and therefore, to use the words of HHJ Owen, the claimant was seeking both to have his cake and to eat it.
17. Consequently, I find that the offer made on 6 November 2017 is not a Part 36 offer and that as such there are no sums which may be recoverable under rule 36.17(4).
COSTS OF COSTS MANAGEMENT PROCESS DISALLOWED
MXX v United Lincolnshire NHS Trust  EWHC B23
The Master was considering an argument that there had been mis-certification. The claimant had sought a rate of £465 an hour in the costs budget, but £335 and £350 in the bill.
57. The need to comply with the indemnity principle must be on page 1 of any introduction to the law of costs. It is fundamental and runs throughout the issues regarding what sums can be claimed from one party by another. It is, or should be, ingrained in everyone dealing with solicitor’s costs. Whether it is a detailed bill of costs that is being produced, a summary assessment schedule or even simply a breakdown in a letter being provided to the opponent, it is imperative that the costs set out as being payable by the opponent do not exceed the sums payable by the client to their solicitor. The case of Harold v Smith  5 H. & N. 381 is more than 150 years old but it remains correct that the sum claimed should not be a punishment to an opponent nor a bonus to the client (or solicitor) which is the effect of claiming more costs from the opponent than are payable by the client.
58. I do not accept that the statement of truth for a precedent H is intended to be a composite statement or one akin to signing an estimate. If that were so, in my judgement, the statement would simply say that the document was a fair and accurate estimate of the costs which it would be reasonable and proportionate for the client to incur in the litigation. But that is not what it says. It specifically refers to incurred and estimated costs separately and it seems to me that a solicitor signing a statement of truth has to consider whether the incurred costs figure is fair and accurate separately from whether the figures for estimated costs are fair and accurate. There is absolutely no reason why the incurred costs figure should not be accurate. There are many reasons to understand that the estimated costs figure is no more than educated guesswork. The change in the hourly rates for future work identified by Irwin Mitchell is but one of those reasons.
The Master held that the appropriate response was to disallow the costs claimed in the costs management activities.
At paragraph 43 in Tucker, I expressed my view as to why the appropriate sanction was to disallow the items claimed in the bill corresponding to the CMO work.
“CPR 44.11(2)(a) indicates a possible sanction of disallowing “all or part of the costs which are being assessed” . The sums claimed in the bill themselves do not offend the indemnity principle and I do not think a general disallowance of, for example, a percentage of the overall bill would be appropriate. It seems to me that the egregious aspect of the conduct here relates solely to the approach to the costs management of the underlying claim. Consequently, it is the costs claimed in the costs management activities that should be penalised. I have concluded that, in order sufficiently to mark the court’s disapprobation of Irwin Mitchell’s conduct in this case, I should disallow all of the costs management elements, or “non-phase” part, of the bill.”
Whilst those behind the Defendant in both cases may have considered the sanction in Tucker to be insufficient, it seems to me to be the only appropriate sanction. There is nothing wrong with the bill in terms of the indemnity principle. The problem lies with the budget. I consider it to be entirely appropriate to impose a sanction in respect of the work which caused the problem.
That work is the non-phase time spent creating and maintaining the budget. It would be wrong in my view retrospectively to disallow some of the budget itself.
NOT REASONABLE TO CHANGE FROM LEGAL AID TO CFA
EPX v Milton Keynes University Hospital NHS Foundation Trust  EWHC B20. The Master held it was not reasonable for a claimant firm to switch from public funding to a conditional fee agreement.
49. In the circumstances, I conclude that the need to change the funding mechanism simply did not exist. Proceedings could have been commenced and depending upon the terms of the defence either (as it turned out) the investigations could move on to quantum or the LSC could consider whether or not to fund the case further should liability have been disputed. Furthermore, on this analysis, the question of the certificate being discharged after April 2013 does not arise because all of the work to prepare the proceedings and require the defendant to enter a defence would have been carried out long before April 2013 since there was no need to seek an extension to the costs limitation in the certificate.
COSTS RECOVERABLE AFTER CLAIMANT FAILED TO FILE COSTS BUDGET BUT MAKES AN EFFECTIVE PART 36 OFFER
Bhatti v Asghar  EWHC B5 considered the difficult position of a lawyer when a cost budget has not been filed and costs are limited to court fees. This is a case that will be considered in
98. When CFAs were first used, solicitors and then barristers all decried the use of such contingent arrangements because of the clear conflicts of interest that would arise in many and varied situations. Nevertheless, such agreements came into being and legal professionals had to deal with the professional difficulties as and when they arose. That solicitors have been able to do so satisfactorily may be demonstrated by the fact that there is only one reference to conditional fee agreements in the SRA Code of Conduct that was in force at the time of this case. Under O(1.6), solicitors were required only to enter into fee agreements that were legal and which the solicitor considered to be suitable for the client’s needs taking into account the client’s best interests. Indicative behaviour 1.17 said that where a solicitor was acting for a client under a fee arrangement governed by statute, “such as a conditional fee agreement”, behaviour achieving the required outcome involved providing the client with all relevant information relating to that arrangement. This very limited reference in the Code of Conduct suggests that the ethical problems in running CFAs had effectively been resolved by the time of this case.
99. In my judgment, the solicitors here have been placed in a situation which is no more ethically difficult than the running of a CFA with a client. The extent of the recoverability of costs from the opponent was not certain. An indemnity basis order would achieve a good recovery and a standard basis order would achieve a partial recovery. It was in both the solicitors’ and the claimants’ interests to seek the best recovery of damages possible.
100. On the other hand, a loss for the client would not necessarily have enabled the solicitors to recover all of their costs. Given the sums involved there must always have been a possibility that the claimants would not have been good for the money if they had not achieved the success at trial. Whilst Rashid said that the costs involved would not bankrupt him, it is noticeable that neither of the claimants have met all of their outstanding solicitors’ fees. It is in my view too simplistic to say that the solicitors would be paid if their clients lost but would only be paid to an extent if the clients won.
101. Once the clients had decided to remain with the solicitors, there is nothing in my view to indicate that the solicitors did not pursue this case as it would have been pursued in any event. The defendants point only to the offers that have been made in terms of conduct. As I have set out above, it does not seem to me that either the optimistic £1.2 million offer or the rejection by Rashid of the defendants’ £127,888 offers demonstrate a conflict, whether actual or potential, between the solicitors and their clients.
102. Consequently, in my judgment the theoretical concerns regarding conflicts of interest, whether actual or potential, raised by the defendants have not been demonstrated in reality and as such there is nothing to taint the validity of the claimants’ retainers with their solicitors.
NO IMPROPER CONDUCT ON ASSESSMENT PROCESS
In XDE North Middlesex University Hospital NHS Trust  EWHC B22 the Master rejected assertions of improper conduct by the claimant’s solicitors. Again there was a decision to change from legal aid to a conditional fee agreement.
“It follows from the paragraphs I have set out in relation to CPR 44.11 that I do not consider that any of the claimant’s conduct reaches the threshold of improper or unreasonable conduct so as to require the court to consider a sanction to be imposed”
(I am told that there was an appeal on this case heard today, 24th May 2019, by Mr Justice Jay. Judgment was reserved).