COST BITES 55: A NON-PARTY COSTS ORDER NOT MADE AGAINST CLAIMANT’S SOLICITORS IN RELATION TO COSTS OF ASSESSMENT: QOCS MAY BE A PROBLEM FOR THE DEFENDANT – BUT THIS IS NOT THE WAY TO SOLVE IT…

In PME v The Scout Association [2023] EWHC 158 (SCCO) Costs Judge Leonard rejected the defendant’s argument that a non-party costs order should be made against the claimant’s solicitors in relation to the defendant’s costs of assessment and subsequent applications and appeals.  A solicitor acting under a CFA and seeking assessment of costs is unlikely to be subject to a non-party costs order.

“It may also be the case that because of QOCS, any adverse costs orders made as a result of that solicitor’s efforts to maximise costs recovery will not be enforceable against the solicitor’s client. That is a consequence of the QOCS regime. It does not follow that the solicitor should pay instead.”

THE FACTS

The claimant’s solicitors Bolt Burdon Kemp (BBK) represented the claimant in a a personal injury case that settled for £29,500.  The retainer between the claimant and the solicitors was a “capped CFA” (limited to 15% of the damages).  A costs order was made and costs were assessed.  Costs were provisionally assessed and a review took place.  After both assessments the costs ordered were lower than the defendant’s offer.

The claimant then filed an appellants notice seeking a de novo assessment. On the day that application was heard the claimant raised a new argument, that the costs offer did not have jurisdiction to carry out a provisional assessment at all.  The costs judge found that there was no viable argument that costs officers did not have jurisdiction. Permission to appeal was granted on a very limited issue relating to the scope of an appeal in these circumstances.

The claimant’s appeal was unsuccessful.

The defendant, therefore, had several costs orders against the defendant for sums exceeding £30,000.

THE DEFENDANT’S DILEMMA: THE COSTS ORDER COULD NOT BE ENFORCED OR SET OFF

The defendant had a costs order, but no practical means of enforcing such an order. The provisions of QOCS meant that the order could not be enforced, nor could it be set off against costs or damages.

 

    1. It is not, as I understand it, in dispute that because the Claimant has accepted a Part 36 offer from the Defendant, there is no order for damages in favour of the Claimant against which the Defendant could enforce an order for costs without the permission of the court (see Cartwright v Venduct Engineering Limited [2018] 1 WLR 6137, at paragraph 44). The effect of the decision in Ho (handed down on 6 October 2021) is that the Defendant is also unable to recover its costs by way of set-off against the damages or costs payable to the Claimant.
  1. It follows that, without the permission of the court, the Defendant has no means of recovering from the Claimant the costs which the Claimant was ordered to pay by Costs Officer Kenny on 15 August 2018 (£3,290.11); by Stewart J on 12 December 2019 (£8,091 net of VAT, the recoverability of which is a bone of contention between the parties); and by me on 16 January 2020 (which have yet to be assessed but which I understand will be claimed in the sum of £28,499.07 inclusive of VAT).

THE DEFENDANT’S APPLICATION FOR COSTS AGAINST THE CLAIMANT’S SOLICITORS

The defendant joined the claimant’s solicitors into the action for the purpose of attempting to recover costs against them.  This was not an application for wasted costs, but for a non-party costs order.

    1. The Defendant has stated in correspondence that it has no intention of attempting enforcement against the Claimant and instead seeks an order that BBK pay all of those costs.
    1. On 14 April 2022 the court made an order in agreed terms for BBK to be added as a party to the proceedings for the purposes of costs only, and giving directions for the hearing of the application.
    1. The Defendant says that following the rejection of the Defendant’s September 2017 offer (which if accepted would have resulted in a better outcome for the Claimant) the Defendant has been forced to incur costs which it puts at over £40,000, a figure which substantially exceeds both the damages payable to the Claimant and the Claimant’s recoverable costs of the claim itself.

 

  1. BBK, says the Defendant, was the only party with an interest in the outcome of the detailed assessment and in particular in recovering more by way of costs than the Defendant had offered in September 2017. That offer was nominally rejected by the Claimant but in reality, says the Defendant, by BBK.

 

THE JUDGE’S REJECTION OF THE DEFENDANT’S APPLICATION

The judge considered the arguments in detail. The claimant was being represented under a “CFA lite” agreement.  The judge held it was not appropriate to make a non party costs order in these circumstances.

