COST BITES 107: A NON-PARTY COSTS ORDER SHOULD NOT BE MADE AGAINST A SOLICITOR REPRESENTING A CLAIM ON A CFA BASIS: SEEKING A FINANCIAL BENEFIT DID NOT MEAN THEY WERE ACTING OUTSIDE THEIR ROLE AS SOLICITOR

I am grateful to Sam Hayman from Bolt Burdon Kemp for sending me a copy of the decision of Mr Justice Freedman in The Scout Association -v- Bolt Burdon Kemp [2023] EWHC 2575 (KB). On appeal Freedman J upheld the earlier decision that a non-party costs order should not be made against a solicitor representing a party on a CFA.  That party had the protection of QOCS as did their solicitor. The fact that the solicitor had made various applications in relation to costs was could not be used as a device to justify a non-party order.  The judgment is available here The Scout Association v Bolt Burdon Kemp – APPROVED JUDGMENT

“The fact that the solicitors stand to benefit financially from the success of the litigation does not mean that the solicitors have acted in some way beyond or outside their role as a solicitor. In line with the above case law, it cannot be said that the solicitor is “either ‘the real party’ to the litigation, the person ‘with the principal interest’ in its outcome, or is acting ‘primarily for his own sake’. Thus, without more, the solicitor should not be made liable to a third party costs order.”

THE CASE

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.

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.  The defendant was unsuccessful for the reasons set out in the post on the first instance decision, discussed here. 

THE DEFENDANT’S UNSUCCESSFUL APPEAL

Mr Justice Freeman refused the defendant’s appeal.

A point of emphasis in the instant case has been that there has been a whole series of
applications to appeal or review the amount of costs payable. In each of them, the result
of the application was irrelevant to the client, whose liability for the costs was
unaffected. The solicitors were able to make the applications without reference to the
client. It was submitted for the Appellants that the solicitors were taking each initiative
for themselves alone, and on each occasion the paying party was vindicated in that there
was an inability to beat the offer made.

84. In my judgment, this does not change the overall position for these reasons. It matters
not whether there is one application or many applications provided that the solicitor is
acting other than “beyond or outside his role as a solicitor”. The key issue remains
whether the solicitor can be described as ‘the real party’ (or ‘a real party’) to the
litigation, but in the context of an NPCO application, that will usually be determined
by reference to whether the solicitor was acting “beyond or outside the role of a
solicitor.” As the Costs Judge put it at [133] “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 solicitorif the solicitoris 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.”

85. A solicitor doing no more than the relevant funding legislation permits will not usually
be so acting. It is said that it is important in these circumstances that there should be
consequences for the solicitors, and that this is not achieved without a costs order
against the solicitor in the event that the applications are not met with a costs order
against the solicitor. This analysis fails to attach any or any adequate significance to
the following matters, namely:

(i) The scheme works on the basis that solicitors are not exposed to personal risk
by, without more, acting for a client on a CFA or CFA lite basis. It is all one
arrangement where at the front end, the solicitor provides access to justice by
offering legal services and paying disbursements and other charges, and at a
later stage, recovering the same through orders for costs in the name of the
client. Their ability to make the application is an incident of the arrangement
with the client which in turn assists with access to justice;
(ii) The solicitor is not like a personal funder who would start on the usual premise
of exposure to costs. The starting point in respect of a solicitor is not to be
penalised in costs, that would be to create a burden on the solicitor which might
affect a solicitor’s willingness to take on such cases;
(iii) In an appropriate case, where the conduct of the solicitor may be criticised, an
application can be made on the basis of improper or unreasonable conduct under
CPR 44.11.

86. It therefore follows that the applications which were met in the context of the CFA were
ones which the solicitors were entitled to bring acting as such and within their role as
solicitors. In these circumstances, there is no reason to treat this case as one outside the
normal where the Courts should make orders against the solicitors personally. The fact
that the solicitors stand to benefit financially from the success of the litigation does not
mean that the solicitors have acted in some way beyond or outside their role as a
solicitor. In line with the above case law, it cannot be said that the solicitor is “either
‘the real party’ to the litigation, the person ‘with the principal interest’ in its outcome,
or is acting ‘primarily for his own sake’. Thus, without more, the solicitor should not be
made liable to a third party costs order.” These words are those contained in the
submission of the Law Society in Flatman that a third-party costs order should not be
made at para. 31,which the Court of Appeal accepted at paras. 45 – 47, quoted at paras
49 and 51 of this above in this Judgment.