    1. I believe that it is important (as Mr Mallalieu, in oral submissions, emphasised) not to lose sight of the distinction between a claim for damages and the costs attendant on making that claim. This is not a stand-alone claim for costs. Notwithstanding some unusual aspects, I have been dealing, in the usual way, with nothing more than the assessment of the Claimant’s costs, as recoverable under a court order following settlement of the Claimant’s claim for damages for personal injury. One has to judge the NPCO application in that context.
    1. In his judgment in Myatt v National Coal Board, Lloyd LJ observed (at paragraph 23) that the relevance of the court’s decision in that case to make a NPCO against a firm of solicitors was limited to cases where the issue is as to the enforceability of a CFA. He further observed (at paragraph 27) that the circumstances that had persuaded the court to make such an order could be
“common in relation to cases where the enforceability of a CFA is at stake but would be most unusual in any other situation.”
    1. Mr Carpenter rightly says that Lloyd LJ did not exclude the possibility of such an order being made where the enforceability of the CFA is not an issue, only that it would be “most unusual”. He also points out that it is not a precondition to an NPCO that a case in itself be exceptional. The point is rather (as I understand it) that an NPCO is itself exceptional, in that the occasion for making such an order will only arise outside the ordinary run of cases.
    1. The Defendant’s case is based upon the premise that the key question, in that context, is not whether a solicitor has been acting outside the role of a solicitor but rather whether the solicitor is the (or a) “real party”.
    1. I do not think that the two questions can so easily be separated. It is in my view clear from Flatman v Germany first that a solicitor cannot be said to be acting outside the role of a solicitor if the solicitor is doing no more than the legislation pertaining to CFAs renders lawful, and second that in such circumstances it would not be right to conclude that the solicitor is “the real party” or even “a real party” to the litigation. It seems to me that those principles, in particular, preclude the making of an NPCO in this case.
    1. It is not suggested that the capped CFA entered into between the Claimant and BBK in any way fails to comply with legislative requirements. Any solicitor for a successful personal injury client will have to address the recovery of costs. If acting under a CFA lite or a capped CFA that solicitor may well be pursuing the costs of the claim largely, if not exclusively, for the solicitor’s own benefit.
    1. It may also be the case that because of QOCS, any adverse costs orders made as a result of that solicitor’s efforts to maximise costs recovery will not be enforceable against the solicitor’s client. That is a consequence of the QOCS regime. It does not follow that the solicitor should pay instead.
    1. I think that Mr Mallalieu must be right in saying that if BBK is properly open to an NPCO because of the way in which it has managed these assessment proceedings, then so would be any solicitor who acts under a CFA lite (and many solicitors acting under a capped CFA) where costs orders are made against their clients in the course of the assessment of their clients’ costs. That, on the Defendant’s case as I understand it, would be so whether QOCS applies or not, and it would be contrary to the principles emphasised in Flatman v GermanyTinseltime Limited v Roberts and Hodgson v Imperial Tobacco Ltd.
    1. Another point made by Mr Mallalieu is that there is no good reason to suppose that BBK has acted any differently in the conduct of the detailed assessment proceedings in the SCCO, and on the appeal before Stewart J, than it would have done had the Claimant had a direct financial interest in the outcome of either the detailed assessment of the appeal.
    1. Some of the points taken by BBK in the course of the detailed assessment proceedings surprised me, but I have no reason that to suppose they would not have been taken in any event. As Mr Mallalieu says it has never been suggested that anything BBK has done would merit a wasted costs order, an order under CPR 44.11 or even an order for indemnity costs.
    1. That to my mind supports Mr Mallalieu’s causation argument. It also justifies the conclusion that BBK has, in attempting unsuccessfully to maximise the Claimant’s cost recovery and to beat the Defendant’s offer, been doing no more than any solicitor might do who is acting under any CFA lite or capped CFA.
    1. It may well be, as Mr Carpenter says, that the operation of the QOCS rules as clarified by Cartwright v Venduct Engineering Ltd and Ho v Adelekun confers an indirect benefit upon BBK, or any other solicitor acting under a “CFA lite” or capped CFA arrangement, in that they can pursue the costs of the claim at less financial risk than before QOCS was introduced. That would be because before QOCS they would, in the course of the detailed assessment proceedings have borne the cost of any adverse costs orders themselves rather than passing them on to their client. Now, absent an NPCO, they may risk only their own costs and expenses. That, again, is however just a consequence of the way the QOCS regime works.
    1. It also seems to me that Mr Mallalieu is right in saying that that the reasoning behind the Defendant’s application would if accepted also justify an application against solicitors acting for a party supported by legal aid. Mr Carpenter argues that the position as regards a legally aided party is different, because a defendant will, in accordance with Lockley v National Blood Transfusion Service [1992] 1 WLR 492, be able to set off against any damages or costs due to a legally aided claimant, the amount of any costs awarded to the defendant.
    1. That does not seem to me to be quite to the point. I appreciate that the Defendant’s inability (thanks to QOCS) to set off its own costs against the costs and damages recoverable by the Claimant has prompted this application. Regardless of that, however, a solicitor for a legally aided claimant seeking to recover costs could on the Defendant’s case properly be characterised as “the real party”. An application for an NPCO against such a solicitor might be less likely, but it would be perfectly possible, and again I do not think that that could be consistent with the policy embodied in the authorities to which I have referred.
    1. I also accept that BBK has a point with regard to access to justice. Mr Carpenter points out that I have been offered no evidence to support the proposition that CFA lites and capped CFAs are in common use, but I do not think that I need such evidence. My experience as a Costs Judge informs me that they are in widespread use, in particular in cases to which the QOCS regime applies.
    1. That to my mind is significant. That is not just because to make the order sought by the Defendant would discourage firms such as BBK from offering arrangements to clients which are beneficial to the clients themselves; which do promote access to justice; and which (bearing in mind the observations of Sir Geoffrey Vos MR in Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387) will in many cases clearly be preferable to an uncapped arrangement.
    1. It is also because if an NPCO could be justified whenever a costs order is made against the client of a solicitor pursuing costs under a CFA lite or capped CFA, merely because the client has no significant stake in the recovery of costs, then NPCOs would not be exceptional. They would become routine.
    1. Although not strictly necessary, I will briefly address the questions of warning and delay raised by Mr Mallalieu. As Mr Carpenter says, I have seen no evidence to support the proposition that, if warned in good time about the possibility of an NPCO being made, BBK would not have pursued their unsuccessful attempt to improve upon the Defendant’s costs offer of September 2017 . It does seem to me however that in circumstances where a solicitor acting under a CFA lite or a capped CFA is doing no more than, in the usual way, attempting to maximise cost recovery it would be incumbent upon a defendant to notify them of any intention to seek an NPCO, and that failure to do so could be significant.
    1. As for delay, again it seems to me that this application should have been pursued more promptly, although in the absence of any real prejudice to BBK I would probably not have attached a great deal of weight to that.
  1. In any event, for the reasons I have given, I am not satisfied that in the circumstances of this case it would be just or consistent with established authority to make an NPCO against BBK. The application will be dismissed.