87. It follows in my judgment that:
(i) The Appellant’s submission does not read Myatt in its true context. It relies on
the broad words of Dyson LJ instead of reading that judgment together with
that of Lloyd LJ who described as “most unusual” an NPCO in cases other than
where “the enforceability of a CFA is at stake”. On that basis, it would not
suffice without more that the solicitor had funded a case or was acting for an
impecunious client and their only chance of being reimbursed was in the name
of the client.

(ii) In any event, the matter has been decided by subsequent cases and especially
Flatman and the decision to follow the position submitted by the Law Society
as intervener. The problem recognised in Flatman case was identified by the
Law Society, and the problem was resolved in the manner set out at [45-47] in
that case, namely that payment of disbursements without more does not give
rise to a liability to an adverse costs order. The same logic ought to apply to
the provision of professional services by a lawyer for an impecunious client
under a CFA or a CFA lite;

(iii)Whatever the true test, in the circumstances of this case, BBK did not act
outside or beyond the role of a solicitor. The fact that there were a number of
applications, and all driven by BBK (and initiated without consultation with the
client) is an incident of the CFA or the CFA lite arrangement, and not that the
solicitor was acting outside the role of a solicitor.

(iv)There is no suggestion that any of the applications which were made were
improper or unreasonable: if such were the case, then the applications could be
met with a costs application under CPR 44.11. The fact that this has not been
done strongly suggests that there has been no misconduct of this kind.

THE GROUNDS FOR REJECTING THE APPEAL

Each of the the defendant’s 10 grounds of appeal was rejected.

(g) Ground 9 – Incentivising desirable litigation behaviour

103. These points do not go anywhere. Whatever the objects of the QOCS regime, they
brought about a series of rules which were to protect claimants, and which indirectly
helped solicitors representing them. This has led to rule changes, and there might be
others, but it would be inconsistent with authority to react to this by making NPCOs a
new norm in respect of cases commenced before the rule changes. In any event, in the
instant case, there are no findings which ought to lead to BBK’s behaviour warranting
an NPCO. There has been no application for a wasted costs order. There is nothing to
show that their conduct in any way improper or unreasonable. It does not follow from
the failure of the applications that there was any misconduct in making the applications.

104. If it is said that NPCOs will control behaviour and make such applications less frequent,
there is no warrant for this to be taken into account. It is not consistent with the principle
that solicitors or lawyers should not have costs orders made against them generally so
long as they are not acting outside their ordinary role, and that in acting without more
in such role, they should not be considered as the real party or a party in these
applications.

(h) Ground 10 – Justice

105. This ground is to the effect that that the only just outcome is for BBK to be ordered to
pay the costs which they caused to be incurred. This is not a free-standing ground. On
the premise that BBK was acting not beyond or outside their role as solicitors and was
not to be considered as the real party or a party, there is no reason to make such an order
in this case. Once that had been found, it was necessary to find that there was something
more to trigger a liability for an NPCO. It was submitted on behalf of the Appellant
that the cap to the amount of costs payable by BBK of 15% of his damages was the
something more, such as had the effect that the costs offer in this case was irrelevant to
the client in that (a) the client stood to recover nothing from the applications, and (b)
the client was not exposed to an order of costs because of the QOCS regime. The Costs
Judge was right to find that there was nothing more in this case. The cap does not affect
the analysis as set out in detail above, especially in the discussion about Grounds 1-3
above. The solicitor in the position of BBK is allowed to make the application to
recover its disbursements and costs, even although there is nothing in this for the client
and the client is protected from exposure to costs under the QOCS regime. As BBK
succinctly put it, if the core of the appeal fails, then the Costs Judge was right to
conclude that it would not be just to make the order